Utmost good faith ppt

This is the first principle of Insurance Law, The principle of Utmost Good Faith

1. PRINCIPLE OF UTMOST GOOD FAITH N. SUBHASHINI Pre Senior Year

2. The doctrine of utmost good faith, also known by its Latin name  ” uberrimae fidei ” , is a minimum standard, legally obliging all parties entering a contract to act honestly and not mislead or withhold critical information from one another. INTRODUCTION

3. According to this principle, the insurance contract must be signed by both parties (insurer and insured) in an absolute good faith or belief or trust. Both parties in the contract must disclose all material facts for the benefit of each other. ABOUT GOOD FAITH

4. Depending on the nature of the transaction, violations of the doctrine of good faith can result in a variety of consequences . Most commonly, a contract created with inaccurate information from intentional misinformation, Fraudulent concealment may cause the contract to become voidable. CLAUSE

5. The Regulation as per section 45 of Insurance Act allows insurers for calling a policy in question on the ground of misrepresentation or suppression of a material fact not amounting to fraud only within the initial three years of the policy. SEC.45 INSURANCE ACT, 1938

6. No Life Insurance can be called in question of any reason after a period of 3 years from date of commencement. Therefore a strict interpretation of sec.45 would mean that even if there was willful non-disclosure, the right of denial of even death claim is not available after 3 years SECTION EXPLANATION

7.   Insurance is uberrimae fidei : A contract of marine insurance is a contract based upon the utmost good faith, and if the utmost good faith be not observed by either party, the contract may be avoided by the other party. SECTION.19 THE MARINE INSURNACE ACT, 1963

8. Unlike insurance contracts, most commercial agreements do not subscribe to the doctrine of utmost good faith. Instead, many are subject to Caveat Emptor, or "buyer beware."  This principle of contract law places the onus on the buyer to perform due diligence before making a purchase. In other words, a seller need only disclose information requested by the buyer. DOCTRINE OF UTMOST GOOD FAITH VS CAVEAT EMPTOR

9. Carter was the Governor of Fort Marlborough, built by the British East India Company. Carter took out an insurance policy with Boehm against the fort being taken by a foreign enemy. CASE STUDY- CARTER Vs BOEHM

10. A witness, Captain Tryon, testified that Carter was aware that the fort was built to resist attacks from natives but would be unable to repel European enemies, and he knew the French were likely to attack. The French successfully attacked, but Boehm refused to honor the indemnifier Carter, who promptly sued. CONTINUATION

11. Lord Mansfield found in favor of the policyholder on the grounds that the insurer knew or ought to have known that the risk existed as the political situation was public knowledge: “ There was not a word said to him, of the affairs of India, or the state of the war there, or the condition of Fort Marlborough. If he thought that omission an objection at the time, he ought not to have signed the policy with a secret reserve in his own mind to make it void,” said the Judge. CONTINUATION

12. FACTS: Insurance policy was taken by the husband of the respondent and the insured died with 1 and half year of taking the policy and the claim was repudiated on the ground of Non-Disclosure and withholding information regarding the health of the insured. LIFE INSURANCE CORPORATION VS ASHA GOEL

13. Writ petition was filed under Article 226 in High Court. Corporation stated that the claim was repudiated on the ground that deceased gave incorrect answers because he stated that his health was good and he had no consulted a medical practitioner within last 5 years, and also not remained absent from work on ground of health for 13 days few year back. CONTINUATION

14. The Division bench held that the corporation should be allowed to lead evidence because it would be useful for their contention that policy was obtained by fraud. Fresh trial started, in the High Court CONTINUATION

15. Whether the judgment of the division bench is right in cancelling the repudiating of the claim? That the claim was repudiated on the ground Non-disclosure of medical history of the ailment and the policy was repudiated after passing of the limitation period of three years. Where Sec. 45 clearly states that claim cannot be brought in to questioning after period of three years had expired from the date of issuance of the policy. ISSUE

16. The corporation couldn’t prove that deceased had made a false statement and such statement was material in nature and was made fraudulently, Hence the defense couldn’t be supported. The petitioner wife stated medical report that the deceased wasn’t affected and was healthy prior to the policy. Hence, they were obliged to the claim. CONTINUATION

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