Recently, the Supreme Court held that an insurance company should not just care for and cater to its own profits.

The matter was heard before the division bench of Justices AS Bopanna and Sanjay Kumar

''It is the duty of the insurance company to disclose all material facts within their knowledge since the obligation of good faith applies to both equally,'' the bench said.

In the said matter, the complainant, obtained insurance coverage from an Insurance Company. There was a major outbreak of a bacterial disease called ‘White Spot Disease’ led to mass mortality of prawns.

The insurance provider declined to fulfill their obligations, citing a violation of policy terms by the complainant. This was due to the inadequate and inaccurate maintenance of records. Subsequently, the National Consumer Disputes Redressal Commission (NCDRC) reviewed the complaint and determined the complainant's total loss to amount to ₹30,69,486.80. Dissatisfied with this verdict, the complainant took the matter to the Supreme Court for further consideration.

"Merely because the contents thereof were not to its liking, the insurance company could not have ignored the same and swept it under the carpet. More so, as such certification was being made by impartial and independent bodies of significant stature and that, perhaps, was precisely the reason why the insurance company had attached such importance to it in its norms. In any event, it is not open to an insurance company to ignore or fail to act upon a certificate or document that it had itself called for from independent and impartial authorities, subject to just exceptions, merely because it is averse to it or to its detriment. Having undertaken to indemnify an insured against possible loss in specified situations, an insurance company is expected to make good on its promise in a bonafide and fair manner and not just care for and cater to its own profits. ", the court said.

"It it is the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties; that good faith forbids either party from non-disclosure of the facts which the party knows; and that the insured has a duty to disclose and similarly it is the duty of the insurance company to disclose all material facts within their knowledge since the obligation of good faith applies to both equally. This obligation and duty would rest on both parties not only at the inception of the contract of insurance but throughout its existence and even thereafter."