The meaning of the clause is that the insurer insures the subject-matter irrespective of the fact that it has already been lost or not lost before the issue of the policy. If he rejects it, the offer dies. The rule; is that immediate and not the remote cause is to be regarded. Insurance provides protection against future risk, accidents, uncertainty. Proximate Cause. In a true sense of the indemnity, the insured is not entitled to make a profit from his loss. The advantage of such scheduled, policies is that one can easily find out the critical information from the schedule rather than taking the trouble of going through the whole policy wordings. c. In an insurance contract an offer and acceptance is not a requirement. Life and personal accident policies do not contain such a condition since the principles of indemnity and subrogation do not apply to it. The utmost Good Faith says that all the material facts should be disclosed in true and fill the form. It should be known by the students that policy as such is not the contract in itself, it is simply evidence to the contract which already exists. In case the ship sinks in a collision and is held liable for the damage done to the other vessel, the underwriter may have to pay a total loss and a heavy claim under the R.D.C. Where deviation or delay is necessary to comply with an express or implied warranty. conditions precedent to contract, e. g., the disclosure of material facts before completion of the contract, some are conditions after contract, e. g., a notice of alteration to insurers, and. Insurance - Insurance - Historical development of insurance: Insurance in some form is as old as historical society. UNDERTAKING OF RISK: In insurance contract, bearing and protecting of risk is the subject matter … Insurance is a mean of protection from risk or loss. The amount of damage extends to include damage done to other ships, her cargo, and compensation for loss of employment in consequence of the collision. For the policy to cover the loss must have an insured peril as the proximate cause of the loss or also the insured peril must occur in the chain of causation that links the proximate cause with the loss. Reinsurance is a contract between the two insurance companies.2. If the insured peril is followed by an excepted peril, there is a valid liability. One party must propose an arrangement to the other, including definite terms. Parties entering into the contract should enter into it by their free consent. The classification of risks is generally simpler in life insurance than in other types of insurance contracts. It may be summed, right, interest, profit or benefit Premium being the valuable consideration must be given for starting the insurance contract. In other words, there should not be any illegal relationship between the policy-holder and the subject-matter to be insured. This principle can be debatable, so call a lawyer if you think you are being unf… The clause protects the ship-owners against losses to be included in claims by the assured. “And in case of loss of misfortune it shall be lawful to the assured, their factors, servants and assigns to sue, labor and travel for in and about the defense, safeguards, and recovery of the said goods and merchandises, and ship, etc., or part thereof, without prejudice to this insurance, to the charges whereof we, the assurers, will contribute each one according to the rate and quantity of his sum herein assured”. The clauses are framed in connection with the loss of freight due to maritime perils which may be insured for a period or a voyage. In the contract of insurance, the agreement between parties must be in written form and dully signed by both parties, properly attested by witness and registered otherwise, it … A marine policy may be assigned by endorsement thereon or in another customary manner. The deviation is excused under certain circumstances but it should be noted that the ship must resume her course and prosecute the voyage with reasonable dispatch. It is taken in such a case where a merchant receives information of the shipment of his cargo very late after the sailing of the steamer and, therefore, when he submits the risk to the underwriter and effects insurance it was not known whether the subject- matter to be insured was lost or was not lost. But, in certain cases, the risks are beyond these two limits, i. e., departing, and destination. Insurable interest must be at the time of proposal in insurance but in property insurance, it must be present at the time of loss. Insurance. If the reassured has paid a claim for which he is not legally liable under his policy, the reinsurer is under no obligation to reimburse him. Proximate cause means the actual efficient cause that sets in motion a train of events which brings about result, without the intervention of any force started and worked actively from a new and independent source. In return to which the insured pay premium for a fixed period of time. We try our level best to avoid any misinformation or abusive content. In life insurance, a fixed amount is paid but in indemnity insurance (fire, marine, etc) amount of payment is uncertain depending upon the quantum of damage. All the insured contribute the premium out  of which the person who actually suffers loss is compensated or is paid up, insurance is a device to share the financial loss of few among many others. There are standard clauses that are invariably used in marine insurance. In such a case if any cause, is excepted peril, the insurer will have to pay up to the extent of loss which occurred due to insured perils. The amount of premium is not important to begin the contract. This clause is known as the ‘Institute Cargo Clause.’