Short

1. Parties to the Ins

2. Ins contracts*
3. Voyage**
4. Perils of the sea***
5. Burglary insurance**
6. Double insurance*
7. Cover note***
8. Third party insur
9. Assures of the assured
10. Wagering agreement
11. Premium*
12. Personal accidental ins*
13. Classification of marine ins
14. Principle of reinstatement*
15. Public liability ins*****
16. Irda**
17. Define insurance***
18. Life ins contract*
19. Implies warranties in marine ins
20. Doctrine of approximation*
21. Rights of third parties
22. Compulsory ins**
23. Nature of fire ins contract
24. Risk****
25. Wager and ins*
26. Insurable int*
27. Assignment of marine policy**
28. Contract of uberrima fide
29. Contract of indemnity*
30. Premium*
31. Surrender value*
32. Assignment and nomination
33. Avg clause
34. Duty of disclosure
35. Contingent contract**
36. Right to contribution***
37. Reinsurance
38. Adjudicating authorities of ins claims
39. Loss by fire
40. Nomination
41. Valued policy

Long
 1. What is premium? Effect of non payment of premium what are the reliefs provided against the
forfeiture of the policy for non payment of premium
2. Various kinds of policy in marine ins meaning perils of the sea
3. Composition of IRDA POWERS AND FUNCTIONS
4. Contents of fire policy scope
5. Fundamental elememts of ins
6. Various types of policies of life ins IS IT A CONTRACT OF INDEMNITY AND CAN THR INSURER AVOID
LIABILITYON THE GROUND THAT AGE OF THE INSURED IS NOT CORRECT HISTORY AND DEVELOPMENT
7. Express and implied warranties in a contract of marine ins What is the effect of breach of warranty*
8. Explain the measuring of the word fire in a fire policy and discuss the requirements of a valid
assignment of a fire ins policy contribution and avg in fire ins types of fire policy**
9. Principle of utmost good faith with case laws* WITH REF TO FIRE AND MARINE
10. Voyage policy explain the circumstances under which the
insurer not discharged from liability even though there is delay in voyage deviation of voyage in marine
ins when is it excused* **
11. Doctrine of subrogation and contribution
12. Explain the role of adjudicating authorities in insurance claims
in social control on insurance business
13. Imp of ins for economic development*
14. Law of contract relating to ins in india fundamental principles
of ins essential conditions* of contract of ins Diff contract of ins and wagering agreement
15. Concept of compulsory ins in India** reasons
16. In what cases and to what extent can a person effect an
ins on another persons life
17. What do yoy understand by insurable int in connection
with life fire and marine
18. Growth and developmentof ins business in india*
19. Object consti and function of LIC
20. Doctrine of proximate causewith case laws
21. General conditions in standard fire policy’
22. What is principle of contribution rights and liabilities of insure and insured
23. Imp of public liability ins act

Ans 1 Growth of insurance business in India

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ),
Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources
that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was
probably a pre-cursor to modern day insurance.

1. Historical Perspective

 Pre-Liberalization Era (Before 1991): The insurance sector was highly regulated and dominated by state-
owned entities. Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) were the primary
players. The market was characterized by limited penetration and product offerings.
 Post-Liberalization Era (1991-Present): Economic reforms introduced in the 1990s opened the insurance
sector to private players. The Insurance Regulatory and Development Authority of India (IRDAI) was
established in 2000 to regulate the sector and promote competition.

The Indian insurance business has seen significant growth in recent years, with the market expanding
rapidly due to factors like increased awareness, economic development, and policy reforms, particularly
driven by the Insurance Regulatory and Development Authority of India (IRDAI), leading to a higher
insurance penetration rate despite still being considered low compared to developed nations; however,
challenges remain in reaching wider demographics with adequate coverage.

. Key Drivers of Growth

 Economic Growth: India’s robust GDP growth has increased disposable income, enabling higher spending
on insurance products.

 Favorable Demographics: A young and growing middle class has fueled demand for life and health
insurance products.

 Urbanization and Lifestyle Changes: Urbanization and rising healthcare costs have heightened the
awareness of risk management and financial protection.

 Government Initiatives:

o Pradhan Mantri Jan Dhan Yojana (PMJDY): Increased access to financial services, including insurance.

o Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY):
Affordable insurance schemes for the masses.

o Ayushman Bharat: Largest government-funded health insurance scheme.

 Digital Transformation: Online platforms and InsurTech innovations have streamlined processes like policy
purchase, claims settlement, and customer engagement.

Ans 2 Insurance and economic development

Insurance has evolved as a process of safeguarding the interest of people from loss and uncertainty. It may
be described as a social device to reduce or eliminate risk of loss to life and property. Insurance plays an
important role in an economy and a strong pillar of financial market. A welldeveloped insurance sector
promotes economic growth by encouraging more industrial activities through risk-taking. For economic
development investments are necessary. Investments are made out of savings. Life Insurance Company is a
major instrument for the mobilization of savings of people, particularly from the middle and lower income
groups. All good life insurance companies have huge funds accumulated through the payments of small
amounts of premium of individuals. These funds are invested in ways that contribute substantially for the
economic development of the countries in which they do business.

1. Provides safety and security: Insurance provides financial support and reduce uncertainties in
business and human life. It provides safety and security against particular event. There is always a
fear of sudden loss. Insurance provides a cover against any sudden loss.
2. Generates financial resources: Insurance generate funds by collecting premium. These funds are
invested in government securities and stock. These funds are gainfully employed in industrial
development of a country for generating more funds and utilised for the economic development of
the country.
 3. Life insurance encourages savings Insurance does not only protect against risks and uncertainties,
but also provides an investment channel too. Life insurance enables systematic savings due to
payment of regular premium
4. Promotes economic growth Insurance generates significant impact on the economy by mobilizing
domestic savings. Insurance turn accumulated capital into productive investments. Insurance
enables to mitigate loss, financial stability and promotes trade and commerce activities which result
into economic growth and development
5. Medical support A medical insurance considered essential in managing risk in health. Anyone can be
a victim of critical illness unexpectedly. And rising medical expense is of great concern. Medical
Insurance is one of the insurance policies that cater for different type of health risk
6. Spreading of risk Insurance facilitates spreading of risk from the insured to the insurer. The basic
principle of insurance is to spread risk among a large number of people. A large number of persons
get insurance policies and pay premium to the insurer. Whenever a loss occurs, it is compensated
out of funds of the insurer.
7. Source of collecting funds Large funds are collected by the way of premium. These funds are utilised
in the industrial development of a country, which accelerates the economic growth. Employment
opportunities are increased by such big investments. Thus, insurance has become an important
source of capital formation.
8. Capital Formation and Insurance
9. . Facilitates efficient capital allocation Insurance provides cover to large number of firms, enterprises
and businesses and also deploy their funds in number of investment projects.
10. Promotes Trade and Commerce The increase in GDP is positively correlated to growth of trade and
commerce in economy. Whether it is production of goods and services, domestic or international
trade or venture capital projects, insurance dominates everywhere. Even banks demand insurance
cover of assets while granting loans for purchase of assets

Ans 3 Principle of utmost good faith

The Principle of Utmost Good Faith (Uberrima Fides) is a fundamental doctrine in insurance contracts. It
mandates that both the insurer and the insured must disclose all material facts honestly and completely
before entering into the contract. Failure to adhere to this principle can render the insurance contract void
or unenforceable. This principle applies to both life insurance and general insurance policies

The doctrine of utmost good faith, also known by its Latin name uberrimae fidei, is a minimum standard,
legally obliging all parties entering a contract to act honestly and not mislead or withhold critical
information from one another. It applies to many everyday financial transactions and is one of the most
fundamental doctrines in insurance law

Key Aspects of the Principle

1. Duty of Disclosure:

o The insured must disclose all material facts that could affect the insurer's

decision to provide coverage or determine the premium.

o The insurer must also disclose all terms, conditions, and exclusions of the

policy.

2. Material Facts:
o These are facts that can influence the insurer’s decision to accept the risk,

calculate the premium, or include specific terms.

o Examples: Medical history, lifestyle habits (e.g., smoking), previous claims,

and existing conditions.

3. Concealment or Misrepresentation:

o Concealing or misrepresenting material facts constitutes a breach of this

principle.

o Consequences: The insurer may deny claims or cancel the policy.

Carter v Boehm (1766) 3 Burr 1905 is a landmark English Contract law case, in which Lord Mansfield
established the duty of utmost good faith or uberrimae fidei in insurance contract

Marine insurance

Though the Doctrine of Uberrima Fides is applicable to all contracts of insurance, and is a commonlaw
doctrine, the doctrine was codified in Marine Insurance Act, 1963. As per Section 19 of the Marine
Insurance Act, 1963 (hereinafter referred to as ‘Act’), a contract of marine insurance is a contract based
upon the utmost good faith, and if the utmost good faith be not observed by either party, the contract may
be avoided by the other party.

