INTRODUCTION
Today, I will talk about the case of Manmohan
Nanda v. United India Assurance Co. Ltd. & Anr., Civil Appeal No.
8386/2015, wherein the Hon’ble Supreme Court discussed the basic rules to be
observed in making a proposal for insurance.
In an earlier post, I had discussed the importance
of good faith in a Contract of Insurance. To know more about it, please visit
the link provided in the description below.
MEANING
Briefly speaking, a Contract of Insurance is “a
contract by which one party undertakes to indemnify another party/insured
against risk of loss, damage, or liability arising from the occurrence of some
specified contingency.”
PROPOSAL FORM
It is pertinent to note that the Proposer/Insured
is generally required to fill up a Proposal Form prior to issuance of the
Insurance Policy. In such Proposal Form, the Proposer is required to fill in
the relevant and material details that have been asked by the Insurer. The Proposal
Form is usually in a Question-Answer Format. For example, in case of Health
Insurance, the Proposer would be required to provide a history of the
pre-existing diseases and other related medical conditions in the relevant
column where such question has been posed by the Insurer. In this regard, the
Court has framed the basic rules that are to be followed in making a Proposal
for Insurance. The pertinent ones are as follows: -
IMPORTANT RULES
a. “A fair and reasonable construction must
be put upon the language of the question which is asked, and the answer given
will be similarly construed.” Minor discrepancies or omissions that are
insubstantial are liable to be ignored.
b. “Carelessness is no excuse, unless the
error is so obvious that no one could be regarded as misled. If the proposer
puts ‘no’ when he means ‘yes’ it will not avail him to say it was a slip of the
pen; the answer is plainly the reverse of the truth.”
c. “An answer which is literally accurate,
so far as it extends, will not suffice if it is misleading by reason of what is
not stated.”
d. “Where the space for an answer is left
blank, leaving the question unanswered, the reasonable inference may be that
there is nothing to enter as an answer.
If in fact there is something to enter as an answer, the insurers are
misled in that their reasonable inference is belied.” Whether leaving
blank is a matter of non-disclosure or not is a matter of interpretation.
e. “Where an answer is unsatisfactory, as
being on the face of it incomplete or inconsistent the insurers may, as
reasonable men, be regarded as put on inquiry, so that if they issue a policy
without any further enquiry they are assumed to have waived any further information.”
f. “A proposer may find it convenient to
bracket together two or more questions and give a composite answer. There is no
objection to his doing so, provided the insurers are given adequate and
accurate information on all points covered by the questions.”
g. “Any answer given, however accurate and
honest at the time it was written down, must be corrected if, up to the time of
acceptance of the proposal, any event or circumstance supervenes to make it
inaccurate or misleading.”
ENDING REMARKS
Thus, such rules ought to be followed in making a
Proposal for Insurance. What is important to note that is that the Court has
tried to balance the rights of the Insurer and the Proposer, at the stage of
filling up the Proposal Form. Everything contained in the Proposal Form must be
considered in proper perspective by adopting the afore-stated rules and the
general rules of interpretation. Sometimes the questions posed in the Proposal
Form are such that the Proposer/Insured becomes vulnerable as the statements in
the proposal form could be held against the insured. All in all, it was held by
the Court that “in order to seek specific information from the insured,
the proposal form must have specific questions so as obtain clarity as to the
underlying risks in the policy, which are greater than the normal risks.”
Thus, I hope that the basic rules that are to be
followed in making a Proposal for Insurance are clear by now.
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