8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 1/25

  PATNA

 

Project Topic:

 REPUDIATION OF INSURANCE 

CONTRACT 

 

Law of insurance

  Project submitted to: Dr. Shaiwal Satyarthi

[ Associate professor(law)

 

Project submitted by:

  P!!"#$%A S$#&'

P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 2/25

"oll no:*+*

 

TABLE OF CONTENTS 

  1) ACKNOWLEDGEMEN T.................................................................3

2) RESEARCH METHODLOGY.........................................................4

3) INTRODUCTION..………………………………………….……5-64) AUDIT ………………………………………..…………………..7-

  D!"!#$%&!'( $ *+,('

 

D!'($'

  /*0 %'%#!0 $ *+,('

  A+,( $&&((!!

  5) ACCOUNT......………..…............……………..….….........….1-26

 

/$$0 $ *$+'( 

M*'(!'*'! $ $$0 $ *$+'( ' !#!($'

'*'*# 0(*(!&!'(

 

C$'0$#,*(!, '*'*# 0(*(!&!'(

 

A$+'(' 0(*',*,

 

A+(!'(*($' $ *$+'(

 

R!"0$' $ *$+'(

 

#' $ *$+'(

 

I'0%!($' $ *$+'(

  6) CONCLUSION…………………………………………………….27

  7) /I/LIOGRAPHY……………………………………………….....28

, P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 3/25

 ACKNOWLEDGEMENT 

I feel highly delighted, as it gives me incredible pleasure to present a research work on

“ Repudiation of insurance contract ” I would like to enlighten my readers regarding this

topic and I hope I have tried my best to pave the way for bringing more luminosity to this

topic

  I am grateful to my faculty “!r "haiwal "atyarthi” who has given me an idea and encourage

me to venture this project I would like to thank librarian of #$%& for their interest in

 providing me a good back up material

  'nd finally yet importantly I would like to thank my parents for their support and

almighty god who helps me in all my endeavours

POORNIMA SINGH

  -th semester /th year

0 P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 4/25

 RESEARCH METHODOLOG 

A&0 *', O9!("!0 :

The aim of the project is to present a detailed study of  Repudiation of insurance contract and to

study the various aspects of insurance contracts and reasons for its repudiation by insurer

S$%! *', L&(*($'0 : 

The four point on which special emphasis has been given in this research are:

• (eaning of ubirimma fidie

• (eaning of repudiation• )rongful repudiation

• *emedy for wrongful repudiation

S$+!0 $ D*(* :

The following secondary sources of data have been used in the project+

'rticles

- .ooks

/ )ebsites

M!($, $ W(' :

The method of writing followed in the course of this research paper is primarily analytical

M$,! $ C(*($' :

The researcher has followed a uniform mode of citation throughout the course of this research

 paper

/ P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 5/25

CHAPTER 1

INTRODUCTION

 

In an ideal world, we0ll all enter into a contractual relationship with another party and

e1perience no issues, and the contract will come to an end when all parties fulfil their

 performance obligations &nfortunately, we don0t live in a perfect world, and problems can

sometimes arise if one party acts in a manner that can be seen to be as a repudiation of the

contractual relationship 

' policy of insurance is a contract of “utmost good faith” 2 uberrimae fidei The reason for

this is that contracts of insurance are generally based on facts which are known only by the

insured at the time of formation of the contract 3nly the insured knows what modifications

have been made to his car, how many miles he is going to drive it every year and the

 purposes for which he is going to drive the car- The insurer has to rely on the information

 provided by the insured in assessing the risk and determining the appropriate premium

The obligation to observe utmost good faith gives rise to - duties on the party proposing

insurance:

 4a5 a duty to disclose all material facts to the insurer6

 4b5 a duty not to misrepresent material facts to the insurer

)hat is a “material” fact7 The test of materiality is not what the insured considers material,

nor what a reasonable insured would consider reasonable, but whether the fact would be

taken into account by a prudent insurer when assessing the risk and determining an

appropriate premium (aterial non+disclosure or misrepresentation entitles the insurer

repudiate the contract or to avoid the contract ab initio if the insurer was induced to enter

into the insurance contract by the non+disclosure or misrepresentation

In order to establish materiality and inducement, it is necessary for an insurer to adduce

evidence from underwriters that the non+disclosure or misrepresentation was material and did

