Uberrima Fides - Utmost Good Faith

Uberrima Fides

Uberrima Fides means ‘the utmost good faith’. Both in England and in Scotland, certain contracts are such that the parties are obliged to observe the utmost good faith. Indeed, parties who are about to enter such a contract are held to be under an obligation to disclose all relevant matters before the contract. Recognized instances are insurance, fidelity guarantees for officials and probably partnership. The effect of this is to allow a party, quite often an insurer, to avoid liability as the contract will be treated as voidable if there has not been disclosure.

Uberrima fides. (n.d.) Collins Dictionary of Law. (2006). Retrieved February 8 2017 from http://legal-dictionary.thefreedictionary.com/uberrima+fides​

CASELAW

In Satwant Kaur Sandhu v. New India Assurance Company Ltd., 2009 (8) SCC 316, the Supreme Court speaking through while deliberating on the lis relating to insurance claim by the Complainant Satwant Kaur Sandhu, has observed thus -

12.There is no dispute that Section 45 of the Insurance Act, 1938 (for short “the Act”), which places restrictions on the right of the insurer to call in question a life insurance policy on the ground of mis-statement after a particular period, has no application on facts at hand, in as much as the said provision applies only in a case of life insurance policy. The present case relates to a mediclaim policy, which is entirely different from a life insurance policy. A mediclaim policy is a non-life insurance policy meant to assure the policy holder in respect of certain expenses pertaining to injury, accidents or hospitalizations. 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 Vs. Law Union & Crown Ins. Co.1, [1908] 2 K.B. 863)”

Facts Of The Case

On 7th May, 1990 appellant’s husband, late Shri Pritpal Singh Sandhu, insured himself under a mediclaim policy provided by the respondent. The policy was for a period from 7th May, 1990 to 6th May, 1991. On 11th September, 1990, Pritpal Singh suddenly fell ill and was admitted in Hospital. He died on 26th December, 1990. On 29th April, 1991 she filed a claim for Rs.23,217.80 for reimbursement of the expenses incurred on hospitalization. The respondent - Insurance Company repudiated the claim on the basis of medical history of the insured. The District Forum directed the respondent to pay the claimed amount with interest at 12% per annum from 1st April, 1991 i.e., 3 months after the death of the insured till the date of actual payment. The respondent was also required to pay Rs.1000/- as cost of litigation. The State Commission allowed the appeal there against and set aside the order of the District Forum. The appeal and revision there against has been dismissed.

Finding of the Court - The Insurance Company rightly repudiated the claim.
Result - Appeal dismissed.

References

  • Baddi, A. (2017, Feb 8). UBERRIMA FIDES. Retrieved Feb-08-2017 Wed from http://satyagraha.com/portal/education/37-legal-terms/2133-uberrima-fides.html

  • Baddi, A. (2017, Feb 8). Satwant Kaur Sandhu v. New India Assurance Company Ltd., 2009 (8) SCC 316. Retrieved Feb-08-2017 Wed from http://satyagraha.com/portal/articles/case-laws/2134-satwant-kaur-sandhu-v-new-india-assurance-company-ltd-2009-8-scc-316.html 

Author Bio

Anil hails from a Consulting Background in the area of Business, Technology and Project Management. This Article is a humble effort to the aforementioned domains by making a foray into Legal Research. The Author may be reached via anil [at] Satyagraha [dot] com  

 

Anil Satyagraha 
on 09 February 2017
Published in Civil Law
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