Section 20 of the Act, lays down that the assured must disclose to the insurer, before the contract is
concluded, every material circumstance which is known to the assured, and the assured is deemed to know
every circumstance which, in the ordinary course of business, ought to be known to him. If the assured
fails to make such disclose, the insurer may avoid the contract.

There are certain exceptions to the rule that all circumstances within the knowledge of the assured must be
revealed. If inquiry is made by the insurer, all particulars of circumstances whether relevant or irrelevant
must be disclosed by the insured. In the absence of such inquiry the following circumstances need not be
disclosed:

1. Any circumstance which diminishes the risk. Because, that will not prejudice the rights of the
insurer.
2. Any circumstance which is known or presumed to be known to the insurer.
3. Any circumstance as to which information is waived by insurer.
4. Any circumstance which is superflous to disclose by reason of any express or implied warranty.
5. Any facts relating to circumstance which only a detailed survey would have revealed

Case laws from pdf

Ans 4 Definition of insurance

Insurance is a contractual arrangement between an insurer (the company) and the insured (individual or
organization) in which the insurer agrees to provide financial compensation for specific losses, damages, or
liabilities in exchange for a premium.

It is fundamentally a mechanism for risk management, transferring the burden of potential financial losses
from the insured to the insurer.
The dictionary (Oxford) meaning of insurance is “undertaking by a company, society or the State to provide,
safeguard - against loss, provision against sickness, death, etc., in return for regular payments”.

According to J.B. Maclean,, “Insurance is a method of spreading a possible financial loss over a large
number of persons, too serious to be conveniently borne by an individual.”

Essential elements of a Valid Insurance Contract

To constitute insurance contract, the following ingredients are to be satisfied:

1. Two parties: To constitute an insurance contract, there must be a contract between two parties namely,
insurer and insured.

2. Undertaking by the insured: The insured person must undertake to make the payment of premium
without any default.

3. Undertaking by the insurer: Insurer must undertake to protect the insured from loss or damages caused
to the subject matter i.e., life or property upon the happening of an event.

4. Written contract: The policy should contain terms and conditions in writing.

5. Offer and Acceptance: When applying for insurance, the insured gets the proposal form of a particular
insurance company. After filling in the required details, the insured send the form to the insurer (i. .e., the
insurance company) with a cheque of premium, sometimes. This is the insured person’s offer. If the
insurance company accepts the offer and agrees to insure the insured person who made the offer, this is
called an acceptance.

6. Consideration: Here, consideration is the premium or the future premiums that the insured has to pay
to the insurance company.

7. Legal capacity: The insured needs to be legally competent to enter into an agreement with his insurer. If
the insured is a minor or is mentally ill, then he may not be qualified to enter into contracts Similarly,
insurers are considered to be competent if they are licensed under the prevailing regulations that govern
them.

8. Legal purpose: If the purpose of insurance contract is to encourage illegal activities, it is invalid. The
object of the contract must be legal and not against public policy

9. Conclusive evidence: When the insured pays the premium and the insurer accepts the risk, the contract
of insurance is concluded. The policy issued by the insurer is the evidence of the insurance contract.

10. Principle of law of insurance: Insurance contracts are subject to certain basic principles evolved under
law. They are: (1) Utmost Good Faith (2) Insurable interest (3) Indemnity, Subrogation and Contribution (4)
Proximate Cause.

Characteristics of Insurance contract pdf

Ans 5 Contract of indemnity

A Contract of Indemnity is a legal agreement in which one party (the indemnifier) promises to compensate
the other party (the indemnified) for losses, damages, or liabilities incurred due to specific actions or
events. The primary purpose of such a contract is to protect the indemnified party from financial harm.
 Definition (Indian Contract Act, 1872): According to Section 124 of the Indian Contract Act, 1872, "A
contract by which one party promises to save the other from loss caused to him by the conduct of the
promisor himself, or by the conduct of any other person, is called a contract of indemnity."

Features of a Contract of Indemnity

1. Two Parties:

o Indemnifier: The party who promises to compensate for the loss.

o Indemnified (Indemnitee): The party who is protected against the loss.

2. Promise to Compensate: The indemnifier agrees to compensate the indemnified for specific losses.

3. Contingent Nature: The liability of the indemnifier arises only when the indemnified suffers a loss due
to a specified event.

4. Legal Enforceability: A contract of indemnity is legally binding and enforceable.

5. Written or Oral: Though typically written, an indemnity contract can also be oral, provided it fulfills
the conditions of a valid contract.

Every contract of insurance, except life insurance, is a contract of indemnity and no more than indemnity.
The principle of indemnity is an important element in non-life insurance policies. It is settled law that the
contract of life insurance, personal accident insurance, and sickness insurance are non-indemnity contracts
because the subject matter (life) cannot be assessed in terms of money and it can never be substituted or
substantiated. In the case of non-life insurance contracts i.e., the contracts of fire and marine insurance
are contracts of indemnity because the subject matter (Property: House, Vessel, Cargo etc) can be assessed
in terms of money and can be substituted/reinstated or substantiated.

Rights of the Indemnified Party

1. Right to Recover Damages: The indemnified party can recover all damages they are compelled to pay due
to the event specified in the contract.

2. Right to Recover Costs: They can claim reimbursement for costs incurred while defending or settling
claims.

3. Right to Recover Sums Paid: Any amount paid to a third party due to a liability under the contract can be
recovered.

Duties of the Indemnified Party

1. Mitigate Loss: The indemnified party must take reasonable steps to minimize losses.

2. Act in Good Faith: They must act honestly and not engage in activities that unnecessarily increase the
indemnifier's liability.

Rights of the Indemnifier

1. Right to Subrogation: Once the indemnifier compensates the indemnified, they can claim the rights of
the indemnified against third parties involved in causing the loss.

2. Right to Limit Liability: The indemnifier is only liable for the specific losses defined in the contract.
It was observed in Dalby vs. India and London Life Insurance Co. that policies of insurance against fire and
marine insurance risks are contracts of indemnity and the insurer agrees to compensate the loss sustained
by the insured. If we analyse the principles applicable to marine and fire insurance, we come to the
conclusion that they are strictly contracts of indemnity.

1. Gajanan Moreshwar v. Moreshwar Madan (1942): The Bombay High Court clarified that indemnity
includes reimbursement for all losses directly arising out of the act covered by the indemnity. 2.
Adamson v. Jarvis (1827): This case established the right of the indemnified party to recover
damages and costs incurred due to indemnifier's promise.

Ans 6 Contract of wager

A wager is an agreement between two parties where one party promises to pay money or other
consideration to the other on the occurrence or non-occurrence of an uncertain event. It is purely a
speculative contract. o Example: Two people bet on the outcome of a cricket match

wager has been defined by J Hawkins in Carlill vs. Carbolic Smoke Ball Co. : A contract by which two persons
professing to hold opposite views touching the issue of a future uncertain event mutually agreed
dependent upon the determining of the event that one shall win from the other a sum of money but
neither of the contracting parties having any other interest.

Purpose

The primary purpose is speculative profit or loss, with no intent to protect against actual loss.

Legal validity

Wagering agreements are void under Section 30 of the Indian Contract Act, 1872. They are not enforceable
by law.

There is no insurable interest. The parties to the wager do not have a financial stake in the outcome of the
event.

Differences between Wagering and Insurance Contracts Wagering Contract Insurance Contract

Pdf

Ans 6 Contingent contract

Contingent contract is a type of contract where the performance of an obligation depends on the
occurrence or non-occurrence of a specific event that is uncertain. These contracts are conditional in
nature and are enforceable only when the stipulated event happens or does not happen.

 Definition (Indian Contract Act, 1872): According to Section 31 of the Indian Contract Act, 1872: "A
contingent contract is a contract to do or not to do something if some event, collateral to such contract,
does or does not happen."

Contingent contract is a contract to do or not to do something if some event collateral to such contract,
does or does not happen. It indicates that the happening of an event is uncertain, and depends on
probability. In a contract of insurance also, there is an ‘uncertain’ event the happening of which depends
on the probability. When a person insures his life for sum assured, the payment of sum assured is
contingent upon two factors., viz, death of the insured or the completion of the term for which the policy is
taken. When it comes to fire insurance, the payment of the sum assured will be contingent upon the
happening of a fire accident, because of which the subject matter of insurance, gets damaged. In marine
insurance, the payment of sum assured by the insurer depends on the happening of some perilous event
(for which risk is covered) at port or sea because of which the subject matter of insurance meets with some
damage.

Characteristics of Contingent Contracts

1. Dependency on an Uncertain Event: The performance of the contract depends on a future event that
may or may not happen.

2. Collateral Event: The uncertain event is collateral, meaning it is not directly tied to the contract but
affects its performance. Page 194 of 306

3. Enforceability: The contract becomes enforceable only when the specified event occurs or does not
occur.

4. Uncertain Nature: The event must be uncertain at the time of the agreement; if the event is certain, the
contract is not contingent

Essentials of a Contingent Contract

1. Existence of a Contract: There must be a valid agreement between the parties.

2. Condition Attached: The contract must specify the condition that determines its enforceability

. 3. Event Must Be Uncertain: The event on which the contract is based should be uncertain at the time of
entering into the contract.

