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Home » Manmohan Nanda v. United India Assurance Co. Ltd.

Manmohan Nanda v. United India Assurance Co. Ltd.

Insurance Law – Mediclaim Policy – The object of seeking a mediclaim policy is to seek indemnification in respect of a sudden illness or sickness which is not expected or imminent and which may occur overseas. If the insured suffers a sudden sickness or ailment which is not expressly excluded under the policy, a duty is cast on the insurer to indemnify the appellant for the expenses incurred thereunder.

Principles

(i) There is a duty or obligation of disclosure by the insured regarding any material fact at the time of making the proposal. What constitutes a material fact would depend upon the nature of the insurance policy to be taken, the risk to be covered, as well as the queries that are raised in the proposal form.

(ii) What may be a material fact in a case would also depend upon the health and medical condition of the proposer.

(iii) If specific queries are made in a proposal form then it is expected that specific answers are given by the insured who is bound by the duty to disclose all material facts.

(iv) If any query or column in a proposal form is left blank then the insurance company must ask the insured to fill it up. If in spite of any column being left blank, the insurance company accepts the premium and issues a policy, it cannot at a later stage, when a claim is made under the policy, say that there was a suppression or non­disclosure of a material fact, and seek to repudiate the claim.

(v) The insurance company has the right to seek details regarding medical condition, if any, of the proposer by getting the proposer examined by one of its empanelled doctors. If, on the consideration of the medical report, the insurance company is satisfied about the medical condition of the proposer and that there is no risk of pre­existing illness, and on such satisfaction it has issued the policy, it cannot thereafter, contend that there was a possible pre­existing illness or sickness which has led to the claim being made by the insured and for that reason repudiate the claim.

(vi) The insurer must be able to assess the likely risks that may arise from the status of health and existing disease, if any, disclosed by the insured in the proposal form before issuing the insurance policy. Once the policy has been issued after assessing the medical condition of the insured, the insurer cannot repudiate the claim by citing an existing medical condition which was disclosed by the insured in the proposal form, which condition has led to a particular risk in respect of which the claim has been made by the insured.

(vii) In other words, a prudent insurer has to gauge the possible risk that the policy would have to cover and accordingly decide to either accept the proposal form and issue a policy or decline to do so. Such an exercise is dependant on the queries made in the proposal form and the answer to the said queries given by the proposer.

The basic rules to be observed in making a proposal for insurance may be summarized as follows :

(a) A fair and reasonable construction must be put upon the language of the question which is asked, and the answer given will be similarly construed. This involves close attention to the language used in either case, as the question may be so framed that an unqualified answer amounts to an assertion by the proposer that he has knowledge of the facts and that the knowledge is being imparted. However, provided these canons are observed, accuracy in all matters of substance will suffice and misstatements or omissions in trifling and insubstantial respects will be ignored.

(b) Carelessness is no excuse, unless the error is so obvious that no one could be regarded as misled. If the proposer puts ‘no’ when he means ‘yes’ it will not avail him to say it was a slip of the pen; the answer is plainly the reverse of the truth.

(c) An answer which is literally accurate, so far as it extends, will not suffice if it is misleading by reason of what is not stated. It may be quite accurate for the proposer to state that he has made a claim previously on an insurance company, but the answer is untrue if in fact he has made more than one.

(d) Where the space for an answer is left blank, leaving the question un­answered, the reasonable inference may be that there is nothing to enter as an answer. If in fact there is something to enter as an answer, the insurers are misled in that their reasonable inference is belied. It will then be a matter of construction whether this is a mere non­disclosure, the proposer having made no positive statement at all, or whether in substance he is to be regarded as having asserted that there is in fact nothing to state.

(e) Where an answer is unsatisfactory, as being on the face of it incomplete or inconsistent the insurers may, as reasonable men, be regarded as put on inquiry, so that if they issue a policy without any further enquiry they are assumed to have waived any further information. However, having regard to the inference mentioned in head (4) above, the mere leaving of a blank space will not normally be regarded as sufficient to put the insurers on inquiry.

(f) A proposer may find it convenient to bracket together two or more questions and give a composite answer. There is no objection to his doing so, provided the insurers are given adequate and accurate information on all points covered by the questions.

(g) Any answer given, however accurate and honest at the time it was written down, must be corrected if, up to the time of acceptance of the proposal, any event or circumstance supervenes to make it inaccurate or misleading.

Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002 – Section 2 (d) – “proposal form” – What is the meaning and content of “material”.

