A contract of insurance is one of utmost good faith. It is
technically known as uberrima fides. The doctrine of disclosing
all material facts is embodied in this important
principle which applies to all forms of insurance. The proposer, who is one
of the parties to the contract, is presumed to have means of
knowledge which are not accessible to the insurance companywho is the
other party to the contract. Therefore, the proposer is bound to tell
the insurer everything affecting the judgment of the insurer, no
matter howsoever unimportant it may seem to him. In all the contracts
of insurance, the proposer is bound to make full disclosure of all
material facts and not merely those which he thinks are important.
Misrepresentation, non-disclosure or fraud in any document
leading to the acceptance of risk automatically discharges the
company from all liability under the contract. Section 45 of the Insurance
Act, 1938, provides that no policy can be called in question after a
period of two years from the date of its issue. This provision is not
applicable on the ground that any statement in the proposal or a related
document was false or inaccurate (making the policy indisputable) and
if the company can prove that misrepresentation or non-disclosure
was on a material fact by the policyholder at the time the statement
was made. It is, therefore, in the interest of the would-be policyholder
to disclose all material facts to the company to avoid any
complications when the claim arises.
It is equally obligatory on an agent to see that the assured
does not obtain the contract by means of untrue representation or
concealment in any respect. It is the duty which the agent owes, both to his client and to the company. |
