The Kerala High Court has clarified that even seemingly unrelated medical disclosures, when omitted in an insurance proposal form, can constitute fraudulent suppression if they fall within the scope of questions asked by the insurer. This judgment reinforces the doctrine of utmost good faith in insurance contracts and sets a strict standard for disclosure obligations.
Background & Facts
The Dispute
The petitioner, Chandrika C.P., a seasoned LIC agent with over 30 years of experience, applied for LIC’s Cancer Cover Policy (Plan 905) on 31 March 2022, seeking a sum assured of ₹10 lakhs. In the proposal form (Ext.R2(a)), she answered "no" to Question 7(ix), which asked whether she had undergone any medical investigations - including ultrasound - in the preceding six months. Unbeknownst to the insurer, she had undergone an abdominal ultrasound on 8 January 2022 at Daya General Hospital for kidney stones. She later claimed she believed this scan was irrelevant to a cancer policy.
Procedural History
- March 2022: Policy issued with effect from 31 March 2022.
- May 2023: Petitioner diagnosed with Stage III C ovarian carcinoma and submitted a claim.
- July 2023: LIC repudiated the claim (Ext.P4), citing material suppression of medical history.
- June 2024: Insurance Ombudsman upheld LIC’s decision (Ext.P7).
- August 2025: Single Judge of Kerala High Court allowed the writ petition, directing LIC to pay the claim.
- January 2026: Writ appeal filed by LIC challenging the Single Judge’s order.
Relief Sought
The petitioner sought quashing of Ext.P4 and Ext.P7, declaration of entitlement to policy benefits, and a writ of mandamus directing LIC to pay the claim. She also filed interlocutory applications seeking prosecution of LIC for perjury under the Bharatiya Nyaya Sanhita, 2023.
The Legal Issue
The central question was whether the petitioner’s failure to disclose an abdominal ultrasound for kidney stones, conducted two months prior to applying for a cancer cover policy, amounted to fraudulent suppression under Section 45 of the Insurance Act, 1938, thereby justifying repudiation of the policy.
Arguments Presented
For the Appellant
LIC argued that the ultrasound scan was a material fact because the proposal form explicitly asked about all diagnostic investigations, including ultrasound, regardless of purpose. Relying on Rekhaben Nareshbhai Rathod, Satwant Kaur Sandhu, and Dalbir Kaur, LIC contended that any answer in the proposal form must be truthful, and the insured cannot unilaterally determine materiality. The insurer emphasized that had the scan been disclosed, the proposal would have been referred to the Central Office for underwriting, potentially altering terms or rejecting coverage. LIC further asserted that Section 45 applies to fixed-sum cancer policies, as they are life insurance products under the Act’s definition.
For the Respondent
The petitioner argued that the ultrasound was for kidney stones, unrelated to cancer risk, and thus not material. She contended that Section 45 applies only to life insurance policies, not cancer-specific fixed-sum policies, and that Section 17 of the Indian Contract Act, 1872 governs fraud. She cited Rekhaben Nareshbhai Rathod to argue that mere silence on irrelevant facts is not fraud. She further claimed LIC’s assertion of an "independent investigation" was false and amounted to perjury, as no hospital records were produced to substantiate their claim of accessing her medical history.
The Court's Analysis
The Court undertook a detailed examination of Section 45 of the Insurance Act, 1938, which permits repudiation of a policy within three years on grounds of fraud. The Court rejected the petitioner’s argument that Section 45 is inapplicable to cancer cover policies, noting that the policy document itself explicitly referenced Section 45 as governing the contract. The Court held that fixed-sum cancer policies, which pay a predetermined amount upon diagnosis rather than reimbursing medical expenses, fall within the ambit of life insurance under the Act’s broader interpretation.
"The duty of full disclosure required that no information of substance or of interest to the insurer be omitted or concealed. Whether or not the insurer would have issued a life insurance cover despite the earlier cover of insurance is a decision which was required to be taken by the insurer after duly considering all relevant facts and circumstances."
- Rekhaben Nareshbhai Rathod, cited with approval
The Court emphasized that the insured cannot be the sole arbiter of materiality. The proposal form’s questions are designed to elicit all information relevant to risk assessment. The ultrasound, though for kidney stones, was a diagnostic procedure falling squarely within the scope of Question 7(ix). The Court held that the petitioner’s answer was not merely an omission but an active concealment, satisfying the definition of fraud under Explanation I(b) of Section 45: "active concealment of a fact by the insured having knowledge or belief of the fact."
The Court further dismissed the petitioner’s perjury claims. It noted that allegations of false statements regarding an "independent investigation" were speculative and lacked concrete evidence of deliberate falsehood. The Court cited James Kunjwal and Ashok Kumar Aggarwal to affirm that perjury requires a deliberate, conscious effort to mislead the court - not mere inconsistency or lack of documentation. The application under Rule 150 of the Kerala High Court Rules was held to be procedurally defective, as it did not comply with Section 379 of the Bharatiya Nyaya Sanhita, which mandates a preliminary inquiry before initiating criminal proceedings.
The Verdict
The appellants won. The Court held that the petitioner’s failure to disclose the ultrasound scan constituted fraudulent suppression under Section 45 of the Insurance Act, 1938, justifying repudiation of the claim. The Single Judge’s order was set aside, the writ petition dismissed, and the interlocutory applications rejected.
What This Means For Similar Cases
Disclosure Obligations Are Strict and Objective
- Practitioners must advise clients that any diagnostic test listed in a proposal form - regardless of perceived relevance - must be disclosed.
- Insureds cannot rely on subjective beliefs about materiality; the insurer’s questions define the scope of disclosure.
- Failure to disclose even non-life-threatening conditions may void coverage if they fall within the scope of the form’s queries.
Cancer Cover Policies Are Covered Under Section 45
- Fixed-sum cancer policies are treated as life insurance for the purposes of Section 45, even if they do not reimburse medical costs.
- Insurers may repudiate claims within three years if fraud is established through suppression in the proposal form.
- Policy documents referencing Section 45 create a binding contractual framework for repudiation.
Perjury Claims Require Concrete Evidence
- Allegations of perjury against insurers must be supported by verifiable proof of deliberate falsehood - not mere suspicion or procedural inconsistency.
- Applications for criminal prosecution under BNSS must strictly follow Section 379 procedures, including preliminary inquiry and formal complaint.
- Courts will not entertain perjury petitions based on speculative claims about access to medical records or internal underwriting norms.
