8 Insurance Law
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PATNA
Project Topic:
REPUDIATION OF INSURANCE
CONTRACT
Law of insurance
Project submitted to: Dr. Shaiwal Satyarthi
[ Associate professor(law)
Project submitted by:
P!!"#$%A S$#&'
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"oll no:*+*
TABLE OF CONTENTS
1) ACKNOWLEDGEMEN T.................................................................3
2) RESEARCH METHODLOGY.........................................................4
3) INTRODUCTION..………………………………………….……5-64) AUDIT ………………………………………..…………………..7-
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6) CONCLUSION…………………………………………………….27
7) /I/LIOGRAPHY……………………………………………….....28
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ACKNOWLEDGEMENT
I feel highly delighted, as it gives me incredible pleasure to present a research work on
“ Repudiation of insurance contract ” I would like to enlighten my readers regarding this
topic and I hope I have tried my best to pave the way for bringing more luminosity to this
topic
I am grateful to my faculty “!r "haiwal "atyarthi” who has given me an idea and encourage
me to venture this project I would like to thank librarian of #$%& for their interest in
providing me a good back up material
'nd finally yet importantly I would like to thank my parents for their support and
almighty god who helps me in all my endeavours
POORNIMA SINGH
-th semester /th year
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RESEARCH METHODOLOG
A&0 *', O9!("!0 :
The aim of the project is to present a detailed study of Repudiation of insurance contract and to
study the various aspects of insurance contracts and reasons for its repudiation by insurer
S$%! *', L&(*($'0 :
The four point on which special emphasis has been given in this research are:
• (eaning of ubirimma fidie
• (eaning of repudiation• )rongful repudiation
• *emedy for wrongful repudiation
S$+!0 $ D*(* :
The following secondary sources of data have been used in the project+
'rticles
- .ooks
/ )ebsites
M!($, $ W(' :
The method of writing followed in the course of this research paper is primarily analytical
M$,! $ C(*($' :
The researcher has followed a uniform mode of citation throughout the course of this research
paper
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CHAPTER 1
INTRODUCTION
In an ideal world, we0ll all enter into a contractual relationship with another party and
e1perience no issues, and the contract will come to an end when all parties fulfil their
performance obligations &nfortunately, we don0t live in a perfect world, and problems can
sometimes arise if one party acts in a manner that can be seen to be as a repudiation of the
contractual relationship
' policy of insurance is a contract of “utmost good faith” 2 uberrimae fidei The reason for
this is that contracts of insurance are generally based on facts which are known only by the
insured at the time of formation of the contract 3nly the insured knows what modifications
have been made to his car, how many miles he is going to drive it every year and the
purposes for which he is going to drive the car- The insurer has to rely on the information
provided by the insured in assessing the risk and determining the appropriate premium
The obligation to observe utmost good faith gives rise to - duties on the party proposing
insurance:
4a5 a duty to disclose all material facts to the insurer6
4b5 a duty not to misrepresent material facts to the insurer
)hat is a “material” fact7 The test of materiality is not what the insured considers material,
nor what a reasonable insured would consider reasonable, but whether the fact would be
taken into account by a prudent insurer when assessing the risk and determining an
appropriate premium (aterial non+disclosure or misrepresentation entitles the insurer
repudiate the contract or to avoid the contract ab initio if the insurer was induced to enter
into the insurance contract by the non+disclosure or misrepresentation
In order to establish materiality and inducement, it is necessary for an insurer to adduce
evidence from underwriters that the non+disclosure or misrepresentation was material and did
89!I %imit in Insurance sector increased from -; to <=;8 IANS newsbiharprabhacom
*etrieved > ?uly -><
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- "overeign guarantee for all policies issued by %I# will continue
induce the contract The insurer must show at least that, but for the non+disclosure or
misrepresentation, the policy would not have been concluded on the same terms It is not
necessary, however, to show that that it was the sole effective cause/ The issue is one of fact
9re@uently, e1pert evidence will also be called on the issue of materiality"ometimes there
may be even wrongful repudiation of an insurance contract by the insurer< )rongful
repudiation of an insurance policy is the illegal action by an insurance company of cancelling
a health, life, automobile, or property insurance policy (ost states allow you to sue an
