Description
insurance like different types of insurance (life, marine, fire), general principles of insurance, indemnity, subrogation, good faith, double insurance, types of life policie
Law of Insurance
• What is „Insurance?? Definition: A contract in which one party insures/assures/ indemnifies/ guarantees another person?s property or life (or the life/property of another person in whom he has interest) against any risk/ liability in consideration for payment of money as the „Premium?. • What are the various laws governing Insurance?
Laws governing Insurance
1. Insurance Act 1938[ consolidated law relating to business of insurance] 2. Insurance Regulatory and Development Authority Act 1999 (IRDA Act)[ Controller of Insurance] 3.Life Insurance Corporation Act 1956 ( Nationalization) 4. General Insurance Business (Nationalization) Act 1972 5. Marine Insurance Act 1963 6. Public Liability Insurance Act 1991 (A minimum „no fault liability? insurance for installations handling hazardous substances)
Types of Insurance
• Insurance was originally applied to cover marine risks. It has now been extended to various risks, life, fire, theft, sickness, unemployment, etc. The more common forms of insurance are: 1. Life Insurance 2. Fire Insurance 3. Marine Insurance
Life Insurance [s.2(11) Insurance Act]
• Life insurance is a contract by which the insurer , in consideration of a premium, undertakes to assure the person insured (or his nominee or heir) a certain sum of money on his death, or on the expiry of a certain period, whichever is earlier. As life can not be measured in money terms, life insurance is not an indemnity. Actually it is not an insurance, but an assurance (guarantee) to pay a certain money. The contingency covered is a certainty-death; only it?s timing is uncertain.
Fire Insurance [S. 2(6-A) Insurance Act 1938]
Definition: A contract of insurance against loss by or incidental to fire [S. 2(6-A) Insurance Act 1938]. There is fire when something burns. Ignition is necessary. It may be caused by heat, electricity, explosion, lightning, etc. It should not be caused by a deliberate act of the insured. Loss by fire caused due to negligence is recoverable.
Marine Insurance
Definition: A contract of insurance to indemnify the insured against marine losses, that is to say, losses incidental to marine adventure. (S. 3 Marine Insurance act 1963). Marine adventure includes adventure exposed to marine perils. Marine perils are perils consequent on, or incidental to, the navigation of the sea, including fire, war perils, pirates, rovers, thieves, captures, seizures, jettisons, barratry and other perils. barratry : misconduct committed by a master or crew of a vessel which damages the vessel or its cargo Jettison: a voluntary sacrifice of cargo to lighten a ship's load in time of distress
General Principles of Insurance
1.
2.
3. 4. 5.
6. 7.
Indemnity: ( except life and personal accident insurance); Compensation for actual loss. Insured not permitted to make profit out of insurance. Good Faith: (uberrimae fidei)(Duty of the insured to disclose all material facts) Insurable Interest: Some proprietory or pecuniary interest in the thing insured Proximate cause (causa proxima): The peril insured against should be the proximate or the nearest cause of the loss or damage, though the damage may not have taken place without the remote cause. Subrogation (right of the insurers to enforce for their own benefit the rights and remedies of the insured against third parties, after satisfying the claim of the insured) Substitution of the insured by the insurer, after satisfying the claim) Mitigation of loss (duty of the insured to make reasonable effort to mitigate the loss) Example: Pumping out water from the ship, which has developed a leakage, in order to avoid danger.) Contribution (in the context of „Double Insurance?)
Examples- Indemnity
1. Example 1: X insures his car against accident and theft for Rs 90,000. The car meets with an accident, and the estimated loss is Rs 10,000. What will be the amount recoverable from the insurer? What amount will be recoverable if the car is stolen? Example 2: A house was insured against fire. The insured then contracted to sell the house, the contract containing no reference to insurance. After the date of contract but before the date fixed for sale, the house was damaged by fire, and the insured received £330 as the indemnity from the insurer. Later on the sale was completed for the full contracted price without any abatement for the damage caused. When the insurer came to know, he brought an action to recover £330. Will he succeed?,
2.
