GUJARAT NATIONAL LAW UNIVERSITY

PROJECT ON LAW OF INSAURANCE

TOPIC:-
UTMOST GOOD FAITH

SUBMITTED TO: - SUBMITTED BY:-

MR. JAGDISH CHANDRA NAME: AAKRITI SINGH (16A003)

RIPUL SWATI KUMARI (16BI30)

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 ACKNOWLEDGEMENT

Writing a project is one of the most significant academic challenges, we have ever faced.
Though this project has been presented by us but there are many people who remained
behind the veil, who gave their all support and helped us to complete this project.

First of all we are very grateful to our subject teacher Mr. Jagdish Chandra and also
Mrs. Garima Goswami, without their kind support and help, the completion of the
project would’ve been a herculean task for us. I am very thankful to the librarian who
provided us with several books on this topic which proved beneficial in completing this
project.

We acknowledge our friends who gave their valuable and meticulous advice which was
very useful and could not be left out while writing the project.

Last but not the least, we are very much thankful to our parents and family, who always
stand beside us and helped us a lot in accessing all sorts of resources.

We thank all of them!

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 TABLE OF CONTENTS
ACKNOWLEDGEMENT................................................................................................................................... 2

TABLE OF CONTENTS.................................................................................................................................... 3

INTRODUCTION................................................................................................................................................ 5

OBJECTIVES:-..................................................................................................................................................... 5

RESEARCH METHODOLOGY:-..................................................................................................................... 5

INSURANCE CONTRACT................................................................................................................................ 6

UTMOST GOOD FAITH................................................................................................................................... 7

SECTION 45 OF INSURANCE ACT, 1938................................................................................................. 8

DOCTRINE OF UTMOST GOOD FAITH..................................................................................................... 9

I. INDISPUTABILITY OF POLICY....................................................................................................... 9

II. MATERIAL FACTS.......................................................................................................................... 9

III. UBERRIMA FIDES: DUTY OF BOTH THE PARTIES.........................................................10

IV. NON-DISCLOSURE OF MATERIAL FACTS AS GROUND OF REPUDIATION..........10

V. VARIATIONS OF DOCTRINE OF UTMOST GOOD FAITH..............................................11

VI. REPERCUSSIONS FOR VIOLATIONS OF GOOD FAITH..................................................11

TYPES OF BREACH OF UTMOST GOOD FAITH.................................................................................. 12

I. REMEDIES FOR BREACH OF UTMOST GOOD FAITH.........................................................12

DOCTRINE OF UTMOST GOOD FAITH UNDER COMMON LAW..................................................13

I. ORIGIN OF DOCTRINE OF GOOD FAITH................................................................................. 13

II. ANALYSIS OF CARTER VS. BOEHM....................................................................................... 14

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 III. ENGLISH COURT ON DOCTRINE OF GOOD FAITH.........................................................14

LANDMARK CASES....................................................................................................................................... 16

I. LIFE INSURANCE CORPORATION VS ASHA GOEL..............................................................16

1. BRIEF FACTS OF THE CASE:............................................................................................... 16

2. ISSUES IN THE CASE:............................................................................................................. 16

II. MITHOOLAL NAYAK VS. LIC.................................................................................................... 18

1. FACTS IN BRIEF:...................................................................................................................... 18

2. ISSUES IN THE CASE:............................................................................................................. 19

III. SATWANT KAUR SANDHU VS NEW INDIA ASSURANCE COMPANY......................19

1. FACTS IN BRIEF:...................................................................................................................... 19

2. ISSUES IN THE CASE:............................................................................................................. 20

CONCLUSION................................................................................................................................................... 22

BIBLIOGRAPHY.............................................................................................................................................. 24

I. BOOKS:-................................................................................................................................................ 24

II. WEBSITES:-.................................................................................................................................... 24

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 INTRODUCTION
Utmost good faith is a common law principle (sometimes called Uberrimae Fidei). The
principle means that every person who enters into a contract of insurance has a legal
responsibility to act with utmost good faith towards the company offering the insurance. A
person must, therefore, always be honest and precise in the information they give to the
insurance company. The insurance company also has a responsibility to act with good faith in
all its transactions with the insured. This doctrine applies to most contract types, together
with contracts of insurance. Although this project discusses how the doctrine applies to
representations, disclosures, and warranties, the doctrine may be applied to many aspects of
the contracting process.

OBJECTIVES:-
 To Study & Understand the Concept of Utmost Good Faith.

 To Study about Section 45 of Insurance Act, 1945.

 To Study and analyze the types of breach of utmost good faith.

