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2019 (4) TMI 2048 - SUPREME COURTInsurance claim - Seeking direction to insurer to pay seventy-five percent of the amount awarded by the SCDRC - HELD THAT:- The NCDRC entered a finding that since the previous insurance policy had been enclosed with the proposal form, the insurer could, upon further enquiry, have learnt of the status of the claims under the earlier policy. The NCDRC considered the exception to Section 19 of the Indian Contract Act, 1872 and held that the insurer could have easily verified the claims submitted by the insured under the previous policy. It was thus held that the insurer cannot deny the benefit of insurance on account of the information not having been disclosed in the proposal form. However, the NCDRC noted that the insured had not expressly disclosed the previous claim and in consequence, deducted twenty-five of the amount payable under the contract of insurance. This line of reasoning of the NCDRC is flawed. Insurance is governed by the principle of utmost good faith, which imposes a duty of disclosure on the insured with regard to material facts. In Satwant Kaur Sandhu v New India Assurance Co. Ltd [2009 (7) TMI 1375 - SUPREME COURT], a two-judge Bench of this Court held that under a contract of insurance, the insured is under a “solemn obligation” to make a true and full disclosure of information asked for in the proposal form - It was further held there is a clear presumption that any information sought in the proposal form is a “material fact”. The burden cannot be cast upon the insurer to follow up on an inadequate disclosure by conducting a line of enquiry with the previous insurer in regard to the nature of the claims, if any, that were made under the earlier insurance policy. On the contrary, it was the plain duty of the respondent while making the proposal to make a clear and specific disclosure. The insurance policy with New India Assurance Company Limited was for the period from 15 November 2004 to 14 November 2005. The excavator remained uninsured from 15 November 2005 until 10 October 2006. The case of the respondent was that during that period, it was under repair. This fact, together with the receipt of the earlier insurance claim, was material to the decision of the insurer on whether to accept the proposal for insurance - it is evident on a bare reading of the proposal form that material information which was required to be disclosed was suppressed by the insured. The proposal form contains a declaration of the insured that the statements which are made are true to the knowledge of the proposer and the declaration forms the basis of the contract with the insurer. The decision of the SCDRC to allow the claim was erroneous and the NCDRC equally erred in affirming the decision. Appeal allowed - decided in favor of appellant.
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