insurance company if the company has wrongfully repudiated your insurance policy The
majority of lawsuits for wrongful repudiation of an insurance policy are based largely
on breach of contract law
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Uberrima ides 4sometimes seen in its genitive form uberrimae fidei5 is a %atin phrase
meaning 8utmost good faith8 4literally, 8most abundant faith85 It is the name of a legal
doctrine which governs insurance contracts This means that all parties to an insurance
contract must deal in good faith, making a full declaration of all material facts in the
insurance proposal This contrasts with the legal doctrine caveat emptor 4let the buyer
beware5
#ontracts, in general, are subject to the doctrine of caveat emptor 4let the buyer beware5 This
means that each party must ask @uestions to ensure that they have all the information they
need before signing the contract "tatutes such as the "ale of Foods 'ct =A= and the &nfair
#ontract Terms 'ct =AA affect what must be supplied 'lso, there must be no
misrepresentation or fraud Insurance contracts are not based on the principle of caveat
emptor Those involved in negotiations for an insurance contract must disclose all relevant
information to all the other parties in the negotiation This is particularly important because
relevant information will typically only be known to one party to the contract, that is, the
proposer or Policyholder This is the principle of uberrima fides or utmost good faith
Thus the insured must reveal the e1act nature and potential of the risks that he transfers to the
insurer, while at the same time the insurer must make sure that the potential contract fits the
needs of, and benefits, the insured
' higher duty is e1pected from parties to an insurance contract than from parties to most
other contracts in order to ensure the disclosure of all material facts so that the contract may
accurately reflect the actual risk being undertaken The principles underlying this rule were
stated by %ord (ansfield in the leading and often @uoted case of Carter v !oehm 4A5 =A
E* -, <,
8Insurance is a contract of speculation The special facts, upon which the contingent chance
is to be computed, lie most commonly in the knowledge of the insured only: the under+writer
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G F3I 8I*!' '#T ===8 F3I *etrieved = ?une ->-
F3I 8I*!' '#T ===8 4P!95 !epartment of 9inancial "ervices, F3I *etrieved = ?une ->-
trusts to his representation, and proceeds upon confdence that he does not
keep back any circumstances in his knowledge, to mislead the under-writer
into a belie that the circumstance does not exist... Good aith orbids either
party by concealing what he privately knows, to draw the other into a bargain
rom his ignorance o that act, and his believing the contrary.“
*einsurance contracts 4between reinsurers and insurersBcedents5 re@uire the highest level of
utmost good faith, and such utmost good faith is considered the foundation of reinsurance In
order to make reinsurance affordable, a reinsurer cannot duplicate costly insurer underwritingand claim handling costs, and must rely on an insurer0s absolute transparency and candor In
return, a reinsurer must appropriately investigate and reimburse an insurer0s good faith claim
payments, following the fortunes of the cedent
(ere non+disclosure of fact, material or not, does not ordinarily amount to misrepresentation,
and the general rule is that in order to be actionable a representation must take an active form
8.ut in certain cases a stricter rule is enforced
The most important of these are the contracts uberrimae idei, in which knowledge of the
material facts generally lies with one party alone6 that party is under a duty to make a full
disclosure of these facts, and failure to do so makes the contract voidable The duty varies
in its e1tent from one type of contract to anotherA
#ontracts of insurance of every kind form the main group of contracts uberrimae idei3ther
e1amples generally included, though these are probably not all uberrimae idei in the strict
sense, are contracts to subscribe for shares in a company, family settlements, contracts for thesale of land, contracts of suretyship, and partnerships
8#ontracts of service are not uberrimae idei, nor are contracts of sale of goods8
In ?owittHs =AA !ictionary, the term was described as follows:
8' contract is said to be uberrimae idei when the promisee is bound to communicate to the
promisor every fact and circumstance which may influence him in deciding whether to enter
into the conract or notC
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8#ontracts which re@uire uberrimae idei are those entered into between persons in a
particular relationship, as guardian and ward, solicitor and client and insurer and insured8
7. Paul v. Virginia, 75 U.S. (8 Wall.) 168, 19 L.Ed. 357 (1869).
8. Eugene R. Anderson, Jordan S. Stanler, ! Lorel"e S. #asters, Insurance Coverage
Litigation ($e% &or' Asen *u+l"sers, -9 su.), / 11.0 at 1113 to 1116.