 To Study the relevant considerations relating to Doctrine of Utmost Good Faith under
Common law.

 To analyze the case laws relating to doctrine of utmost goof faith.

RESEARCH METHODOLOGY:-
In this project, the researcher has relied on the ‘Doctrinal Method’, which is mainly based
upon books, news, articles etc. A comprehensive study is made in order to arrive at analytical
& critical support of the arguments. The fragments are structured and written actively. The
writing style is descriptive and analytical. This project has been done after a thorough
research based upon intrinsic and extrinsic aspect of the assigned topic.

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 INSURANCE CONTRACT
In insurance contracts, there are usually two parties involved: the insurer and the applicant (or
insured). The insurer is the party licensed to offer insurance products. For example, if you get
your automobile insurance from Northern Insurance, then Northern Insurance is the insurer.
The applicant is the party seeking to purchase an insurance policy. An applicant can be an
individual, such as you purchasing automobile insurance. An applicant can also be an
organization or business and may apply for general liability insurance.

An insured is the party that owns a valid insurance policy. Once the applicant has been
offered a policy, paid the initial premium, and received the policy, the applicant becomes the
insured. An insurance policy is a document that sets forth terms and conditions and serves as
the formal insurance contract. If you purchase a policy of automobile insurance, its terms and
conditions may require that you pay a deductible and that it will only cover 80% of the cost
of replacement if your vehicle’s damaged beyond repair.

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 UTMOST GOOD FAITH
Uberrima fidei is a Latin phrase meaning “utmost good faith” (literally, “most abundant
faith”). It is a legal doctrine which governs insurance contracts which means that all parties to
an insurance contract duty to deal in good faith, making a full declaration of all material facts
in the insurance proposal. It is defined as “firm adherence to promises made to another as
well as disclosure of all related facts and complete trust in the fidelity of the other.”

The insurance contract is led by the legal maxim “the utmost good faith”. The observance of
utmost good faith by the parties is essential to a contract of insurance. Insurance is called an
UBERRIMA FIDEI contract since the parties are required to conform to a higher degree of
good faith than in the general law of contract. Insurance, a device of risk transference stands
on a separate basis. The non-disclosure of a material fact by the assured whether fraudulent or
innocent, has the equal effect of avoiding the contract. A stringent duty is imposed on the
assured to provide all the material facts that might influence the decision of the insurer.

It is the responsibility of the assured to disclose all material facts within their knowledge. In
cases of life insurance, certain precise questions are proposed as the facts affecting in general
all mankind. But there may be circumstances also affecting particular persons, which are not
likely to be known to the insurer, and which had they been known, would undoubtedly, have
been made subject to specific enquiries. The question as to which information is material to
the contract is a wide one. In case of dispute a court or a committee of arbitrators may decide
it. But this cannot certainly get to the opinion of the proposer. “Every status quo is material
which would affect the judgment of a prudent insurer in fixing the premium or determining
whether he will take the risk”.

In an insurance contract each party acts on the good faith of the other. If the proposer hides or
misrepresents material facts, the contract is vitiated. Concealment or misrepresentation
amounts to fraud, and the policy is legally void. Innocent defamatory or misrepresentation
renders the policy voidable at the option of the insurer up to two years.

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 SECTION 45 OF INSURANCE ACT, 1938
Under Section 45 of the Insurance Act, 1938 in the case of life insurance a two years’ time
limit is imposed in bring the validity of the policy into question by the insurer on the ground
of misstatements in answers to questions in the proposal form or in any report or document
leading to the issue of the policy. Section 45 says that after the expiry of two years from the
date on which it was effected no policy of life insurance be called in question by an insurer
on the ground that a statement made in the proposal for insurance or in any report of a
medical officer, or referee, or friend of the insured, or in any other document leading to the
issue of the policy, was inaccurate or false. The insurer cannot avoid the consequences of the
insurance contract by simply showing inaccuracy or falsity of the statement made in the
proposal form but has to prove under section 45 that the life insurance policy has been
obtained by means of fraudulent misrepresentation.1

For evading the policy on the ground of fraudulent concealment under the provisions of
section 45, “it must be persuasively shown that the matter in question was knowingly
concealed.” The insurer has also to show:

(a) That such statement was on a material matter or suppressed facts which it was
material to disclose and,
(b) That it was fraudulently made by the policyholder and,
(c) That the policyholder knew at the time of making it that the statement was false or
that it suppressed facts which it was material to disclose.