 89!I %imit in Insurance sector increased from -; to <=;8 IANS  newsbiharprabhacom

*etrieved > ?uly -><

* P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 6/25

-  "overeign guarantee for all policies issued by %I# will continue

induce the contract The insurer must show at least that, but for the non+disclosure or

misrepresentation, the policy would not have been concluded on the same terms It is not

necessary, however, to show that that it was the sole effective cause/ The issue is one of fact

9re@uently, e1pert evidence will also be called on the issue of materiality"ometimes there

may be even wrongful repudiation of an insurance contract by the insurer< )rongful

repudiation of an insurance policy is the illegal action by an insurance company of cancelling

a health, life, automobile, or property insurance policy (ost states allow you to sue an

insurance company if the company has wrongfully repudiated your insurance policy The

majority of lawsuits for wrongful repudiation of an insurance policy are based largely

on breach of contract law

/ The 3riental Insurance #ompany %td was incorporated at .ombay on - "eptember =<A

8http:BBwwworientalinsuranceorginBabout+oriental+insurancejsp8

1 P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 7/25

< http:BBwwwirdaindiaorgBregulationsBTheInsurance'ct=/Cer-><->><doc

#D'PTE* -+*EP&!I'TI3$ 39 I$"&*'$#E

#3$T*'#T '$! &.E**I('E 9I!EI

Uberrima ides 4sometimes seen in its genitive form uberrimae fidei5 is a %atin phrase

meaning 8utmost good faith8 4literally, 8most abundant faith85 It is the name of a legal

doctrine which governs insurance contracts This means that all parties to an insurance

contract must deal in good faith, making a full declaration of all  material facts in the

insurance proposal This contrasts with the legal doctrine caveat emptor  4let the buyer

 beware5

#ontracts, in general, are subject to the doctrine of caveat emptor 4let the buyer beware5 This

means that each party must ask @uestions to ensure that they have all the information they

need before signing the contract "tatutes such as the "ale of Foods 'ct =A= and the &nfair

#ontract Terms 'ct =AA affect what must be supplied 'lso, there must be no

misrepresentation or fraud Insurance contracts are not based on the principle of caveat

emptor Those involved in negotiations for an insurance contract must disclose all relevant

information to all the other parties in the negotiation This is particularly important because

relevant information will typically only be known to one party to the contract, that is, the

 proposer or Policyholder This is the principle of uberrima fides or utmost good faith

Thus the insured must reveal the e1act nature and potential of the risks that he transfers to the

insurer, while at the same time the insurer must make sure that the potential contract fits the

needs of, and benefits, the insured

' higher duty is e1pected from parties to an insurance contract than from parties to most

other contracts in order to ensure the disclosure of all material facts so that the contract may

accurately reflect the actual risk being undertaken The principles underlying this rule were

stated by %ord (ansfield in the leading and often @uoted case of  Carter v !oehm 4A5 =A

E* -, <,

8Insurance is a contract of speculation The special facts, upon which the contingent chance

is to be computed, lie most commonly in the knowledge of the insured only: the under+writer

+ P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 8/25

G  F3I 8I*!' '#T ===8 F3I *etrieved = ?une ->-

F3I 8I*!' '#T ===8 4P!95 !epartment of 9inancial "ervices, F3I *etrieved = ?une ->-

trusts to his representation, and proceeds upon confdence that he does not

keep back any circumstances in his knowledge, to mislead the under-writer

into a belie that the circumstance does not exist... Good aith orbids either

party by concealing what he privately knows, to draw the other into a bargain

rom his ignorance o that act, and his believing the contrary.“

*einsurance contracts 4between reinsurers and insurersBcedents5 re@uire the highest level of

utmost good faith, and such utmost good faith is considered the foundation of reinsurance In

order to make reinsurance affordable, a reinsurer cannot duplicate costly insurer underwritingand claim handling costs, and must rely on an insurer0s absolute transparency and candor In

return, a reinsurer must appropriately investigate and reimburse an insurer0s good faith claim

 payments, following the fortunes of the cedent

(ere non+disclosure of fact, material or not, does not ordinarily amount to misrepresentation,

and the general rule is that in order to be actionable a representation must take an active form

