1. The plaintiff who was unsuccessful in both the Courts below has filed this second appeal. The suit was filed by him for recovery of a sum of Rs. 3715-20 against the defendant-insurance company. The plaintiff's lorry MDS 4779 was insured with the defendant against loss or damage by any accident for the period from 11-8-1962 to 10-8-1963. The licenced carrying capacity of the lorry was 5.392 tons as admitted in these proceedings. Subsequently on 7-11-1962 the licenced carrying capacity was increased to 6.1742 tons. The proposal for insuring the vehicle was made on 11-8-1962 and this proposal was signed by Parasmal Mahar, who was the financier and who had a hire purchase agreement in his favour. In this proposal form, which is marked as Ex. B1 in this case, in the column relating to particulars of vehicle to be insured, the licensed carrying capacity of the vehicle was given as 5 tons. The defendant accepted the proposal and issued the insurance policy No. 12710, CV, Ex. A-1 in this case. The policy starts with the following clause:
'Whereas the insured by a proposal and declaration dated as stated in the schedule which shall be the basis of this contract and is deemed to be incorporated herein has applied to the Society for the insurance hereinafter contained and has or agreed to pay the premium as consideration for such insurance in respect of accident loss or damage occurring during the period of insurance.'
Then followed the usual printed terms of exceptions and conditions. In the schedule to the policy under the clause 'limitations as to use', among other things, it is specially provided as follows:
'Warranted that the weight of the goods carried by the within described vehicle shall at no time exceed 5 tons or the licensed carrying capacity of the vehicle whichever is less.'
The vehicle met with an accident on 25-1-1963 at Krishnagiri. The plaintiff intimated the accident by telegram to the defendant and after following the usual procedure the surveyor of the defendant company approved the estimated cost of repair at Rupees 3715-20. It is admitted by the parties to the proceedings that the vehicle was carrying less than 5 tons of goods at the time when the accident took place.
2. The defendant repudiated the claim on the ground that there was a fraudulent misrepresentation in the proposal as to the carrying capacity of the vehicle and that the licenced carrying capacity of the vehicle is a material fact in fixing the premium. It also contended that the increase in the licensed carrying capacity made on 7-11-1962 was not intimated to the defendant and higher premium paid and that therefore the company was entitled to avoid the contract of insurance.
3. The point for consideration is whether, on the facts of this case, under the terms and conditions of the policy is defendant company is entitled to avoid the contract, and refuse payment of the loss or damage to the vehicle.
4. It is well-known that contracts of insurance are uberrimae fidei and every fact of any materiality must be disclosed otherwise there is ground for rescission. 'Material' means 'anything which would influence a prudent insurer as to whether he will accept the offer and, if so, at what rate of premium'--Vide the Law of Motor Insurance by Shawcross 2nd Edn. page 381. In the same book at page 391 'materiality' as per the English Marine Insurance Act, 1906, is set out as follows:
'Every circumstance.... which would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk.'
At page 392, Section 10(3) of the English Road Traffic Act, 1934 is extracted as follows:
'The expression 'material' means of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk, and, if so, at what premium and on what condition...'
As observed by the learned author, these definitions contained in the Marine Insurance Act and the Road Traffic Act, merely produce the results of the common law authorities as to 'materiality' and as such this test is applied to cases of motor insurance policies. It would be seen from the foregoing definitions, 'Materiality' is a question of fact in every case and depends on whether a particular fact or circumstance would have influenced the prudent insurer in accepting the risk.
5. It would be seen from the facts set out in this case that the insurance company has stipulated that the proposal shall be the basis of the contract and that the proposal shall be deemed to have been incorporated in the policy. In cases of such policies it is now well-settled that the answers to the basis of or condition precedent to the liability of the insurers under the contract. Hence, the question of materiality in relation to any circumstance, which is dealt with in the proposal form or the answers thereto, becomes irrelevant. By making the truth of the matters stated a part of the contract, the assured and insurers are deemed mutually to agree that every circumstance in fact, in relation to which non-disclosure or misrepresentation will avoid the contract. The fact that a specific question is directed to it, may afford strong proof of the materiality of fact--vide page 395 Law of Motor Insurance by Shawcross 2nd Edn.
