Insurer Must Prove Fraud with Direct and Cogent Evidence — Post-Policy Records Not Enough to Void Life Insurance: Punjab & Haryana High Court Restores Widow’s Claim

“To permit post-hoc inferences to override the contemporaneous act of medical certification is to dilute the insurer’s burden under Section 45” — In landmark judgement Punjab and Haryana High Court delivered a significant ruling on the burden of proof in life insurance claims repudiated on grounds of concealment of illness. The Court allowed the appeal of a widow whose husband’s insurance claim had been denied by LIC, reaffirming the principle that “the insurer must prove with admissible and reliable evidence that the proposer knowingly made false statements or suppressed material facts which were within his knowledge and material to the risk.”

Justice Mandeep Pannu, in a detailed and sharply reasoned decision, set aside the lower appellate court’s judgment that had reversed the trial court's decree in favour of the widow, holding that the insurer failed to discharge its statutory burden under Section 45 of the Insurance Act, 1938.

The Court observed:

“To treat hospital admission notes as conclusive proof of fraudulent suppression would be to permit post-hoc inferences to override the contemporaneous act of the insurer, namely, the medical examination by the Corporation’s authorised doctor.”

“Failure to Produce Own Doctor or Investigator Raises Adverse Inference — LIC’s Repudiation Held Unsustainable”

The dispute arose when Ranjit Kaur, widow of Kehar Singh, filed a suit to recover ₹50,000 — the sum assured under a life insurance policy issued by LIC on 27 December 1987. Her husband, a serving Kanungo under the Punjab Government, died on 28 June 1988, just six months after the issuance of the policy. The claim was repudiated by LIC on 1 June 1989, alleging fraudulent concealment of pre-existing diabetes, hypertension, and chronic renal failure by the deceased.

Initially, the Trial Court at Samrala decreed the suit in 1994, holding that LIC had not proved any suppression of material facts. However, the District Judge, Ludhiana reversed the decree in 1995, relying heavily on hospital records from after the issuance of the policy, including admission records from CMC Hospital, Ludhiana, and leave applications filed by the deceased.

Upon second appeal, the High Court restored the trial court’s findings, noting that the lower appellate court had “misapplied the evidentiary burden under Section 45” and placed reliance on materials that lacked the legal capacity to prove fraud.

Justice Mandeep Pannu clarified:

“The Corporation did not adduce in evidence the best available witnesses and documents necessary to discharge the onus under Section 45... Their absence cannot be treated as neutral — in such circumstances, an adverse inference can legitimately be drawn that their testimony would not have supported the case of the insurer.”

“Fraud Must Be Proved, Not Presumed — Mere Illness or Hospitalisation Does Not Establish Suppression”

A core aspect of the Court's reasoning lay in distinguishing actual fraud from mere presence of illness, and in scrutinising whether the insured was shown to have knowingly suppressed material facts.

Rejecting the insurer's reliance on post-policy documents, the Court held:

“The documentary material relied upon by the respondents, notably the hospital history and treatment records, relates to events after the issuance of the policy and therefore has limited value in proving the state of health at the time of proposal.”

Further, the Court underlined that even the key medical witness, Dr. A. Manni, who authored a hospital certificate indicating serious ailments, did not examine the deceased at the time of the policy. Her findings, based on post-admission history, were not sufficient to establish suppression at the time of proposal.

The Court noted:

“The doctor herself had not examined the deceased at any time prior to 24.1.1988 and her note is essentially an admission record... It does not amount to direct evidence that the insured had made deliberate false statements in the proposal form.”

Additionally, leave applications produced by LIC — some of which were for marriage-related leave — could not independently establish the presence or knowledge of a chronic illness. The Court found that the insured was in active government service with no sick leave recorded in the year prior to obtaining the policy.

“Principle of Uberrima Fides Imposes High Duty on Proposer — But It Also Casts High Burden on Insurer Alleging Breach”

In reaffirming the core contractual principle of uberrima fides (utmost good faith), the Court clarified that while the proposer must disclose material facts truthfully, the insurer must prove suppression with specificity and reliability.

Justice Pannu explained:

“This is a strict standard of proof... the insurer must establish both the falsity and the materiality of the non-disclosure. The Corporation failed to discharge the heavy onus cast upon it.”

The Court categorically rejected the reasoning of the lower appellate court, stating that it had “allowed conjecture and after-the-event history to supplant the evidentiary requirement” under the Insurance Act. The trial court’s decision, in contrast, was based on a “cautious and reasoned approach” and properly weighed the evidence, including the non-production of LIC’s own authorised doctor and investigating officer.

Trial Court Decree Restored — Widow Entitled to Insurance Sum with Interest

Setting aside the appellate judgment dated 2 November 1995, the High Court restored the trial court decree dated 4 August 1994 in full. Accordingly, the plaintiff Ranjit Kaur is entitled to recover the insured sum of ₹50,000, along with interest at 12% per annum and all consequential benefits under the policy.

The Court concluded: “The appeal is allowed. The judgment and decree dated 2.11.1995 are set aside. The judgment and decree of the learned Sub Judge 1st Class, Samrala dated 4.8.1994 are restored. Pending applications, if any, also stand disposed of.”

This ruling not only provides relief to the nominee but also reaffirms a crucial proposition in insurance jurisprudence: post-policy evidence cannot substitute for pre-policy proof of knowledge or intent to deceive, and insurers must meet a stringent evidentiary standard before invoking fraud to deny coverage.

Date of Decision: 29 October 2025