4. Collateral to the Contract: The event should not form part of the contract's core promise but should be
collateral to it

Judicial Interpretations 1. N.P. Rama Krishnaiah v. State of Andhra Pradesh (1960): The court held that
contingent contracts become void if the event on which they are contingent does not occur. 2. Fateh Chand
v. Balkishan Das (1964): This case reinforced that contingent contracts are enforceable only if the condition
precedent is satisfied.

Ans 7 Insurable interest

Ind=surable int means an int whichcan be protected by a contract of insurance. This int is considered as a
form of property in the contemplation of law. The two meanings of the term insurable int in insurance law
are

1. In indemnity int unless there is some proprietary int which is sought to be covered by the policy
there is no loss suffered and in such types therefore the contract by its very nature requires some
int to be involved in the subject matter and this is called contractual insurable int
2. Where loss is not necessary to be proved this is not necessary

Insurable interest refers to the right of the insured to insure something or someone, owing to a financial or
legal relationship with the insured object or person. The insured must stand to suffer a financial loss or
liability if the insured subject is damaged, lost, or destroyed.  Example: A person can insure their own
house because they would suffer a financial loss if the house is damaged. However, they cannot insure a
neighbor’s house as they have no financial stake in it.
. It is only the presence of insurable interest that distinguishes a contract of insurance from a wagering
contract and hence it is a sine qua non for the validity of the contract of insurance

Essentials of insurable int

1. Legal Right: The insured must have a legal or recognized interest in the subject matter of the insurance.
2. Financial Relationship: The insured must stand to gain financially from the subject matter’s existence and
suffer a financial loss from its damage or destruction.

3. Time of Interest: o In life insurance, insurable interest must exist at the time of taking the policy. o In
general insurance (like fire or marine insurance), it must exist both at the time of taking the policy and at
the time of the loss.

4. Public Policy: Insurable interest ensures that insurance is not used for gambling or wagering purposes.

5 The interest should not be a mere sentimental right or interest, for example, love and affection alone
cannot constitute insurable interest.

6 The interest must be pecuniary, that is, capable of estimation in terms of money. In other words, the peril
much be such that its happening may bring upon the insured an actual or deemed pecuniary loss

7 The interest must be lawful, that is, it should not be illegal, unlawful, immoral or opposed to public policy.

In Life policies, the following persons have been recognized as having insurable interest and they may
conveniently be considered under three main headings, namely:

(a) By relationship by marriage, blood or adoption

(b) By contractual relationship

(c) By Statutory duty

A Blood relationship

One one’s own life: Every person is presumed to have insurable interest in his own life without any
limitation. Every person is entitled to recover the sum insured whether it is for full life or for any time short
of it. If he dies, his nominee or dependents are entitled to receive the amounts.

By husband or wife: a wife has an insurable interest in the life of the husband and vice-versa. The policy
continues to be valid even if the marriage is dissolved as the subject matter here is the life of the spouse
not the marriage.

By parent and child : If the person has any pecuniary interest in the life of the child, whether natural or
adopted, he can take out an insurance policy on the life of such child. On the other hand, a child, whether
natural or adopted, is presumed to have an insurable interest in the life of the parent because it depends
on the life of the parent for support. Howerever a parent has no insurable in the child

1. Macaura v. Northern Assurance Co. (1925): The court held that a person does not have an insurable
interest in a property owned by a company simply because they are the company's shareholder.

2. Dalby v. India and London Life Assurance Co. (1854): Established that insurable interest must exist at the
inception of the life insurance contract but not necessarily at the time of the claim.

Ans 8 Premium
A premium is the amount of money paid by the insured to the insurer to obtain and maintain an insurance
policy. It acts as the consideration for the insurance contract, where the insurer agrees to cover specified
risks in exchange for this payment. The insurance company/insurer stipulates that an individual or business
(insured person) periodically pay them a specific amount of money as premium for the availing and
maintenance of their insurance policy and coverage. Insurance companies consider many factors while
determining the premiums, particularly in case of life insurance. These include the chances of claims being
made by the policyholder, medical conditions, smoking and other lifestyle habits, area of residence, nature
of employment and so on. The higher the risks linked to the individual, the higher will be the premium for
life insurance. Premiums can be paid through monthly, half-yearly or even annual installments. Customers
can also pay the entire amount as a one-time payment for the whole policy term prior to the
commencement of coverage in some cases.

Lawrence J defined premium as “a price paid adequate to the risk”. It is thus the price for which the insurer
undertakes his liabilities under the contract. It is the insurer that bargains for its payment either in lump
sum or in instalments. The adequacy of premium as that of consideration is purely a concern of the parties
and once it is agreed upon it is sufficient for the purpose of the law.

Factors Influencing Premium Calculation

1. Nature of the Risk: o Higher risks (e.g., insuring a person with a chronic illness or a high-value asset) lead
to higher premiums.

2. Sum Assured or Coverage Amount: o A higher sum assured typically results in a higher premium.

3. Age and Health (Life/Health Insurance): o Younger and healthier individuals pay lower premiums for life
or health insurance.

4. Duration of the Policy: o Longer policy durations may involve lower periodic premiums but higher
cumulative payments.

5. Lifestyle and Occupation: o Riskier lifestyles (e.g., smoking, adventurous hobbies) or occupations lead to
higher premiums.

6. Claim History: o Frequent claims or a poor claim history can increase premiums.

7. Add-Ons and Riders: o Additional coverages or riders (e.g., critical illness, accidental death benefits)
increase the premium.

8. Economic Factors: o Inflation, interest rates, and administrative costs also influence the premium
amount.

Types of Premiums

1. Single Premium: A one-time payment made at the inception of the policy for the entire coverage period.
o Example: Some term life insurance policies.

2. Regular Premium: Payments made periodically over the policy term, such as monthly, quarterly, or
annually. o Example: Health insurance.

3. Level Premium: A fixed premium amount paid throughout the policy period. o Example: Whole life
insurance.
4. Flexible Premium: Allows the insured to vary the premium amount within specified limits. o Example:
Some unit-linked insurance policies (ULIPs).

Days of grace

Generally most of the policies or renewal notices contain a stipulation enabling the assured to renew the
policy after the due date on payment of the premium during a further period and this further period is
called “Days of Grace”. For example in Webb and Hughes vs. Bracey – (1964) 1 Lloyd’s Rep 465 (QB), 15
days further time was given and even in that period the renewal premium was not paid and hence the
policy was held to lapse. It is the privilege of the insurer to include such days of grace. In the absence of
such a stipulation in the policy, that is if such further period is not stipulated either in the policy or in the
renewal notice, the assured is not entitled to days of grace.

Forfeiture

Forfeiture Usually the insurance contracts used to lay down conditions regarding the forfeiture of the
policy, if the policy lapses due to non-payment of the premium in due time. If the policy is forfeited the
result is that the insurer will not be liable under the policy and even the premiums already paid need not
be refunded by the insurer to the insured. As equity leans against forfeiture the courts while interpreting
these conditions providing forfeiture of the policy not only strictly interpreted them against the insurers but
even leaned against them. In RBI Vs. Peerless General Finance and Invest Co – AIR 1987 SC 1023,
Chinnappa Reddy J observed: Since it is the poorer class of policy holders that may ordinarily be expected
to commit default in payment of premiums, the forfeiture clause in practice operates harshly, specially
against that class, the very class which requires greater security and protection.

The Insurance Act, 1938 has laid down certain rules in favour of the insured with reference to life insurance
contract. They are listed below: According to Sec. 50(1) of the Act which is applicable to the Life
Insurance Corporation, the insurer must give, within three months of the date on which the premium was
due and not paid, notice to the policy holder informing him about the options available to him. For
example, the options are: i. Either to treat the policy as the paid up policy, or ii. To accept the guaranteed
“surrender value”, or iii. To keep the policy alive for such time as the surrender value will be sufficient etc.

