IMPORTANT POINT
Any fact which goes to root of contract of insurance and has bearing on risk involved would be material.

J.M. Malik, Presiding Member —The main controversy in this case swirls around the question, “what is the material fact as per proviso appended to Section 45 of the Insurance Act”. In the instant case, the claim made by the complainant was repudiated on the ground owing to non-disclosure of material facts, relating to her earlier policy with various other insurers including Sahara India Insurance Company Ltd. and also her annual income. The State Commission came to the conclusion that the repudiation of the claim was not valid.

2. We have heard the counsel for the petitioners -Sahara India Life Insurance Company Ltd. and perused the written submissions made by the respondent/complainant. The counsel for the petitioners has placed reliance on the celebrated authority of Hon’ble Supreme Court reported in Satwant Kaur Sandhu v. New India Assurance Co. Ltd., IV (2009) CPJ 8 (SC): 2013 (3) CPR 654 SC), which was also relied by us in the case of LIC of India & Anr. Versus Vidya Devi & Anr. in Revision Petition No. 382 of 2011 and Komal Sharma, Deepak Kumar Sharma & Ors. Versus Life Insurance Corporation of India & Ors., I (2013) CPJ 606 (NC). The Apex Court in the said judgment in the case of “Satwant Kaur Sandhu v. New India Assurance Co. Ltd.” (Supra) was pleased to hold:-

“12.. ……… Nonetheless, it is a contract of insurance falling in the category of contract ‘uberrimae fidei’, meaning, ‘a contract of utmost good faith, on the part of the assured’. Thus, it needs little emphasis that when an information on a specific aspect is asked for in the proposal form, an assured is under a solemn obligation to make a true and full disclosure of the information on the subject which is within his knowledge. It is not for the proposer to determine whether the information sought for is material for the purpose of the policy or not. Of course, obligation to disclose extends only to facts which are known to the applicant and not to what he ought to have known. The obligation to disclose necessarily depends upon the knowledge one possesses. His opinion of the materiality of that knowledge is of no moment. (See: Joel v. Law Union & Crown Ins. Co. [1908] 2 K.B. 863).

13. In United India Insurance Co. Ltd. v. M.K.J. Corporation, III (1996) CPJ 8 (SC)=(1996) 6 SCC 428, this Court has observed that it is a fundamental principle of insurance law that utmost faith must be observed by the contracting parties. Good faith forbids either party from non-disclosure of the facts which the party privately knows, to draw the other into a bargain, from his ignorance of that fact and his believing the contrary. (Also see: Modern Insulators Ltd. v. Oriental Insurance Co. Ltd., II (2000) SLT 323 = I (2000) CPJ 1 (SC) = (2000) 2 SCC 734).

17. The term “material fact” is not defined in the Act and, therefore, it has been understood and explained by the courts in general terms to mean as any fact which would influence the judgment of a prudent insurer in fixing the premium or determining whether he would like to accept the risk. Any fact which goes to the root of the Contract of Insurance and has a bearing on the risk involved would be “material”.

18. As stated in Pollock and Mulla’s Indian Contract and Specific Relief Acts, any fact the knowledge or ignorance of which would materially influence an insurer in making the contract or in estimating the degree and character of risks in fixing the rate of premium is a material fact”.

3. We are of the considered view that these authorities rather go to help the complainant/respondent. The Para 17 of the Apex Court order is crucial and significant. It is difficult to fathom as to why these facts would influence the judgment of a prudent insurer in fixing the premium or determining the cover or whether he would like to take the risk. This appears to be a mistake committed by the agent. Agent is the villain and for his omissions and commissions, the insured or her LRs should not suffer. On the contrary, the repudiati