1. Introduction

Insurance is an important risk-allocation mechanism in electricity projects because power plants, transmission systems, substations, renewable-energy installations, storage facilities and associated infrastructure are exposed to substantial risks such as fire, explosion, flooding, machinery breakdown, natural disasters, construction defects, operational failures and business interruption.

In large electricity projects, insurance arrangements may include Contractors’ All Risk (CAR) insurance, Erection All Risk (EAR) insurance, Industrial All Risk policies, machinery breakdown insurance, fire and special-perils insurance, business-interruption insurance, delay-in-start-up cover and third-party liability insurance.

A central legal principle governing these policies is uberrimae fidei, or utmost good faith. The insured must disclose material facts that would affect the insurer's assessment of the proposed risk. The Supreme Court of India has repeatedly held that the obligation is substantive rather than merely formal: an insured cannot deliberately suppress material information simply because the insurer did not specifically ask about it. At the same time, the duty is not unlimited; materiality and the insured's actual or reasonably expected knowledge remain important. (Sci API)

For electricity projects, this principle becomes particularly significant because the risk profile can be technically complex and may change substantially between project conception, construction, commissioning and commercial operation.

2. Meaning of Insurance Disclosure

Insurance disclosure means providing the insurer with complete and accurate information concerning facts that materially affect the risk being insured.

A material fact is generally a fact that would influence a prudent insurer in deciding:

whether to accept the risk;

whether to reject the proposal;

what premium to charge;

what exclusions to impose;

what deductibles to prescribe;

what policy limits to provide; or

what special conditions should apply.

The Supreme Court has stated that the materiality of a fact depends upon the nature of the policy, the risk being insured and the questions asked in the proposal form. (Sci API)

Therefore, an electricity-project developer should not approach disclosure as simply a matter of completing an insurance questionnaire. Disclosure should be treated as part of the project's broader risk-governance process.

3. Why Disclosure Is Particularly Important in Electricity Projects

Electricity projects frequently involve information that can materially change the insurer's assessment of risk.

For example, a developer seeking insurance for a hydroelectric project may need to disclose information concerning:

geological conditions;

landslide or seismic risks;

flood history;

dam or tunnel conditions;

construction delays;

design modifications;

previous incidents;

defects discovered during testing;

equipment failures;

commissioning problems;

unusual site conditions; and

interruptions in construction.

Similarly, for a thermal power plant, material information could include:

previous boiler or turbine failures;

coal-quality problems;

fire incidents;

equipment defects;

abnormal vibration;

operational limitations;

maintenance history; and

known safety deficiencies.

For solar and wind projects, relevant information may include:

site-specific weather risks;

flooding;

cyclone exposure;

foundation problems;

equipment defects;

grid-connection limitations;

construction delays; and

previous damage.

The precise disclosure obligation will always depend on the policy, proposal and circumstances.

4. The Principle of Uberrimae Fidei

Insurance contracts are traditionally regarded as contracts of utmost good faith.

In LIC of India v. Asha Goel, the Supreme Court recognised that insurance contracts require disclosure of material facts and that the duty continues up to the conclusion of the contract. (Sci API)

Similarly, in Satwant Kaur Sandhu v. New India Assurance Co. Ltd., the Supreme Court described the insured's obligation to provide truthful and complete information concerning matters specifically asked about in the proposal form as a solemn obligation. The Court emphasised that the insured cannot decide for itself whether information sought by the insurer is material. (Sci API)

The principle therefore has two important dimensions:

First, the insured must provide truthful information.

Second, the insured must not deliberately withhold material information relevant to the insurer's assessment of the risk.

5. What Must Be Disclosed?

A. Physical Characteristics of the Project

The insured should accurately disclose the nature and physical characteristics of the electricity project.

For example:

project capacity;

technology used;

location;

construction stage;

major equipment;

transmission facilities;

storage facilities;

civil structures;

substations;

expected commissioning date; and

operating conditions.

Incorrect information about project characteristics can alter the insurer's assessment of risk.

B. Previous Losses and Insurance Claims

Previous losses can be highly significant.

A developer should carefully disclose relevant:

fire losses;

machinery failures;

flooding;

equipment damage;

business-interruption losses;

third-party claims;

construction incidents; and

previous insurance claims.