In #oronation Insurance v Taku 'ir , #anadaHs "upreme #ourt wrote:
8The uberrima ides doctrine is a longstanding tenet of insurance law which holds parties to
an insurance contract to a standard of utmost good faith in their dealing It places a heavy
burden on those seeking insurance coverage to make full and complete disclosure of all
relevant information when applying for a policy=
In a #anadian case, "abriel v# $amilton Ti%er&Cat Football Club, ?ustice 3H%eary used these
words:
8There is a limited class of contracts in which one of the parties is presumed to have means of
knowledge which are not accessible to the other and is, therefore, bound to tell him
everything which may be supposed likely to affect his judgment They are known as
contracts uberrimae idei, and may be avoided on the ground of non+disclosure of material
facts”>
8#ontracts of insurance of every kind are in this class There are other contracts, though not
contracts uberrimae idei in the same sense, which impose a duty of full disclosure of all
material facts by the parties entering into them #ontracts for family settlements and
arrangements fall into this category
The Douse of %ords in !ell v 'ever !ros# 'td# refused to e1tend the duty of disclosing
material facts to contracts for service
In the conte1t of maritime law, ?ustice (ceown of the &nited "tates #ourt of 'ppeals , =th
#ircuit, used these words in the 9ebruary ->>C decision of Certain Under(riters at 'lo)d*s v
Inlet Fisheries 'td#:
8This case involves the interplay between an ancient legal doctrine and
contemporary vessel pollution insurance Distorically, all insurance policies were
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contracts uberrimae idei, meaning that both parties were held to the highest standard of good
faith in the transaction-
9. tt22onl"ne.e+.o42alases2-25-d650.t4
1. tt22onl"ne.e+.o42alases23293d566.t4
11. Egan v. Mutual of Omaha Ins. Co. (1979) -0 al.3d 89.
1-. Kanne v. Connecticut Gen. Life Ins. Co., 867 .-d 089 (9t "r. 1988).
8The doctrine of uberrimae idei was grounded both in morality and efficiency6 insureds were
considered morally obligated to disclose all information material to the risk the insurer was
asked to shoulder, but such a principle was also an economic necessity where insurers had no
reasonable means of obtaining this information efficiently, without the ubi@uity of telephones,
email, digital photography, and air travel/
The reasons which brought into being the strict marine insurance law doctrine as to
disclosures, go far back into the early days of marine insurance, when sailing ships in
faraway seas were insured in %ondon by underwriters who could get no information e1cept
from the ship owners<
The contract of insurance, is one of mutual good faith6 and the principles which govern it, are
those of an enlightened moral policy
Today, uberrimae idei has been displaced in most insurance conte1ts $evertheless, the
doctrine enjoys continuing vitality in the world of marine insurance
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13. Buss v. Superior Court , 16 al. 0t 35 (1997).
10. GuieOne Elite v. !ieler "oa Baptist Church# 197 S.W.3d 35 (e. -6).
CHAPTER 3-LEGAL PRO;ISIONS RELATING TO
U/IREMMAE IDEI
The principles of what must be disclosed were established in the case of #arter v .oehm
4A5: The proposer must disclose all material facts (aterial facts are those that would
influence an underwriter as to whether he should or should not accept the risk The proposer
does not need to disclose what the underwriter ought to know The proposer is not re@uired to
disclose things he could not know These have been codified in the M*'! I'0+*'! A(
16:
C#*+0! 17 - ' contract of marine insurance is a contract based upon the utmost good faith,
and, if the utmost good faith being not observed by either party, the contract may be avoided
by the other party
C#*+0! 18<1) + "ubject to the provisions of this section, the assured must disclose to the
insurer, before the contract is concluded, every material circumstance which is known to the
assured, and the assured is deemed to know every circumstance which, in the ordinary course
of business, ought to be known by him If the assured fails to make such disclosure, the
insurer may avoid the contract
C#*+0! 18<2) + Every circumstance is material which would influence the judgment of a
prudent insurer in fi1ing the premium, or determining whether he will take the risk
C#*+0! 18<3) + In the absence of in@uiry the following circumstances need not be disclosed,
namely:
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4a5 'ny circumstance which diminishes the risk6
4b5 'ny circumstance which is known or presumed to be known to the insurer The insurer is
presumed to know matters of common notoriety or knowledge, and matters which an insurer
in the ordinary course of his business, as such, ought to know6 G
4c5 'ny circumstance as to which information is waived by the insurer6
4d5 'ny circumstance which it is superfluous to disclose by reason of any e1press or implied
warranty
C#*+0! 18<4) - )hether any particular circumstance, which is not disclosed, be material or
not is, in each case, a @uestion of fact
C#*+0! 18<5) - The term circumstance includes any communication made to, or information
received, by the assured
H$= U(&$0( G$$, *( 0 A%%#!, ' P*(!
