The insured needs to follow specific terms and obligations while proposing. The kind of insurance policy taken, along with the risk covered and also the queries raised in the proposal form, determine the material fact
The Supreme Court (SC) has recently laid down specific rules regarding the duty or obligation of the insurer, which is the insurance company and the insured. The court issued a writ petition to counter arguments of the assistant secretary, deputy secretary, or secretary, insurance ombudsman, Lucknow.
Justice Shekhar B. Saraf and Justice Vipin Chandra Dixit, a division bench, to pick out the following rules:
The insured needs to follow specific terms and obligations while proposing. The kind of insurance policy taken, the risk covered, and the queries raised in the proposal form determine the material fact.
It needs to be checked whether the questions are influencing the wise insurer in any way or not. A fact can only be deemed material if it influences a wise insurer’s decision to set the premium or accept the risk.
Other factors decide a material fact, like the health and medical condition of the proposer.
There is an ancient origin of the contra proferentem rule. In case there are two possible interpretations of a text, the one that goes against the person who used the unclear words or who wrote applies. In cases where the standard form contracts include exceptional clauses, they are typically interpreted against the person who drafted them, following the contra proferentem rule.
The insurer is expected to answer the questions when there are specific questions. However, in case a section is left blank, it is the job of the insurance company to ask the policyholder to complete it. In case the company accepts the premium without questioning it, it usually cannot reject a claim based on missing information. In such cases, the insurer must cross-check the details of the previous policy, which is already with them.
While advocate Shruti Malviya represented the respondents, advocate Hari Bans Singh stood for the petitioner.
Facts: The insured (petitioner’s wife), in the year 2018, took a life insurance policy from the Life Insurance Corporation of India (LIC) for a sum of Rs 15 lakh through an agent. As the beneficiary happened to be the insured’s husband, he was appointed as the nominee in the said policy. Under the terms and conditions suggested by LIC, while applying for the policy, the insured put forward all necessary details in the application form, as decided by the agent. Moreover, it was confirmed that no material information was misrepresented or hidden.
However, the insurer rejected the policyholder’s claim, saying he hadn’t disclosed all information about his earlier policy. The LIC regional manager also turned down the policyholder’s claim. His claim was further turned down by the insurance ombudsman-respondent. Becoming aggrieved, he moved the High Court.