. The clauses may be about losses resulting from a collision, standing, general average, etc. To discourse over insurance the principle of indemnifying it an essential feature of an insurance contract, in the absence of which this industry would have the hue of gambling, and the insured would tend to affect over-insurance and then intentionally cause a loss to occur so that a financial gain could be achieved. Cargo policy is freely assignable, and no notice thereof is essential to be given to the underwriter. A person is said to be of sound mind to make a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests. They may be about Hull, Cargo, and Freight. Where authorized by any special term in the policy. Thereafter the risks covered are continued whilst the goods are in transit and/or awaiting transit until delivered to final warehouse at the destination named in the policy or until the expiry of 15 days (30 days if the destination to which the goods are insured is outside the limits of the port) whichever shall first occur. An insurance contract is an agreement with your provider that you will pay premiums for coverage in exchange for guaranteed payment in the event of a loss. The reinsurance policy is closely linked with the original insurance and any alteration in the original policy must be agreed with the reinsurer. According to Marine Insurance Act, “A warranty is that by which the assured undertakes that some particular thing shall or shall not be done, or that some conditions shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts.”. The cost of risk in insurance contract is the value of insurance object. The event, the death, in life insurance is certain, but the only uncertainty is the time when death will occur. An offer is the beginning of a contract. Where several ports are specified, the ship may touch or stay at all or any of them. In it, the insurer agrees to pay or compensate for the loss. At the moment, the notice of acceptance is given to another party; it would be a valid acceptance. Principle of Uberrimae fidei (Utmost Good Faith), Principle of Insurable Interest, Principle of Indemnity, Principle of Contribution, Principle of Subrogation, Principle of Loss Minimization, and. Alien energy, an undischarged insolvent and criminals cannot agree. The elements of an insurance contract are the standard conditions that must be satisfied or agreed upon by both parties of the contract (the insured and the insurance company). (i) not forbidden by law or(ii) is not immoral, or(iii) opposed to public policy, or(iv) which does not defeat the provisions of any law, is lawful. Thus, the risk of land, craft transport and transshipment are also covered under a single marine insurance policy. To avoid an Anti-social Act; if the assured is allowed to gain more than the actual loss, which is against the principle of indemnity, he will be tempted to gain by the destruction of his property after getting it insured against risk. Thus, it will be appreciated, adds considerably to the convenience of mercantile transactions as the policy can be negotiated through a bank along with other documents of title. Underwriters are responsible for the risk commencing from the time of loading to the time of unloading the cargo. The maxim is “sed causa proximo non-remold-spectator”; see the proximate cause and not, the distant cause. The risk of landing within a reasonable time is permitted in most of the cases. But in the insurance contract, the seller, i.e., the insurer will also have to disclose all the material facts. The clause excludes salvage charges. It assigned either before or after a loss. Assignment in fire insurance constitutes a new contract. Content Writer, Law Corner, B.A.LL.B(Hons), 5th Semester, Unity Law and PG college. In the event of fire, the insured is entitled to get the amount of claim only from the original insurer and not from reinsurer.5. The assured may pay a full premium while affecting the insurance but it may be agreed to return it wholly or partly in the happening of certain events. Warranty is a very important condition in the insurance contract which is to be fulfilled by the insured. An insurance contract comes into existence when one party makes an offer or proposal of a contract and the other party accepts the proposal. Note - The information contained in this post is for general information purposes only. These clauses are mainly framed wife the insurances on vessels and are incorporated in hull policies. For example, special packing may reduce risk. For example, insurance may be taken for a voyage in stages, each stage being rated separately. A contract of insurance must be made based on utmost good faith (a contract of uberrimate fidei). Thus, the whole society will be doing only anti-social acts, i.e., the persons would be interested in gaining after the destruction of the property. “Com, fish, salt, fruit, flower, and seed are warranted free from average, unless general, or the ship is stranded—sugar, tobacco,… are warranted free from average,… and all other goods, also the ship and freight, are warranted free from average.”. An object that is. In an insurance contract an insurer makes an offer and the prospect accepts it. The court decided that due to negligent, such losses were outside the scope of the insurance arid should not be covered by it. Here is a brief explanation of each of these different types of insurance companies and the specific specialty risks insured and other unique attributes. Once deviation has taken place the risk ceases to attach to the rest of the voyage even though the loss has occurred after the vessel had reverted to the proper course. The elements of special contract relating to insurance: the special contract of insurance involves principles: insurable interest, utmost good faith, indemnity, subrogation, warranties. The risks clauses, general average clause and collision clause are included in these clauses. The time limit referred to above to be from midnight of the day on which the discharge overside of the goods hereby insured from the overseas vessel is completed. This clause is applicable in voyage policies insuring hull, and freight. The insurer is subrogated all the rights, claims, remedies and securities’ of the damaged insured property after indemnification, but he is entitled to gel these benefits only to the extent