8.ut in certain cases a stricter rule is enforced

The most important of these are the contracts uberrimae idei, in which knowledge of the

material facts generally lies with one party alone6 that party is under a duty to make a full

disclosure of these facts, and failure to do so makes the contract voidable The duty varies

in its e1tent from one type of contract to anotherA

#ontracts of insurance of every kind form the main group of contracts uberrimae idei3ther

e1amples generally included, though these are probably not all uberrimae idei in the strict

sense, are contracts to subscribe for shares in a company, family settlements, contracts for thesale of land, contracts of suretyship, and partnerships

8#ontracts of service are not uberrimae idei, nor are contracts of sale of goods8

In ?owittHs =AA !ictionary, the term was described as follows:

8' contract is said to be uberrimae idei when the promisee is bound to communicate to the

 promisor every fact and circumstance which may influence him in deciding whether to enter

into the conract or notC

- P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 9/25

8#ontracts which re@uire uberrimae idei are those entered into between persons in a

 particular relationship, as guardian and ward, solicitor and client and insurer and insured8

7. Paul v. Virginia, 75 U.S. (8 Wall.) 168, 19 L.Ed. 357 (1869).

8. Eugene R. Anderson, Jordan S. Stanler, ! Lorel"e S. #asters, Insurance Coverage

Litigation ($e% &or' Asen *u+l"sers, -9 su.), / 11.0 at 1113 to 1116.

In #oronation Insurance v Taku 'ir , #anadaHs "upreme #ourt wrote:

8The uberrima ides doctrine is a longstanding tenet of insurance law which holds parties to

an insurance contract to a standard of utmost good faith in their dealing It places a heavy

 burden on those seeking insurance coverage to make full and complete disclosure of all

relevant information when applying for a policy=

In a #anadian case, "abriel v# $amilton Ti%er&Cat Football Club, ?ustice 3H%eary used these

words:

8There is a limited class of contracts in which one of the parties is presumed to have means of 

knowledge which are not accessible to the other and is, therefore, bound to tell him

everything which may be supposed likely to affect his judgment They are known as

contracts uberrimae idei, and may be avoided on the ground of non+disclosure of material

facts”>

8#ontracts of insurance of every kind are in this class There are other contracts, though not

contracts uberrimae idei in the same sense, which impose a duty of full disclosure of all

material facts by the parties entering into them #ontracts for family settlements and

arrangements fall into this category

The Douse of %ords in !ell v 'ever !ros# 'td# refused to e1tend the duty of disclosing

material facts to contracts for service

In the conte1t of maritime law, ?ustice (ceown of the &nited "tates #ourt of 'ppeals , =th

#ircuit, used these words in the 9ebruary ->>C decision of Certain Under(riters at 'lo)d*s v

 Inlet Fisheries 'td#:

8This case involves the interplay between an ancient legal doctrine and

contemporary vessel  pollution insurance Distorically, all insurance policies were

2 P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 10/25

contracts uberrimae idei, meaning that both parties were held to the highest standard of good

faith in the transaction-

9. tt22onl"ne.e+.o42alases2-25-d650.t4

1. tt22onl"ne.e+.o42alases23293d566.t4

11. Egan v. Mutual of Omaha Ins. Co. (1979) -0 al.3d 89.

1-. Kanne v. Connecticut Gen. Life Ins. Co., 867 .-d 089 (9t "r. 1988).