Relief against forfeiture

i. For the payment of the premium, days of grace are generally given.
ii. If the premium is not paid even during the days of grace the insurers were providing non-
forfeiture clauses. According to these non-forfeiture clauses it is usually provided that if the
premium is not paid the policy will not be forfeited but it will be treated as a “paid up policy”,
that is, the policy will be reduced to the total of the premiums paid and in such a case the
assured need not pay further premiums but the amount will be paid as calculated according
terms of the contract on the happening of the event. A paid up policy is really a fully paid up
policy for a reduced amount proportionate to the number of premiums actually paid.
iii. Provision is made in the policy whereby the assured becomes entitled on notice to surrender
the policy and to be paid its surrender value.
iv. Even though the policy lapsed for non-payment of the premium, the assured may apply for the
renewal of the policy on payment of a penalty and satisfying other conditions

Ans 9 Risk
A contract of insurance is a contract under which the insurer undertakes to protect the insured from a
specified loss if it occurs. The insured is afraid of loss which is called the risk of loss, and the insurer
undertakes to indemnify him from the apprehended loss for a consideration called the premium. The
insurer calculates the premium according to the probability, nature, and the extent of risk from which the
insurer desires to be protected. The risk of loss is co-extensive with the value of the insurable interest, the
insured has. The law does not compel a man to insure, but if he so desires, he may like to be covered in
respect of all or certain risks; so he must describe in his proposal form the risk he wants to be covered by
the insurer. The insurer fixes the premium according to the nature, quantity, quality and probability of the
risk desired to be covered by the policy. The lifeblood of an insurance contract is the risk it deals with, the
determination of the dimensions of the risk covered by the contract is important to both parties. It is
important to the assured as from that he can know the exact extent of the risk covered by the contract so
that he may adjust his economic affairs and to the insurer because he has to calculate the exact premium
required to cover it. In this context, risk remains the risk until the happening of contingency; once the
contingency happens, it becomes a definite loss and it is against this loss the insurer undertakes to
indemnify the assured.

Scope of the risk

The insurer indemnifies the insured only against the loss caused during the period insured for which the
direct and proximate cause is the peril

i. The risk includes the loss caused, i.e., the risk brought about by the negligence not only of the
insured but even by his servants or strangers
ii. Risk brought about willfully or maliciously by the insured’s servants or strangers,
iii. The risk does not include (a) loss caused by the wilful misconduct of the insured or caused with
his connivance whether it amounts to crime or not; (b) loss due to ordinary wear and tear and
(c) the risk is such that it must happen and the risk in insurances is that which may happen and
not which must happen.

Time of loss

Firstly the contingncy must happen during the subsistence of the policy. It is sufficient if the peril insured
against happens during the period of insurance, though the full effect to the peril is manifested or the
extent of the loss is discovered after the period of insurance. But where the event happens at or before the
beginning of the insurance and only the loss is manifested during the operation of the policy, the loss is not
recoverable. Similarly, if the operation of the peril begins partly before the commencement of the policy
and partly afterwards and if the loss is apportionable, so much loss referable only to events which occurred
at the commencement of the policy and before the expiration of the policy are recoverable unless by the
operation of the peril before the commencement, the subject matter of insurance is so damaged that it
does not answer the description. Description here means it is not known, which part of the subject matter
is damaged before and after commencement. Where the loss is only attributable to the operation of the
peril after the policy seizes to be in operation, the loss cannot be recovered.

The Element of Risk Risk depends upon various elements of the event insured against in its happening
sooner or later. These circumstances must be disclosed by the insured and the insurers generally calculate
with reference to these elements. In Life insurance, the risk depends upon: Habits in life (smoking,
drinking) or Mode of living (adventurous) Occupation Environment Position and Status in life Character
Heredity Previous illness Opportunities for exposure to special dangers.
 In Property Insurance, the risk depends upon: The nature of the property like movable or immovable,
perishable or otherwise Character and constitution Area Situation and Locality Exposure to outside dangers
Inherent defect Use and habits of the assured The title to the property

In Marine Insurance, the risk depends upon Voyage and its nature The route of the voyage The winds and
storms in the locality The danger of war, capture and seizure Pirates Mutiny of the crew Insurrection of
natives and dangerous coasts.

Types of Risk in Insurance 1. Pure Risk: o Involves only the possibility of loss or no loss. o Example: Fire
damaging property, death, or theft. o Insurance covers pure risks. 2. Speculative Risk: o Involves the
possibility of profit, loss, or no loss. o Example: Stock market investments, gambling. o Insurance does not
cover speculative risks. 3. Static Risk: o Relates to losses caused by natural or human factors that are
constant over time. o Example: Natural disasters, theft. 4. Dynamic Risk: o Arises from changes in the
economy or environment. o Example: Inflation, technological advancements. 5. Fundamental Risk: o Affects
a large population or community and arises from external causes. o Example: Natural calamities,
pandemics. o Some fundamental risks, like natural disasters, may be covered by insurance. 6. Particular
Risk: o Affects specific individuals or entities. o Example: A car accident, house fire.

Ans 10 Doctrine of subrogation and contribution

The Doctrine of Subrogation allows the insurer, after compensating the insured for a loss, to step into the
shoes of the insured and exercise their rights to recover the loss from a third party responsible for the
damage. It prevents the insured from receiving double compensation for the same loss.

The Doctrine of subrogation is a necessary incident to a contract of indemnity and therefore is applicable to
a contract of fire insurance and one of marine insurance. It is given statutory recognition in Section 79 of
the Marine Insurance Act, 1906. Under this doctrine, as applicable to fire insurance, the insurer has a right
of standing in the shoes of insured and avail himself of all the rights and remedies of the insured, whether
already enforced or not. The principle of subrogation prevents an insured who holds a policy of indemnity
from recovering from the insurer the sum greater than the economic loss he has sustained. Therefore if a
loss occurs under such circumstances that he has an alternative right to recover damages under common
law, tort or statute and if the loss is also covered by the policy and so he can recover the entire loss from
the insurer and if he so receives, the insurer is entitled to or is subrogated to the former alternative rights
and remedies of the insured and this is technically called Subrogation. The insurer in his turn is entitled by
subrogation only upto the amount he has paid the insured. . In case, the claim is met (amount is paiid) by
the insurer he (insurer) can sue the third party under the doctrine of subrogation to recover the amount.
In other words, the right of insured against the third party gets subrogated (transferred) to the insurer.
Under this right of subrogation the insurer enters into the shoes of third party to sue and recover the
amount.

A contract of insurance is a contract of indemnity. Where the insurer pays the insured, value of the goods
lost due to the negligence of a third party the court said that the rights and remedies of the insured against
such third party stand transferred to and becomes vested in the insurer. Such equitable assignment of
rights and remedies is implied in a contract of indemnity and is also known as subrogation. Economic
Transport Organization vs. Charan Spinning Mills Pvt. Ltd. (2010) 4 SCC 114.

Limitations on the Doctrine of Subrogation

It does not apply to life and personal accident policies

Before the doctrine is applied there must be indemnity

Insurer must pay before he claims subrogation;

Assured must have been able to bring action subrogation only upto the amount he has paid the insured.

Key Features 1. Insurer's Rights: Once the claim is paid, the insurer acquires the legal right to recover the
amount from the party responsible for the loss. 2. No Enrichment: The insured cannot profit from the loss;
they can only be indemnified to the extent of the loss. 3. Applicable to Indemnity Policies: Subrogation
applies to insurance contracts of indemnity (e.g., fire, marine, motor insurance) but not to life insurance. 4.
Extent of Recovery: The insurer can recover only up to the amount paid to the insured.

The Doctrine of Contribution applies when the insured has multiple insurance policies covering the same
risk. It ensures that all insurers share the liability proportionately, preventing the insured from recovering
more than the actual loss

Contribution arises because of the liberty of the assured to insure the same property with more than one
insurer which is called, ‘double insurance’. By mere double insurance also, the right to contribution does
not arise unless, there is over-insurance. Where there is double insurance and simultaneously over-
insurance, the right of contribution springs up, which means even though there is double insurance if there
is no over-insurance, the right of contribution does not exist. To give rise to a right of contribution, the
following conditions must be satisfied

All the insurance must relate to the same subject-matter

The policies concerned must all cover the same interest of the same insured;

The policies concerned must all cover the same peril which caused the loss;

The policies must have been in force and all of them should be enforceable at the time of loss.

Differences between the Doctrines of Contribution and Subrogation

 In contribution, the purpose is to distribute the loss, while in subrogation the loss is shifted from one
person to another;

 Contribution is between insurers but subrogation is against third party;

 In contribution there must be more than one insurer but in subrogation, there may be one insurer and
one policy;

 In contribution the right of the insurer is claimed but in subrogation the right of the insured is claimed.

Ans 11 Life insurance contract

A Life Insurance Contract is a legal agreement between the insured (policyholder) and the insurer
(insurance company), wherein the insurer promises to pay a predetermined amount, known as the sum
assured, to the beneficiary or nominee upon the insured's death or after a specified period, in exchange for
regular premium [Link]
There is no statutory definition for the term “life insurance”. It was defined in Dalby vs. London & India Life
Insurance Company, 1854 15 CB 365. As a contract to pay a certain sum of money on the death of a person
on a consideration of due payment of certain annuity for his life calculated according to the probable
duration of life. In a broader sense, the expression Life Insurance, as defined in Sec.2(11) of Insurance Act,
1938 comprises any contract in which one party agrees to pay a given sum upon happening of a particular
event contingent upon the duration of human life.

