Insurer Cannot Reject Claim for a Defect Found After the Loss

Direct answer: No. An insurer cannot reject your claim just because it found a defect, corrosion, or some hidden condition only after the loss happened. The Supreme Court held in November 2025 that a defect discovered after the loss cannot be used to repudiate the claim, because that defeats the very purpose of the insurance contract.

If your insurer rejected a genuine claim by pointing to damage or corrosion that it noticed only during the post-loss survey, that rejection is on weak ground. This page explains the ruling and shows you the exact steps to challenge it.

At a glance:

• Who this helps: Any policyholder whose claim was repudiated using a defect or condition the insurer found only after the loss.
• What the ruling says: A defect found after the loss cannot defeat the claim; the insurer carries a heavy burden when it relies on an exclusion clause.
• What to do: Send a written grievance to the insurer, then escalate to the Insurance Ombudsman, and if needed to the consumer commission.

The case is Kopargaon Sahakari Sakhar Karkhana Ltd v. National Insurance Co Ltd, 2025 INSC 1315, decided on 13 November 2025.

The insurer tried to reject the claim by relying on an exclusion clause (clause 5) and on damage or corrosion that came to light only after the loss. The Supreme Court did not accept this. It held that a subsequent discovery of damage or corrosion, that is a defect found only after the loss occurred, cannot be used to repudiate the claim. Allowing that would defeat the main purpose of the insurance contract.

The Court also held the insurer to a heavy burden when it leans on an exclusion clause. It allowed the policyholder's appeals and sent the matter back to the National Consumer Disputes Redressal Commission (NCDRC) to decide the quantum, that is the actual amount payable.

So the policyholder won on the principle. The figure is to be worked out by the NCDRC on remand.

If your insurer has rejected your claim on a defect-found-after-loss ground, follow these steps in order. Keep every letter, email, and survey report.

Ask the insurer for the exact reason for rejection in writing. A claim cannot be defended on a vague oral excuse. If the repudiation letter cites an exclusion clause or a “pre-existing” defect, note the exact clause number quoted.

Write to the insurer's Grievance Redressal Officer. State your policy number, the claim number, the date of loss, and why the rejection is wrong. Make the point clearly: the defect or corrosion was discovered only after the loss, so it cannot be used to repudiate the claim. The insurer must respond within its grievance timelines.

If the insurer does not reply, or the reply is unsatisfactory, approach the Insurance Ombudsman. The Ombudsman handles policyholder complaints under the Insurance Ombudsman Rules 2017. This route is free and does not need a lawyer. Attach the policy, the claim papers, the repudiation letter, and your grievance.

You can also take the matter to a consumer commission under the Consumer Protection Act 2019. Wrongful rejection of a valid claim is a deficiency in service. The Supreme Court's remand in the Kopargaon case went to the NCDRC, which is the apex consumer body, so this is a recognised forum for insurance disputes.

The insurer, not you, must prove a valid ground to repudiate. Exclusion clauses are read narrowly against the insurer, that is the contra proferentem rule. Quote this in your complaint: the insurer carries the burden, and a defect found only after the loss does not discharge it.

These two are very different, and insurers often blur them. Keep them separate.

• Non-disclosure before the policy: This is about a material fact you should have told the insurer when you bought the policy. A material fact is one that would influence a prudent insurer's decision to give cover or set the premium. Hiding such a fact can be a valid ground to repudiate.
• Defect discovered after the loss: This is something the insurer noticed only during the post-loss survey. Under the 2025 ruling, this cannot be used to reject the claim, because it defeats the purpose of the cover.

If your rejection letter is really about a defect spotted after the loss but is dressed up as “non-disclosure”, say so plainly in your grievance and complaint.

No. The Supreme Court held in 2025 that a defect, damage, or corrosion discovered only after the loss cannot be used to repudiate the claim. Doing so would defeat the main purpose of the insurance contract. The insurer also carries a heavy burden when it relies on an exclusion clause.

Kopargaon Sahakari Sakhar Karkhana Ltd v. National Insurance Co Ltd, 2025 INSC 1315, decided on 13 November 2025. The Court allowed the policyholder's appeals and sent the matter back to the NCDRC to decide the amount payable.

The insurer. Under insurance law, the insurer carries the burden of proving a valid ground to repudiate a claim. Exclusion clauses are read narrowly against the insurer under the contra proferentem rule. You do not have to prove the absence of a defect.

A material fact is one that would influence a prudent insurer's decision to give cover or to fix the premium. Non-disclosure of a material fact at the time of buying the policy can be a valid ground to repudiate. But that is different from a defect the insurer finds only after the loss.

First write to the insurer's grievance officer. If that fails, approach the Insurance Ombudsman under the Insurance Ombudsman Rules 2017, which is free. You can also file before a consumer commission under the Consumer Protection Act 2019 for deficiency in service.