8The doctrine of uberrimae idei was grounded both in morality and efficiency6 insureds were

considered morally obligated to disclose all information material to the risk the insurer was

asked to shoulder, but such a principle was also an economic necessity where insurers had no

reasonable means of obtaining this information efficiently, without the ubi@uity of telephones,

email, digital photography, and air travel/

The reasons which brought into being the strict marine insurance law doctrine as to

disclosures, go far back into the early days of marine insurance, when sailing ships in

faraway seas were insured in %ondon by underwriters who could get no information e1cept

from the ship owners<

The contract of insurance, is one of mutual good faith6 and the principles which govern it, are

those of an enlightened moral policy

Today, uberrimae idei has been displaced in most insurance conte1ts $evertheless, the

doctrine enjoys continuing vitality in the world of marine insurance

3 P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 11/25

13. Buss v. Superior Court , 16 al. 0t 35 (1997).

10. GuieOne Elite v. !ieler "oa Baptist Church# 197 S.W.3d 35 (e. -6).

CHAPTER 3-LEGAL PRO;ISIONS RELATING TO

U/IREMMAE IDEI

  The principles of what must be disclosed were established in the case of #arter v .oehm

4A5: The proposer must disclose all material facts (aterial facts are those that would

influence an underwriter as to whether he should or should not accept the risk The proposer

does not need to disclose what the underwriter ought to know The proposer is not re@uired to

disclose things he could not know These have been codified in the M*'! I'0+*'! A(

16:

 C#*+0! 17 - ' contract of marine insurance is a contract based upon the utmost good faith,

and, if the utmost good faith being not observed by either party, the contract may be avoided

 by the other party

C#*+0! 18<1) + "ubject to the provisions of this section, the assured must disclose to the

insurer, before the contract is concluded, every material circumstance which is known to the

assured, and the assured is deemed to know every circumstance which, in the ordinary course

of business, ought to be known by him If the assured fails to make such disclosure, the

insurer may avoid the contract

C#*+0! 18<2) + Every circumstance is material which would influence the judgment of a

 prudent insurer in fi1ing the premium, or determining whether he will take the risk

C#*+0! 18<3) + In the absence of in@uiry the following circumstances need not be disclosed,

namely:

P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 12/25

4a5 'ny circumstance which diminishes the risk6

4b5 'ny circumstance which is known or presumed to be known to the insurer The insurer is

 presumed to know matters of common notoriety or knowledge, and matters which an insurer

in the ordinary course of his business, as such, ought to know6 G

4c5 'ny circumstance as to which information is waived by the insurer6

 4d5 'ny circumstance which it is superfluous to disclose by reason of any e1press or implied

warranty

 C#*+0! 18<4) - )hether any particular circumstance, which is not disclosed, be material or

not is, in each case, a @uestion of fact

C#*+0! 18<5) - The term circumstance includes any communication made to, or information

received, by the assured

H$= U(&$0( G$$, *( 0 A%%#!, ' P*(!

 E+amples o acts (hich need NOT be disclosed b) the Insured or Insurer,

5 9acts of law 9acts which the Insurer should know 4eg common knowledge, current

affairs5-5 9acts which lessen the risk 4security fittings, sprinklers, alarms5

/5 9acts which the Insurer should have noticed from other information given 4eg if the

 proposer has referred to other records5

<5 9acts related to the Insurer0s survey

G5 9acts covered by policy conditions

5 9acts which the proposer could not reasonably be e1pected to know

 Facts (hich must be disclosed, 

5 9acts which make a risk greater than usual

-5 9acts which would increase the possibility of a loss/5 Previous claims or losses 9acts which reduce an Insurer0s subrogation rights

<5 The e1istence of other Policies

G5 9acts relating to and descriptions of the subject matter of the insurance

J 9or e1ample+ there is a restaurant policy which provides cover for contents, fi1tures and

fittings, and stockThe following facts must the restaurateur disclose to his Insurers:

The neighbouring properties are a hardware shop and a Post 3ffice

- The restaurant suffered a fire - years ago

, P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 13/25

/ ' sprinkler system was installed after the fire

15. Montrose Chemical Corp. v. Superior Court , 6 al. 0t -87 (1993).

16. !it$patric% v. &merican 'ona Co., 78 $.&.-d 61 (1991).