Thus, if an alcoholic person had mentioned that he is non-alcoholic as well as he dies in a

heart attack within 2 years of the policy commencement, then also the Insurance Company
may repudiate or decline the claim on grounds of “non-disclosure” or “misrepresentation” of
“material facts”, i.e. for not stating the complete truth or misstating information which is
relevant for underwriting and risk assessment. His policy could be over-rated or loaded with
additional premium if the underwriters were aware of the fact. Thus, it is the proposer’s duty
to make full disclosure. In the event of failure to disclose material facts, the contract can be
held null and void. The duty of disclosure in life insurance operates till the risk begins.

1
The Insurance Act 1938, s 45

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 DOCTRINE OF UTMOST GOOD FAITH
In the insurance market, the principle of utmost good faith entails the applicant to disclose all
relevant personal information, such as previous health problems. Likewise, the insurance
agent must disclose critical details about the contract and its terms. Unlike insurance
contracts, several commercial agreements do not subscribe to the doctrine of utmost good
faith. Instead, most are subject to caveat emptor which is “buyer beware.” A seller need only
disclosed information requested by the buyer.

The doctrine of utmost good faith provides general assurance that the parties involved in a
transaction are truthful and acting ethically. Ethical transactions include assuring all relevant
information is available to both parties during negotiations or when amounts are determined.2

I. INDISPUTABILITY OF POLICY

The doctrine of utmost good faith works as a great hardship for a long period on the plea of
miss-statement at the time of proposal. In such cases, it would be hard to demonstrate or
invalidate whether a specific proclamation made, at the hour of strategy was valid. Hence, to
expel this hardship, certain areas in the concerned Act are given. In India, Section 45 of the
Insurance, Act 1938 arrangements with such debate. It is called unquestionable condition. No
strategy of extra security, after expiry of two years from the date on which it was affected, be
raised doubt about by a back up plan on the ground that an announcement made in the
proposition for protection or in any report of a clinical official or arbitrator or companion of
the guaranteed or in some other archive prompting the issue of the arrangement was
erroneous or bogus, except if the guarantor shows that such proclamation was on a material
issue or smothered realities which it was material to reveal and that it was deceitfully made
by the approach holder and that the policyholder knew at the hour of making it that the
announcement was bogus or that it stifled realities which it was material to uncover. Given
that nothing right now keep the safety net provider from calling for confirmation old enough
whenever in the event that he is qualified for do as such. Material facts depend on the
legitimate head of "most extreme great confidence," which requires an individual who is
looking for protection of any sort to reveal all data that could be regarded important by a

2
Doctrine of utmost good faith < https://www.investopedia.com/terms/d/doctrineofutmostgoodfaith.asp>
accessed on 19 March 2020

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safety net provider. This data, known as material actuality, might be any reality or realities
that a protection guarantor could use to survey the degree of hazard related with safeguarding
a specific person. This level of hazard is the thing that a safety net provider uses to decide
your inclusion and your premium, or cost.

In the case of Satwant Kaur Sandhu vs. New India Assurance Co. Ltd,3 the term “material
fact” was explained by the court to mean any fact that would influence the judgement of the
insurer in fixing the premium or determining if he would like to accept the risk or not.

I. UBERRIMA FIDEI: DUTY OF BOTH THE PARTIES

Good faith is normal from the safeguarded or guaranteed just as the guarantor. It is the
purchaser's obligation to unveil all realities identified with the hazard to be secured. So also,
it is the safety net provider's obligation to advise the protected regarding all the details of the
agreement. Be that as it may, it is commonly the guaranteed individual on whom there is a
greater obligation to unveil. This is fundamentally in light of the fact that regularly the safety
net provider needs to rely on what subtleties the protected notices in his structure. On the off
chance that the protected gives wrong subtleties or subtleties of products which are really not
in presence, the safety net provider may wind up paying for inappropriate cases later on. The
safety net provider faces a great deal of issues attempting to confirm every single such detail,
despite the fact that the appearance of innovation has made the errand similarly simpler these
days. Wrong data given influences the backup plan as well as the others engaged with the
protection pool whose premiums might be wrongly used to fulfil the cases. It is in this
manner a suggested condition or guideline of protection that the Assured be required to make
a total honesty of every single material specific inside his insight about the hazard. Further,
considering the expansion in new organizations wherein protection is being taken, it gets
required for the guaranteed to illuminate the guarantor if there are any modifications or
changes to the business which expands the hazard during the legitimacy of the approach and
get his authorization. On the off chance that no revelation is made, the safety net provider has
each option to stay away from the agreement.