Features or Essential elements of Life Insurance To constitute life insurance the following ingredients are to
be satisfied – 1. It is a contract relating to human life. 2. There need not be an express provision that the
payment is due on the death of the person. 3. The contract provides for the payment of lumpsum. 4. The
amount is paid at the expiration of certain period or on the death of the person (whichever is earlier).

Types of Life Insurance Policies 1. Term Life Insurance: o Pure protection plan that provides coverage for a
specific term. o Pays the sum assured only upon the insured’s death during the policy term. 2. Whole Life
Insurance: o Provides lifetime coverage with benefits payable upon the insured’s death. 3. Endowment
Plans: o Offers dual benefits of life coverage and savings. o Pays the sum assured either upon death or at
the end of the policy term. 4. Money-Back Policies: o Periodic payouts during the policy term along with a
final payout upon maturity or death. 5. Unit-Linked Insurance Plans (ULIPs): o Combines insurance with
investment in market-linked instruments. 6. Child Plans: o Provides financial support for a child’s education
or other future needs. 7. Retirement/Pension Plans: o Offers regular payouts after retirement

Event Insured against in a Life Insurance In Life Insurance, the event insured against is death of an insured.
It is immaterial whether the death is natural or accidental or due to the criminal act of a third party
(murder of insured person by a third party). Exceptions: The insurer is not liable to pay in respect of the
following cases – 1. If the death is due to the criminal violation of law by the assured himself. Example –
hanging. Then the insurer is not liable. In other words, if the insured person is awarded capital
punishment by competent court because of which he dies in the hands of justice, then the insurer is not
liable to pay. 2. If the death is the result of suicide the insurer is not liable. Caselaw: Amicable Society vs.
Bolland (1830) 4 Bligh NS 194 HL – in this case it was pointed out that it would be contrary to public policy
to give benefit to a man upon his death by the hands of justice. In other words, if the insured is guilty of
serious offence, like murder and is sentenced to death and the same is executed by hanging, the insurer
would not the claim

Life Insurance contract

A policy of insurance on life is not a contract of indemnity against loss like a fire or marine insurance policy,
but is a contract to pay a definite sum, in consideration of an annuity paid during the life. The contract
commonly called life insurance when property considered, is a mere contract to pay a certain sum of
money on the death of a person, in consideration of due payment of certain annuity for his life, the amount
of annuity being calculated in the first instance according to the probable duration of his life and when
once fixed, it is constant and invariable. The stipulated amount of annuity is to be uniformly paid on one
side and the sum to be paid in the event of death is always the same, on the other side. This species of
insurance in no way resembles a contract of indemnity.”

A contract of life insurance may further be defined to be that in which one party agrees to pay a given sum
of money upon the happening of a particular event contingent upon the duration of human life in
consideration of immediate payment of a smaller sum or other equivalent periodical payments by the
other. One of the effects of the life insurance not being a contract of indemnity is that on the happening of
the event insured against the insurer should pay the agreed amount irrespective of whether the assured
suffers any loss or not

Life insurance is therefore, in the nature of contingency insurance. It does not provide an indemnity. It
provides for a payment on a contingent event. The sum to be paid is not measured in terms of a loss. The
policy states the amount payable. The sum undertaken to be paid becomes payable irrespective of the
value of the life or limb lost.

Essential elements of life insurance contract

Agreement

Consideration

Principle of utmost good faith

Competency of parties

Free consent

Lawful object

Ans 12 Personal accident insurance

Personal Accident Insurance is a type of insurance policy that provides financial compensation to the
insured or their beneficiaries in case of accidental injuries, disabilities, or death. It is designed to protect
individuals from unforeseen accidents that can cause physical and financial distress. The risk insured in
personal accident insurance is the bodily injury resulting solely and directly from accident caused by
violent, external and visible means.

The liability of the insurer is to pay the Capital sum insured stated in the Schedule of the Policy, if such
injury within six small calendar months of its occurrence be the sole and direct cause of – a. Death of the
insured b. Total loss of sight of both eyes c. Of actual loss by physical separation of two entire hands or two
entire feet or of one entire foot and one entire hand or d. Of such loss of sight of one eye and such loss of
one entire hand or one entire foot. The insurer has to pay 50 percent of the Capital sum insured if such
injury shall within six months of the occurrence be the sole and direct cause of the total and irrecoverable
loss of A. The sight of one eye or of the actual loss by physical separation of one entire foot or one entire
hand or B. Total and irrecoverable loss of use of a hand or foot without physical separation.

Key Features of Personal Accident Insurance

1Coverage for Accidents: o Provides benefits in case of accidental injuries, temporary or permanent
disabilities, or death caused by an accident. 2. Worldwide Coverage: o Most policies offer global coverage,
meaning the insured is protected no matter where the accident occurs. 3. No Medical Examination
Required: o Policies usually do not mandate a pre-policy medical check-up. 4. Standalone or Add-on: o Can
be purchased as a standalone policy or as a rider to other insurance policies. 5. Affordable Premiums: o
Premiums for personal accident insurance are generally low compared to other types of insurance.

Benefits of Personal Accident Insurance 1. Accidental Death Cover: o In the event of the insured's
accidental death, the nominee or beneficiary receives a lump-sum payment. 2. Permanent Total Disability
Cover: o Provides compensation if the insured suffers a permanent total disability, such as the loss of limbs
or eyesight. 3. Permanent Partial Disability Cover: o Covers partial but permanent disabilities, such as the
loss of one eye or one hand. 4. Temporary Total Disability Cover: Offers weekly compensation if the insured
is temporarily unable to work due to an accident. Page 213 of 306 5. Medical Expenses: o Some policies
cover medical costs arising from the treatment of accidental injuries. 6. Education Benefits: o Provides
financial assistance for the education of the insured's children in case of accidental death or permanent
disability. 7. Ambulance Expenses: o Covers the cost of ambulance services required after an accident.
Ans 12 Doctrine of proximate cause

Pdf

Ans 13 Lic

The Life Insurance Corporation of India (LIC) is the largest life insurance company in India. It plays a pivotal
role in the life insurance sector, providing financial security to individuals while also contributing to the
nation’s economic development. Life Insurance Business in India was nationalized with effect from January
19, 1956. This was done by a merger of 16 insurance companies and 75 provident societies.

The Life Insurance Corporation of India, Act was passed by Parliament on June 18, 1956 and came into
force as of July 1, 1956. Life Insurance Corporation of India began operating as a corporate body as of 1
September 1956. The operations are regulated by the LIC Act. The LIC is a corporation with perpetual
succession and a common seal with the right to gain possession and dispose of the land, and can sue and
be sued by its name. Investment is one of the core functions of LIC. Its main function is to collect the
people’s money and invest it in the various securities and financial markets in India and abroad. As a rule,
LIC is required to invest at least 75% of the funds in Central and State Government securities. Thus, LIC is
the largest investment institution in India as on date. It collects people’s funds by selling insurance policies,
and invests those funds in India’s financial markets. It also provides term loans and bonds to raise investor
funds. Not only that, as regards a number of policies released, the LIC has become the world’s largest
insurance company. As of 2019, total policy coverage including citizen, party, and other social schemes has
gone beyond 13 crores.

Objectives of LIC

The main objectives of LIC are as follows:

1 Spread life insurance widely and in particular to the rural areas, to the socially and economically
backward classes with a view to reach all insurable persons in the country and provide them adequate
financial cover against death at a reasonable cost. 2. Maximisation of people’s savings for nation-building
initiatives. 3. Provide complete security and facilitate efficient service at economic premium rates to policy-
holders. 4. Conduct business with the utmost competitiveness, and fully realize that the money belongs to
the policyholders. 5. Act as trustees in their individual and collective capacity to the insured public. 6.
Involve all people working within the Company to the best of their ability to advance the interests of the
insured public by courtesy in delivering efficient service. 7. Promote a sense of engagement, pride and job
satisfaction among all of the Corporation’s agents and employees by discharging their duties with
commitment to achieving Corporate Objective. 8. Meet the various life insurance needs of the community
that would arise in the changing social and economic environment.

Functions of LIC

Some of the main functions of Life Insurance corporation can be seen as under:

1 The main function of LIC is to collect the savings of the people through a life insurance policy and invest
that money in various financial markets. 2. Investing fund in government securities to secure the wealth of
individuals who have given their money to LIC. 3. To issue an insurance policy at affordable rates to people.
4. To provide direct loans to industries at lower interest rates. The rate of interest is as low as 12% for the
entire tenure. 5. It provides refinancing activities through SFCs in different states and other industrial loan
giving institutions. 6. It has provided indirect support to industry through subscriptions to shares and bonds
of financial institutions such as IDBI, IFCI, ICICI, SFCs etc. at the time when they required initial capital. It
also directly subscribed to the shares of Agricultural Refinance Corporation and SBI. 7. It lends loans to
projects that are important to national economic welfare. The LIC prioritizes socially-oriented programs like
electrification, sanitation, and water channelling. 8. It nominates directors on the boards of companies in
which it makes its investments. 9. It gives housing loans at reasonable rates of interest. 10. It acts as a
bridge between the process of saving and of investing. Through several schemes it generates the savings of
the small savers, middle income community and the wealth.