< The value of the wines and spirits held on the premises

G 'gency waiting staff are used on a regular basisK

 U- 'e%al Cases continue to conirm the Principles

 In  La!"ert # Cooperati#e $nsurance Societ% &'()*+, it was confirmed that the prudent

insurer test in "ection C of the (arine Insurance 'ct => not only applies in connection

with non+marine matters, but is still the relevant test

Utmost "ood Faith at the Claims Sta%e,

 There is a limited duty of utmost good faith at the claims stage It is effectively confined to a

duty not to make a fraudulent claim JOra-po # Barc.a%s $nsurance Ser#ices Co Ltd &'((/+

and Ga..o0a% # Guardian Ro%a. E1c2an3e &'(()+45 

  Impact o Proposal Forms

 If information is waived, for e1ample by insurers asking only certain @uestions in their proposal form, there may be no duty on the proposer to volunteer additional information

4unless there is a general @uestion asking if there is anything else that should be disclosed5 A

Utmost "ood Faith applies to Insurers

 3ther case law, notably Ban6ue Financiere de .a Cite SA # West3ate $nsurance Co!pan%

 Ltd &'(77+ confirmed that the duty of disclosure is mutual .oth proposer 4or policyholder if

0 P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 14/25

there is a change in risk during the currency of the policy or at renewal5 and insurer must

disclose all material facts

A Cassim v . &llstate Ins. Co., 33 al. 0t 78 (-0).

 4'AP56" /7&!!D 8A$5' 69P6456D 8"!%

!5' PA"5$6S7

  Food faith is e1pected from the insured or assured as well as the insurer It is the buyerHsduty to disclose all facts related to the risk to be covered "imilarly, it is the insurerHs duty to

inform the insured of all the terms of the contract Dowever, it is generally the assured person

on whom there is a bigger duty to discloseC This is primarily because very often the insurer 

has to depend upon what details the insured mentions in his form If the insured gives wrong

details or details of goods which are actually not in e1istence, the insurer may end up paying

for the wrong claims in the future The insurer faces a lot of problems trying to verify all such

details, even though the advent of technology has made the task comparatively easier now a

days )rong information given not only affects the insurer but also the other people involved

in the insurance pool whose premiums may be wrongly utiliLed to satisfy the claims It is

therefore an implied condition or principle of insurance that the 'ssured be re@uired to make

a full disclosure of all material particulars within his knowledge about the risk =  9urther,

considering the increase in new businesses in which insurance is being taken, it becomes

mandatory for the assured to inform the insurer if there are any alterations or changes to the

 business which increases the risk during the validity of the policy and get his permission -> If 

no disclosure is made, the insurer has every right to avoid the contract

#'"E":

1 4 8nited $ndia $nsurance Co4 Ltd4 #4 MK9 Corpn4, &'((7+ (: Co!p Cases ;;' &;;;+

/ P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 15/25

?ust as the insured has a duty to disclose, it is the duty of the insurers and their agents, to

disclose, all material facts within their knowledge, since obligation of good faith applies to

them e@ually with the assured

 

2 4 Ban6ue Finaciere de .a Cite #4 West3ate $nsurance Co4 Ltd4, &'(7(+ : A.. ER (7:

In this case, the plaintiff bank had agreed to lend some /> million pounds securities in the

form of some gemstones and some credit insurance policies The gemstones when valued did

18. !it$patric% v. &merican 'ona Co., 78 $.&.-d 61 (1991).

19. Cassim v. &llstate Ins. Co., 33 al. 0t 78 (-0).

-. Esse( Ins. Co. v. !ive Star )*e 'ouse# Inc., 38 al. 0t 1-5- (-6).

not prove to be worth much "o, the bank sought to rely on the insurance policies The

 policies had been brokered by a major firm of brokers who resorted to a series of false covers

due to inability to obtain full cover

-

  3n making claims under the policies, the bank discovered severe shortage in cover It was held that the insurers were under an obligation to

disclose the same It was also held that the only remedy available to the insured is to rescind

the policy and claim the premium $o other damages may be awarded--

/ 9oe. #4 La0 8nion, )) L9KB ''<7

The duty to show good faith falls on the insured as well as the insurer to an e@ual degree in

all types of insurance contracts

< Anste% #4 Britis2 Natura. 

The insurer must 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 prospectus if any

* P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 16/25

 

-1.  +atson v. Emplo*ers Lia,ilit* &ssurance Corp., 308 U.S. 66 (1950).