Indemnity
1. Ans; The amount recoverable from the insurer will be the actual loss, ie. Rs 10,000. In case the car is stolen , it would be Rs 90,000-Depreciation. 2. Ans: As the insured had suffered no real loss (there was nothing to indemnify), the Insurer was allowed to recover the £ 330 which had already been paid. [ Castellain v Preston (1883) 2 QB 380]
Indemnity
• Contracts of insurance are contracts of indemnity. In no case can an insured recover more than the amount insured. The insured is not permitted to make a profit out of his loss. • Life insurance is an exception. No money value can be placed on human life. The insurer, therefore undertakes to pay a fixed or guaranteed sum irrespective of the loss. Life insurance, is thus nearer to „Gurantee? than to Indemnity. • Accident and sickness insurance and „Valued Policies? are also exceptions to the principle of indemnity
„Valued Policies?: Where value of the subject matter and the amount payable in the event of loss are agreed upon, conclusively, beforehand.
Subrogation
• The right of the insurers to enforce, for their own benefit, the rights and remedies of the insured against third parties, after satisfying the claim of the insured. Substitution of the insured by the insurer, after satisfying the claim Example 3. If your car is insured against accident, your insurer, after compensating you for the actual loss, can recover damages on your behalf (can subrogate himself in your place or substitute you) from the owner of the other car if it can be proved that the accident occurred due to the negligence of the driver of the other car.
Good Faith
Good Faith (uberrimae fidei), in the context of insurance, is the duty of the insured to disclose all material facts. Non disclosure of material fact will make the contract Voidable. Material facts are facts which are relevant for assessing the risk. The insured has better knowledge of his risks than the insurer. That is why the „good faith? principle requires full disclosure of all material facts. The general duty of all parties to any valid contract is: (i) not to make any misrepresentation or (ii) commit any fraud. This duty is carried, in the case of insurance, to the furthest point, to the duty of the insured to make full disclosure of all material facts. Example 4: Where an applicant for an insurance when asked whether he had applied to any other company for insurance and whether such application was accepted, replied that he was insured with two other companies but concealed the fact that his application was rejected by several others. The insurer came to know of the rejection, and sought to avoid the policy. Will the court allow?
Good Faith
Ans. 3: Yes. It was held that there was a material concealment. [London Assurance Co. v. Mansell II Ch D 363]
Insurable Interest
Some proprietary or pecuniary interest in the thing insured. A contract of insurance without any insurable interest in the thing insured is a „wagering agreement?; and is thus void Example 5: You can not insure a car belonging to some body else. However, if you have given him a loan and the car is hypothecated with you, you have an interest to protect (insurable interest), and you can insure it. In life insurance, husband is presumed to have an insurable interest in the life of wife, and viceversa.
Proximate cause (causa proxima)
• The peril insured against should be the proximate or the nearest cause of the loss or damage, though the damage may not have taken place without the remote cause Example 6: Cargo (sugar) being shipped is insured against sea perils. Rats make holes into the bottom of the ship wherefrom the sea water enters the ship and destroys the cargo. Will the loss be recoverable? What is the proximate cause, and what is the remote cause?
Proximate cause (causa proxima)
Answer 6: Sugar is destroyed by sea water entering the ship, which is the peril covered by insurance (sea peril). The proximate cause is thus covered. The loss will, therefore, be recoverable, even though the remote cause, i.e. rats is not covered by the risk insured.
Contribution
• Contribution (in the context of „Double Insurance?): Where a property is insured with two or more insurers against the same risk,[ it is called „double insurance?]; the insurers must share the burden in proportion to the amount assured by each. Example 7: A insures his ship with an insurance company X for Rs two lakh, and with another insurance company Y for Rs one lakh. The ship suffers actual damage of Rs 48,000. The two insurers will contribute rateably to indemnify the loss. X: Rs 32,000, Y: Rs 16,000. „Double Insurance? is different from „re-insurance?. Reinsurance is the insurance taken by the insurer, while double insurance is taken by the insured.
„Double Insurance?
• „Double Insurance? is subject to the principle of indemnity. The insured can not recover more than the actual loss from all the insurers together. • However, as we know „Life Insurance? is not subject to the principle of indemnity, since life can not be measured in terms of money. • Example 8: A insures his life with an insurance company X for Rs two lakh and with another insurance company Y for Rs one lakh. A?s nominee or heir can claim from both the insurers the sum assured- Rs three lakh.
Life Insurance [s.2(11) Insurance Act]
• Life insurance is a contract by which the insurer , in consideration of a premium, undertakes to assure the person insured (or his nominee or heir) a certain sum of money on his death, or on the expiry of a certain period, whichever is earlier. As life can not be measured in money terms, life insurance is not an indemnity. Actually it is not an insurance, but an assurance (guarantee) to pay a certain money. The contingency covered is a certainty-death; only it?s timing is uncertain.