Ans 14 Marine Insurance

A contract of Marine insurance is a contract whereby the insurer undertakes to indemnify the assured in
the manner and extent thereby agreed against marine losses that is to say, the losses incidental to a marine
adventure. In Lloyd vs. Fleming (1872) LR 7 QB 299, 302 Blackburn J define a policy of marine insurance as
a contract of indemnity against all losses occurring to the subject matter of the policy from certain perils
during the adventure. A contract of marine insurance may by its express terms or usage of trade be
extended so as to protect the assured against losses on inland waters or on any land-risk which may be
incidental to any sea-voyage. Where a ship in the course of building or the launch of a ship or any
adventure analogous to a marine adventure is covered by a policy, the relevant provision of he Act are
made applicable as if it is a marine policy.

Nature of Marine Insurance

1. Contract of Indemnity: o Marine insurance operates as a contract of indemnity, meaning the insured is
compensated for actual losses incurred, subject to the policy limits. 2. Utmost Good Faith (Uberrimae
Fidei): o Both parties must disclose all material facts honestly. Non-disclosure of significant information may
render the contract void. 3. Insurable Interest: o The insured must have an insurable interest in the subject
matter of the policy at the time of loss. 4. Risk Transfer: o Transfers the financial risk of maritime losses
from the insured to the insurer. 5. Conditional Contract: o Compensation is contingent upon the occurrence
of covered risks, such as perils of the sea, fire, theft, or collision. 6. Specified Coverage: o The policy only
covers risks explicitly mentioned in the contract or implied by custom. 7. Global Nature: o Marine insurance
applies globally, reflecting the international nature of maritime trade. 8. Legal Framework: o Governed by
principles established in the Marine Insurance Act, 1906 (in countries like India and the UK), along with
international trade practices.

Types of Marine Insurance – based on coverage area

The coverage area of an insurance policy is the geographical area or the protected area (for example ship or
cargo) in which the benefits of an insurance policy apply. The following types of marine insurance are
classified, based on the coverage area of the insurance policy –

 Hull & machinery insurance Hull is the most noticeable part of any ship. It is the watertight body of a ship
or a boat that protects the cargo inside the ship from being damaged. Hull and Machinery Insurance,
therefore, covers the loss or the damage caused to the body of the ship or any machinery or equipment in
it, used for the functioning of the ship. It mostly covers accidents caused due to collisions, or the damages
caused by earthquakes and explosions. This type of insurance is generally taken by the owners of the ship.
 Marine cargo insurance – Marine cargo insurance is a type of property insurance that covers the cargo
owners against any loss or damage caused to their cargo during its transit.
Liability insurance – Liability insurance covers the financial liability of the person who is insured. It covers
primarily the liabilities which arise due to the damages or injuries caused to the third party, for instance,
the death or personal injury caused to any third party traveling in the ship.
Freight insurance – Freight insurance covers the liability of the shipping company or the logistics provider
for the damage or loss caused to the shipment during transit due to events outside the control of the
company. The difference between Cargo Insurance and Freight Insurance is that, the Cargo Owners are the
insured persons in Cargo Insurance and the freight Insurance, the Shipping Company is the insured party.

Types of Marine Insurance policies – based on the structure of the contract

Open policy or floating policy- This type of policies are generally taken by carriers, factors or
warehousesmen to cover their limited interests in the goods they carry or in their possessionor by the
insured when he does not know by which ship or ships his goods are dispatched. These policies are taken in
general terms and the particulars as filled by the subsequent declarations. Therefore floating policy is
defined as a policy which describes the general terms of the insurance and leaves the other terms for
subsequent declarations

Valued policy – In a valued policy, the insured property is given a specific value when the policy is issued,
and before any claims are made. When the claim is made by the insured, a pre-estimated or the specified
amount is given, which does not depend on the amount of loss incurred by the insured. The depreciation of
the property also does not affect the amount of claim, under a valued policy. In other words, a valued
policy is a policy which specifies the agreed value of the subject matter insured. In a valued policy, the
value mentioned is conclusive between the parties unless there is a fraud whether the loss be total or
partial. Unless the policy otherwise provides, the value fixed by the policy is not conclusive for the purpose
of determining whether there has been a constructive total loss.

Unvalued policy – Every insurance policy is either an unvalued or a valued policy. Under an unvalued policy,
the insurance company does not assign a value to the thing insured (the vessel or the cargo), at the time of
underwriting the policy. The valuation of the property is done only after the claim of insurance has been
filed. However, for a successful claim, the true value of the property has to be proved by the insured by way
of invoices or estimates, before the valuation

Time policy - A time policy, as the name suggests, is issued for a fixed period of time. The vessel may make
any number of voyages during this period. Generally, the insurance company issues this policy for one year,
however, the period may vary depending on the agreement between both parties. Where a ship is insured
for a particular time ‘from’ a particular date ‘to’ a particular date, the policy is called a Time Policy. The
period should not exceed one year, though it may contain, one or several voyages.

Voyage policy- voyage policy works on the same lines as the marine cargo insurance. Under this policy, the
insurance company agrees to cover the losses or damages caused to the cargo during a specific voyage. It
expires when the vessel reaches its destination, irrespective of the time it takes to reach there. Usually, it is
bought by small exporters who ship their goods by sea only on some occasions

Ans 15 Voyage Voyage policy explain the circumstances under which the insurer not discharged from
liability even though there is delay in voyage deviation of voyage in marine ins when is it excused*

In the context of marine insurance, a voyage refers to the transportation of a ship, cargo, or other subject
matter insured from one specified location to another. It involves a journey undertaken by the vessel or
goods under coverage, and its risks are the basis for issuing a voyage policy.

A voyage policy contains a contract to insure the subject matter ‘at and from’ or ‘from’ one place to
another. Sections 44 to 51 of the Indian Act deal with the voyage. If the subject matter is insured by a
voyage policy ‘at and from’ or ‘from’ a particular place, according to the Act it is not necessary that the ship
should be at that place when the contract is concluded

A voyage policy is a type of marine insurance policy that provides coverage for risks associated with a
specific journey or voyage. It is valid only for the duration of the defined trip, from the starting point to the
destination.

Features of a Voyage Policy: 1. Specific Journey: The policy explicitly mentions the points of departure and
arrival. 2. Coverage of Perils: Includes risks such as storms, collisions, fire, or piracy encountered during the
voyage. 3. Termination: Coverage ends once the voyage is completed at the destination port or the insured
subject matter is unloaded. 4. Single Transit: The policy does not cover repeated trips but is confined to one
voyage only.

Deviation

Section 48 of the Marine Insurance Act, 1963 provides that there is a deviation from the voyage
contemplated by the policy;

If the course of the voyage is specifically designated by the policy and that course is departed from; or
Where the course of the voyage is not specifically mentioned in the policy, the usual and customary course
if departed from. The effect of such a deviation without lawful excuse is that the insurer is discharged from
liability from the time of deviation and it is immaterial that the ship has regained the original route before
any loss occurs. Mere intention to deviate is not sufficient. But there should be a ‘deviation in fact’ to
discharge the insurer from his liability under the policy.

In Middlewood vs. Blakes (1797) 7 TR 162 the ship was to sail from L to J and there are two routes, one
going North and another South of an island D. Sometimes one route is better and some other times, the
other route is better, and it is for the Master of the Ship to choose the route using his discretion in each
case. On that particular occasion, the owners directed the Master to touch a port in the North of the Island
‘D’ and therefore the ship took upon that route and when the ship was captured enroute, it was held that
there was deviation because the Master was not allowed to use his discretion.

Lawful Excuses for Deviation or Delay Section 51 of the Marine Insurance Act 1963 lays down the provisions
relating to the excuses for deviation as under: Deviation or delay in prosecuting the voyage contempled by
the policy is excused –

[Link] authorized by any special term in the policy; orb. where caused by circumstances beyond the
control of the master and his employer; or c. where is is reasonably necessary in order to comply with an
express or implied warranty; or d. where it is reasonably necessary for the safety of the ship or subject-
matter insured; or e. for the purpose of saving human life or aiding a ship in distress where human life may
be in danger; or f. where it is reasonably necessary for the purpose of obtaining medical or surgical aid for
any person on board the ship; or g. where it is caused by the barratrous conduct of the master or crew, if
barratry be one of the perils insured against. Explanation pdf

Ans 16 Perils of the sea

Perils of the sea refer to the natural and unforeseen hazards or accidents that occur during a maritime
voyage, resulting in loss or damage to the insured subject matter, such as a ship or cargo. These perils are a
fundamental concept in marine insurance, as they form the basis of the risks covered under a policy.
Definition According to the Marine Insurance Act, 1906, "Perils of the sea" are understood as fortuitous
accidents or casualties of the seas. They do not include the ordinary action of wind and waves but are
rather extraordinary, unexpected, and uncontrollable events

Losses in the marine insurance business are the result of various perils. Marine insurance policy does not
necessarily cover all the risks. The insurer is liable to indemnify an insured in respect of only losses which
result from perils insured against. When the loss occurred is beyond the insured peril, the insured himself
shall have to bear. The onus of proof under a policy of Marine insurance is upon the insured to establish
that the loss was proximate, caused by an insured peril. When goods are insured against ‘All Risks,’ the onus
of proof of loss is transferred to the insurer. The perils insured against are mentioned in the policy, and the
underwriter shall be liable for damages caused by the insured perils. “Marine Perils means the perils
consequent on,” or incidental to the navigation of the sea, that is to say, perils of the seas, fire, war perils
(enemies), pirates, rovers, thieves, captures, seizures, restraints, and detainment of princes and peoples,
jettisons, barratry and other perils, either of the like-kind or which may be designated by the policy.”

