🏛️ “Defeats the Purpose of Life Insurance”: Kerala High Court Pulls Up LIC for Rejecting Claims on Trivial Grounds
Author: Amarjeet Panghal | Date: October 5, 2025
Introduction
In a strongly worded judgment, the Kerala High Court recently criticised the Life Insurance Corporation of India (LIC) for rejecting genuine medical insurance claims on trivial technical grounds, observing that such actions “defeat the very purpose of life insurance.” The ruling marks an important reaffirmation of consumer rights under the Insurance Act, 1938, and underscores the judiciary’s stand against arbitrary claim repudiations by insurers.
Case Background
The case arose from LIC’s repudiation of a claim under its Health Plus (Table 901) policy. The insured had undergone medical treatment and subsequently filed a claim, which LIC rejected on the ground that the insured had failed to disclose a pre-existing medical condition at the time of obtaining the policy.
The High Court found that the alleged pre-existing condition had no connection to the ailment for which the claim was made. LIC’s refusal was therefore held to be arbitrary and unjustified.
Court’s Key Observations
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Material Non-Disclosure Must Be Relevant
The Court held that non-disclosure must be material to the risk insured. Concealment of an ailment unrelated to the cause of the claim cannot form the basis for rejection.“An insurer cannot deny a claim on the ground of non-disclosure of a medical condition that has no nexus with the treatment sought under the policy.”
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Protection Under Section 45, Insurance Act, 1938
The judgment reaffirmed that once a policy has been in force for over two years, it cannot be called into question on the ground of misstatement or suppression—except in cases of proven fraud.This statutory protection was violated when LIC repudiated the claim nearly eight years after the policy was issued.
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Doctrine of Contra Proferentem
The Court invoked the principle of contra proferentem—that ambiguities in an insurance policy must be interpreted against the drafter, i.e., the insurer. It observed that standard-form contracts drafted by large institutions cannot be allowed to exploit technicalities to the detriment of policyholders. -
Public Duty of a State-Run Insurer
The Court reminded LIC of its social welfare obligations as a public sector undertaking. The insurer’s conduct, the Court said, must reflect fairness, transparency, and empathy rather than rigid adherence to technical clauses. -
Right to Life and Health
In a powerful observation, the Court noted that arbitrary denial of insurance claims can effectively amount to denial of medical treatment, infringing upon the right to life under Article 21 of the Constitution of India.
Legal Precedents and Citations
The Court’s reasoning aligns with earlier Supreme Court and High Court rulings such as:
- LIC of India v. Asha Goel (2001) 2 SCC 160 – held that repudiation of insurance claims must be based on sound reasoning, not technicalities.
- Satwant Kaur Sandhu v. New India Assurance Co. Ltd. (2009) 8 SCC 316 – emphasised that suppression of material facts must relate directly to the cause of the claim.
- Reliance Life Insurance Co. Ltd. v. Rekhaben Nareshbhai Rathod (2019) 6 SCC 175 – clarified the strict limits under Section 45 regarding repudiation after two years.
Broader Implications
This judgment has wider consequences for India’s insurance industry:
- It strengthens consumer protection in the insurance sector by restricting arbitrary repudiations.
- It highlights the fiduciary responsibility of insurers to act in good faith and avoid using obscure clauses to deny benefits.
- It sends a clear message to both public and private insurers: technical excuses cannot override the spirit of social security embedded in life and health insurance policies.
Conclusion
The Kerala High Court’s decision serves as a reminder that insurance is not merely a commercial contract but a social instrument of protection. By denouncing claim denials on trivial grounds, the Court reaffirmed that the purpose of life and health insurance.
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