E+amples o acts (hich need NOT be disclosed b) the Insured or Insurer,
5 9acts of law 9acts which the Insurer should know 4eg common knowledge, current
affairs5-5 9acts which lessen the risk 4security fittings, sprinklers, alarms5
/5 9acts which the Insurer should have noticed from other information given 4eg if the
proposer has referred to other records5
<5 9acts related to the Insurer0s survey
G5 9acts covered by policy conditions
5 9acts which the proposer could not reasonably be e1pected to know
Facts (hich must be disclosed,
5 9acts which make a risk greater than usual
-5 9acts which would increase the possibility of a loss/5 Previous claims or losses 9acts which reduce an Insurer0s subrogation rights
<5 The e1istence of other Policies
G5 9acts relating to and descriptions of the subject matter of the insurance
J 9or e1ample+ there is a restaurant policy which provides cover for contents, fi1tures and
fittings, and stockThe following facts must the restaurateur disclose to his Insurers:
The neighbouring properties are a hardware shop and a Post 3ffice
- The restaurant suffered a fire - years ago
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/ ' sprinkler system was installed after the fire
15. Montrose Chemical Corp. v. Superior Court , 6 al. 0t -87 (1993).
16. !it$patric% v. &merican 'ona Co., 78 $.&.-d 61 (1991).
< The value of the wines and spirits held on the premises
G 'gency waiting staff are used on a regular basisK
U- 'e%al Cases continue to conirm the Principles
In La!"ert # Cooperati#e $nsurance Societ% &'()*+, it was confirmed that the prudent
insurer test in "ection C of the (arine Insurance 'ct => not only applies in connection
with non+marine matters, but is still the relevant test
Utmost "ood Faith at the Claims Sta%e,
There is a limited duty of utmost good faith at the claims stage It is effectively confined to a
duty not to make a fraudulent claim JOra-po # Barc.a%s $nsurance Ser#ices Co Ltd &'((/+
and Ga..o0a% # Guardian Ro%a. E1c2an3e &'(()+45
Impact o Proposal Forms
If information is waived, for e1ample by insurers asking only certain @uestions in their proposal form, there may be no duty on the proposer to volunteer additional information
4unless there is a general @uestion asking if there is anything else that should be disclosed5 A
Utmost "ood Faith applies to Insurers
3ther case law, notably Ban6ue Financiere de .a Cite SA # West3ate $nsurance Co!pan%
Ltd &'(77+ confirmed that the duty of disclosure is mutual .oth proposer 4or policyholder if
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there is a change in risk during the currency of the policy or at renewal5 and insurer must
disclose all material facts
A Cassim v . &llstate Ins. Co., 33 al. 0t 78 (-0).
4'AP56" /7&!!D 8A$5' 69P6456D 8"!%
!5' PA"5$6S7
Food faith is e1pected from the insured or assured as well as the insurer It is the buyerHsduty to disclose all facts related to the risk to be covered "imilarly, it is the insurerHs duty to
inform the insured of all the terms of the contract Dowever, it is generally the assured person
on whom there is a bigger duty to discloseC This is primarily because very often the insurer
has to depend upon what details the insured mentions in his form If the insured gives wrong
details or details of goods which are actually not in e1istence, the insurer may end up paying
for the wrong claims in the future The insurer faces a lot of problems trying to verify all such
details, even though the advent of technology has made the task comparatively easier now a
days )rong information given not only affects the insurer but also the other people involved
in the insurance pool whose premiums may be wrongly utiliLed to satisfy the claims It is
therefore an implied condition or principle of insurance that the 'ssured be re@uired to make
a full disclosure of all material particulars within his knowledge about the risk = 9urther,
considering the increase in new businesses in which insurance is being taken, it becomes
mandatory for the assured to inform the insurer if there are any alterations or changes to the
business which increases the risk during the validity of the policy and get his permission -> If
no disclosure is made, the insurer has every right to avoid the contract
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1 4 8nited $ndia $nsurance Co4 Ltd4 #4 MK9 Corpn4, &'((7+ (: Co!p Cases ;;' &;;;+
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?ust as the insured has a duty to disclose, it is the duty of the insurers and their agents, to
disclose, all material facts within their knowledge, since obligation of good faith applies to
them e@ually with the assured
2 4 Ban6ue Finaciere de .a Cite #4 West3ate $nsurance Co4 Ltd4, &'(7(+ : A.. ER (7:
In this case, the plaintiff bank had agreed to lend some /> million pounds securities in the
form of some gemstones and some credit insurance policies The gemstones when valued did
18. !it$patric% v. &merican 'ona Co., 78 $.&.-d 61 (1991).