Maritime perils may be grouped as under:

1. Perils of sea They refer to all risks, perils and dangers peculiar to the sea. They include accidents,
capture of the ship or its cargo by pirates, losses by collision, etc. A point to note here is that losses
caused by perils of the sea cannot be prevented by any reasonable care, skill and diligence on the
part of human beings. Thus, if a ship hits a sunken rock and sinks or collides with another ship and
suffers a loss, it is a case of loss by perils of the sea.
2. Fire Damage resulting from fire and smoke is included under fire-peril. The water used for
extinguishing a fire may cause damage to the insured goods. So, this peril is also insurable. The
damage due to spontaneous combustion may be maritime peril and be insured against.
3. Man of war This is the vessel that is authorized by nations for the purpose of defense or attack in
the event of hostilities. Any damage to the goods or ships arising out of collision against a man-of-
war is insurable.
4. Enemies The ships belonging to the foe (enemy) may cause loss to the insured and is re-
underwritten by the marine policy. This policy extends to all the persons of the enemy country and
to their hostile acts provided such acts form part of the enemy’s actions.
5. Pirates, Rovers, Thieves In the olden days, when means of communications and transport were not
so developed, the perils on account of pirates (it means sea robbers but it includes passengers of
the ship who rise in revolt or those who attack the ship from the shore), rovers (wanderers and
pirates on the high seas), and thieves (robbers using force for violence and not clandestine thieves
or pilferers or pickpockets from among the passengers or crew) were very common.
6. Jettison Jettisoning is the voluntary and intentional throwing overboard or away a part of the cargo
or part of vessel’s equipment for the purpose of lightening or relieving the ship in case of necessity
or emergency to have a safe adventure or voyage.
7. Barratry Barratry includes every wrongful act willfully committed by the master or crew to the
prejudice of the owner. The act of barratry must be committed without the knowledge of the
owner.

Ans 17 Warranties of marine insurance

Warranty means a statutory warranty, a warranty by which the assured undertakes to do or not to do a
particular thing, or satisfy a particular condition and whereby he affirms or negates the existence of a
particular state of facts. According to this definition warranties include undertakings (a) as to past or
present facts (affirmative warranties), (b) as to future conduct of the assured (continuing/promissory
warranties) or (c) that some condition has been fulfilled.

According to Section 35 of the Marine Insurance Act, 1963, A warranty, means a promissory warranty, that
is to say a warranty by which the assured undertakes that some particular thing shall or shall not be done,
or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular
state of facts. A warranty may be express or implied. A warranty, as above defined, is a condition which
must be exactly complied with, whether it be material to the risk or not. If it be not so complied with, then,
subject to any express provision in the policy, the insurer is discharged from liability as from the date of the
breach of warranty, but without prejudice to any liability incurred by him before that date.

There are certain circumstances under which a breach of warranty is excused as per the Act. They are as
under:

(1) Non-compliance with a warranty is excused when, by reason of a change of circumstances, the
warranty ceases to be applicable to the circumstances of the contract, or when compliance with the
warranty is rendered unlawful by any subsequent law. For example, there is an implied warranty that the
ship is seaworthy. But due to circumstances beyond the control of the carrier and assured, the ship is
attacked by some enemy nation and destroyed to the extent that it became unseaworthy, as a result, the
goods insured were damaged. Under such circumstances the non-compliance with a warranty is excused
and the insurer is liable.

2) A breach of warranty may be waived by the insurer

Ans 18 Assignment of marine policy pdf

Ans 19 Fire insurance

A fire insurance contract is a legal agreement between the insurer and the insured where the insurer
undertakes to indemnify the insured for any financial loss or damage caused by fire during a specified
period, subject to the terms and conditions of the policy. It is primarily a contract of indemnity and
operates to cover the actual monetary loss suffered by the insured.

Definition Section 2 (6) of the Indian Insurance Act, 1938 defines fire insurance business as “the business of
effecting, otherwise than incidentally to some other class of insurance business, contract of insurance
against loss by or incidental to fire or other occurrence customarily included among the risks insured
against in fire insurance policies”.

From the above definitions the test of fire insurance contract can be summarised thus: It is a contract of
insurance where – • the primary object is insurance against loss or damage caused by fire • the liability of
insurer is limited to the extent of the sum assured or to the extent of damage caused by fire, whichever is
less • the insurer has no interest in the safety or damage of the insured property other than the liability
undertaken.

Nature of Fire Insurance

1 Contingent Contract: o The insurer’s liability arises only if the insured event (fire) occurs. 2. Risk-Centric: o
The primary objective is to cover the risk of loss or damage to property due to fire. 3. Short-Term Contract:
o Fire insurance policies are typically issued for a limited period and must be renewed periodically. 4.
Subject to Underwriting: o The terms of the policy, including premiums and coverage limits, are based on
an assessment of risks associated with the insured property. 5. Legal Obligation: o Once the contract is
signed, both parties are legally bound to fulfill their obligations as per the policy terms.

Key Features of a Fire Insurance Contract

1. Contract of Indemnity: o The insured is compensated only for the actual loss or damage incurred due
to fire, up to the maximum amount insured. o No profit can be made from a fire insurance claim. 2.
Insurable Interest: o The insured must have a financial or legal interest in the property insured. o
Insurable interest must exist at the time of taking the policy and at the time of the loss. 3. Utmost
Good Faith (Uberrima Fides): o Both parties are bound to disclose all material facts truthfully. o
Concealment or misrepresentation can render the contract void. 4. Coverage of Specified Risks: o The
policy typically covers damage caused directly by fire and related perils like explosions, lightning, or
smoke. o Certain risks, such as arson by the insured or war-related damages, are generally excluded.
Page 229 of 306 5. Personal Contract: o The policy is specific to the insured and their interest in the
property. o It cannot be transferred without the insurer’s consent. 6. Subject to Principle of
Subrogation: o After indemnifying the insured, the insurer has the right to recover the amount from a
third party responsible for the fire. 7. Term-Based Coverage: o Fire insurance contracts are typically for
a specific term, often one year, and must be renewed for continued coverage. 8. Specific or Floating
Policies: o A fire insurance contract may cover a specific property or be a floating policy covering
multiple properties. 9. Proximate Cause Rule: o The damage must be caused directly by fire or by a
peril covered under the policy. o Indirect losses or those caused by excluded risks are not covered.

Fire

Definition of Fire The term fire in a fire insurance contract is used in its popular and literal sense. It means
the production of light and heat by combustion. Combustion occurs only at the actual ignition point. Hence
there is no fire without ignition. Loss or damage which occurs as a result of putting out the fire would be
covered by the fire risks. However, fire policies do not cover the risk of fire caused by earthquakes, riots,
civil commotion, foreign enemy, rebellion. etc.

Causes of Fire The cause of fire is immaterial. However, the loss is significant. Generally, the fire waste is
usually the result of two types of hazard:

1. Physical Hazard: It refers to the inherent risk of fire in the property which may occur due to inflammable
nature, construction, artificial lighting and heating, lack of extinguishing applicances in the property, etc.

2. Moral Hazard: This hazard depends upon humans just as physical hazard depends on the property. The
property may be set on fire by the owner or by any other person with his willingness, or carelesseness, and
lack of sense of duty which may also increase the fire waste. Sometimes when the market price is going
down, the owner can willingly set on fire the property to gain from the payment from the insurance
company. Thus, when losses are caused deliberately, moral hazard exists.

To start a fire, there are three essential factors: (a) There must be a flammable substance or gas or vapour.
(b) There must be oxygen present. (c) There must be source of heat, e.g. flame or a spark.

