Diabetes Non-Disclosure and Section 45 after Four Years
In 2019 Mr. Mohanty, a 45-year-old schoolteacher, bought a 20-year endowment policy for a sum assured of ₹15 lakh from a private insurer. In the proposal form he answered 'No' to the question 'Have you been hospitalised or treated for diabetes, hypertension or any chronic disease in the last five years?' He also answered 'No' to 'Are you currently on regular medication?' In fact, he had been diagnosed with Type 2 diabetes in 2017 and was taking metformin daily, though he had never been hospitalised. He paid premiums regularly. In 2023, while the policy was in force, he died in a road accident. His widow, the nominee, filed a claim with the death certificate and FIR. The insurer repudiated the claim, citing suppression of material facts and stating that the policy was obtained by false answers. The policy had run for four years and two months.
1. Was the diabetes treatment a material fact that Mr. Mohanty was bound to disclose? Explain with reference to the duty of utmost good faith and the proposal form questions.
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Yes. A prudent underwriter would treat Type 2 diabetes and regular metformin as material because it affects mortality and morbidity, and the proposal asked specifically about treatment for diabetes and current medication. The duty of utmost good faith requires the proposer to disclose facts within his knowledge that would influence the insurer’s decision on acceptance, premium or terms. Mr. Mohanty’s answer 'No' was factually false even though he had not been hospitalised: the question covered treatment, not only hospitalisation. The fact that he died in a road accident does not by itself make the diabetes irrelevant to the contract, because materiality is judged at proposal stage; however, causation may matter when the insurer alleges fraud or tries to link the suppression to the death. The agent’s role should also be checked - if the agent filled the form, the insurer must show the proposer knew and adopted the false answers.
2. Can the insurer repudiate the death claim after four years and two months? Discuss Section 45 of the Insurance Act, 1938 and the fraud exception.
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Section 45 of the Insurance Act, 1938 restricts repudiation. After three years from the date of issuance or revival, a life policy cannot be called in question on the ground of misstatement of fact or false answer unless the insurer proves that the answer was fraudulently given. Here the policy had run four years and two months, so the insurer cannot rely on mere negligence or innocent non-disclosure; it must prove fraud - knowledge of the true fact, intent to deceive, and that the false answer induced the contract. The burden is on the insurer. The insurer’s letter only says 'suppression', which is not enough. If fraud is proved, repudiation may be valid; if not, the claim is payable. The accident death means the insurer may struggle to show that the diabetes answer caused or was connected to the death, but Section 45 does not require causation where fraud is established; it requires fraudulent suppression of a material fact. The nominee should demand the precise basis and evidence.
3. What steps should the nominee take, and what principles should the grievance forum apply in deciding the complaint?
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Steps: (1) Write to the insurer’s grievance redressal officer with the policy, proposal copy, death certificate, FIR/post-mortem, premium receipts and the repudiation letter, asking for reconsideration within 14 days. (2) If not resolved, register on IRDAI’s IGMS and approach the Insurance Ombudsman for the jurisdiction; the Ombudsman can examine the proposal, the agent’s role and the insurer’s underwriting file, and can award up to the prescribed limit (currently ₹30 lakh) without court fees. (3) Keep evidence that the agent may have filled the form and that the death was accidental. The forum should apply Section 45, place the burden of proving fraud on the insurer, and check whether the insurer would have declined or rated the policy had the diabetes been disclosed. If fraud is not proved, the claim should be paid with applicable interest; if it is proved, the insurer may repudiate but must still act fairly and consider refund or other remedies as per policy. The nominee should not accept an oral rejection.