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Insurance policy not voidable for misrepresentation if insurer had means of finding truth

In Oriental Insurance Company vs Mahendra Construction, the respondent / complainant obtained an insurance policy from the appellant in respect of a hydraulic excavator machine. The said machine having been set on fire by Naxalites, a claim was preferred before the appellant. The claim was rejected as the vehicle was earlier insured with M/s New India Assurance Co. Ltd., prior to obtaining insurance from Oriental Insurance, after the gap of approx. eleven months since the expiry of previous policy.

The State Forum allowed the complain and awarded compensation. Appeal was filed before NCDRC against said order.

The NCDRC partly allowed the appeal and referring to various judgments including the judgement of the NCDRC in United India Insurance Co. Ltd. Vs. M/s Jindal Poly Buttons Ltd., held that as per Section 18 & 19 of the Contract Act, particularly the exception under Section 19, even if the insurance policy is obtained by misrepresentation or silence, the contract of insurance is not voidable if the insurer had the means of discovering the truth with ordinary diligence.  Since admittedly the previous insurance policy had been annexed to the proposal submitted by the complainant, the appellant, on exercise of due diligence, could easily have verified from New India Assurance Co. Ltd.  that the complainant had submitted a claim with it under the previous policy which it had taken from the said insurer. Therefore, considering the exception to the Section 19 of the Indian Contract Act, the appellant cannot deny the benefit of insurance to the complainant on account of the information with respect to the previous claim lodged by the complainant having not been disclosed in the proposal form.

However, following the decision rendered by the Larger Bench and considering the fact that the complainant / respondent did not expressly disclose the previous claim lodged with New India Assurance Co. Ltd.  while responding to Clause 25(g) of the proposal form, the complainant, should be paid on non-standard basis by deducting 25% of the amount otherwise payable to it under the contract of insurance.

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