Life Insurance
• In case of life insurance, the insurable interest should exist on the date of the contract. It is not necessary that the assured should have an insurable interest at the time when policy falls due. Example 8: A borrows from B. B to protect his interest takes an insurance on the life of A. A pays the entire borrowed amount to B, and then died. Could B recover on the policy?
Insurable Interest-Life Insurance/Fire Insurance
Example 8: Answer, Yes. The insurable interest was there on the date of the contract. Example 9: A the owner of a house, which was insured against fire, sold the house to B. He did not transfer the policy to B. The house was, thereafter, destroyed, by fire. Can B recover the loss from the insurer. Answer: Does B have an insurable interest? Has he paid any consideration (Premium). No. Can A recover anything from the insurer? Has he suffered any loss?
Types of Life Policies
1. Whole Life Policy (Payble on death of the assured) 2. Endowment Life Policy (Paybale on attaining a specified age, or on death, whichever is earlier) 3. Joint Life Policy 4. Children?s Deferred Insurance (education or marriage) 5. Double Accident Indemnity Policy (double the amount) 6. Group Insurance Policy (members of family or employment) 7. Annuity Policy 8. Partnership Assurance (In case a partner dies, the partnership dissolves, to cover payments to the deceased partner?s heirs) 9. Term Assurance (Only if the assured dies before a certain age) 10. With Profit Policy (the assured gets a share in the profit declared by the insurer)
Assignment, Nomination of a Policy
• Assignment: Transfer or assignment of a policy can be made only by an endorsement on the policy attested by at least one witness. It becomes binding on the insurer after a notice in writing along with a certified copy of the policy with endorsement and attestation. • Nomination: The assured may, when effecting the policy or any time before it matures, nominate a person to whom the amount shall be paid after his death.
Effect of Suicide on Life Insurance
• Life insurance policies usually carry a clause that no payment shall be made if the assured commits suicide. However, if the assured was insane and was incapable of appreciating the nature of his act, the insurance company shall be liable in spite of the clause.
Fire Insurance
• Definition: A contract of insurance against loss by or incidental to fire [S. 2(6-A) Insurance Act 1938]. There is fire when something burns. Ignition is necessary. It may be caused by heat, electricity, explosion, lightning, etc. It should not be caused by a deliberate act of the insured. Loss by fire caused due to negligence is recoverable. • Example 8: The insured hid her jewellery under the fire-place. Having forgotten, she lit the fire and the jewellery was damaged. Can she recover the damage. Yes
Fire Insurance- Insurable interest
• Insurable interest should be there at the time of the loss. It is not necessary at the time of insurance. Example 9: A the owner of a house, which was insured against fire, sold the house to B. He did not transfer the policy to B. The house was, thereafter, destroyed, by fire. Can A or B recover the loss from the insurer. Answer: Does B have an insurance contract? Has he paid any consideration (Premium). No. Does A have an insurable interest at the time of the loss. No.
Fire Insurance-Average Class
• If the insured thing is worth more than the amount insured, the insured shall bear the risk on the excess amount. The purpose of average clause is to check under insurance • Example: A house worth Rs 80,000 is insured for Rs 60,000. The actual loss is Rs 20,000. The insurer will bear such proportion of the loss as the sum insured bears to the total value, i.e.6/8 of Rs 20,000= Rs 15,000. The balance loss of Rs 5,000, the insured will bear himself.
Marine Insurance
Definition: A contract of insurance to indemnify the insured against marine losses, that is to say, losses incidental to marine adventure. (S. 3 Marine Insurance Act 1963). Marine adventure includes adventure exposed to marine perils. Marine perils are perils consequent on, or incidental to, the navigation of the sea, including fire, war perils, pirates, rovers, thieves, captures, seizures, jettisons, barratry and other perils. barratry : misconduct committed by a master or crew of a vessel which damages the vessel or its cargo Jettison: a voluntary sacrifice of cargo to lighten a ship's load in time of distress
Contents of a Marine Policy
1. Name of the assured 2. Subject matter and the risk insured against 3. The Voyage, or period of time, or both. 4. Sum insured 5. Name or names of insurers 6. The policy must be signed by the insurers
Types of marine insurance Policies
1.
2.
3.
4.
5.
