Oriental Insurance Company Limited vs Mahendra Construction - Supreme Court Important Judgment 2019

 Oriental Insurance Company Limited vs Mahendra Construction - Supreme Court Important Judgment 2019 - 

On 1st April, 2019, in the case of Oriental Insurance Company Limited. v. Mahendra Construction [Civil Appeal No.3359 of 2019], the Supreme Court examined an insurance claim, which was repudiated by the insurer on the ground that all material facts required to be disclosed through the proposal form to enable the insurer to assess the risk profile had not been disclosed.

In the case at hand, the insurance claim had been lodged by the respondent for his excavator, which was insured with the appellant from 11th October, 2006 to 10th October, 2007. The Supreme Court observed that “insurance is governed by the principle of utmost good faith, which imposes a duty of disclosure on the insured with regard to material facts”, and, on facts, “information regarding insurance claims lodged by the respondent for his excavator in the preceding three years was a material fact”. It was observed that “the proposal form contained a specific question regarding claims lodged in the preceding three years” and “the respondent was under a bounden duty to disclose that the excavator was previously insured with another insurer and that a claim for damage to the excavator on 12 April 2005 had been settled.”

Noticing that “it was only in the affidavit of evidence dated 6 January 2017, that the respondent disclosed” that the earlier insurer, namely, New India Assurance Company Limited, “had paid an amount of Rs 36.66 lakhs by cheque on 23 September 2005”, the Supreme Court observed that “this material fact was suppressed from the proposal form.” It was held that “mere disclosure of a previous insurance policy did not discharge the obligation which was cast on the respondent, as the proposer, to make a full, true and complete disclosure of the claims which were lodged under the previous policy in the preceding three years.” The Supreme Court held that “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.”

Dismissing the complaint of respondent, the Supreme Court observed that “the respondent was under an obligation to make a full disclosure of the status of the previous insurance policy, together with the material facts relevant to the claim which had been lodged with New India Assurance Company Limited. The fact that such a claim was lodged and had been settled at Rs 36.66 lakhs was suppressed. This suppression goes to the very root of the contract of insurance which would validate the grounds on which the claim was repudiated by the insurer.”