Principles of insurance

Problem After examination by the doctor of the insurance company, the insured proposal for life insurance was accepted in May 2015.But no premium was paid. He injured in a road accident on 15 June, 2015.Again on 1 st July, 2015, he made another proposal stating that there have been no material change in his health since his medical examination. No medical examination was made in this time. Again his proposal was accepted but no premium was paid. On 8 th October 2015 he fell ill and on 10 th October he paid the first premium and he died on 12 October, Whether the insurance company is liable by this contract?

Carter v Boehm Carter was the Governor of Fort Marlborough, which was built by the British East India Company in Sumatra, Indonesia. Carter took out an insurance policy with Mr. Boehm against the fort being taken by a foreign enemy. A witness, Captain Tryon, testified that Carter knew that the fort had been built to resist attacks from natives, but not European enemies, and the French were likely to attack. The French did attack, and Boehm refused to fulfill the insurance claim. Carter sued. Whether Carter can satisfy his claim?

Principles of Uberrimae fidei Utmost good faith S- 52 of The Penal Code-1860 defines good faith. It states as “Nothing is said to be done or believed in "good faith" which is done or believed without due care and attention.” According to this principle the person getting insured must willingly disclose and surrender to the insurer his complete true information regarding the subject matter of insurance. The insurers liability gets void if any facts about the subject matter of insurance are either omitted, hidden, falsified or presented in a wrong manner by the insured.

MATERIAL FACTS Material facts are those facts by which the insures assess risk. Must disclose the facts which within his ACTUAL OR PRESUMED KNOWLEDGE (ought to be known, expected to be known, could have discovered by making reasonable inquiries) The object of disclosure is to help the insurer by every means to estimate the risk which he is about to undertake and the proper value thereof.

Test of materiality Whether a fact is material or not is whether non closure of the facts would influence a prudent insurer in determining whether he will take the risk or not or in fixing the premium. Materiality is a question of fact. It depends upon the circumstances of each particular case.

Whether duty to disclose is a continuous duty or not?

Test of materiality Disclosure of material facts continue up to the date of the formation of the contract. Revives with the alteration of existing policy or with the renewal of existing policy.

Consequence of non disclosure on policy Any concealment of material fact either intentionally, negligently, fraudulently or by mistake, error of judgment or even to his failure to appreciate its materiality renders the contracts voidable at the option of the insurer. Case Study Bufy v. Turner (ware house fire insurance) Candogianis v. Guardian Assurance Co.Ltd.(question about car insurance:Has the proponent ever been a claimant on a fire insurance company in respect of the property now proposed or any other property? If so, state when and the name of the company) Harrington v. Pearl Life Assurance Co. Ltd.(health insurance)

problem A proposal for life insurance was accepted upon the condition that the risk would commence and the policy would be issued on payment of the first premium. The proposer then became ill. His illness was diagnosed as pneumonia and he died of it. Three days before his death he sent a cheque for the first premium and one day before his death the company sent its final acceptance. Whether the insurance company liable?

Consequence of non Disclosure on return of premium The return of policy in case of non disclosure depend on the terms of the policy. Where the policy is silent on this matter, then whole premium has to be returned to the insured. If the policy contain any stipulation that in case of non disclosure full premium may be forfeited.

Facts Normally Material Exposure to more than ordinary danger(nature condition and other surrounding circumstances)threats have been made to destroy the property. Special motive of insured not ordinary prudence. (exceeding real value) Greater liability of insurer.(previous injury or destruction) Moral Hazard i.e. question of moral integrity of the proposed insured.(other insurers refuses to grant or renew) Facts regarded as material by insurer

Facts not normally material Which knows insurer Could have discovered by inquiry Facts which are superfluous to disclose by reason of any condition or warranty Diminish the risk Trifle

Burden of proof Lies on the insurer. Where non disclosure alleged, the insurer must prove: 1. That the fact not disclosed was material. 2.That it was within the knowledge of the insured. 3.That it was not communicated to the insurer. Where breach of condition relating to disclosure is alleged, the insurer must prove 1.that by express stipulation the duty to disclose is made contractual. 2.That the non disclosure alleged to have been made is a breach of duty as defined in the stipulation. 3.That the insured was guilty of the alleged non-disclosure.

Peril insured against(pia) Peril insured against means the contingency against which the insured seeks to protect himself. The Maxim is causa proxima non remota spectaur,i.e.the proximate and not the remote cause is to be looked into and if the peril insured against causes the loss the assured will recover indemnity.

Principle of causa proxima/doctrine of proximate cause The insurer is liable to indemnify for any loss proximately caused by the peril insured against, but he is not liable for any loss which is not proximately caused by the peril insured against. Every loss that clearly and proximately result, whether directly or indirectly, from the event insured is within the policy. The question which is the causa proxima of a loss,can only arise where there has been a succession of causes. The application of the doctrine varies according to the question is whether the loss was caused by the peril insured against or whether the peril was brought into operation by an excepted cause.

Different types of causes in case of succession of causes Peril insured against Last Cause Preceding cause Concurrent cause Independent cause Excepted cause Interrupted cause Uninterrupted cause