19. Cassim v. &llstate Ins. Co., 33 al. 0t 78 (-0).
-. Esse( Ins. Co. v. !ive Star )*e 'ouse# Inc., 38 al. 0t 1-5- (-6).
not prove to be worth much "o, the bank sought to rely on the insurance policies The
policies had been brokered by a major firm of brokers who resorted to a series of false covers
due to inability to obtain full cover
-
3n making claims under the policies, the bank discovered severe shortage in cover It was held that the insurers were under an obligation to
disclose the same It was also held that the only remedy available to the insured is to rescind
the policy and claim the premium $o other damages may be awarded--
/ 9oe. #4 La0 8nion, )) L9KB ''<7
The duty to show good faith falls on the insured as well as the insurer to an e@ual degree in
all types of insurance contracts
< Anste% #4 Britis2 Natura.
The insurer must inform the insured about the terms and conditions of the policy that is going
to be issued to him and must strictly conform to the statements in the prospectus if any
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-1. +atson v. Emplo*ers Lia,ilit* &ssurance Corp., 308 U.S. 66 (1950).
--. State !arm Mutual &uto. Ins. Co. v. Camp,ell , 538 U.S. 08 (-3).
CHAPTER 5-MATERIALITY O ACT
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'nother problem arises as to the definition of the term material fact )hat may be material
for one may be immaterial for the other and vice+versa .ut, generally speaking, a material
fact is one which affects the judgmental capacity of a person It must be such that a different
conse@uence would have occurred had it not been disclosed The following cases illustrate
the different theories evolved by the judiciary regards this
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Marine Life $nsurance Co4 #4 Ontario Meta. =roducts, (> L9=C /<
The test of materiality is the judgment of the prudent insurer and it is not what is material in
the opinion of a reasonable assured
- Re%no.ds #4 =2oeni1 Assurance Co4 &'()7+ : L.o%ds Rep >><
The test is whether the circumstance in @uestion would influence the prudent insurer and not
whether it might influence him
/ Lindenau #4 Des"orou32, &'7:7+ 7 B ? C *7/
The @uestion is whether any particular circumstance is infact material and not whether the
proposer believed it to be so
< St4 =au. Fire and Marine $nsurance Co4 &8K+ Ltd4 #4 Mc Conne.. Do0e.. Constructors
Ltd, >* Con LR 7(
Two major @uestions were decided in this case The first was the test of materiality
according to which the fact in @uestion must have been of interest to a prudent insurer
"econdly, as regards the presumption of inducement, it was held that the test would be
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satisfied if the insurer could show that he was influenced in whole or in part by the assureds
misleading presentation of the risk
The Prudent insurer test has been adopted in "<=45 of Indian (M 'ct,=CC and " <=4G5
of English *oad Traffic 'ct, =A-
FACTS .$IC$ NEED TO !E DISC'OSED AND FACTS .$IC$ NEED NOT !E
DISC'OSED+
Facts re/uired to be disclosed +
' fact which is earlier immaterial but becomes material later on must be disclosed if it has
been e1pressly mentioned in the terms and conditions of the policy Eg 9ire insurance of
ones house Earlier, vacant plot located nearby %ater on a petrol pump is constructed on such
plot-/
- ' fact which increases the risk must be disclosed in all circumstances Eg incase of theft
insurance, if a person lives alone in an isolated place, the same needs to be compulsorily
disclosed as it increases the risk
/ Previous losses incurred and claims under previous policies needs to be disclosed This is
mainly in case of double insurance where it needs to be ascertained as to whether the
subse@uent insurance company is willing to insure and to what e1tent
< "pecial terms and conditions under previous policies if any
G 9act of e1istence of non+indemnity is to be disclosed This relates to any charge or
encumberance on the policy in the form of a loan security or otherwise
The description of the subject matter must be stated properly This is mainly to locate the
property if it is immovable and to recogniLe it if it is movable
A 9acts which suggest any special motive to take the insurance
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C 9acts which suggest the e1istence of any moral haLards which relate to the moral integrity
of the proposer, etc
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Econo!ides #4 Co!!ercia. 8nion Assurance Co4 p.c, &'(()+ ; A.. ER /;/
It was held that the duty of the assured to disclose all material facts re@uired an assured only
-< Paul v. Virginia, 75 U.S. (8 Wall.) 168, 19 L.Ed. 357 (1869).