Voyage policy: To insure the subject matter „at and from a place to another place? Time policy: A policy covering a specified period of time, not exceeding 12 months(S.27). A continuation clause usually provides that if at the end of the period the ship is at sea the policy will continue till the safe arrival of the ship at the port of destination. Valued/ unvalued policy (specifying the agreed value of the subject matter) Floating policy: It leaves out the name or names of ships and other particulars to be defined by subsequent declarations to be made by endorsement on the policy or in any other customary manner Wagering policies: „ppi policies? „policy proof of interest?. Legally such policies are void. However, they are honoured by underwriters as a trade practice.
Warranties-Express and Implied
1. Warranty of seaworthiness is an implied warranty ( presumed): that the ship will be seaworthy at the commencement of the voyage, or at the commencement of each stage of the voyage. Example 10: The ship left on a voyage without enough coal as a result of which the ship?s spares and fittings had to be burnt. This is breach of an implied warranty. Value of fittings and spares burnt could not be recovered from the insurers [ Greenock SS Co. v Maritime Insurance Co. (1903) 2 KB 657]
Warranties-Implied
2. Warranty of legality of voyage: The adventure should be lawful and should be carried out lawfully in so far the insured is able to control (s.43). Where the master of the ship, without the knowledge of the owner, indulges in unlawful activities, the contract will not become void on this ground.
Certain Terms used in Marine Insurance
• Constructive Total Loss: When the subject matter is abandoned because actual total loss appears to be unavoidable, without an expenditure which would exceed its value. It is like dropping a shilling in deep sea water. However, notice of abandonment should be given to the insurer • Partial loss: Particular Average: it is a partial loss of the subject matter insured caused by the peril insured. Particular average may be on ship, on cargo, and on freight.
Certain Terms used in Marine Insurance
• General Average (S.66): A „general average loss? is caused by a „general average act?. A „general average act? is a sacrifice or expenditure reasonably made in time of peril to protect the property imperilled in the common adventure. Example 11: (i) Landing or jettisoning cargo to lighten ship in distress (ii) Wages paid to non-members of the crew for pumping out water from the ship • “General average Contribution”: The party on whom the general average loss falls is entitled to rateable contribution from the other interested parties.
doc_129091908.pptx
insurance like different types of insurance (life, marine, fire), general principles of insurance, indemnity, subrogation, good faith, double insurance, types of life policie
Law of Insurance
• What is „Insurance?? Definition: A contract in which one party insures/assures/ indemnifies/ guarantees another person?s property or life (or the life/property of another person in whom he has interest) against any risk/ liability in consideration for payment of money as the „Premium?. • What are the various laws governing Insurance?
Laws governing Insurance
1. Insurance Act 1938[ consolidated law relating to business of insurance] 2. Insurance Regulatory and Development Authority Act 1999 (IRDA Act)[ Controller of Insurance] 3.Life Insurance Corporation Act 1956 ( Nationalization) 4. General Insurance Business (Nationalization) Act 1972 5. Marine Insurance Act 1963 6. Public Liability Insurance Act 1991 (A minimum „no fault liability? insurance for installations handling hazardous substances)
Types of Insurance
• Insurance was originally applied to cover marine risks. It has now been extended to various risks, life, fire, theft, sickness, unemployment, etc. The more common forms of insurance are: 1. Life Insurance 2. Fire Insurance 3. Marine Insurance
Life Insurance [s.2(11) Insurance Act]
• Life insurance is a contract by which the insurer , in consideration of a premium, undertakes to assure the person insured (or his nominee or heir) a certain sum of money on his death, or on the expiry of a certain period, whichever is earlier. As life can not be measured in money terms, life insurance is not an indemnity. Actually it is not an insurance, but an assurance (guarantee) to pay a certain money. The contingency covered is a certainty-death; only it?s timing is uncertain.
Fire Insurance [S. 2(6-A) Insurance Act 1938]
Definition: A contract of insurance against loss by or incidental to fire [S. 2(6-A) Insurance Act 1938]. There is fire when something burns. Ignition is necessary. It may be caused by heat, electricity, explosion, lightning, etc. It should not be caused by a deliberate act of the insured. Loss by fire caused due to negligence is recoverable.
