Reliance Life v. Rekhaben Rathod: Utmost Good Faith and Disclosure in Insurance

What happened in Reliance Life v. Rekhaben Rathod?

The dispute concerned a life insurance proposal. The proposal form asked about other insurance held, and an earlier policy was not disclosed in the answer. When a claim was later made, the insurer relied on that non-disclosure.

Insurance underwriting depends on information about the risk being insured. When a proposal form asks for information relevant to the insurer’s assessment, a business should treat the answers as a governance responsibility, not paperwork.

Reliance Life case timeline

1. Proposal

   A life insurance proposal is submitted. A question in the form asks about existing insurance.

2. Proposal

   An earlier insurance policy is not disclosed in the answer.

3. Claim

   A claim is made under the policy, and the insurer relies on the non-disclosure.

4. 24 April 2019

   The Supreme Court allows the insurer’s appeal.

Was the non-disclosure of an earlier policy significant?

Insurance is a contract of utmost good faith. The insurer accepts and prices a risk on the basis of what the proposer tells it. The question was whether the undisclosed earlier policy mattered to that assessment.

What did the Supreme Court decide?

The Supreme Court examined the significance of the non-disclosure and allowed the insurer’s appeal on 24 April 2019.

Put simply, where a proposal form asks a specific question and the answer leaves out relevant information, the insurer may be entitled to rely on that omission. The exact disclosure obligations always depend on the applicable law, the policy and the questions the insurer actually asked.

Why does a life insurance case matter to corporate insurance buyers?

Although the case involved an individual life policy, the principle travels. For a business, disclosure can involve previous claims, existing insurance arrangements, business activities, locations, revenue, cyber incidents, material changes, litigation or any other information a proposal form asks for.

It is especially relevant to Directors & Officers insurance, cyber insurance, property insurance, professional indemnity, marine insurance and employee benefits programmes, where proposal forms ask detailed questions about claims history, controls and operations.

Disclosure lessons for corporate insurance

• Proposal forms are not routine paperwork. What is submitted at underwriting can become decisive when a claim is assessed.
• Involve the people who know the facts. Finance, legal, HR, IT, operations and risk teams should verify the answers that relate to them.
• Disclose existing insurance and claims history when asked. Earlier policies, open claims and past losses are standard questions.
• Update the insurer on material changes. New locations, acquisitions, incidents or litigation since the last renewal may need to be declared.
• Keep a record. Retain a copy of the completed proposal and supporting documents so the company can show what it disclosed.

Proposal form disclosure checklist

• Previous policies and claims reviewed before the proposal is signed
• Operational and financial figures verified against source records
• Material changes since the last renewal listed and disclosed
• Cyber incidents, litigation and regulatory notices checked with legal and IT
• Each answer owned by the function that holds the facts
• Signed proposal and attachments archived with the policy

Why it matters for businesses in Bengaluru and across India

Proposal forms for D&O, cyber and professional indemnity cover ask detailed questions about claims, controls and operations. Whether a company is a start-up in Bengaluru, a listed group in Mumbai or a manufacturer in Pune or Chennai, the governance lesson is the same: insurance begins before the policy is issued.

How ClearCover helps with disclosure and renewals

ClearCover helps Indian businesses evaluate corporate insurance requirements and prepare for structured insurance reviews across property, liability, cyber and employee benefits — including working through proposal forms with the teams that hold the facts.

Key terms explained

Utmost good faith (uberrimae fidei)

The principle that both parties to an insurance contract must deal honestly and disclose material facts.

Material fact

Information that would influence an insurer’s decision to accept a risk, or the terms on which it does so.

Proposal form

The insurer’s questionnaire completed by the applicant. Its answers typically form the basis of the insurance contract.

Non-disclosure

Leaving out information the insurer asked for, or that is material to the risk.