6. It may also be mentioned that under the Indian Motor Tariff Schedule of rates issued by the defendant company, which is marked as Ex. B-2 in this case, for public carrier vehicles with a licenced carrying capacity exceeding 3 tons but not exceeding 5 tons, the rate for a comprehensive policy in mofussil is given as Rs. 900 plus 1/2 per cent. of IEV (Insured's estimated value). If the licensed carrying capacity of the vehicles exceeds 5 tons in addition to the rate of 5 tons, an additional ton or part thereof will have to be paid as premium.
7. It would be seen from the foregoing statement of law and facts that it would have been open to the defendant to repudiate the contract on the ground that the proposal form gave the licenced carrying capacity of the vehicle as 5 tons while actually the licenced carrying capacity was 5.392 tons. But in this case, the insurance policy, Ex. A-1, has an additional special clause under the heading 'Limitations as to use' which reads as follows:
'Warranted that the weight of the goods carried by the within described vehicle shall at no time exceed five tons or the licensed carrying capacity of the vehicle whichever is less.'
This, in my opinion, has changed the rights and liabilities of the insured and the insurer. In effect, this provides that the parties have agreed that the vehicle could carry only five tons or the licensing carrying capacity of the vehicle whichever is less. It would mean that the insured is liable to pay premium on the basis that the vehicle could carry only 5 tons irrespective of its licensed carrying capacity. In other words, as the weight of the goods that could be carried has been restricted to five tons for the purposes of the insurance, the licensed carrying capacity of the vehicle has been made irrelevant and immaterial. The phrase 'whichever is less' contemplates two possibilities--firstly, the licenced carrying capacity of the vehicle might be more at the time of issue of the policy or might be increased subsequently. On both these cases, so far as the policy is concerned, carrying capacity of the vehicle is restricted to five tons. Secondly, the licenced carrying capacity of the vehicle may be reduced below five tons; in such a case the vehicle cannot carry more than the licenced carrying capacity. For both possibilities the policy covers the risk. The carrying capacity of the vehicle restricted to five tons in the policy is a material circumstance in determining the liability of the insurance company. If this condition as to carrying capacity was contravened, though it did not violate the licensed carrying capacity of the vehicle the insured would have been entitled to avoid the contract. The policy specially restricts the carrying capacity to 5 tons in order to determine the premium payable on the policy and that, therefore, in my opinion, the mention of the licenced carrying capacity of the vehicle in the proposal form as 5 tons which has been incorporated in the policy, did not affect the liability of the insurer. If the licenced carrying capacity was so important, there could not have been any special clause in the policy restricting the carrying capacity of the vehicle.
8. Further, it would be seen from Ex. B-2, the schedule rates of premium, that where the licenced carrying capacity of the vehicle was above 3 tons but did not exceed 5 tons, the premium is the same. Therefore, for instance, if the licenced carrying capacity of the vehicle was 4.5 tons and in the proposal form it was given as 4 tons, there being no different in the premium for 4 ton and 4.5 tons the wrong statement in the proposal would not have affected the acceptance of the risk. It is because that there is a possibility of an increase or a decrease in the licensed carrying capacity of the vehicle during the period of the licence that the special clause is provided restricting the carrying capacity to 5 tons or the licenced carrying capacity whichever is less. It carrying capacity of the vehicle was given as 5 tons in the column relating to the particulars of the vehicle in the proposal form and not in answer to any of the questions in the proposal form so as to make the question as a condition precedent of the policy. In my opinion, therefore, it was not open to the insurance company to repudiate its liability in this case on the ground that in the proposal form the licenced carrying capacity of the vehicle was given as five tons.
9. The Courts below have accepted another argument of the defendant that since the plaintiff had not informed the defendant of the increase in the carrying capacity on 7-11-1962, it was open to the defendant to avoid the contract. There is no clause in the insurance policy imposing a duty on the insured to inform the insurer of any increase in the carrying capacity nor has it fixed any time limit within which the insurer should be informed of the increase. As already seen, the carrying capacity of the vehicle was restricted to five tons or the licenced carrying capacity whichever is less so far as the policy is concerned. It was, therefore immaterial for the purpose of enforcing this policy whether the licenced carrying capacity was increased. It may also be mentioned that, as a matter of fact the plaintiff by a letter dated 1-4-1963, marked as Ex. B-3 in this case, has informed the defendant of the increase in the carrying capacity and offered to pay extra premium. Therefore, this ground also will not enable the defendant to repudiate its liability.
10. For the foregoing reasons, the second appeal, is allowed and the suit is decreed as prayed for with costs through out. Leave granted.
11. Appeal allowed.