Court caseAIR 1984 MP 126

A man took out a life insurance policy with the Corporation. In the proposal form he did not mention that some earlier policies on his life had lapsed for non-payment of premium. After his death the Corporation repudiated the claim of his widow, Bhagwani Bai, on the ground that the proposer had fraudulently suppressed a material fact in breach of the duty of utmost good faith owed by an assured.

The Madhya Pradesh High Court decreed the widow's claim. Although a contract of insurance is one of utmost good faith, not every omission avoids it. The insurer must show that the undisclosed fact was material to the risk and that it was suppressed fraudulently; mere silence about a fact which did not affect the insurer's assessment of the life proposed, such as earlier policies that had simply lapsed, is not fraud. The repudiation was unjustified.