The Doctrine of Uberrima fidesis
is the primary doctrine that governs insurance
contracts. The Latin phrase 'Uberrima fidesis
' means "utmost good faith
parties to an insurance contract must behave in good faith and provide a
complete statement of all important facts set out in the insurance policy.
Because insurance functions as a risk transference on a separate basis and it is
always important to have a higher degree of good faith in the insurance
It is the responsibility of the insured to disclose any significant
information about which they are aware. In the case of life insurance, some
particular questions are suggested as issues that impact everyone. However,
there may be conditions affecting specific people that are unknown to the
insurer, and which, if known, would very certainly have prompted further
investigation. The issue of which information is relevant to the contract is a
The party who is entering into the contract shall have the good
faith of the other. And according to the Doctrine, if the proposer hides and
misrepresents the material facts, then the contract is said to have been
violated. The concealment and the misrepresentation of the material facts are
said to be void. Furthermore, the insurer's innocent misstatement or
misrepresentations are inadmissible for up to two years at the insurer's
The Section 45 of the Insurance Act of 1938, in the event of life
insurance, a two-year time limit is imposed in bringing the issue of policy
legality on the basis of misstatements in replies to questions that were untrue
or incorrect. The insurer has no right in showing that the insurance policy
obtained is of an innocent manner and for proving under the provision one has to
prove the statement made by the insurer.
Facts of the case
On July 10, 2009, the insured purchased a life insurance policy from Max New
York Life Insurance Company for a maximum of Rs. 11 lakhs. On September 16,
2009, the insured submitted a request for a new life insurance policy with
Reliance Life Insurance for a sum of Rs. 10 lakhs. The fact of the previous
insurance being taken has been suppressed by the insured while the questions
being asked by the Reliance Life Insurance regarding whether any policy has
already been taken.
There were also specific queries about the information from
other insurance plans, to which the response by the insurer was 'not
applicable.' The following were the terms of the declaration provided by the
Insured with the proposal form:
"I understand and agree that the statements in this proposal form shall be the
basis of the contract between me and Reliance Life Insurance Company Limited
("the Company") and that if any statements made by me are untrue or inaccurate
or if any of the matter material to this proposal is not disclosed by me then
the Company may cancel the contract and all the premiums paid, will be
The Respondent's spouse died in the year 2010 and the policy has been claimed by
the Respondent. The information regarding the previous policy in Max New York
Insurance has been disclosed to Reliance Life Insurance company. Further, the
claim of the respondent was rejected on the basis of suppression of facts.
the complaint has been filed by the Respondent's spouse in the District Consumer Redressal Commission and the same has been rejected on the grounds of
non-disclosure. The State and National Commission has allowed the appeal and
stated that the disclosure of previous insurance policy will not affect the mind
of the prudent insurer. The appeal was filed by the Appellant against the
judgment of the State and National Consumer Redressal Commission.
District Consumer Redressal Forum- The Complaint has been dismissed on the
ground that there was non-disclosure of the material facts by the Complainant
and the same has been rightly entitled against the policy claim under the
policy. Further, it is against the doctrine of Uberrima fidesis where it is
considered the basic and important principle dealing with insurance contracts.
State Consumer Redressal Forum:
The Insured's wife filed an appeal against the rejection of the complaint in the
District Consumer Redressal Forum. The appeal was heard by the State Consumer
Redressal forum and the same has been allowed. In the judgment of the State
Consumer Redressal forum, it was stated that "the omission of the insured to
disclose a previous policy of insurance would not influence the mind of a
prudent insurer". In this case, the insured might not have the intention to
non-disclosed the material facts and have thought the prudent insurer would not
be affected because of the same.
National Consumer Redressal Forum:
The Judgement of the State Consumer Redressal Forum has been upheld and affirmed
by the National Consumer Redressal Forum.
The Apex Court Considered various things while providing the judgements and they
- Disclosure of the insured in the policy proposal form: "there was
evidently a non-disclosure if the earlier cover for life insurance held by
- The insured's omission to disclose significant information in the
policy's proposal form, according to the Court, invalidates the claim under
- The Court has overseen the fundamental principle formulated by the MacGillivray which is Doctrine of uberrima fidei as there shall be complete good
faith by the insured. And stated that the assured must disclose all the
material facts to the insurer and breach of the same shall be avoided.
The respondent was allowed to withdraw half of the decretal sum, according to
the apex court. In order to achieve the goals of justice, the supreme court have
ordered that the sum withdrawn by the respondent not be retrieved under Article
142 of the Constitution.
Arguments by the Counsels in the Supreme Court:
Argument and Contentions of the Appelent Counsel
- The respondent has suppressed the material fact of not providing and
furnishing the required details and it's the mere duty of the insured to
look into the same.
- The said claim was initiated by the appellant within two years which is
under Section 45 of the act and it does not repudiate the ground of
misstatement after two years. Here the Judgment of State and National
Consumer Redressal Forum is
contrary to the provision.
- And it is stated that the insurer is entitled to reject the claim under
Sections 17 and 19 of the Contract Act, 1872 which is fraud and voidability of a
contract without free consent.
Arguments and Contention of the Respondent Counsel:
- That the agent has taken the blank proposal from the insured while taking
his signature. Further, the nondisclosure of the previous policy shall not
be the ground for rejection of the claim as the proposal form was a blank
- There is no prohibition on holding any number of life insurance policies
from different insurers.
Relevance of the judgments contended in the following judgment:
- VK Srinivasa Setty V. Messers Premier Life and General Insurance Co Ltd
In this case, it was established that a person who signs a proposal that
contains a false statement cannot typically avoid the consequences of his
actions by claiming that he signed the proposal without reading or comprehending
it. This is mere because while filling the proposal form the agent is assumed to
have the authority of the insurer and the untruth and the inaccuracy of the
writing by the agent does not affect the policy and knowledge of the insurer
shall always be there.
- Satwant Kaur Sandhu v New India Assurance Co Ltd
In this case, it was determined that the proposer's non-disclosure, concealment,
or falsification of answer is significant. This is due to the fact that the
insurer, not the proposer, is responsible for determining whether the
information requested in the proposal form is significant or not.
In terms of the insurer, he shall ascertain all the necessary consequences to
the insured. And this shall serve as justice to both the insured and insurer.
Benefits of the judgment:
It can be classified that the judgment representing that mere favoring of the
fact that non disclosure of material facts has been done, but there is a
possibility that the insured might not have enough knowledge of the policy as he
might be illiterate and not able to understand things. The fact of suppression
of the facts shall be considered when the policy been called to question but
intention of the insured shall be overseen by the courts. The Judgemnet pertaing
to Fifty percent decretal amount to the Respondent shall be considered valid as
no parties been suffered and it have mitigated the loss of both.
The sole purpose of life insurance is to protect the family's financial future
during the event of the uncertain death of the policyholder. It is necessary
that all the material facts which are required by the insurer be provided and it
shall be limited to the policy only. The insurer has the burden of proof that no
life insurance policy would have been issued if the insurer had been aware of
Furthermore, before signing a proposal, one should carefully
study the terms and conditions. There is a legal assumption that after you sign
it, you have read all of the questions and answers included within. Hence upon
the analysis, it can be said that the court shall not only consider the mere
facts but also consider all the relevant facts in terms of illiteracy of the
person signing and misappropriation by the agent.