The Regulation defines the word “material” to mean and include all “important”, “essential” and “relevant” information in the context of guiding the insurer in deciding whether to undertake the risk or not.

Uberrimae Fidei

It is observed that insurance contracts are special contracts based on the general principles of full disclosure inasmuch as a person seeking insurance is bound to disclose all material facts relating to the risk involved. Law demands a higher standard of good faith in matters of insurance contracts which is expressed in the legal maxim uberrimae fidei.

Just as the insured has a duty to disclose all material facts, the insurer must also inform the insured about the terms and conditions of the policy that is going to be issued to him and must strictly conform to the statements in the proposal form or prospectus, or those made through his agents. Thus, the principle of utmost good faith imposes meaningful reciprocal duties owed by the insured to the insurer and vice versa. This inherent duty of disclosure was a common law duty of good faith originally founded in equity but has later been statutorily recognised as noted above. It is also open to the parties entering into a contract to extend the duty or restrict it by the terms of the contract.

The duty of the insured to observe utmost good faith is enforced by requiring him to respond to a proposal form which is so framed to seek all relevant information to be incorporated in the policy and to make it the basis of a contract. The contractual duty so imposed is that any suppression or falsity in the statements in the proposal form would result in a breach of duty of good faith and would render the policy voidable and consequently repudiate it at the instance of the insurer.

Contra Proferentem Rule

The Contra Proferentem Rule has an ancient genesis. When words are to be construed, resulting in two alternative interpretations then, the interpretation which is against the person using or drafting the words or expressions which have given rise to the difficulty in construction, applies. This Rule is often invoked while interpreting standard form contracts. Such contracts heavily comprise of forms with printed terms which are invariably used for the same kind of contracts. Also, such contracts are harshly worded against individuals and not read and understood most often, resulting in grave legal implications. When such standard form contracts ordinarily contain exception clauses, they are invariably construed contra proferentem rule against the person who has drafted the same. [Para 44]

Case Law Reference

  1. Sushilaben Indravadan Gandhi v. New India Assurance Co. Ltd., ­(2021) 7 SCC 151
  2. Branch Manager Bajaj Allianz Life Insurance Co. v. Dalbir Kaur, AIR 2020 SC 5210
  3. Canara Bank v. United India Insurance Co., ­(2020) 3 SCC 455
  4. Oriental Insurance Co Ltd. v. Mahendra Construction, (2019) 18 SCC 209
  5. Life Insurance Corporation of India v. Manish Gupta, (2019) 11 SCC 371
  6. Reliance Life Insurance v. Rekhaben Nareshbhai Rathod, (2019) 6 SCC 175
  7. United India Insurance Co. Ltd. v. Orient Treasures (P), (2016) 3 SCC 49
  8. Sulbha Prakash Motegaonkar v. Life Insurance Corporation of India, 05.10.2015
  9. Export Credit Guarantee Society v. Garg Sons International, (2014) 1 SCC 686
  10. Satwant Kaur Sandhu v. New India Assurance Co., (2009) 8 SCC 316
  11. Hari Om Agarwal v. Oriental Insurance Co.,­ 2007 (98) DRJ 246
  12. LIC of India v. G.M. Channabasamma, (1991) 1 SCC 357
  13. Reynolds v. Phoenix Assurance Co. Ltd. (1978) 2 Lloyd’s Rep. 440
  14. Delhi Development Authority v. Durga Chand Kaushish, AIR 1973 SC 2609
  15. General Assurance Society Ltd. v. Chandmull Jain, AIR 1966 SC 1644
  16. Central Bank of India v. Hartford Fire Insurance Co. Ltd., AIR 1965 SC 1288
  17. Md. Kamgarh Shah v. Jagdish Chandra, AIR 1960 SC 953
  18. Carter v. Boehm (1766) 3 Burr 1905

Case Number : CIVIL APPEAL NO.8386/2015

CORAM : HON’BLE DR. JUSTICE D.Y. CHANDRACHUD HON’BLE MRS. JUSTICE B.V. NAGARATHNA

For Appellant(s) Mr. Gopal Sankaranarayanan, Sr. Adv. Ms. Zehra Khan, Adv. Mr. Shrutanjaya Bhardwaj, Adv. Ms. Shreya Choudhary, Advocate For M/S Law Associates For Respondent(s) Ms. Sunaina Phul, Adv. Mr. Mohit Paul, AOR (N/P)

Case Link : https://pdf.caselaw.in/sc/2021/12/1097/

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