Life Insurance Corporation of India v Manubhai
Life Insurance Corporation of India v. Manubhai
1. Case Citation
AIR 1976 SC 262
2. Facts of the Case
The appellant, Life Insurance Corporation of India (LIC), issued a life insurance policy to the respondent, Manubhai.
After some time, Manubhai made a claim under the policy.
LIC rejected the claim on the ground that the policy was obtained through misrepresentation and non-disclosure of material facts by the insured.
Manubhai challenged the rejection of the claim.
3. Legal Issues
The Supreme Court examined:
Whether non-disclosure of material facts by the policyholder amounted to misrepresentation sufficient to avoid the contract.
The scope of good faith in insurance contracts under the Insurance Act.
The burden of proof on the insurer to show that misrepresentation affected the risk.
4. Supreme Court's Analysis
The Court reiterated that an insurance contract is contract of utmost good faith (uberrimae fidei).
The insured must disclose all material facts which would influence the insurer’s decision to accept the risk or the terms.
Non-disclosure or misrepresentation, if material, entitles the insurer to repudiate the policy.
However, the insurer must prove that the non-disclosed fact was material and affected the risk.
The Court noted that trivial or immaterial non-disclosure would not justify repudiation.
5. Judgment
The Supreme Court held that if the non-disclosure or misrepresentation is material and affects the insurer's risk assessment, the insurer can reject the claim.
The Court upheld LIC’s right to reject the claim, provided that material facts were concealed or misrepresented.
6. Significance
Reinforced the doctrine of utmost good faith in insurance contracts.
Clarified the burden of proof lies with the insurer to show that the non-disclosure was material.
Ensured that only material misrepresentations or concealment of facts can void insurance contracts.
Prevents insurers from avoiding liability on trivial grounds.
7. Relation to Other Case Law
The case builds on principles established in National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd. (2009), where the Supreme Court emphasized materiality in insurance claims.
Also relates to LIC of India v. Ramlal, which discusses disclosure duties.
8. Summary
| Aspect | Details |
|---|---|
| Court | Supreme Court of India |
| Year | 1976 |
| Issue | Non-disclosure/misrepresentation in insurance |
| Key Principle | Insurance is a contract of utmost good faith |
| Holding | Material misrepresentation can void the policy |
| Burden of Proof | Lies with the insurer |
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