II. NON-DISCLOSURE OF MATERIAL FACTS AS GROUND OF

REPUDIATION

3
Satwant Kaur Sandhu v New India Assurance Company Ltd. [2002] Civil Appeal No. 2776, [2002]

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Cases wherein the guaranteed smothers material realities or give bogus and false data with
respect to the previous sickness, right age, salary and occupation and protection approach. In
such cases, the backup plan is inside its privileges to renounce the case, emerging after the
demise of the safeguarded, on the ground that the guaranteed didn't reveal material realities at
the hour of entering the agreement. The existence guaranteed or proposer is under serious
commitment to make full, total, genuine and address divulgence of the material realities
which might be significant for the guarantor to consider while choosing whether the
proposition ought to be acknowledged. On the off chance that the existence guaranteed or
proposer neglected to reveal the genuine and address material realities to the safety net
provider, at that point the strategy got by the existence guaranteed or proposer stands vitiated
and the existence guaranteed or any individual asserting under the approach isn't entitled for
any advantages under the said arrangement. The onus of confirmation is on the guarantor to
demonstrate that the case is disavowed on the ground of non-divulgence or misquote of
material realities. Without narrative proof, the District Forum or State Commission will
dismiss the revocation of guarantee.

III. VARIATIONS OF DOCTRINE OF UTMOST GOOD FAITH

Beside the utilization in the protection showcase, people practice great confidence while
finishing different money related exchanges. This incorporates organizations or people
looking to back from banking foundations, or money related establishments giving expense
gauges.

Regularly, gauges gave by singular specialist organizations, for example, handymen and
circuit testers, are made in accordance with some basic honesty. Great confidence gauges
recommend the specialist organization is positive about the quote dependent on the realized
elements encompassing the exchange. Right now, isn't legitimately authoritative as not all
factors are known. Besides, explicit issues may not be discoverable by either party until work
has started.

IV. REPERCUSSIONS FOR VIOLATIONS OF GOOD FAITH

Depending on the nature of the transaction, violations of the doctrine of good faith can result
in a various consequences. Most commonly, a contract formed with incorrect information
from intentional misinformation or fraudulent concealment may cause the contract to become
voidable.

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Further, in the case of the provision of goods or services before the information is discovered
or disclosed, the misinformed party may possibly enforce legal action. Legal action can
include the right to recover costs associated with the fulfillment of the contract that could be
deemed fraudulent.

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TYPES OF BREACH OF UTMOST GOOD FAITH
A breach of utmost good faith can be in the form of either a misrepresentation (i.e. the giving
of false information) or a non-disclosure (i.e. failure to give material information).
Alternatively, it can be classified into a fraudulent breach and a non-fraudulent breach (i.e. a
breach committed innocently or negligently, rather than fraudulently). Both classifications
combined produce a four-fold categorisation as follows:4

(a) Fraudulent Misrepresentation: an act of fraudulently giving false material facts to

the other party;
(b) Non-fraudulent Misrepresentation: an act of giving false material facts to the other
party done either innocently or negligently;
(c) Fraudulent Non-disclosure: a fraudulent omission to give material facts to the other
party; or
(d) Non-fraudulent Non-disclosure: an omission to give material facts to the other party
done either innocently or negligently.

I. REMEDIES FOR BREACH OF UTMOST GOOD FAITH

If the duty of utmost good faith is breached (any one of the four types mentioned above), the
aggrieved party (normally the insurer) may have available certain remedies against the guilty
party:

(a) To avoid within a reasonable time the whole contract as from policy inception, with
the effect that premiums (and claims) previously paid without knowledge of the
breach are generally returnable, unless it was a fraudulent breach on the part of the
insured or his agent;
(b) In addition to (a) above, it is in principle possible to sue in tort (see Glossary) for
damages in the case of fraudulent or negligent misrepresentation;
(c) To waive the breach, alternatively, in which case the contract becomes valid
retrospectively.

4
Uberrima Fidei http://www.legalservicesindia.com/article/2352/Uberrima-Fides.html accessed on 19 March
2020

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Note: An insurer aggrieved by a breach of utmost good faith has not the option to refuse
payment of a particular claim, to treat the policy as valid for the remainder of the insurance
period, and to retain part of or the whole of the premium paid.

DOCTRINE OF UTMOST GOOD FAITH UNDER

COMMON LAW
The doctrine of uberrima fides is one of the most important doctrines of insurance law. In the
field of Marine Insurance Law, the principle of ‘Utmost Good Faith’ has always been the
crown. This doctrine was originated from the case of Carter vs. Boehm5 and the doctrine
developed under the common law through the subsequent cases till the codification of the
Marine Insurance Act, 1906. However, in English Law there are still some extant divergences
with regard to the understanding of utmost good faith in practice, since the test is founded on
a hypothetical situation and the scope of the statutory provision is still uncertain. Therefore,
analysis of this doctrine is crucial for the study of Marine Insurance Law in the UK, which
needs a study of the pre-existing Common Law describing the basis and courts’ approach,
and also for remodeling the marine insurance law if needed.

