Principal of Insurance

7/31/2019 Principal of Insurance

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PRINCIPLES

OFINSURANCE

By:

CA SIDDDHARTH ARORAASSISTANT MANAGER

Global Solutions delivered locally


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PRINCIPAL OF INSURANCEA. PRINCIPAL OF UTMOST GOOD FAITH

In Insurance Law principle ofgood faith (Voluntary disclosure)must be followedotherwise the contract is not valid.

Exceptions:-Facts which diminish the risk(example the installation of fire extinguishingappliances in relation to fire insurance)

Facts which are known or presumed to be known to the insurer (matters of commonknowledge like large scale riots, geography).

Facts which could be ascertained or should be ascertained from the information suppliedby the proposer (various fire risks associated with the plastic Industry).

Matters of Law(Like municipal regulations in regard to storage of crackers and explosives.)

Facts in regard to which the insurer appears to be indifferent or about which the insurerhas waived information(an incomplete answer to a question in in a proposal form has been

accepted by the insurer)


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PRINCIPLES OF INSURANCE

Duration of Duty of disclosure.

Duty of Disclosure is required till the proposal is accepted by the Insurer.

The duty of disclosure revives at the time of renewal of Insurance Policy.

If specifically mentioned in Policy Conditions.

BREACH OF WARRANTYis a fundamental Condition in the policy and allows theaggrieved party to repudiate the contract.

BREACH OF UTMOST GOOD FAITH

Non Disclosure.

Misrepresentation.

Breach of utmost good faith renders the contract voidable. A voidable Contractremains valid until it is treated as void by the aggrieved party.


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B. Principle of Insurable Interest Essentials.

There must be some property, Right, Interest, life or potential liability capable of beinginsured.

It is this property , right, interest, which must be subject matter of insurance.

The insured must stand in a relationship with the subject matter of insurance whereby hebenefits from its safety , or freedom from liability and would be prejudiced by its loss,damage or creation of liability.

The relationship between the insured and subject matter of insurance must be recognized atlaw.

C. Principle of SUBROGATION

The Insurance Law follows the principle of Indemnity which means the Insured is not entitledto recover more than the actual loss incurred/make profit.

The Insured may recover the loss from two/more than two sources by effecting twoinsurance policies on the same subject matter or from third party responsible for the loss.


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To avoid the recovery from more than 1 source the principle of subrogation is followedwhich states that the insurer after indemnifying the loss to the insured is entitled to all therights of the insured against the third party which the Insured has against the third party.

Under Fire Polices and miscellaneous policies the rights of Subrogation can be exercisedbefore/after indemnifying the loss but subject to the value of loss indemnified.

Under Marine cargo policies the rights of subrogation vest to the insurersfrom the date of

Occurrence of loss.

Under Personal Accident Insurance Policies the principle of Subrogation does not apply and the

contract of the Insurance is not insurance of Indemnity.

The rights of Subrogation are limited to the extent of Indemnification only.

The rights of Subrogation also do not apply in case of EX Gratia Payments.


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D. PRINCIPLE OF CONTRIBUTION

The subject matter of Insurance must be common to all policies in respect of the items

for which claim is made.

The peril which causes the loss, must be common to all policies, although any or all

policies may cover perils in addition.

The Interest covered under all the policies must be same(policies must be effected in

favour of a common insured).

The policies must be in force at the time of loss.

The policies must be legally enforceable.


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ASSIGNMENT OF GENERAL INSURANCE

POLICIESAssignment of General Insurance Policies.

Fire Policies are Personal Contracts which involves personal integrity of the parties to thecontract , therefore consent of the Insurers is required for assignment of Policies. The

consent of the insurers to the assignment is granted by way of endorsement which createsa new contract between the insurer and the assignee. The Insurance contracts ends if theinterest in the property is transferred otherwise than by Will or Operation of Law. Theinsurable Interest is required both during the continuation of the policy as well as at thetime of loss.

Marine Cargo Policies are FREELY ASSIGNABLE WITHOUT THE CONSENT OF THE

INSURERS PROVIDED THE INSURABLE INTEREST IS TRANSFERRED(AGREED TO BETRANSFERRED) TO THE ASSIGNEE. The policy has to be assigned before the insuredsparts with his interest and by creating a blank endorsement on the policy. The insurableinterest in marine policies is required at the time of Loss.


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Thank You

Principal of Insurance

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