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LAW OF INSURANCE
The contract of insurance is called an aerator contract because it depends upon an uncertain event. Lord Mansfield described insurance as “a contract on speculation.”
FUNDAMENTAL PRINCIPLES OF INSURANCE: (i) good faith, (ii) insurable interest, (iii) indemnity, (iv) mitigation of loss, (v) attachment of risk, (vi) causa proxima.
GOOD FAITH: A contract of insurance is a contract, uberrimae fidei, a contract based on utmost good faith and if the utmost good faith is not observed by either party the contract may be avoided by the other.
INSURABLE INTEREST: The assured must have an actual interest called the insurable interest, in the subject-matter of the insurance; either he must own part or whole of it, or he must be in such a position that injury to it would affect him adversely.
INDEMNITY: Excepting life assurance and personal accident and sickness insurance, a contract of insurance contained in a fire, marine, burglary or any other policy is a contract of indemnity.
MITIGATION OF LOSS: In the event of some mishap to insured property, the owner (the insured) must act as though he were uninsured, and make every effort to preserve his property. RISK MUST ATTACH: A contract of insurance can be enforced only if the risk has attached.
CAUSA PROXIMA: Make the insurer liable for loss, such loss must have been proximately caused by the peril insured against. Causa proxima non remota spectator.
CONTRACT OF INSURANCE ONE FROM YEAR TO YEAR: The general rule is the except in the case of life assurance a contract of insurance is a contract from year to year only,
PREMIUM: The premium is the price for the risk undertaken by the insurer. It is the consideration for the insurance.
DAYS OF GRACE: The days of grace are the days allowed by the insurance company after the expiry of the stipulated period of insurance during which the assured can pay the premium in order to continue or to renew the policy of insurance.
POLICY: The policy is a formal and enforceable stamped document signed and issued by the insurance company embodying the terms of the contract between the parties.
INTERIM RECEIPT, CERTIFICATE OR COVER NOTE: A cover note or interim certificate is a document which the insurance company, on receiving the proposal, may issue pending the execution of a policy or the final decision of the directors as to acceptance or rejection of the proposal.
RE-INSURANCE: Re-insurance is a contract which insures the thing originally insured, and by which an insurer is to be indemnified against any loss which he may sustain by reason of being himself compelled to pay the assured under the original contract of insurance.
DOUBLE INSURANCE: When the same subject-matter is insured with two or more insurers and the total sum insured exceeds the actual value of the subject- matter, it is known as double insurance and it amounts to over-insurance.
SUBROGATION: The right of subrogation is a necessary corollary of the principle of indemnity and is essential for its preservation.
VALUED POLICY: A valued policy is a policy which specifies the agreed value of the subject-matter insured.
UNVALUED POLICY: An unvalued policy is a policy which does not specify the value of the matter insured, but subject to the limit of the sum insured, leaves the insurable value to be subsequently ascertained (Sec. 30).
FLOATING POLICY: A floating policy is a policy which describes the insurance in general terms, and leaves the name or names of the ship or ships and other particulars to be defined by subsequent declaration.
WAGER OR HONOUR POLICY: It is a policy in which the assured has no insurable interest or the insurer or underwriter is willing to dispense with the proof of interest.
INSURABELE INTEREST: The person who effects an insurance, or issues instructions for effecting it, must have an insurable interest in the subject-matter. The assured must have insurable interest at the time of the loss thought he may not have been interested when the insurance was actually effected. INSURABLE VALUE: Insurable value is the amount of the valuation of the insurable interest for the purpose of insurance.
DISCLOSURE AND REPRESENTATION: The assured must disclose to the insurer every material circumstance which is known to him, and he is deemed to know everything which he ought to know in the ordinary course of business.
WARRANTIES: A warranty, according to sec. 35 of the Act, is an undertaking by the assured that some condition shall be fulfilled, or that a certain thing shall be or shall not be done, or whereby he confirms or negatives the existence of a particular state of facts. A warranty may be express or implied. An express warranty is a condition which is set forth in the policy or attached thereto; and an implied warranty is an essential condition implied by law, though not written in the policy.
SEA-WORTHINESS : The ship must be sea-worthy at the commencement of the voyage, or if the voyage is divisible into distinct stages, at the commencement of each stage. LEGALITY: So far as the assured can control the matter, the adventure shall be carried out in a lawful manner. THE VOYAGE: The subject-matter may be insured by a voyage policy “from a port” or “at and from” a port. Perils- Perils are the risks which the underwriter agrees to take upon himself, and are inserted in the policy. Perils of the sea are all perils, losses, misfortunes of a marine character or a character incident to a ship as such. The purpose of the policy is to secure an indemnity against accidents which may happen, not against events which must happen. LOSSES KINDS OF LOSSES: A loss may be either Total or Partial. Total loss may be subdivided into two classes: (i)Actual Total Loss, and (ii) Constructive Total Loss. The case of partial loss arises when the subject-matter of the insurance is partially lost. Partial loss is also of two classes: (i)Particular Average, and (ii) General Average.
FIRE INSURANCE
A fire insurance is a contract to indemnify the insured for destruction of or damage to property caused by fire.
AVERAGE CLAUSE: It is becoming very common in policies of fire insurance to insert a condition called the average clause, by which the insured is called upon to bear a portion of the loss himself. This condition is called the pro rata condition of average. Insurable interest, the insured must have insurable interest in the subject-matter both at the time of effecting the policy and at the time of the loss.
THE RISK: The risk in fire policy commences from the moment the cover note, or the deposit receipt, or the interim protection is issued and continues for the term covered by the contract of insurance.