The significance of previous losses depends upon the policy and the circumstances, but repeated losses may indicate a risk profile different from that represented to the insurer.

C. Known Defects

Known defects in critical equipment may constitute highly relevant information.

For example, suppose a turbine has developed abnormal vibration before an insurance policy is issued. If the defect is known and materially relevant to the proposed machinery or property risk, concealing it could create serious coverage disputes.

The same principle could apply to:

transformers;

generators;

boilers;

turbines;

switchgear;

transmission equipment;

battery systems; and

control systems.

The issue is not whether every minor technical imperfection must be reported. The question is whether the information is material to the risk and within the insured's knowledge.

6. Construction and Project-Development Information

Electricity projects frequently obtain insurance before construction is completed.

Consequently, the insurer may rely on information about:

construction schedules;

contractors;

subcontractors;

engineering specifications;

project location;

construction methodology;

commissioning plans;

expected operational dates; and

anticipated project values.

A significant change in circumstances before the insurance contract is concluded may therefore require reconsideration of previously supplied information.

The Supreme Court has recognised that the duty of disclosure can continue during negotiations and up to the conclusion of the insurance contract. (Sci API)

7. Material Changes Before Policy Acceptance

One particularly important principle is that an answer that was correct when initially provided may become inaccurate before the insurer accepts the proposal.

The Supreme Court has expressly recognised that information must be corrected where an intervening event makes an earlier answer inaccurate or misleading before acceptance. (Sci API)

Electricity-project example

A developer submits an insurance proposal stating that construction is progressing normally.

Before the insurer accepts the proposal:

a major transformer fails;

a fire damages part of the plant;

construction is suspended;

serious geological problems emerge; or

the commissioning schedule changes substantially.

If the new event materially affects the proposed risk, the developer should not simply rely on the original proposal.

This is particularly important in long negotiations for major infrastructure projects.

8. Disclosure Is Not Unlimited

The doctrine of utmost good faith should not be interpreted as requiring disclosure of every conceivable fact.

The Supreme Court has clarified that the insured's obligation concerns material facts within its knowledge and that the insured is not required to disclose facts that it did not know and could not reasonably have been expected to know at the relevant time. (Indian Kanoon)

The distinction is important.

Actual knowledge

If the project company knows that a transformer has repeatedly failed testing, that information may be material.

Reasonably expected knowledge

A project operator may also be expected, in appropriate circumstances, to know information ordinarily available through its normal technical and operational processes.

Unknown information

The insured generally cannot be expected to disclose information genuinely outside its knowledge and not reasonably discoverable in the circumstances.

9. Proposal Forms and Specific Questions

Proposal forms are particularly important in determining disclosure obligations.

In Satwant Kaur Sandhu, the Supreme Court emphasised the importance of answering specific questions truthfully and completely. (Sci API)

A project company therefore needs to maintain consistency between:

proposal forms;

technical reports;

engineering certificates;

due-diligence reports;

loss histories;

inspection reports;

project schedules;

financial information; and

information supplied to brokers and insurers.

Inconsistencies between these documents can later become important evidence in a coverage dispute.

10. Reciprocal Duty of the Insurer

The principle of utmost good faith is not necessarily a one-way obligation.

The Supreme Court's recent jurisprudence recognises reciprocal duties of disclosure. In Maha Kali Sujatha v. Branch Manager, Future Generali India Insurance Co. Ltd., the Court explained that both parties must make complete disclosure of material facts relevant to the risk and the decision to enter into the insurance contract. (Sci API)

This has significant implications for electricity projects.

An insurer cannot simply rely upon the doctrine of utmost good faith as an unrestricted basis for repudiating a claim. The insurer's own conduct, proposal questions, policy wording and knowledge of the risk may also become relevant.

11. Electricity Project Insurance and Contractual Disclosure

Project contracts frequently impose insurance-related obligations on contractors.

A useful illustration is Delhi Transco Ltd. v. Techno Electric & Engineering Co. Ltd.

The Delhi High Court considered an electricity-substation construction contract in which the contractor was contractually required to obtain appropriate insurance. The contractual framework required insurance covering relevant risks and required the contractor to provide copies of insurance documents and notify the owner concerning expiry, cancellation or changes in insurance coverage. (Indian Kanoon)

This illustrates an important distinction:

Insurance disclosure obligations can arise not only from insurance law but also from the underlying electricity-project contract.

