Page 20 - Insurance Times December 2019

It was further added: contains a statement which is not true, cannot ordinarily
escape from the consequence arising therefrom by pleading
"The mere disclosure of a previous insurance policy did not
that he chose to sign the proposal containing such
discharge the obligation which was cast on the respondent,
statement without either reading or understanding it.
as the proposer, to make a full, true and complete
disclosure of the claims which were lodged under the
That is because, in filling up the proposal form, the agent
previous policy in the preceding three years."
normally, ceases to act as agent of the insurer but becomes
the agent of the insured and no agent can be assumed to
In Reliance Life Insurance Co Ltd & Anr. V Rekhaben
have authority from the insurer to write the answers in the
Nareshbhai Rathod, Civil Appeal No. 4261 of 2019 (Arising
out of SLP (C) No 14312 of 2015), delivered on 24.04.2019, proposal form. If an agent nevertheless does that, he
becomes merely the amanuensis of the insured, and his
among the questions that the proposer was required to
knowledge of the untruth or inaccuracy of any statement
answer in the proposal form was whether he was currently
contained in the form of proposal does not become the
insured or had previously applied for life insurance cover,
knowledge of the insurer."
critical illness cover or accident benefit cover. This query
was answered in the negative.
Conclusion
The Apex Court while upholding the repudiation of the The contracts of insurance is contracts uberrima fides that
claim by the insurance company held that the expression means contract based on "utmost good faith" that means
"material" in the context of an insurance policy can be contract based on "utmost good faith" hence, each and
defined as any contingency or event that may have an every material facts must be disclosed and the concealment
impact upon the risk appetite or willingness of the insurer of any material information or providing any false or
to provide insurance cover. incorrect information renders the contract voidable at the
option of the insurer.
The Apex Court has cited with approval Privy Council's
ruling in Condogianis v Guardian Assurance Company Ltd, This emanates from the right of every person to know
AIR 1921 PC 195, where it was held that even a partial non- about every material fact associated with the subject
disclosure or ambiguous disclosure regarding the previous matter of the contract and there is no escape to this.
policies in the proposal form vitiates the policy, which is Concealment of any material fact will entitle the insurer to
thus, liable to be rescinded. In that case, the Privy Council deprive the assureds' benefits of the contract.
dealt with an appeal by Special Leave from a judgment of
the High Court of Australia. There is no clear distinction between material or immaterial
facts. It is still very easy for an insurer to repudiate the
The appellant had claimed a declaration under a policy of contract on the slightest point of non-disclosure by treating
insurance that the insurer was liable to pay him for a loss them as warranties, thereby putting the assured in an even
sustained as a consequence of a fire. In response to the more difficult position.
requirement of disclosing whether the proponent had ever
been a claimant of a fire insurance company in respect of While both parties are under a duty of utmost goodfaith,
the property proposed or any other property, the insurer it is unclear what this entails to the insurer. The violation
had disclosed one claim which had been made in the past of this duty by the insurer is often overlooked and not taken
but omitted to disclose another, in respect of the burning seriously by the law enforcement agencies including
of a motor car. insurance regulator.

Finally, negating the contention that insured There should be strict law to deal with violation of this duty
by the insurer as well, to prevent the mis-selling, as it is
had not read and understood the proposal
common knowledge that selling agents do not provide the
form and it was filled in by the agent, Court full and complete disclosure dispassionately as required by
came down heavily: regulator, so that the prospect chooses the product best
" A person who affixes his signature to a proposal which suited to his needs. T

20 The Insurance Times, December 2019