Q2. A factory owner took a fire insurance policy for his factory from New India Assurance Company by hiding the fact that the electricity board has issued him statutory warning letter to get his factory wiring changed at the earliest. Later on, the factory catches accidental fire due to short circuit in the electric board. Explain the principle of insurance violated in this situation.
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No, the factory owner cannot claim compensation from the insurance company since he has hidden the fact of statutory warning from the electricity board. He has violated the priciple of 'utmost good faith'. According to this principle, the insured must voluntarily make full, accurate disclosure of all facts, material to the risk being proposed. The insurer must also make clear all the terms and conditions in the insurance contract.
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