Thus, a contractor may owe disclosure obligations simultaneously to:

the insurer;

the project owner;

lenders;

the employer;

other project participants; and

sometimes regulatory authorities.

12. Disclosure During Construction

Construction-stage electricity projects create special disclosure challenges.

CAR and EAR policies may cover projects during:

procurement → transportation → construction → erection → testing → commissioning → handover.

A change in project status may therefore affect the insured risk.

For example:

A power project originally expected to be commissioned in June experiences substantial construction delays and remains incomplete until December.

If the policy contains provisions concerning extensions, suspension of work, maintenance periods or changes in risk, those provisions must be followed carefully.

Recent Indian litigation concerning project-specific EAR insurance illustrates the importance of policy periods, project suspension and extensions in large infrastructure projects. (Indian Kanoon)

13. Case Law

13.1 Satwant Kaur Sandhu v. New India Assurance Co. Ltd., (2009) 8 SCC 316

This is one of the leading Indian authorities on disclosure.

The Supreme Court held that insurance is a contract of utmost good faith and that an insured must truthfully disclose material information sought in the proposal form. (Sci API)

Principle

Specific questions require truthful and complete answers.

Relevance to electricity projects

Project insurers frequently use detailed technical proposal forms. Misrepresentations concerning equipment, previous failures, site conditions or project risks may therefore have contractual consequences.

13.2 LIC of India v. Asha Goel, (2001) 2 SCC 160

The Supreme Court recognised that the duty to disclose material facts continues up to the conclusion of the insurance contract. (Sci API)

Principle

The insured must disclose material changes occurring before the contract is concluded.

Electricity-project application

If significant damage occurs between submission of an insurance proposal and policy acceptance, the insured should consider whether the event materially changes the proposed risk and requires disclosure.

13.3 Maha Kali Sujatha v. Branch Manager, Future Generali India Insurance Co. Ltd. (2024)

The Supreme Court provided a detailed discussion of material facts and the duty of disclosure.

It explained that the insured's duty extends to material facts within its knowledge and, in appropriate circumstances, facts it ought reasonably to know. It also emphasised that representations concerning material facts must be made in good faith. (Indian Kanoon)

Principle

Materiality is connected with the insurer's assessment of the risk.

Electricity-project application

The principle can apply to information held by project management, technical teams and other responsible personnel concerning known project risks.

13.4 Manmohan Nanda v. United India Assurance Co. Ltd., (2022) 4 SCC 582

The Supreme Court reiterated that insurance contracts impose a higher standard of good faith and that material information relevant to assessment of the insured risk must be disclosed. (Sci API)

Although the case was not an electricity-project dispute, its general insurance-law principles are relevant to infrastructure insurance.

13.5 Delhi Transco Ltd. v. Techno Electric & Engineering Co. Ltd. (Delhi High Court, 2012)

This case is particularly useful from an electricity-infrastructure perspective.

The dispute arose from construction of the 400/220 kV Bamnauli substation, and the contract placed substantial insurance responsibilities upon the contractor, including maintaining adequate insurance and supplying insurance documentation to the owner. (Indian Kanoon)

Principle

Electricity-project contracts can impose detailed and continuing insurance obligations independent of the general principles of insurance law.

14. Consequences of Non-Disclosure

Where a material fact is deliberately concealed or materially misrepresented, possible consequences include:

avoidance of the insurance contract;

repudiation of a claim;

reduction or denial of coverage;

disputes regarding policy validity;

contractual liability;

arbitration or litigation;

difficulties in obtaining future insurance; and

potential financing consequences.

However, not every omission automatically justifies rejection of a claim.

Courts examine questions such as:

Was the information material?

Was it known to the insured?

Was the question asked in the proposal?

Was the answer false or incomplete?

Did the information affect the insurer's assessment of the risk?

Did the insurer accept the proposal despite information available to it?

What does the policy actually provide?

The Supreme Court has specifically recognised that materiality depends on the nature of the insurance and the circumstances. (Sci API)

15. Disclosure and Project Lenders

Electricity projects are often financed through substantial debt.

