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Report No. 190 The principle of uberrimae fidei 5.1.3 The principle governing section 45 is that of uberrimae fidei (also referred to as uberrima fides) which requires that the insured should fully disclose to the insurer at the time of entering into the contract of insurance all material facts within the knowledge of insured. This principle of common law, which has been adopted in India, has been elucidated in the judgment of Lord Mansfield in Carter v. Boehm, [(1758-1774) All ER Rep 183] in the following words: "Insurance is a contract upon speculation. The special facts upon which the contingent chance is to be computed lie more commonly in the knowledge of the insured only; the underwriter trusts to the insured's representations and proceeds upon confidence that he does not keep back any circumstance in his knowledge to mislead the underwriter into the belief that the circumstance does not exist. The keeping back such circumstance is a fraud and, therefore, the policy is void. Although the suppression should happen through mistake without any fraudulent intention but still the underwriter is deceived and the policy is void; because the risk run is really different from risk understood and intended to be run at the time of the agreement. Good faith forbids the other party, by concealing what he privately knows, to draw the other into a bargain from his ignorance of the fact and his believing the contrary".    |
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