I. ORIGIN OF DOCTRINE OF GOOD FAITH

The common law doctrine of “good faith” in insurance contracts was originated in the 18 th
Century. Lord Mansfield is credited with first articulating this concept in Carter vs. Boehm.6
The action was based upon a 12 months policy of insurance, taken out for the benefit of the
governor of Fort Marlborough, George Carter, against the loss of Fort Marlborough on the
island of Sumatra in the East Indies, by its being taken by a foreign enemy. The governor also
had an insurable interest in goods, which he owned, which were kept at the fort. In fact, the
event insured against occurred: the fort was taken, by Count D’Estaigne, during the policy
period. The defendant underwriter, Mr Charles Boehm denied that underwriters were liable to
indemnify the insured because of a fraud, as a result of the concealment (non-disclosure) of
circumstances which ought to have been disclosed particularly, the weakness of the fort, and
the probability of it being attacked by the French.

5
Carter vs. Boehm [1766] 97 ER 1162, 1164
6
Ibid

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The concealment should not have been done by the plaintiff, should have been disclosed
everything which was matters in that insurance policy. If the insurer would know the fact, the
situation could be different. In support of the insurer’s defence, two letters from the governor
were depend on upon – one to his brother, his trustee, the plaintiff in the case and the second
to the governor of the East India Company. The letter to his brother indicated that the
governor was more afraid than before that the French would attack. The governor speculated
to his brother that the French had such an intention the previous year. They asserted that if the
governor had disclosed what he knew or, what he ought to have known, he could not have
obtained the insurance of the fort. Therefore, this was a fraudulent concealment and the
underwriters were not liable.

V. ANALYSIS OF CARTER VS. BOEHM

The general position was that the special facts upon which the contingent chance is to be
computed, like most commonly in the knowledge of the insured only, the underwriter trusts
to his representation, and proceeds upon confidence that he does not keep back any
circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance
does not exist, and to induce him to estimate the risk, as if it did not exist. The keeping back
of such circumstance is a fraud, and therefore, the insurance policy is void on the ground of
the fraud and the principle of utmost good faith was introduced.

From the date of the origins of the doctrine, Lord Mansfield was careful to explain that the
duty of good faith was reciprocal. He opined that an insurance policy would equally be void,
against the underwriter, if he concealed the fact that he insured a ship on her voyage, which
he privately knew to have arrived. In such a case, an action would lie by the insured, to
recover the premium. Lord Mansfield went as far as to state that the governing principle of
“good faith” is applicable to “all contracts and dealings”

VI. ENGLISH COURT ON DOCTRINE OF GOOD FAITH

Utmost good faith was not defined comprehensively, “it is enough that much more than an
absence of bad faith is mandatory for both parties to all contracts of insurance”. It is
nevertheless clear, however, that the court was not prepared to allow arguments that there
were shades of utmost good faith. Similarly, in Banque Keyser Ullman SA v. Skandia (UK)
Insurance Co. [1987] 1 Lloyd’s Rep. 69 at 93 (per Steyn J.): the duty is “not only to abstain
from bad faith but to observe in a positive sense the utmost good faith”.

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This appeared to Good faith prohibits either party by concealing what he privately knows, to
draw the other into a bargain, from his ignorance of that fact, and his believing the contrary.
Nevertheless, during the 18th Century, the English Court placed limitations on the duty of
disclosure. Lord Mansfield expressly pointed out that the insured doesn’t have to mention
what the underwriter knows or ought to know or, what he takes upon himself the knowledge
of or, what he waives being informed of. Neither need the underwriter be told of what lessens
the risk agreed and understood to be run by the express terms of the policy nor, to be told
general topics of speculation; for example, the underwriter is bound to know every cause
which may occasion natural perils such as the difficulty of the voyage, the types of weather;
the probability of lightening, hurricanes, earthquakes which may occur or, political perils
which may arise.

In consequence, it was clear that although the insured is under a duty to disclose material
facts to the insurer, he doesn’t have to disclose facts which the insurer knows or is deemed to
know. This seems to be fair enough.

