Principles of insurance,Double insurance,contribution and subrogation

Principle of co-operation Mutual co-operation prevailing up to the era of Christ. Agreement between the individual or the society to pay certain sum in advance. Now it is the duty and responsibility of the insurer to pay them.

Principle of probability The chances of loss are estimated in advance to affix the amount of premium. The degree of loss depends upon various factors, the affecting factors are analyzed before determining the amount of loss. The target of this principle –the uncertainty of loss is converted into certainty. The insurer has to charge only so much of the amount which is adequate to meet the losses. The probability tells what are the chances of losses and what will be the amount of losses. The insurance on the basis of past experience,present condition and future prospects fixes the amount of premium.

Interpretation In interpreting documents in the insurance contract the duty of the court is to interpret the words in which the contract is expressed by the parties. The consideration is that effect should be given to the intention of the contracting parties.

Contra proferentem rule If there is any ambiguous clause. That meaning should be adopted which is most favorable to the insured. There are two established rules of construction.. “The first is that in case of doubt,wording in a contract is to be construed against a party who seeks to rely on it in order to diminish or exclude his basic obligation or any common law duty which arises apart from contract. The second is that in case of doubt, wording is to be construed against the part who proposed it for inclusion in the contract : it was up to him to make it clear.”

PROBLEM A 20 year old boy took out a motor insurance policy. He was living with his father where his sister also resided. His negligence driving caused injuries to his sister. There was a clause which excluded liability for death of or injury to any member of the assured household of which the assured was the head. Whether the insurer liable?

PROBLEM A professional football player insured under a personal accident insurance scheme, suffered “permanent total disablement”. He was paid $-500 by the insurers. He signed an undertaking as required by the policy that he would take no part as a playing member in any form of professional football in the future. One of the clauses in the policy stated that member shall mean a person…who is registered with the football players and trainers union. The insured ceased to be a member of the union. Later he made a remarkable recovery from his injuries and started playing professional football again. The insurer claimed the return of the $500. Whether the contra proferentem rule applies?

PROBLEM The claimant`s husband was an employee of a local Municipality. The latter proposed to effect an insurance for its employees with an insurance company. But there was still no such contract between the company and Municipality that the employee died. There was no contract with the employee. Whether there is any base to proceed against the company?

PROBLEM A strike contingency Insurance Policy taken out by a fruit importer provided that it covered physical loss or damage or deterioration caused by strikes. A loss of market was caused by delay arising out of a strike. Whether insurer liable?

Double insurance When the subject-matter is insured with two or more insurers it is known as Double Insurance. A insures his motor cycle worth taka with three insurers:with X for tk 50000,with Y tk and with Z for tk 15000=

What happened when both the seller and the buyer insured a property that was severely damaged between exchange and completion ?

Case study In National Farmers Union Mutual Insurance Society Ltd v HSBC Insurance (UK) Ltd, the seller and buyer each held their own buildings insurance between exchange and completion. After exchange, a fire caused extensive damage to the property but the transfer subsequently completed in accordance with the terms of the sale contract. The buyer claimed under its policy who paid out in full and then claimed a contribution from the sellers' insurer, HSBC, on the basis that there was 'double insurance'. The High Court held that, although the HSBC policy extended to "anyone buying" the property until the sale was completed, it also excluded payment if the buildings were insured under any other insurance. The buyer was not covered by the HSBC policy and there was no resulting double insurance. Accordingly, NFU was not entitled to any contribution from HSBC. The court made it clear that the policy wording will determine whether or not there is double insurance in any particular circumstances.