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13. It was next contended that the proposal form was worded in such a manner that there was no specific query which could have led to the appellant disclosing that he was suffering from hyperlipidaemia. This argument was made as an alternative submission on the assumption that the appellant had in fact knowledge that he was suffering from hyperlipidaemia at the time of filling up of proposal form seeking insurance policy.

14. It was further contended that the proposal form and the insurance policy did not define the terms “pre­existing disease,” “pre­ existing ailment,” “pre­existing condition”, “disease” or “illness.” That query number 2 of part 2 dealing with “medical history” in the proposal form namely “have you ever suffered from any illness or disease up to the date of making this proposal”, was too vague and the appellant left the column blank. Failure to fill in all the queries in the proposal form cannot be termed as suppression or misdeclaration vide Canara Bank v. United India Insurance Co. ­ (2020) 3 SCC 455.

(b) Any fact is material which leads to the inference that the particular proposer is a person, or one of a class of persons, whose proposal for insurance ought to be subjected at all or accepted at a normal rate. This is usually referred to as the ‘moral hazard’.

The materiality of a particular fact is determined by the circumstances of each case and is a question of fact.

39. If a fact, although material, is one which the proposer did not and could not in the particular circumstances have been expected to know, or if its materiality would not have been apparent to a reasonable man, his failure to disclose it is not a breach of his duty.

41. Thus, a proposer is under a duty to disclose to the insurer all material facts as are within his knowledge. The proposer is presumed to know all the facts and circumstances concerning the proposed insurance. Whilst the proposer can only disclose what is known to him, the proposer’s duty of disclosure is not confined to his actual knowledge, it also extends to those material facts which, in the ordinary course of business, he ought to know. However, the assured is not under a duty to disclose facts which he did not know and which he could not reasonably be expected to know at the material time. The second aspect of the duty of good faith arises in relation to representations made during the course of negotiations, and for this purpose all statements in relation to material facts made by the proposer during the course of negotiations for the contract constitute representations and must be made in good faith.

42. The basic rules to be observed in making a proposal for insurance may be summarized as follows :

(a) A fair and reasonable construction must be put upon the language of the question which is asked, and the answer given will be similarly construed. This involves close attention to the language used in either case, as the question may be so framed that an unqualified answer amounts to an assertion by the proposer that he has knowledge of the facts and that the knowledge is being imparted. However, provided these canons are observed, accuracy in all matters of substance will suffice and misstatements or omissions in trifling and insubstantial respects will be ignored.