At the beginning of the 20th Century, the English Court was still saying that it: …“is an
essential condition of the policy of insurance that the underwriters shall be treated with good
faith, not merely in reference to the inception of the risk, but in the steps taken to carry out
the contract” (Boulton v Houlder Bros & Co).7

With the codification of the Marine Insurance Act 1906, the principle found expression in
Sections 17 to 20: Sec. 178 presents the general duty to observe the utmost good faith, with
the following sections introducing particular aspects of the doctrine, namely, the duty of the
assured (Sec. 18)9 and the broker (Sec. 19)10 to disclose material circumstances, and to avoid
making misrepresentations (Sec. 20)11.

However, in English Law there are still some extant divergences with regard to the
understanding of utmost good faith in practice. A minimum standard that requires both the
buyer and seller in a transaction to act honestly toward each other and not mislead or
withhold critical information from one another. In the insurance market, the doctrine of
utmost good faith requires that the party seeking insurance discloses all relevant personal

7
Boulton v Houlder Bros & Co., [1904] (1) KB 784
8
Marine Insurance Act 1906, s 17
9
Marine Insurance Act 1906, s 18
10
Marine Insurance Act 1906, s 19
11
Marine Insurance Act 1906, s 20.

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information and the principle of utmost good faith is one of the key principles in marine
insurance law.

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 LANDMARK CASES

I. LIFE INSURANCE CORPORATION VS ASHA GOEL12

1. Brief facts of the case:

 Insurance policy was taken by the husband of the respondent and the insured died
with 1 and half year of taking of the policy and the claim was repudiated on the
ground of Non-disclosure and withholding information regarding the health of the
Insured.
 Writ petition was filed under Article 22613 in High Court.
 Learned judge held that in view of question of maintainability held that liabilities of
the corporation under life insurance is statutory liability and writ petition can lie under
article 226.
 Corporation stated that the claim was repudiated on the ground that deceased gave
incorrect answers because he stated that his health was good and he had no consulted
a medical practitioner within last 5 years, and also not remained absent from work on
ground of health for 13 days few year back.
 Corporation was not given the opportunity to lead the evidences by the single judge
and there was no enough record brought by corporation to establish conditions
mentioned in the second part of Sec. 45 of the Insurance act. 14 13 days leave could not
be ground to draw conclusion that deceased suffered from health ailment in 1976.
 The Division bench held that the corporation should be allowed to lead evidence
because it would be useful for their contention that policy was obtained by fraud.
Fresh trial started.

2. Issues in the case:

 Whether the high court should entertain writ petition with disputes regarding facts and
evidences?

12
Life Insurance Corporation v Asha Goel [2001] 2 S.C.C. 160 : A.I.R. [2001] S.C. [549]
13
Constitution of India 1950, Article 226
14
The Insurance Act 1938, s 45

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The High Court should not entertain the matter regarding contractual liability. In the case of
Smt. Kiran Sinha vs. LIC15, that Supreme Court passed an order that “High Court could not
have directed payment of money claimed under Insurance policies in question in petition
under Art. 226 of Constitution. The only remedy available to the Respondent in this case was
suit before a civil court. The judgement of High court is thus set aside.

In the following case, the appeal to division bench was allowed on the ground that
corporation was not allowed to lead evidence. This was allowed by the Division Bench. So,
when corporation when starts presenting evidence will defeat the position that states that if it
becomes necessary to inquire into evidences then the proceeding should not be entertained
under Art. 226 of constitution and the matter should go to alternate forum which is civil suit
and not writ petition under writ under High Court. The writ petition should be filed in such
cases where there is no dispute to the facts and no requirement to file evidences. Therefore
the matter should be entertained in civil suit and not in writ petition.

 Whether the judgement of the division bench is right in cancelling the repudiating of
the claim?

The judgement of the division bench upholding the decision of single judge to pay the
claimed is supported because of the following points:

(a) That the claim was repudiated on the ground Non-disclosure of medical history of the
ailment and the policy was repudiated after passing of the limitation period of 2 years. Where
Sec. 45 clearly states that claim cannot be brought in to questioning after period of 2 years
had expired from the date of issuance of the policy.

(b) The defence taken under the second part of the policy cannot be supported because the
corporation has to prove that the deceased had made a false statement and such statement was
material in nature and was made fraudulently. The corporation submitted a claim form B-1
that showed that the deceased suffered from Myocardial infarction given by the patient to Dr.
Kowde.

