16. A factory owner took a fire Insurance policy for his factory without informing
the insurance company that he received notice from electricity department to get
the wiring of the factory repaired. After six months of taking policy the factory
caught fire due to fire due to faulty wiring.
• Will the factory owner get compensation for the loss due to fire?
• Which Principle of Insurance is related with this case? Explain that Principle
Answers
Answer:
a) The Factory owner will not get compensated for the loss due to fire.
b) The Principal Of Utmost Good Faith
Explanation:
The factory owner will not get compensated for the loss due to fire because he made a misrepresentation of material fact that was relied on by the insurance company. He could have inform the insurer that he had received notice from the electricity department to get wiring of the company repaired.
B)
THE PRINCIPLE OF UTMOST GOOD FAITH
The principle of utmost good faith legally oblige all parties entering a contract to act honestly and not mislead or withhold critical information from one another.
In this principle a contact created with inaccurate information or intentional misinformation or fraudulent concealment cause the contact to be voidable.
In this case the factory owner was not honest with the insurance company