to disclose facts known to him There is no obligation on the assured to make en@uiries as to
the factual basis of his belief
Facts (hich need not be disclosed +
9act lessening the risk need not be disclosed-G
- Public knowledge Eg facts regarding govt policies, ta1es, subsidies, etc which are
e1pected to be known to all
/ 9act of law like rules, regulations, etc which have already been made available to all by
way of the notification in the official gaLette-
< "uperfluous facts or such information which is not logical
G 9acts which are inferred information
9act waived by the insurer himself
A 9acts governed by the policy itself
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L$C #4 S2a-unt2a.a"ai, A$R '()* A= /7
In this case, the insured had failed to disclose that he suffered from indigestion for a few days
and took chooram from an ayurvedic doctor De died within that year due to jaundice The
insurer repudiated the claim on this account The court did not approve of the repudiation as
the insurer did not establish by clear and cogent evidence that the @uestion was properly
e1plained to the insured and that he was told that illness included such casual disturbances to
health and medicines included tablets that could be purchased at the nearest coffee store
- B2a30ani Bai #4 L$C of $ndia, A$R '(7> M= ':/&';<+
The insurer cannot avoid or repudiate an insurance policy on the ground of non+disclosure of
lapsed policies by the assured which had no bearing on the risk taken by the insurer
-. +alsh v. /icholls -0: $;J $o. -81.
-0. -0. State Insurance Lt v. Ceenco !oos Lt (A -16297, 6 August 1998), . 7.
CHAPTER 6-REPUDIATION O INSURANCE
CONTRACT
The remedy for non+disclosure of a material fact is that the Policy is voidable 4in other
words it can be affirmed or rescinded5 at the option of the aggrieved party-A 's the non+
disclosure is usually on the part of the proposerBPolicyholder, the initiative is with the Insurer
If the Policy is avoided, the Policy is treated as if it had never come into effect and any claims
paid should be refunded to the Insurer and the premium returned to the Policyholder-C
The strict legal position in the & is amended by the '.I "tatement of Feneral
Insurance Practice, in relation to persons insuring in their private capacity &nder this
agreement, members of the '.I will not repudiate liability to indemnify a Policyholder on
grounds of non+disclosure of a material fact which a policyholder could not reasonably be
e1pected to have disclosed, or on grounds of misrepresentation unless it is a deliberate ornegligent misrepresentation of a material fact-= The *ehabilitation of 3ffenders 'ct =A< is
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also relevant The 'ct provides that, when the rehabilitation period has e1pired, certain
convictions need not be disclosed The rehabilitated person can then truthfully answer no to
any @uestion relating to his criminal history or, if no specific @uestion is asked, he has no
need to volunteer his criminal record
01# Dartwig *P, )ilkinson # 4->>/5 (old and Insurance Insurance Issue "eries
02# .hiten v# Pilot Insurance Co#, ->>- "## C, J->>-K "#* G=G
03# .alsh v# Nicholls J->><K $.? $o -C
CHAPTER 7-WRONGUL REPUDIATION O AN
INSURANCE POLICY
)rongful repudiation of an insurance policy is the illegal action by an insurance company of
canceling a health, life, automobile, or property insurance policy/> 'side from completely
canceling an insurance policy, an insurance company has also wrongfully repudiated an
insurance policy if they:
• !eny the e1istence of the policy,
• *efuse to comply with the terms of the policy,
• "eek to change to terms of the insurance policy without your consent,
• Intend not to perform their obligations under the policy,
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• 9ail to adhere to the established customs as related to the insurance policy, or
• 9ail to renew the policy without providing a reason for doing so
*E(E!N 93* )*3$F9&% *EP&!I'TI3$
(ost states allow you to sue an insurance company if the company has wrongfully
repudiated your insurance policy/ The majority of lawsuits for wrongful repudiation of an
insurance policy are based largely on breach of contract law/- There are generally three
different approaches that a victim of a wrongful repudiated insurance policy can take:
Treat the insurance policy as terminated, or rescinded, and sue for any appropriate
damages,
- "ue the insurance company to enforce the e1isting policy, or
/ )ait until the terms of the insurance policy have matured and sue the insurance
company for damages