Marine Insurance
Definition: A contract of insurance to indemnify the insured against marine losses, that is to say, losses incidental to marine adventure. (S. 3 Marine Insurance act 1963). Marine adventure includes adventure exposed to marine perils. Marine perils are perils consequent on, or incidental to, the navigation of the sea, including fire, war perils, pirates, rovers, thieves, captures, seizures, jettisons, barratry and other perils. barratry : misconduct committed by a master or crew of a vessel which damages the vessel or its cargo Jettison: a voluntary sacrifice of cargo to lighten a ship's load in time of distress
General Principles of Insurance
1.
2.
3. 4. 5.
6. 7.
Indemnity: ( except life and personal accident insurance); Compensation for actual loss. Insured not permitted to make profit out of insurance. Good Faith: (uberrimae fidei)(Duty of the insured to disclose all material facts) Insurable Interest: Some proprietory or pecuniary interest in the thing insured Proximate cause (causa proxima): The peril insured against should be the proximate or the nearest cause of the loss or damage, though the damage may not have taken place without the remote cause. Subrogation (right of the insurers to enforce for their own benefit the rights and remedies of the insured against third parties, after satisfying the claim of the insured) Substitution of the insured by the insurer, after satisfying the claim) Mitigation of loss (duty of the insured to make reasonable effort to mitigate the loss) Example: Pumping out water from the ship, which has developed a leakage, in order to avoid danger.) Contribution (in the context of „Double Insurance?)
Examples- Indemnity
1. Example 1: X insures his car against accident and theft for Rs 90,000. The car meets with an accident, and the estimated loss is Rs 10,000. What will be the amount recoverable from the insurer? What amount will be recoverable if the car is stolen? Example 2: A house was insured against fire. The insured then contracted to sell the house, the contract containing no reference to insurance. After the date of contract but before the date fixed for sale, the house was damaged by fire, and the insured received £330 as the indemnity from the insurer. Later on the sale was completed for the full contracted price without any abatement for the damage caused. When the insurer came to know, he brought an action to recover £330. Will he succeed?,
2.
Indemnity
1. Ans; The amount recoverable from the insurer will be the actual loss, ie. Rs 10,000. In case the car is stolen , it would be Rs 90,000-Depreciation. 2. Ans: As the insured had suffered no real loss (there was nothing to indemnify), the Insurer was allowed to recover the £ 330 which had already been paid. [ Castellain v Preston (1883) 2 QB 380]
Indemnity
• Contracts of insurance are contracts of indemnity. In no case can an insured recover more than the amount insured. The insured is not permitted to make a profit out of his loss. • Life insurance is an exception. No money value can be placed on human life. The insurer, therefore undertakes to pay a fixed or guaranteed sum irrespective of the loss. Life insurance, is thus nearer to „Gurantee? than to Indemnity. • Accident and sickness insurance and „Valued Policies? are also exceptions to the principle of indemnity
„Valued Policies?: Where value of the subject matter and the amount payable in the event of loss are agreed upon, conclusively, beforehand.
Subrogation
• The right of the insurers to enforce, for their own benefit, the rights and remedies of the insured against third parties, after satisfying the claim of the insured. Substitution of the insured by the insurer, after satisfying the claim Example 3. If your car is insured against accident, your insurer, after compensating you for the actual loss, can recover damages on your behalf (can subrogate himself in your place or substitute you) from the owner of the other car if it can be proved that the accident occurred due to the negligence of the driver of the other car.
Good Faith
Good Faith (uberrimae fidei), in the context of insurance, is the duty of the insured to disclose all material facts. Non disclosure of material fact will make the contract Voidable. Material facts are facts which are relevant for assessing the risk. The insured has better knowledge of his risks than the insurer. That is why the „good faith? principle requires full disclosure of all material facts. The general duty of all parties to any valid contract is: (i) not to make any misrepresentation or (ii) commit any fraud. This duty is carried, in the case of insurance, to the furthest point, to the duty of the insured to make full disclosure of all material facts. Example 4: Where an applicant for an insurance when asked whether he had applied to any other company for insurance and whether such application was accepted, replied that he was insured with two other companies but concealed the fact that his application was rejected by several others. The insurer came to know of the rejection, and sought to avoid the policy. Will the court allow?
Good Faith
Ans. 3: Yes. It was held that there was a material concealment. [London Assurance Co. v. Mansell II Ch D 363]
Insurable Interest
Some proprietary or pecuniary interest in the thing insured. A contract of insurance without any insurable interest in the thing insured is a „wagering agreement?; and is thus void Example 5: You can not insure a car belonging to some body else. However, if you have given him a loan and the car is hypothecated with you, you have an interest to protect (insurable interest), and you can insure it. In life insurance, husband is presumed to have an insurable interest in the life of wife, and viceversa.