of his payment. The students should also observe that marine policies stand in a different category since they do not contain any express condition marshaled as such. In the same way, if die insured is compensated for his loss from another party after he has been indemnified by his insurer he is liable to part with the compensation up to the extent that the insurer is entitled to. From means, the risk commences from the time of departure of the ship and not previous to that. The proposal for free consent must sign a declaration to this effect, the person explaining the subject matter of the proposal to the proposer must also accordingly make a written declaration or the proposal. The duty to disclose the material facts lies on both the parties the insured as well as the insurer, but in practice the assured has to be more particular, about the; observance of this principle because it is usually in full knowledge of facts relating to the subject-matter which, despite all effective inspections of the insurer, would not be disclosed. The financial relationship between the policy-holder and subject-matter should be such that the policy-holder is economically benefited by the survival or existence of the subject-matter and or will suffer economic loss at the death or existence of the subject matter. “Rejection of Application is allowed under Insolvency and Bankruptcy Code when debtor is earning sufficient income”, Hindu Women’s Inheritance Rights – Influence Of The British In The Indian Subcontinent. These clauses are known as ‘Institute Time Clauses’. But in hull insurance, specific endorsement of an assignment is essential. If there are concurrent causes, the insured perils and excepted perils have to be segregated. A minor cannot sign a contract. The efficient cause of a loss is called the proximate cause of the loss. Ordinarily, the premium once paid cannot be refunded. No emotional or sentimental loss, as an expectation or anxiety, would be the ground of the insurable interest. In insurance, the publication of the prospectus, the canvassing of the agents are invitations to offer. The insurer is liable only for that loss caused by an insured peril; where there is an excepted peril, the subsequent loss caused by an insured peril will be a new and indirect cause because of the interruption in the chain of events. There should be no false statement and no half-truth nor nay silence on the material facts. Some of the different types of insurance companies include: standard lines, excess lines, captives, direct sellers, domestic, alien, mutual companies, stock companies, Lloyds of London and more. are used in the freight clauses. Facts that could be inferred from the information disclosed. The consideration for the insurer under an insurance Return of Premium. It is a contract between an insurer and an insured. The life policies can be assigned whether the assignee has an insurable interest or not. Under a bottomry contract, loans were granted to … This clause was most prevalent in olden times when the media of communication were not developed so much. The old form of policy is even used today, To make the standard policy suitable for the different types of contracts, suitable conditions are added to the policy. The expenses are incurred to avert or minimize a loss from a peril covered by the policy. This clause requires underwriters to pay any expenses properly incurred by the assured or his agents in preventing or minimizing loss or damage to the subject-matter. In case of hull insurance, the clauses provide that if the insured vessel at the expiration of the policy is at sea or a port of refuge. The ship should not deviate from the course of the voyage described in the policy or where the course is not a specifically designated one, from the customary course. The contract can continue only when warranties are fulfilled. This is our final principle that creates an insurance contract and the most simple one probably. The insurer, according to this principle’, becomes entitled to all the rights of insured subject matter after payment because he has paid the actual loss of the property. The fact is that without payment of premium, the insurance contract cannot start. In such a case if some stages are not completed the premium relating to the incomplete stage is returnable. In absence of premium, the promise will be NUDAM PACTUM, hence void. The additional marine perils against which cover may be sought or which are excluded from the policies are inserted through special clauses. There should be no concealment, misrepresentation, mistake or fraud about the material facts. According to this principle, the insurer undertakes to put the insured, in the event of loss, in the same position that he occupied immediately before the happening of the event insured against, in a certain form of insurance, the principle of indemnity is modified to apply. Clauses attached to the policy would override the printed wording in the policy. It means that the facts should be disclosed in that form in which they exist. Insurance Contract: Elements and Clauses Insurance Contract, Difference between Different Types of Insurance Contract, Insurance Proposal Form - Example, Format, Importance, Purpose, Elements, Insurance Cover Note: How Insurance Cover Note Works, Utmost Good Faith in Insurance Contract, Marine Insurance, Life Insurance, insurable interest in the subject matter of insurance, important principle ‘utmost good faith’ which applies to all forms of insurance, Certain sum. Any departure from the specified course or a customary course amounts to the deviation. The assured himself has to bear one-fourth of the loss so that he may exercise greater care in the navigation of the vessel. The basic risk covered is financial. All he can do is that he can select the most appropriate policy among various policies which the insurer is offering. If there is over-insurance by double insurance, a proportionate part of the several premiums is returnable provided that if the policies are taken at different