Insurance requirements may therefore appear in:

financing agreements;

security documents;

concession agreements;

EPC contracts;

O&M agreements;

power-purchase arrangements; and

direct agreements with lenders.

A failure to maintain appropriate insurance or disclose material changes can consequently have consequences beyond the insurer-insured relationship.

For example, lenders may require:

assignment of insurance proceeds;

lender loss-payee clauses;

minimum insurance limits;

notification of cancellation;

evidence of renewal; and

disclosure of material insurance disputes.

Insurance disclosure is therefore also part of project-finance risk management.

16. Disclosure in Renewable-Energy Projects

The same principles apply to renewable projects.

Solar projects

Relevant issues may include:

flood exposure;

hail and storm risks;

module defects;

inverter failures;

construction quality;

fire risks;

site conditions.

Wind projects

Potentially relevant information can include:

cyclone exposure;

turbine defects;

foundation problems;

blade damage;

transportation risks;

geological conditions.

Hydropower projects

Important risk information may include:

hydrology;

geological instability;

flooding;

landslides;

tunnel conditions;

dam safety;

construction interruptions.

A recent Indian dispute involving a hydroelectric project demonstrates how insurance questions can arise around substantial project property, transmission lines, plant and machinery and losses caused by extreme weather events. (Indian Kanoon)

17. Relationship Between Disclosure and Claims Investigation

Disclosure obligations become particularly important after an accident.

Suppose a transformer in a power plant catches fire.

The insurer may investigate:

maintenance records;

previous breakdowns;

inspection reports;

technical warnings;

operating conditions;

repair history;

modifications; and

information provided during underwriting.

If the insurer discovers that significant pre-existing information was not disclosed, it may raise non-disclosure as a defence.

This is why electricity companies should maintain a reliable document trail from underwriting through project operation.

18. Corporate Governance Dimension

For large electricity projects, disclosure should not be treated solely as an insurance department responsibility.

A sound governance framework should involve:

Board → Project Management → Engineering Team → Risk Management → Legal Department → Insurance Broker → Insurer

The project company should maintain a central record of material information supplied to insurers.

This reduces the risk that:

engineering knows something that insurance does not;

the broker receives incomplete information;

the proposal differs from technical reports; or

an important project change is not communicated.

19. Practical Disclosure Checklist

Before obtaining or renewing insurance for an electricity project, the insured should consider documenting:

Project information

project capacity;

location;

technology;

project stage;

project value;

commissioning status.

Technical information

equipment specifications;

known defects;

testing results;

maintenance history;

engineering reports.

Risk information

previous accidents;

previous insurance claims;

fire incidents;

flooding;

geological risks;

natural hazards.

Contractual information

EPC contract;

O&M contract;

warranties;

indemnities;

subcontracting arrangements.

Financial information

business-interruption exposure;

revenue assumptions;

debt obligations;

estimated replacement costs.

Continuing disclosure

material changes before policy acceptance;

project delays;

major equipment failure;

change in project scope;

suspension of construction;

major incidents.

20. Conclusion

Insurance disclosure obligations in electricity projects are an essential component of risk allocation and infrastructure governance. The fundamental principle is uberrimae fidei: the insured must provide truthful and complete information concerning material facts relevant to the insurer's assessment of the risk.

Indian Supreme Court jurisprudence, particularly Satwant Kaur Sandhu, LIC v. Asha Goel and Maha Kali Sujatha, establishes that material disclosure is a substantive obligation rather than a mere procedural formality. (Sci API)

For electricity projects, the obligation becomes more complex because risks evolve throughout construction, commissioning and operation. Project companies should therefore establish systematic processes for identifying, recording and communicating material changes.

At the same time, the doctrine does not give insurers an unlimited right to reject claims. Materiality, knowledge, the questions asked, the policy wording and the conduct of both parties remain relevant. The Supreme Court's recent formulation also recognises that utmost good faith involves reciprocal duties between insurer and insured. (Sci API)

Ultimately, effective disclosure governance connects insurance law, electricity regulation, project finance, engineering risk management and corporate governance. In major electricity infrastructure, accurate disclosure is therefore not merely an underwriting requirement—it is an important mechanism for ensuring that financial risks are allocated transparently among developers, contractors, insurers, lenders and other project participants.