Smt. Krishna Wanti Puri v. Life Insurance Corporation of India, AIR 1975 Del. 19

On 19 February 1968 Smt. Krishna Wanti Puri, widow of the late Dharam Pal Puri, sued the Life Insurance Corporation for Rs 85,000 with profits and interest on four policies taken out by her husband, claiming as his assignee. Dharam Pal Puri had died on 5 August 1964.

The Corporation resisted. Its defence was that the deceased had been suffering from heart disease, that he knew of it, that he had consulted doctors about it, and that he fraudulently suppressed those facts. In the proposal forms and personal statements he had stated his usual state of health as good and had answered No to the question whether he had consulted a medical practitioner within the last five years.

Of the four issues framed, the crucial one was the third: were the defendants entitled to deny payment on the grounds stated in the written statement? The onus on that issue lay on the Corporation, to prove fraudulent concealment and material suppression.

The Corporation examined three doctors. Their evidence was relied on to show that the deceased had been suffering from heart disease since 1946, that he knew of it, and that it was the disease of which he ultimately died. One of the doctors was cross-examined on an inconsistency between certificates — in some the duration of the disease was given as seven and a half years, in others as one and a half years — and accepted that without reference to the original records he could not say whether the entries were correctly made.

The judgment restates the doctrine and then the statutory test.

The doctrine. Contracts of insurance are uberrima fides; the insured owes a duty, before the contract is made, to disclose every material fact of which he knows or ought to know, and if a material fact is not disclosed the insurers have the right at any time to avoid the contract. The judgment invokes Lord Mansfield in Carter v. Boehm: insurance is a contract upon speculation, the special facts lying generally in the knowledge of the assured only, so that good faith requires that he should not keep back anything which might influence the insurer in deciding whether to accept or reject the risk.

Materiality. A fact is material if it is one that would affect the mind of a prudent man, even though the assured does not appreciate the materiality. That sentence is the most quotable line in the case: materiality is objective and is not tested by the assured's own view of what matters.

The statutory test. The court applied the three conditions laid down in Mithoolal Nayak: a statement on a material matter or suppression of material facts; fraud in the suppression; and knowledge by the policyholder at the time.

The three conditions were satisfied. The suit was dismissed, the parties bearing their own costs.

The widow's alternative claim to the premiums paid also failed, on three grounds, and they should be learned as a set:

1. Where a policy is voidable for fraudulent misrepresentation, the insurer may have it set aside without returning the premiums.
2. Mithoolal Nayak holds that in a case of fraud the plaintiff cannot claim a refund, because the courts will not entertain an action for money had and received where, to succeed, the plaintiff must prove his own fraud.
3. The policy itself contained a term that if the policy was void the premium would be forfeited, and that term prevented recovery.

It is the natural companion to Dipashri. Both are High Court decisions on s. 45; in one the insurer discharged the burden and in the other it did not. Taken together they show that the section does not favour either side — it fixes an onus and a standard, and the result turns entirely on the evidence.