times and any earlier policy has at any time born the entire risk or if a claim has been paid. But, where goods are willfully detained, the underwriter shall cease his liability. The doctrine of subrogation is the supplementary principle of indemnity. Therefore, in life insurance, ordinarily every piece will become a claim sooner or later but it is not certain in indemnity insurance. This clause is also called a collision clause and is included in hull policies. Indemnification cannot be more than the amount insured. The special contract of insurance involves principles: So, in total, there are eight elements of the insurance contract which are discussed below: The valid contract, according to Section 10 of the Indian Contract Act 1872, must have the following essentialities; The offer for entering into the contract may come from the insured. Now, the clause has lost much of its importance. If there is a single cause of the loss, the cause will be the proximate cause, and further, if the peril (cause of loss) was insured, the insurer will have to repay the loss. Marine and life policies can be freely assigned but assignments under fire and accident policies, are not valid without the prior consent of the insurers—except changes of interest by will or operation of law. The essentials of a valid insurable interest are the following: The subject-matter is life in the life insurance, property, and goods in property insurance, liability, and adventure in general insurance. Another unique characteristic of insurance contracts is unilateral insurance. If he amends the offer, the original offer dies and his amendments become a new … In case of cargo policies with Average. The undeclared balance of on open policy: The policy may be canceled and premium may be returned for short interest allowed provided there was no further interest in the policy. Click Here to submit your article. Whereas the other forms of insurance are taken for not more than one-two years. or With Particular Average, ‘Exposed during transit,’ etc., are the important clauses of cargo insurance. So, to cover the inland risks from the original place of departure to the port of sailing and from the port of discharge to the place of final destination are insured under ‘Warehouse to warehouse clause.’. The claim was covered under the “and all other perils, losses, and misfortunes clause”. some are conditions precedent to liability, e. g., a notice of loss to insurers. The clauses to be incorporated in the policy are taken from Lloyd’s Association. Insurance is a contract between the insurance company and the policyholder wherein the policyholder (insured) makes an offer and the insurance company (insurer) accepts his offer. If there is a broken chain of events with no excepted peril involved, it is possible to separate the losses. The subject-matter in life insurance is life. In practice, different insurers use different types of policies for the same class of business, and there is no standardization as such. Proper knowledge of insurance object enables the insurer in calculation of right … To make an agreement valid, prescribed legal formalities of writing, registration, etc. ‘With Average (W.A.) Both parties to the insurance contract must agree (ad idem) at the time of the contract. In an insurance contract a prospect makes an offer and an insurer accepts it. The terms and conditions of Cargo insurance are specially incorporated in the policies. It means it is contract which is not arrived by mutual negotiations between the parties, It means he has to adhere to the policy in which way it is offered there is no chance if bargain. But, in case of hull insurance die policy cannot be assigned freely, and the consent of underwriter is essential because the degree of risk of the subject- matter is materially changed when the management and ownership of the vessel are changed. Proximate cause, assignment, and nomination, the return of premium. Where the assured has over-insured under an unvalued policy a proportionate part of the premium is returnable. “And it shall be lawful for the said ship, etc., in the voyage to proceed and sail to and touch and stay at any ports or places whatsoever without prejudice to this insurance.”. In the case of cargo policy, this clause is amended as the risk may commence boom the ‘time the cargo is loaded onto the vessel. An insurance contract is a contract of uherrimae fidei, i.e., of absolute good faith both parties to the contract must disclose all the material facts and fully. The consent will be free when it is not caused by—. The following conditions should be fulfilled in full application of the principle of indemnity. For example, if an insured dies due to. The insurance contract involves—(A) the elements of the general contract, and (B) the element of special contract relating to insurance. Interested to publish an article at Law Corner? Subrogation. Such a condition also does not appear in marine policies. The individuals can be single persons, shipowners for instance, corporations or other legal entities. Least Expensive Alternative Treatment (LEAT): A clause in an insurance policy that indicates that the insurer will only cover the least expensive option for … Like other contracts, there must be lawful consideration in insurance also. In case of insurance contract the legal maxim ‘Caveat Emptor” (let the buyer beware) docs not prevail, where it is the regard of the buyer to satisfy himself of the genuineness of the subject-matter and the seller is under no obligation to supply information about it. The utmost good faith in fire insurance has two aspects first, the disclosure of material facts and second, preservation of the property insured. II. Utmost Good Faith. However, where the assured has parted with his interest in the subject, matter insured and has not, before or at time of so doing, expressly or impliedly agreed to assign the policy and subsequent assignment of the policy is inoperative. The essential features of Sue and Labor Charges are; The reinsurance clause….