Proximate cause (causa proxima)
• The peril insured against should be the proximate or the nearest cause of the loss or damage, though the damage may not have taken place without the remote cause Example 6: Cargo (sugar) being shipped is insured against sea perils. Rats make holes into the bottom of the ship wherefrom the sea water enters the ship and destroys the cargo. Will the loss be recoverable? What is the proximate cause, and what is the remote cause?
Proximate cause (causa proxima)
Answer 6: Sugar is destroyed by sea water entering the ship, which is the peril covered by insurance (sea peril). The proximate cause is thus covered. The loss will, therefore, be recoverable, even though the remote cause, i.e. rats is not covered by the risk insured.
Contribution
• Contribution (in the context of „Double Insurance?): Where a property is insured with two or more insurers against the same risk,[ it is called „double insurance?]; the insurers must share the burden in proportion to the amount assured by each. Example 7: A insures his ship with an insurance company X for Rs two lakh, and with another insurance company Y for Rs one lakh. The ship suffers actual damage of Rs 48,000. The two insurers will contribute rateably to indemnify the loss. X: Rs 32,000, Y: Rs 16,000. „Double Insurance? is different from „re-insurance?. Reinsurance is the insurance taken by the insurer, while double insurance is taken by the insured.
„Double Insurance?
• „Double Insurance? is subject to the principle of indemnity. The insured can not recover more than the actual loss from all the insurers together. • However, as we know „Life Insurance? is not subject to the principle of indemnity, since life can not be measured in terms of money. • Example 8: A insures his life with an insurance company X for Rs two lakh and with another insurance company Y for Rs one lakh. A?s nominee or heir can claim from both the insurers the sum assured- Rs three lakh.
Life Insurance [s.2(11) Insurance Act]
• Life insurance is a contract by which the insurer , in consideration of a premium, undertakes to assure the person insured (or his nominee or heir) a certain sum of money on his death, or on the expiry of a certain period, whichever is earlier. As life can not be measured in money terms, life insurance is not an indemnity. Actually it is not an insurance, but an assurance (guarantee) to pay a certain money. The contingency covered is a certainty-death; only it?s timing is uncertain.
Life Insurance
• In case of life insurance, the insurable interest should exist on the date of the contract. It is not necessary that the assured should have an insurable interest at the time when policy falls due. Example 8: A borrows from B. B to protect his interest takes an insurance on the life of A. A pays the entire borrowed amount to B, and then died. Could B recover on the policy?
Insurable Interest-Life Insurance/Fire Insurance
Example 8: Answer, Yes. The insurable interest was there on the date of the contract. Example 9: A the owner of a house, which was insured against fire, sold the house to B. He did not transfer the policy to B. The house was, thereafter, destroyed, by fire. Can B recover the loss from the insurer. Answer: Does B have an insurable interest? Has he paid any consideration (Premium). No. Can A recover anything from the insurer? Has he suffered any loss?
Types of Life Policies
1. Whole Life Policy (Payble on death of the assured) 2. Endowment Life Policy (Paybale on attaining a specified age, or on death, whichever is earlier) 3. Joint Life Policy 4. Children?s Deferred Insurance (education or marriage) 5. Double Accident Indemnity Policy (double the amount) 6. Group Insurance Policy (members of family or employment) 7. Annuity Policy 8. Partnership Assurance (In case a partner dies, the partnership dissolves, to cover payments to the deceased partner?s heirs) 9. Term Assurance (Only if the assured dies before a certain age) 10. With Profit Policy (the assured gets a share in the profit declared by the insurer)
Assignment, Nomination of a Policy
• Assignment: Transfer or assignment of a policy can be made only by an endorsement on the policy attested by at least one witness. It becomes binding on the insurer after a notice in writing along with a certified copy of the policy with endorsement and attestation. • Nomination: The assured may, when effecting the policy or any time before it matures, nominate a person to whom the amount shall be paid after his death.
Effect of Suicide on Life Insurance
• Life insurance policies usually carry a clause that no payment shall be made if the assured commits suicide. However, if the assured was insane and was incapable of appreciating the nature of his act, the insurance company shall be liable in spite of the clause.
