Page 19 - Insurance Times December 2019

Insurance contracts are generally considered contracts of treated by any doctor. This shows that there was intention
adhesion because the insurer draws up the contract and of suppressing the material fact and the concealment was
the insured has little or no ability to make any changes to deliberate.
it. Insurance policies are sold without the policyholder even
seeing a copy of the contract. If any ambiguity is found in The Apex Court extended the principle of uberrime fides
the policy document, it is interpreted against the insurer to health insurance in Satwant Kaur Sandhu Vs New India
by applying the principle of Contra Proferrentum. Assurance Company, 2009 (8) SCC 316, holding that though
health insurance is not life insurance but basic principle of
Judicial Interpretations: Evolving Case utmost goodfaith applies and upheld the repudiation of
claim.
Laws
In many cases courts have held that the information furnished The question was whether Section 45 of Insurance Act,
was incomplete and/or incorrect and deliberately concealed. 1938, which places restrictions on right of insurer to call in
The insurers were able to prove that such concealment was question a life Insurance policy on ground of misstatement
deliberate before the court and they got the decree in their and suppression of material facts apply to mediclaim policy
favor for breach of principle of utmost good faith on the part as well.
of insured. The decision of insurer to repudiate the claim in
those cases has been upheld by the courts. Court held that a mediclaim policy is no doubt a non life
insurance policy. Nonetheless, it is a contract of insurance
It has been held many times that nobody knows better than falling under the "uberrima fides" meaning a contract of
the prospect about the subject matter of insurance; hence, utmost good faith on part of the assured, and the insured
it is prime duty of the prospect to disclose all material facts was under solemn obligation to make true and full
known to him at the time of proposal. Concealment or non disclosure of the information on the subject which is within
disclosure of material fact renders the policy voidable, and his knowledge.
insurers cannot be held liable for the claim arising out of
such concealment or non-disclosure of material fact. Court went on to add:

"It would be ignorant to say that the insured was not aware
The proposer must disclose all information required by the
of his health and the fact that he was suffering from
insurer without forming opinion that information required
diabetes and chronic renal failure, more so when he was
to be furnished is not material. Certain material facts in
stated to be on regular haemodialysis. There is hardly any
isolation may not be material but may be guiding factor to
scope of doubt that the questions asked in the proposal
other material facts.
form were material facts the answer to which would have
influenced the insurer."
MacGillivray on Insurance Law (12th edition)
elucidates on materiality thus: In a recent Supreme Court decision Oriental Insurance
"The opinion of the particular assured as to the materiality Company Limited v/s Mahendra Construction, Civil Appeal
of a fact will not as a rule be considered, because it follows No.3359 of 2019 (Arising out of SLP(C) No.3381 of 2019)
from the accepted test of materiality that the question is delivered on 01.04.2019, principle of utmost goodfaith on
whether a prudent insurer would have considered that any the part of insured was re-emphasized in the following
particular circumstance was a material fact and not words:
whether the assured believed it so ..."
"The burden cannot be cast upon the insurer to follow up
In Mithoolal Nayak v LIC, 1962 AIR 814, the Supreme Court on an inadequate disclosure by conducting a line of enquiry
of India upheld the repudiation of death claim by insurance with the previous insurer in regard to the nature of the
company on the ground of suppression of material facts. claims, if any, that were made under the earlier insurance
The Supreme Court held that deceased not only did not policy. On the contrary, it was the plain duty of the
disclose the information of getting treated by the doctor respondent while making the proposal to make a clear and
but he also made false statement that he has not been specific disclosure."

The Insurance Times, December 2019 19