Ans 19 Cover note

A Cover Note is a temporary document issued by the insurer as proof of coverage before the formal policy
is issued. It serves as an interim contract of insurance. ‘Cover note’ is a document evidencing issuance of an
insurance policy and gives a summary of the information given in a certificate of insurance. It is a
document issued in advance of the policy. In practice, on making the proposal, the insurance company, on
payment of premium gives a deposit receipt called the ‘cover note’. It is also called an ‘interim protection
note’. Cover notes are issued when the negotiations for insurance are in progress and it is necessary to
provide cover on a provisional basis or when the premises are being inspected for determining the actual
rate applicable. Pending the preparation of the policy, the cover note is issued as evidence of protection
for a temporary period of time viz., 15 days or 30 days and to prove that cover is in force. It gives brief
details of cover. The cover note is temporary and will be superseded once the policy is issued.

Cover note is provisional and provides valid evidence of a contract: The first requirement of a binding
insurance contract is that there must be an offer and an acceptance of its terms. In most cases, the
applicant for insurance makes this offer, and the company accepts or rejects the offer. An agent merely
solicits or invites the prospective insured to make an offer. A legal offer by an applicant for insurance must
be supported by a tender of the premium and it should always be prior to commencement of the
‘coverage’. The agent usually gives the insured a conditional receipt that provides that acceptance takes
place when the insurability of the applicant has been determined by the Insurer. In property and liability
insurance, the offer and acceptance can be oral or written. Issuance of a policy may take some time after
acceptance due administrative procedures. Therefore the insurers may in that case issue a Cover Note for a
stipulated period which is also a valid evidence of the contract.

A cover note is not a policy of insurance. It is only an interim protection note. It is a temporary and limited
agreement. The effect of the cover note is that if the fire takes place between the date of the receipt of the
cover note and the date of intimation by the insurance company regarding the acceptance or refusal of the
policy, the insurance company will be responsible. A cover note is an unstamped document issued based on
the details given in the proposal form confirming the acceptance of the risk from the date and time of
receiving the consideration (premium). This document is issued immediately only under circumstances
where the issuance of the policy is not feasible. This cover note is a replica of the policy to be issued. The
validity of the cover note is 60 days, which can be further extended at the option of the insurer, if
necessary.

Ans 20 Right to average

The Right to Average comes into play when the insured property is underinsured (i.e., the sum insured is
less than the property's actual value). It ensures that the insured shares a proportion of the loss in such
cases. A fire policy containing an average clause is called as Average Policy. In this policy, the insured is
penalized for under-insurance of the property. In other words, the insured is considered as self -insured to
the extent of under-insurance. For example: When a property worth Rs. 8 lakhs is insured for Rs.6 lakhs
and the loss caused by fire is Rs. 4 lakhs, the amount of claim to be paid by the insurer will be Rs. 3 lakhs,
calculated as under: Rs. 6,00,000 x 4,00,000/8,00,000 = Rs. 3,00,000

Key Features:

1. Application: o The sum insured is less than the actual value of the property. o The principle of average
applies to partial losses.

2. Purpose: o To discourage underinsurance and ensure fair premiums are paid for adequate coverage.

3. Proportional Liability: o The insurer compensates only for the proportion of the sum insured to the
actual value of the property.

Formula for Average: Claim payable=Sum insured/Actual value of property × Loss amount

Ans 21 Double insurance and re insurance

Double insurance occurs when the same risk and the same subject matter are insured by the same insured
with multiple insurers under separate policies. Where a risk connected with a particular subject matter is
insured under more than one policies taken out from different insurers, it is called ‘double insurance’.
‘Double insurance’ is the situation in which the same risk is insured by two overlapping but independent
policies. It iss also called ‘dual insurance’. Double insurance is lawful and the insured can make claim to
both insurers in the event of a loss because both are liable under their respective policies. The insured,
however, cannot profit (recover more than the loss suffered) from this arrangement because the insurers
are bound only to share the actual loss in the same proportion they share the total premium. Double
insurance is possible in all cases of insurance whether contingency insurance or life insurance or indemnity
insurance. Double insurance may not be of much advantage in case of indemnity insurance because the
insured can recover only one amount which is equal to his loss and not more than that. There is no such
restriction in cases of life insurance. One can insure oneself with any number of insurers or under different
policies with the same insurer. The whole of the insured amount will be recoverable under each of the
policies.

Key Features: 1. Multiple Policies: o The insured purchases two or more policies covering the same risk and
property. 2. No Profit Rule: o The insured cannot recover more than the actual loss, adhering to the
principle of indemnity. 3. Right to Contribution: o If a claim arises, all insurers contribute proportionally to
the loss based on their respective sums insured. 4. Application: o Common in high-value assets or projects
to ensure adequate coverage.

Reinsurance is a contract where an insurer (called the ceding company) transfers a portion of its risk to
another insurer (called the reinsurer) to mitigate potential losses from large claims. Reinsurance is an
arrangement whereby an original insurer who has insured a risk insures a part of that risk again with
another insurer, that is to say, reinsures a part of the risk in order to diminish his own liability. Insurance is
a contract between the insurer and the original insured. Reinsurance is a contract between the reinsured
(insurer) and the ‘reinsurer’. Therefore, the original insured is not a party to the contract of reinsurance.
The insurer and the reinsurer enter into reinsurance agreement which details the conditions upon which
the reinsured would pay the insurer’s losses (in terms of ‘excess of loss or proportional to loss’). The
reinsurer is paid a reinsurance premium by the insurer, and the insurer issues insurance policies to its own
policy holders. The main reason for insurers to buy reinsurance is to transfer ‘risk’ from the insurer to the
reinsurer, but reinsurance has various other functions.

Limits It is usual to fix a limit up to which the insurer is prepared to lose on risks in a specified class. The
limit depends on the following circumstances: i. ii. iii. iv. The financial status and premium income of the
insurer. A new insurer with small premium income cannot afford to sustain a loss which might be borne
with ease by established insurer with ample reserve. The experienced in a particular class of risk: a) The
degree of the fire hazard present. b) The extent of the damage likely to be sustained. c) The fire
extinguishing facilities available. The limit will vary according to the nature and size of the concerns
proposing for ‘insurance’. Location and other factors affecting the risk are also taken into account while
calculating the amount of limit.

Ans 22 Burglary Insurance

Burglary insurance is as common in business houses as fire insurance. It involves forceful and illegal entry
into the business premises for the purpose of stealing. “Forceful entry” is the prerequisite for burglary. It is
necessary to differentiate it from theft, robbery or housebreaking.
Burglary insurance is not only for the goods owned by the person but also for the goods he is responsible
for like those held in his trust. It also includes the relationship of bailment or agency regarding the goods.
Under burglary insurance, various types of schemes are available. The policy with wider cover excludes the
items that are specifically covered under other policies. For example, if the jewels of a person are covered
under jewellery and valuables policies and he avails all risk policy of burglary insurance jewellery would not
be covered under it.

The main policies available under the burglary insurance are: i) Burglary business premises insurance
policies ii) Burglary private dwellings insurance policies (theft covered) iii) Combined fire and burglary
insurance policies iv) All risk insurance policies

Ans 23 Compulsory insurance

The expression “compulsory insurance” means the insurance which is made compulsory by statute. In
India certain kinds of insurance must be compulsorily taken. The following enactments make insurance
compulsory for certain classes of people:

Employees’ State Insurance Act, 1948

Motor Vehicles’ Act, 1988

Public Liability Insurance Act, 1991.

ESI This compulsory scheme of the insurance is applicable only to industrial workers and excludes
agricultural labourers. The purpose of the insurance under this Act is to cover the risk to employees
earning Rs.21000 or less per month relating to sickness, disablement, death etc. and meet the needs of
pregnant woman and dependents. The scheme provides five-folder benefits: Sickness Medical Maternity
Disablement Dependents etc. For the administration of Employees’ State Insurance Scheme, a statutory
corporation known as the Empoyees’ State Insurance Corporation has been established. This scheme is
intended to provide welfare facilities which are required for the increase of productivity of workers and for
the increase of national income

Motor Vehicles Act, 1988 The purpose of compulsory insurance under Motor Vehicles Act, 1988 is to cover
the risk to general public arising out of usage of motor vehicles by owners/users. Under the provisions of
the Motor Vehicles Act, 1988, every person using a motor vehicle in public place must cover the risk to
third parties in terms of injury, life or damages to property.

Public Liability Insurance Act, 1991 The purpose of compulsory insurance under the Public Liability
Insurance Act, 1991 is to cover the risk to the people living around the industries operating with hazardous
substances which may lead to disasters like Bhopal Gas Tragedy. The liability has to be compulsorily insured
under a contract of insurance for an amount of the paid up capital of the undertaking handling any
hazardous substance. The maximum aggregate liability of the insurer to pay relief under an award to the
several claimants arising out of an accident shall not exceed rupees five crores and in case of more than
one accident during the currency of the policy or one year, whichever (whichever means ‘time’ i.e., period
of policy or one year which ever is less) is less, shall not exceed rupees fifteen crores in the aggregate. Every
owner, in addition to premium, has to pay to the insurer an equivalent amount to be credited to the
Environment Relief Fund established under the act. The contribution received by the insurer shall be
remitted as per the Scheme made by the Government.