Dipashri vs.

Life Insurance Corporation Of India

Citation:AIR 1985 Bombay 192
Petitioner. :Dispashri
Respondent: Life insurance corporation of India
Bench: Pendse
Court:Bombay Highcourt

Facts:
-The case involves a widow, Dipashri, seeking relief against the Life Insurance Corporation (LIC) for the
amount under a policy taken out by her deceased husband.

-The deceased husband had submitted a proposal for an Endowment Policy with LIC, which was
accepted in 1975. However, he passed away in 1977 due to accidental burns from a stove fire.

- Dipashri requested the settlement of the insurance claim, but LIC repudiated the claim, alleging that
the deceased had made false statements about his health in the proposal form.

Issues:
1. Whether the deceased policyholder made false statements about his health in the proposal form.

2. Whether LIC had the right to repudiate the policy based on the alleged false statements.

3. The applicability of Section 45 of the Insurance Act, which limits the insurer's ability to challenge a
policy after two years.

Holding:
The court found that the deceased’s non-disclosure of minor ailments did not amount to fraudulent
suppression of material facts, as these ailments were not material to the policy. This ruling is in line with
Section 45 of the Insurance Act, which limits an insurer’s ability to challenge a policy after two years
unless there is evidence of fraudulent intent and materiality of the facts suppressed. Since the
deceased’s health conditions were minor and had no significant impact on the policy’s validity, LIC could
not repudiate the policy based on these grounds.

Rationale:
The court found that LIC had raised false and frivolous defenses to deny the claim of the petitioner,
despite the deceased policyholder's health examination by LIC's medical officer. The court emphasized
that trivial ailments like fever or dysentery need not be disclosed in the proposal form, and the
deceased's non-disclosure of such minor illnesses did not amount to fraudulent suppression of material
facts.

Procedural History:
The petitioner filed a petition under Article 226 of the Constitution of India seeking a writ of mandamus
to compel LIC to pay the insurance claim.

Party's Arguments:
- The petitioner argued that the deceased's non-disclosure of minor ailments did not warrant the
repudiation of the policy.

- LIC claimed that the deceased had made false statements about his health in the proposal form,
justifying the repudiation of the contract.

Judgment:
1. The court found that the deceased's non-disclosure of minor ailments did not amount to fraudulent
suppression of material facts, as these ailments were not material to the policy.

2. LIC's repudiation of the policy was not justified, as the deceased had been examined by LIC's medical
officer before policy acceptance.

3. Section 45 of the Insurance Act applied, and LIC could not challenge the policy after two years from its
commencement.

The court held in favor of Dipashri, the petitioner, and ordered LIC to pay the amount due under the
policy, along with bonuses and interest at a rate of 15% per annum from the date of claim submission.
LIC was also directed to pay the costs of the petition and an additional Rs. 1,000 as compensatory costs.