--. State !arm Mutual &uto. Ins. Co. v. Camp,ell , 538 U.S. 08 (-3).

CHAPTER 5-MATERIALITY O ACT

1 P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 17/25

  'nother problem arises as to the definition of the term material fact )hat may be material

for one may be immaterial for the other and vice+versa .ut, generally speaking, a material

fact is one which affects the judgmental capacity of a person It must be such that a different

conse@uence would have occurred had it not been disclosed The following cases illustrate

the different theories evolved by the judiciary regards this

 

#'"E":

 Marine Life $nsurance Co4 #4 Ontario Meta. =roducts, (> L9=C /<

The test of materiality is the judgment of the prudent insurer and it is not what is material in

the opinion of a reasonable assured

- Re%no.ds #4 =2oeni1 Assurance Co4 &'()7+ : L.o%ds Rep >><

The test is whether the circumstance in @uestion would influence the prudent insurer and not

whether it might influence him

/ Lindenau #4 Des"orou32, &'7:7+ 7 B ? C *7/ 

The @uestion is whether any particular circumstance is infact material and not whether the

 proposer believed it to be so

< St4 =au. Fire and Marine $nsurance Co4 &8K+ Ltd4 #4 Mc Conne.. Do0e.. Constructors

 Ltd, >* Con LR 7(

  Two major @uestions were decided in this case The first was the test of materiality

according to which the fact in @uestion must have been of interest to a prudent insurer

"econdly, as regards the presumption of inducement, it was held that the test would be

+ P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 18/25

satisfied if the insurer could show that he was influenced in whole or in part by the assureds

misleading presentation of the risk

 

The Prudent insurer test has been adopted in "<=45 of Indian (M 'ct,=CC and " <=4G5

of English *oad Traffic 'ct, =A-

 FACTS .$IC$ NEED TO !E DISC'OSED AND FACTS .$IC$ NEED NOT !E 

 DISC'OSED+

 Facts re/uired to be disclosed +

' fact which is earlier immaterial but becomes material later on must be disclosed if it has

 been e1pressly mentioned in the terms and conditions of the policy Eg 9ire insurance of 

ones house Earlier, vacant plot located nearby %ater on a petrol pump is constructed on such

 plot-/

- ' fact which increases the risk must be disclosed in all circumstances Eg incase of theft

insurance, if a person lives alone in an isolated place, the same needs to be compulsorily

disclosed as it increases the risk

/ Previous losses incurred and claims under previous policies needs to be disclosed This is

mainly in case of double insurance where it needs to be ascertained as to whether the

subse@uent insurance company is willing to insure and to what e1tent

< "pecial terms and conditions under previous policies if any

G 9act of e1istence of non+indemnity is to be disclosed This relates to any charge or 

encumberance on the policy in the form of a loan security or otherwise

The description of the subject matter must be stated properly This is mainly to locate the

 property if it is immovable and to recogniLe it if it is movable

A 9acts which suggest any special motive to take the insurance

- P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 19/25

C 9acts which suggest the e1istence of any moral haLards which relate to the moral integrity

of the proposer, etc

#'"E":

 Econo!ides #4 Co!!ercia. 8nion Assurance Co4 p.c, &'(()+ ; A.. ER /;/ 

It was held that the duty of the assured to disclose all material facts re@uired an assured only

-< Paul v. Virginia, 75 U.S. (8 Wall.) 168, 19 L.Ed. 357 (1869).

to disclose facts known to him There is no obligation on the assured to make en@uiries as to

the factual basis of his belief

 Facts (hich need not be disclosed  +

9act lessening the risk need not be disclosed-G

- Public knowledge Eg facts regarding govt policies, ta1es, subsidies, etc which are

e1pected to be known to all

/ 9act of law like rules, regulations, etc which have already been made available to all by

way of the notification in the official gaLette-

< "uperfluous facts or such information which is not logical

G 9acts which are inferred information

9act waived by the insurer himself

A 9acts governed by the policy itself

#'"E":