(c) The thing to note is that the claim form B-1 came into the possession of the LIC after the
claim had been repudiated. Which shows that there was a clear hurry in the minds of the

15
Smt. Kiran Sinha v LIC W.P. No. 1620 [1981]

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 corporation to repudiate the claim. Another thing to note is that Dr. Kowde is still working in
the hospital and for unknown reasons no affidavit by doctor was filed in court

(d) The petitioner (widow) had annexed 2 documents. Firstly, medical attendant’s certificate
by Dr. P.S. Kulkarni which states that he had no heart ailment prior to the policy and
secondly, another claim form B-1 obtained by Irwin group of hospital that showed he
suffered from no heart ailment.

It is clear from the following grounds that there are no sufficient evidences to prove that he
suffered from heart ailment. So there is no question of repudiation on grounds of Non-
disclosure by fraudulent means. Taking all points in mind the repudiation of claim seems to
be done unfairly, unjustly and arbitrarily. The claim should be passed.
VII. MITHOOLAL NAYAK VS. LIC16

1. Facts in brief:

 Appellant (Mithoolal Nayak) took life insurance for sum of Rs 25000/- for life of
one Mahajan Deolal. After the death of Mahajan Deolal the claim was repudiated
on the ground of deliberate misstatement.
 Dr. Desai checked him and gave report that Mahajan looked 55 as opposed to
what he had claimed i.e. 45 years and suffered from Pneumonia. Company
suggested check up from 2 other doctors.
 He has stated his answer in negative to the question when asked “whether he has
consulted a medical practitioner for treatment in last 5 years?”
 Respondent company claims that his answer was lie because Dr. P.N. Lakshman,
Japalpur stated he treated Mahajan suffering from diarrhoea and panting from
exertion.
 On the other hand Dr. Motilal, Brother of the appellant had stated in his report that
Mahajan was fit and healthy and suffered from no ailments.
 After his death, certificate of Dr. Clarke, showed that Mahajan’s death was caused
by Malaria followed by Diarrhoea and secondary anaemia. Supreme Court upheld
the repudiation.

16
Mithoolal Nayak v Life Insurance Corporation of India A.I.R. [1962] S.C. 814

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 3. Issues in the case:

 Whether the policy is void due to the suppression of material facts by Mahajan
Deolal?

The policy is void and liable to be repudiated because the insured had given negative answers
to the question that he had never received treatment for any illness.

Dr. Lakshman had stated on record that patient was brought to him by Dr. Motilal Nayak
himself. In his report Dr. Motilal Nayak had stated that he does not remember the deceased to
have ever consulted the doctor. There is no valid reason why Dr. Motilal would forget that he
himself took insured to Dr. Lakshman few months ago.

Deceased not only did not disclose the information of getting treated by the doctor but he also
made false statement that he has not been treated by any doctor. This shows that there was
intention of supressing the material fact deliberately and policy passes to be repudiated.

 Whether the appellant is entitled to a refund of money, paid to insurance

company?

Money was paid as premium because of the policy belonging to the company. Policy was
declared void because of suppression of facts. When the party to a contract breaches his
promise of the contract then the other party shall be discharged from the performance of his
part of the contract. The party guilty of fraud cannot be entertained for the refund of money.
VIII. SATWANT KAUR SANDHU VS NEW INDIA ASSURANCE
COMPANY17

1. Facts in Brief:

 Pritam Singh was insured under Mediclaim Policy. He fell ill and was shifted to
Vijaya Heath Centre, Chennai. The claim was repudiated on the ground of non-
disclosure of previous ailment. The company furnished a certificate collected from
Vijaya Heath Centre stating deceased to be a known case of “chronic renal
Failure” and “diabetes”.

17
Satwant Kaur Sandhu v New India Assurance Company Ltd. [2002] Civil Appeal No. 2776

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  District forum preferred the appeal on the ground that certificate was not
supported by evidences hence disregarded. District Forum ordered company to
pay the claim.
 State forum stated that the answers given by insured amounted to
misrepresentation and suppression of facts regarding his health. Held that there
was no deficiency of service.
 NCDRC dismissed the revision petition stating no changes in order of the State
Commission.
 Matter went to appeal to Supreme Court.

4. Issues in the case:

 Whether the mediclaim policy be repudiated on ground of misstatement and

nondisclosure of facts?

There is dispute that Section 45 places restrictions on right of insurer to call in question a life
Insurance policy on ground of misstatement and suppression of material facts. It will not be
applicable in the following case because this provision applies only to life insurance policies
and not to mediclaim policy. A mediclaim policy is a non-life insurance policy. Nonetheless,
it is a contract of insurance falling under the “UBERRIMA FIDES” meaning a contract of
utmost good faith on part of the assured. Thus it needs emphasis that when an information is
asked for in a proposal form, an assured in under solemn obligation to make true and full
disclosure of the information on the subject which is within his knowledge. Of course the
obligation to disclose extends only to the facts that are known to the applicant and not to what
he ought to have known.

