Q.Sunil takes out a fire insurance policy on his shop and, in the proposal form, deliberately does not mention that a serious fire had already damaged the same shop two years earlier. A year later the shop is damaged by fire again and Sunil files a claim. On what ground can the insurer refuse the claim, and why?

Insurance places a special duty of honesty on the proposer, so hiding a fact that would have affected the insurer's decision has serious consequences for the policy.

Identify which principle requires disclosure of past losses, and what happens when a material fact is concealed.

Step 1 — Identify the key facts. Sunil took a fire policy on his shop but deliberately concealed that the same shop had suffered a serious fire two years earlier. A later fire loss occurs and he claims.

Step 2 — Identify the relevant principle. Every insurance contract is governed by the Principle of Utmost Good Faith (Uberrimae Fidei), which requires the proposer to disclose every MATERIAL fact relevant to the risk, honestly and completely, even without being asked. A previous fire in the same premises is plainly a material fact — it would clearly have influenced the insurer's decision to accept the risk or the premium it charged.

Step 3 — Apply the principle. By deliberately hiding the earlier fire, Sunil concealed a material fact and thereby breached the duty of utmost good faith. The law's consequence is that the policy becomes voidable at the insurer's option, regardless of whether the concealed fact actually caused the later loss.

Step 4 — Conclusion. The insurer is entitled to refuse the claim (and treat the policy as void) on the ground of breach of the principle of utmost good faith through non-disclosure of a material fact.