' few states even allow you to rescind an insurance policy and sue for damages if the
insurance company has not yet actually wrongfully repudiated on the policy, but you have
reason to believe that they will do so in the future This action is called an anticipatory
repudiation// Nou should take e1treme caution in this area because it could end up that you
45# .atson v# Emplo)ers 'iabilit) Assurance Corp#, /<C &" 4=G<5
46# State Farm 7utual Auto# Ins# Co# v# Campbell , G/C &" <>C 4->>/5
40# Dartwig *P, )ilkinson # 4->>/5 (old and Insurance Insurance Issue "eries
44# .hiten v# Pilot Insurance Co#, ->>- "## C, J->>-K "#* G=G
are the one in breach, and the insurance company could sue you
)D'T !3E" 3$E *E#3ME* I$ "&#D #'"E"7
Even though a lawsuit for the wrongful repudiation of an insurance policy is very similar to
a breach of contract case, the damages available in a wrongful repudiation lawsuit are slightly
different that those available for a breach of contract case
/<
In most cases, damages for awrongful repudiation lawsuit can include:
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• 'ny damages you suffered during the time you were covered by the insurance policy,
including monetary loss and pain and suffering,/G
• Punitive damages against the insurance company/,
• !amages prescribed by a statute, and
• The benefits you have forthcoming under the policy minus the premiums you paid, or
• *ecovery of all the premiums you paid, but none of the benefits you are owed/A
48# !an/ue -e)ser Ullmann SA v# S9andia :U-; Insurance Co 'td# J==>K O. G
4<# !an/ue Financiere de la Cite SA v# .est%ate Insurance Co# 'td# J==K - '# -<=, -C>
4=# !uss v# Superior Court , #al <th /G 4==A5
41# "uideOne Elite v# Fielder Road !aptist Church> =A ")/d />G 4Te1 ->>5
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#D'PTE* C+#3$#%&"I3$
Thus, this principle forms an integral part of insurance law It gives a fair chance of risk assessment to the insurer and also ensures that the assured fully understands all the terms and
conditions of the contract/C .ut, this principle is more favourable to the insurer as it is the
assured who has to generally make all the disclosures This is primarily because when this
doctrine was evolved in the Cth century, the insurance market was in its infancy and thus
re@uired protection/= Dowever, the enactment of the English &nfair #ontract Terms 'ct,
=AA has considerably alleviated the position of the assured who is now protected against
unfair contractual terms 9urther, the Insurance 'ct lays down that an insurance policy cannot
be called in @uestion two years after it has been in force This was done to obviate the
hardships of the insured when the insurance company tried to avoid a policy, which has been
in force for a long time, on the ground of misrepresentation <> Dowever, this provision is not
applicable when the statement was made fraudulently $evertheless, technological
advancements have further made it possible for both parties to see to it that their interest is
taken care of .ut, there are several other grey areas to this doctrine as well There is still no
clear cut distinction between as to what is material or immaterial and the same is largely
dependent on the whims of the insurers and the terms of the contract < It is still very easy for
an insurer to repudiate the contract on the slightest point of non+disclosure by treating them
as warranties, thereby putting the assured in an even more difficult position 'nother problem
is with regards to as to what duration does the disclosure need to be made #ommon law
cases may somewhat seem to have settled this point but the Indian (arine Insurance 'ct still
shows a confusion regards the same as it says that duty of disclosure shall end with the
conclusion of the contract<- Thus, all these problems need to be taken care of and an effective
solution must be provided considering the principle of utmost good faith is one of the most
fundamental principles associated with insurance law Dence in cases of breach of utmost
good faith one has the remedy to repudiate the contract
42# Sprun% v# Ro)al Insurance :U-; 'td J===K %loydHs *ep
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43# C"U .or9ers Compensation :NS.; 'imited :CAN 554 626 550; v# "arcia J->>AK $")#' =/
85# http:BBonlinecebcomB#al#asesB#/B=#/dGhtm
86# E%an v# 7utual o Omaha Ins# Co# 4=A=5 -< #al/d C>=
80# -anne v# Connecticut "en# 'ie Ins# Co#, CA 9-d <C= 4=th #ir =CC5
CHAPTER -/I/LIOGRAPHY
.E!SITES,
wwwirmicom
wwwbusinessdictionarycom
wwwinvestopedi com enwikipediaorg
wwwlawhandbookorg
!OO-S,