Abdul Rehman, an employee of WAPDA, obtained a life insurance policy from State Life Insurance Corporation of Pakistan in 2002. Tragically, he passed away in 2010, and his legal heir, Atta Ur Rehman, filed a claim. The insurer denied the claim, alleging that Abdul had concealed his diabetes and heart condition when applying for the policy. What followed was a decade-long legal battle that culminated in a landmark Supreme Court of Pakistan ruling in favor of policyholder rights.
The Legal Battle: Duty of Utmost Good Faith
Insurance contracts are based on the principle of uberrimae fidei (utmost good faith), requiring both parties to act honestly. The insurer argued that Abdul violated this duty by withholding his medical history, which they claimed was crucial to their risk assessment.
Key Legal Principles
- Material Non-Disclosure: If the insured conceals critical information (e.g., a severe heart condition), the insurer may void the policy.
- Inducement: The insurer must prove that the non-disclosure influenced their decision to issue the policy.
- Section 80 of the Insurance Ordinance: Insurers cannot contest a policy after two years unless they prove fraudulent intent.
Why the Insurer Lost: The Court’s Reasoning
- Medical Examination Matters: Abdul’s own doctor had certified him as “fit, first class.” The Court ruled that the insurer could not hold Abdul accountable for their doctor’s oversight.
- No Proof of Fraud: Under Section 80, the insurer failed to meet the high burden of proving deliberate deception.
- Industry Practice: Life insurers typically rely on medical tests. If their process fails, they cannot shift blame to the policyholder.
Outcome: A Win for Policyholders
The Supreme Court dismissed the insurer’s appeal, upholding the lower courts’ rulings. The decision reinforced:
- After two years, insurers must prove fraud to deny a claim.
- Policyholders are protected if insurers fail in their due diligence.
Key Takeaways
- Always disclose your medical history when applying for insurance.
- Insurers must act ethically and cannot deny claims without solid evidence of fraud.
- Laws like Section 80 safeguard policyholders from unjust claim rejections.
Learn more about how to challenge a denied insurance claim in Pakistan.
Frequently Asked Questions
Can an insurer reject a claim after two years?
Only if they prove fraud; otherwise, Section 80 prohibits it.
What if the insurer’s doctor misses a medical condition?
The insurer bears the risk, not the policyholder.
For the full judgment, visit the Supreme Court of Pakistan’s website.