Fire Insurance
• Definition: A contract of insurance against loss by or incidental to fire [S. 2(6-A) Insurance Act 1938]. There is fire when something burns. Ignition is necessary. It may be caused by heat, electricity, explosion, lightning, etc. It should not be caused by a deliberate act of the insured. Loss by fire caused due to negligence is recoverable. • Example 8: The insured hid her jewellery under the fire-place. Having forgotten, she lit the fire and the jewellery was damaged. Can she recover the damage. Yes
Fire Insurance- Insurable interest
• Insurable interest should be there at the time of the loss. It is not necessary at the time of insurance. Example 9: A the owner of a house, which was insured against fire, sold the house to B. He did not transfer the policy to B. The house was, thereafter, destroyed, by fire. Can A or B recover the loss from the insurer. Answer: Does B have an insurance contract? Has he paid any consideration (Premium). No. Does A have an insurable interest at the time of the loss. No.
Fire Insurance-Average Class
• If the insured thing is worth more than the amount insured, the insured shall bear the risk on the excess amount. The purpose of average clause is to check under insurance • Example: A house worth Rs 80,000 is insured for Rs 60,000. The actual loss is Rs 20,000. The insurer will bear such proportion of the loss as the sum insured bears to the total value, i.e.6/8 of Rs 20,000= Rs 15,000. The balance loss of Rs 5,000, the insured will bear himself.
Marine Insurance
Definition: A contract of insurance to indemnify the insured against marine losses, that is to say, losses incidental to marine adventure. (S. 3 Marine Insurance Act 1963). Marine adventure includes adventure exposed to marine perils. Marine perils are perils consequent on, or incidental to, the navigation of the sea, including fire, war perils, pirates, rovers, thieves, captures, seizures, jettisons, barratry and other perils. barratry : misconduct committed by a master or crew of a vessel which damages the vessel or its cargo Jettison: a voluntary sacrifice of cargo to lighten a ship's load in time of distress
Contents of a Marine Policy
1. Name of the assured 2. Subject matter and the risk insured against 3. The Voyage, or period of time, or both. 4. Sum insured 5. Name or names of insurers 6. The policy must be signed by the insurers
Types of marine insurance Policies
1.
2.
3.
4.
5.
Voyage policy: To insure the subject matter „at and from a place to another place? Time policy: A policy covering a specified period of time, not exceeding 12 months(S.27). A continuation clause usually provides that if at the end of the period the ship is at sea the policy will continue till the safe arrival of the ship at the port of destination. Valued/ unvalued policy (specifying the agreed value of the subject matter) Floating policy: It leaves out the name or names of ships and other particulars to be defined by subsequent declarations to be made by endorsement on the policy or in any other customary manner Wagering policies: „ppi policies? „policy proof of interest?. Legally such policies are void. However, they are honoured by underwriters as a trade practice.
Warranties-Express and Implied
1. Warranty of seaworthiness is an implied warranty ( presumed): that the ship will be seaworthy at the commencement of the voyage, or at the commencement of each stage of the voyage. Example 10: The ship left on a voyage without enough coal as a result of which the ship?s spares and fittings had to be burnt. This is breach of an implied warranty. Value of fittings and spares burnt could not be recovered from the insurers [ Greenock SS Co. v Maritime Insurance Co. (1903) 2 KB 657]
Warranties-Implied
2. Warranty of legality of voyage: The adventure should be lawful and should be carried out lawfully in so far the insured is able to control (s.43). Where the master of the ship, without the knowledge of the owner, indulges in unlawful activities, the contract will not become void on this ground.
Certain Terms used in Marine Insurance
• Constructive Total Loss: When the subject matter is abandoned because actual total loss appears to be unavoidable, without an expenditure which would exceed its value. It is like dropping a shilling in deep sea water. However, notice of abandonment should be given to the insurer • Partial loss: Particular Average: it is a partial loss of the subject matter insured caused by the peril insured. Particular average may be on ship, on cargo, and on freight.
Certain Terms used in Marine Insurance
• General Average (S.66): A „general average loss? is caused by a „general average act?. A „general average act? is a sacrifice or expenditure reasonably made in time of peril to protect the property imperilled in the common adventure. Example 11: (i) Landing or jettisoning cargo to lighten ship in distress (ii) Wages paid to non-members of the crew for pumping out water from the ship • “General average Contribution”: The party on whom the general average loss falls is entitled to rateable contribution from the other interested parties.
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