 Whether at the time of taking the Mediclaim policy, the policy holder suffering
from disease was material fact?

The term “Material fact” is not defined in the act and, therefore it has been understood and
explained by the courts in general terms to mean any fact that would influence the judgement
of insurer in fixing the premium or determining whether he would like to accept the risk. Any
fact that goes to the root of the contract of insurance and had a bearing on the risk involved
would be “Material”. It is stated in Pollock and Mulla’s Indian contract and specific relief
acts that “any fact the knowledge or ignorance of which would materially influence an insurer

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in estimating the degree and character of risks in fixing the rate of premium is Material fact.
In the following case, it would be ignorant to say that the insured was not aware of his health
and the fact that he was suffering from diabetes and chronic renal failure, more so when he
was stated to be on regular haemodialysis. There is hardly any scope of doubt that the
questions asked in the proposal form were material facts the answer to which would have
influenced the insurer.

It is clear that wrong answer given about the health issues was clear cut suppression of
material facts and therefore the insurance company was justified to repudiate the claim.

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 CONCLUSION
The term good faith has been referenced in the Indian Penal Code and it means a good
intention and due consideration and alert. The agreements of protection including the
agreement of extra security are contracts Uberrima fidei that implies contract dependent on
"most extreme great confidence" subsequently every single material realities must be
revealed and the covering of any material data or giving any bogus or wrong data in the
strategy is an infringement of the protection contract. This exudes from the privilege of each
individual to think about each material certainty related with the topic of the agreement and
there will never be a way out to this. Camouflage of any material certainty will qualifies the
safety net provider for deny the assureds' advantages of the agreement. It was seen that the
reason for taking an arrangement of protection isn't exceptionally material. It might fill the
need of government managed savings yet then the equivalent ought not be gotten with a fake
demonstration by the guaranteed. Proposition can be revoked if a deceitful demonstration is
found. The proposer must show that his expectation was true blue. It must show up from the
essence of the record. Along these lines, this guideline frames a necessary piece of protection
law. It gives a reasonable possibility of hazard appraisal to the safety net provider and
furthermore guarantees that the guaranteed completely sees all the terms and states of the
agreement. In any case, this guideline is progressively positive for the safety net provider as it
is the guaranteed who needs to by and large make all the revelations. Further, the Insurance
Act sets out that a protection approach can't be brought being referred to two years after it has
been in power. This was done to block the hardships of the protected when the insurance
agency attempted to stay away from a strategy, which has been in power for quite a while, on
the ground of deception. Be that as it may, this arrangement isn't material when the
announcement was made falsely. Never the less, mechanical progressions have additionally
made it workable for the two gatherings to make sure that their advantage is dealt with. Be
that as it may, there are a few other hazy areas to this tenet too.

Initially, there is still no obvious differentiation between with respect to what is material or
irrelevant and the equivalent is to a great extent reliant on the impulses of the safety net
providers and the particulars of the agreement. It is still simple for a backup plan to renounce
the agreement on the smallest purpose of non-divulgence by regarding them as guarantees, in
this manner putting the guaranteed in a significantly increasingly troublesome position.

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Also, while the two gatherings are under an obligation of most extreme great confidence, it is
indistinct what this involves in the interest of the safety net provider. Basically the backup
plan is left with the base or no obligations at all other than an obligation to make certain
inquiries. These inquiries are regularly ambiguous and it isn't clear to the guaranteed, what he
is being asked or what to unveil. Accordingly, the guaranteed may end up in a position where
he is required to reveal material realities.

A successful arrangement must be given considering the guideline of most extreme great
confidence is one of the most crucial standards related to protection law.

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 BIBLIOGRAPHY

I. BOOKS:-

 K.S.N. Murthy and K.V.S. Sarma, Modern Law Of Insurance In India, Fifth
Edition 2013, Lexis Nexis Butterworth’s Publication
  K.B. Agarwal and Vandana Singh, Insurance Law in India, First Edition 2012,
Kluwer Law International.
 S.K. Sarvaria, B N Singh's New Insurance Law, Fifth Edition 2016, Universal
Law Publications.

IX. WEBSITES:-

 http://lawstudentshelpline.com
 www.legalserviceindia.com
 http://www.mondaq.com
 www.law.cornell.edu/wex/
 legal-dictionary.thefreedictionary.com
 www.manupatra.com
 www.scconline.com

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