2 P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 20/25

 L$C #4 S2a-unt2a.a"ai, A$R '()* A= /7

In this case, the insured had failed to disclose that he suffered from indigestion for a few days

and took chooram from an ayurvedic doctor De died within that year due to jaundice The

insurer repudiated the claim on this account The court did not approve of the repudiation as

the insurer did not establish by clear and cogent evidence that the @uestion was properly

e1plained to the insured and that he was told that illness included such casual disturbances to

health and medicines included tablets that could be purchased at the nearest coffee store

- B2a30ani Bai #4 L$C of $ndia, A$R '(7> M= ':/&';<+

The insurer cannot avoid or repudiate an insurance policy on the ground of non+disclosure of 

lapsed policies by the assured which had no bearing on the risk taken by the insurer

 

-. +alsh v. /icholls -0: $;J $o. -81.

-0. -0. State Insurance Lt v. Ceenco !oos Lt  (A -16297, 6 August 1998), . 7.

CHAPTER 6-REPUDIATION O INSURANCE

CONTRACT

  The remedy for non+disclosure of a material fact is that the Policy is voidable 4in other

words it can be affirmed or rescinded5 at the option of the aggrieved party-A 's the non+

disclosure is usually on the part of the proposerBPolicyholder, the initiative is with the Insurer

If the Policy is avoided, the Policy is treated as if it had never come into effect and any claims

 paid should be refunded to the Insurer and the premium returned to the Policyholder-C

  The strict legal position in the & is amended by the '.I "tatement of Feneral

Insurance Practice, in relation to persons insuring in their private capacity &nder this

agreement, members of the '.I will not repudiate liability to indemnify a Policyholder on

grounds of non+disclosure of a material fact which a policyholder could not reasonably be

e1pected to have disclosed, or on grounds of misrepresentation unless it is a deliberate ornegligent misrepresentation of a material fact-= The *ehabilitation of 3ffenders 'ct =A< is

,3 P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 21/25

also relevant The 'ct provides that, when the rehabilitation period has e1pired, certain

convictions need not be disclosed The rehabilitated person can then truthfully answer no to

any @uestion relating to his criminal history or, if no specific @uestion is asked, he has no

need to volunteer his criminal record

01# Dartwig *P, )ilkinson # 4->>/5 (old and Insurance Insurance Issue "eries

02# .hiten v# Pilot Insurance Co#, ->>- "## C, J->>-K "#* G=G

03# .alsh v# Nicholls J->><K $.? $o -C

CHAPTER 7-WRONGUL REPUDIATION O AN

INSURANCE POLICY

  )rongful repudiation of an insurance policy is the illegal action by an insurance company of 

canceling a health, life, automobile, or   property insurance policy/> 'side from completely

canceling an insurance policy, an insurance company has also wrongfully repudiated an

insurance policy if they:

• !eny the e1istence of the policy,

• *efuse to comply with the terms of the policy,

• "eek to change to terms of the insurance policy without your consent,

• Intend not to perform their obligations under the policy,

, P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 22/25

• 9ail to adhere to the established customs as related to the insurance policy, or 

• 9ail to renew the policy without providing a reason for doing so

*E(E!N 93* )*3$F9&% *EP&!I'TI3$

  (ost states allow you to sue an insurance company if the company has wrongfully

repudiated your insurance policy/ The majority of lawsuits for wrongful repudiation of an

insurance policy are based largely on breach of contract law/- There are generally three

different approaches that a victim of a wrongful repudiated insurance policy can take:

Treat the insurance policy as terminated, or rescinded, and sue for any appropriate

damages,

- "ue the insurance company to enforce the e1isting policy, or 

/ )ait until the terms of the insurance policy have matured and sue the insurance

company for damages

' few states even allow you to rescind an insurance policy and sue for damages if the

insurance company has not yet actually wrongfully repudiated on the policy, but you have

reason to believe that they will do so in the future This action is called an  anticipatory

repudiation// Nou should take e1treme caution in this area because it could end up that you