No. In the Kopargaon case the Supreme Court decided the principle and sent the matter back to the NCDRC to work out the quantum, that is the actual amount. The ruling settles that the rejection ground was wrong, not how much money you receive.

• Pull out your repudiation letter and underline the exact clause or reason quoted.
• Check whether the reason is really a defect or corrosion the insurer found only after the loss.
• Draft a short written grievance to the insurer's Grievance Redressal Officer with your policy and claim numbers.
• Note the Kopargaon case (2025 INSC 1315) in your grievance as the legal basis.
• Keep copies of the policy, the survey report, and all correspondence in one folder.

• Insurer cannot reject your claim over non-disclosure of other policies
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• The RTI Playbook

• Kopargaon Sahakari Sakhar Karkhana Ltd v. National Insurance Co Ltd, 2025 INSC 1315 (Supreme Court, 13 November 2025): https://indiankanoon.org/doc/104695873/

The IRDAI rule that insurers cannot reject claims for defects found after the loss is crucial. Here is the complete guide:

1. Step 1: What is the rule? (a) IRDAI has clarified that insurers cannot reject a claim based on a defect found after the loss occurred, (b) the rule applies to: (i) motor insurance (the car had a defect that was discovered after the accident — the insurer cannot reject the claim), (ii) property insurance (the property had a structural defect discovered after the damage — the insurer cannot reject), (iii) health insurance (the insured had a pre-existing condition discovered after the claim — the insurer cannot reject if the moratorium period has passed), © the principle is: the defect must have existed before the loss, but the insurer cannot use it to reject the claim if it was not known to the insured.
2. Step 2: How insurers try to reject. (a) the insurer conducts a post-loss survey (and discovers a defect — e.g., the car had a modified engine, the property had unauthorised construction), (b) the insurer says: “the policy does not cover defects — the loss was caused by the defect, not by an insured peril”, © the insurer says: “the insured did not disclose the defect — this is non-disclosure”, (d) the insurer says: “the policy is void ab initio — because the insured concealed the defect at the time of policy purchase”.
3. Step 3: How to counter. (a) argue: the defect was not known to the insured (the insured was not aware of the defect — the insurer cannot penalise the insured for something they did not know), (b) argue: the defect did not cause the loss (the loss was caused by an insured peril — e.g., the accident was caused by the other driver, not by the car's defect), © argue: the insurer had the opportunity to inspect (at the time of policy purchase — the insurer could have inspected the property/vehicle and identified the defect), (d) argue: the IRDAI regulation prohibits rejection for post-loss discovered defects.
4. Step 4: Motor insurance specific. (a) the car had a modified engine (the insurer says: “modification is a breach of policy conditions — claim rejected”), (b) counter: (i) the modification was not performance-enhancing (e.g., a different air filter — this does not affect the accident), (ii) the modification was declared to the insurer (check the proposal form — if the insured declared the modification, the insurer accepted it), (iii) the accident was not caused by the modification (the surveyor's report will show the cause of the accident), © the car had an expired PUC (the insurer says: “expired PUC is a breach — claim rejected”), (d) counter: (i) expired PUC does not cause accidents (the PUC is an environmental requirement, not a safety requirement), (ii) the Supreme Court has held that expired PUC cannot be a ground for claim rejection.
5. Step 5: Property insurance specific. (a) the property had unauthorised construction (the insurer says: “unauthorised construction is a breach — claim rejected”), (b) counter: (i) the unauthorised construction was not known to the insured (the insured may have bought the property with the construction — the insurer cannot penalise the insured for the previous owner's act), (ii) the loss was caused by an insured peril (e.g., fire, flood — not by the unauthorised construction), © the property had an old roof (the insurer says: “old roof is wear and tear — claim rejected”), (d) counter: (i) wear and tear is excluded (but the loss was caused by a storm — the storm damaged the roof, the roof's age did not cause the storm).
6. Step 6: How to enforce. (a) file a complaint with the insurer's grievance redressal officer (citing the IRDAI regulation), (b) file a complaint with IRDAI (at igms.irda.gov.in), © file a complaint with the Insurance Ombudsman (the Ombudsman can order the insurer to pay the claim — the Ombudsman's order is binding on the insurer), (d) file a consumer complaint (the rejection is a deficiency of service — the consumer forum can order payment of the claim with compensation).
7. Step 7: File RTI. File RTI with IRDAI asking for: (a) the regulation/circular on post-loss discovered defects (to attach to your complaint), (b) the number of complaints against [insurer name] for rejecting claims based on post-loss defects, © the action taken by IRDAI on those complaints.

See Health Insurance Moratorium and Find PIO.