45# .atson v# Emplo)ers 'iabilit) Assurance Corp#, /<C &"  4=G<5

46# State Farm 7utual Auto# Ins# Co# v# Campbell , G/C &" <>C 4->>/5

40# Dartwig *P, )ilkinson # 4->>/5 (old and Insurance Insurance Issue "eries

44#  .hiten v# Pilot Insurance Co#, ->>- "## C, J->>-K "#* G=G

are the one in breach, and the insurance company could sue you

)D'T !3E" 3$E *E#3ME* I$ "&#D #'"E"7

  Even though a lawsuit for the wrongful repudiation of an insurance policy is very similar to

a breach of contract case, the damages available in a wrongful repudiation lawsuit are slightly

different that those available for a breach of contract case

/<

 In most cases, damages for awrongful repudiation lawsuit can include:

,, P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 23/25

• 'ny damages you suffered during the time you were covered by the insurance policy,

including monetary loss and pain and suffering,/G

• Punitive damages against the insurance company/,

• !amages prescribed by a statute, and

• The benefits you have forthcoming under the policy minus the premiums you paid, or 

• *ecovery of all the premiums you paid, but none of the benefits you are owed/A

48# !an/ue -e)ser Ullmann SA v# S9andia :U-; Insurance Co 'td# J==>K O. G

4<# !an/ue Financiere de la Cite SA v# .est%ate Insurance Co# 'td# J==K - '# -<=, -C>

4=# !uss v# Superior Court , #al <th /G 4==A5

41# "uideOne Elite v# Fielder Road !aptist Church> =A ")/d />G 4Te1 ->>5

,0 P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 24/25

#D'PTE* C+#3$#%&"I3$

Thus, this principle forms an integral part of insurance law It gives a fair chance of risk assessment to the insurer and also ensures that the assured fully understands all the terms and

conditions of the contract/C .ut, this principle is more favourable to the insurer as it is the

assured who has to generally make all the disclosures This is primarily because when this

doctrine was evolved in the Cth century, the insurance market was in its infancy and thus

re@uired protection/= Dowever, the enactment of the English &nfair #ontract Terms 'ct,

=AA has considerably alleviated the position of the assured who is now protected against

unfair contractual terms 9urther, the Insurance 'ct lays down that an insurance policy cannot

 be called in @uestion two years after it has been in force This was done to obviate the

hardships of the insured when the insurance company tried to avoid a policy, which has been

in force for a long time, on the ground of misrepresentation <> Dowever, this provision is not

applicable when the statement was made fraudulently $evertheless, technological

advancements have further made it possible for both parties to see to it that their interest is

taken care of .ut, there are several other grey areas to this doctrine as well There is still no

clear cut distinction between as to what is material or immaterial and the same is largely

dependent on the whims of the insurers and the terms of the contract < It is still very easy for 

an insurer to repudiate the contract on the slightest point of non+disclosure by treating them

as warranties, thereby putting the assured in an even more difficult position 'nother problem

is with regards to as to what duration does the disclosure need to be made #ommon law

cases may somewhat seem to have settled this point but the Indian (arine Insurance 'ct still

shows a confusion regards the same as it says that duty of disclosure shall end with the

conclusion of the contract<- Thus, all these problems need to be taken care of and an effective

solution must be provided considering the principle of utmost good faith is one of the most

fundamental principles associated with insurance law Dence in cases of breach of utmost

good faith one has the remedy to repudiate the contract

42# Sprun% v# Ro)al Insurance :U-; 'td  J===K %loydHs *ep

,/ P a g e

8/16/2019 8 Insurance Law

http://slidepdf.com/reader/full/8-insurance-law 25/25

43# C"U .or9ers Compensation :NS.; 'imited :CAN 554 626 550; v# "arcia J->>AK $")#' =/

85#  http:BBonlinecebcomB#al#asesB#/B=#/dGhtm

86# E%an v# 7utual o Omaha Ins# Co# 4=A=5 -< #al/d C>=

80# -anne v# Connecticut "en# 'ie Ins# Co#, CA 9-d <C= 4=th #ir =CC5

CHAPTER -/I/LIOGRAPHY

.E!SITES,

wwwirmicom

wwwbusinessdictionarycom

  wwwinvestopedi com enwikipediaorg

  wwwlawhandbookorg

 !OO-S,