Assignment Report on

Insurance Law in India

An assignment report submitted on Insurance Law in India in the partial fulfillment of the requirement of subject Business Law SY BBA DM’s college 08-09.

September 2008.

Delawar

Acknowledgement

I am Delawar S/O Mohammad Ramzan Studying Bachelor of Business administration in DM’s college affiliated to Goa University, Goa, India. My successful completion of assignment of insurance law gave me an immense knowledge and corporate exposure regarding insurance and insurance law. During this assignment I had discussion with one of insurance agent Ms. Amelia Sonya who provided me lots of information about insurance and insurance law, I would like to appreciate her cooperation and I would like to express my heartfelt thanks to her. I would also like to thank Mrs. Isha Savant our lecturer of Business Law for her guidance. At the end I would like to thank all those who assisted me in successful completion of my assignment.

What is insurance

There are more definitions for insurance which some of them we would like to state as beneath

A system under which individuals, businesses, and other organizations or entities, in exchange for payment of a sum of money (called a premium), are guaranteed compensation for losses resulting from certain perils under specified conditions in a contract.

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium.

A means by which individuals can have fewer expenses and more financial coverage in the event of death or health issues that cannot be foreseen occurring in the future.

A means of indemnity against occurrence of an uncertain event; The business of providing insurance; Metaphoric: Any attempt to anticipate an unfavorable event; Blackjack: A bet made after the deal, which pays off if the dealer has blackjack.

In simple word we can say insurance is a contract in which one party agrees to compensate another party for any losses or damages caused by risks identified in the contract in exchange for the payment of a lump sum or periodic amounts of money to the first party.

The essential elements of insurance

Promise of reimbursement in the case of loss; paid to people or companies so concerned about hazards that they have made prepayments

Policy: the instrument in which the contract of insurance is generally embodied. Means "you should have read the small print on your policy" which is not the contract but it is evidence of the contract.

Indemnity and premium: protection against future loss

Insurer & Insured: person who under taking the risk and the person to be compensated.

Subject-matter of insurance and insurable interest: the thing or property is called the subject-matter of insurance and the interest of the insured in the subject-matter is called his insurable interest.

Insurance is mainly of two types; life insurance and general insurance; life insurance a variety of risks which a person anticipates to his/her life (sickness, or dangerous disease), and general insurance means Fire, Marine and Miscellaneous insurance which includes insurance against burglary or theft, fidelity, guarantee, insurance for employer’s liability, and insurance of motor vehicles, livestock and corps.

Insurance Law

Insurance law is the name given to practices of law surrounding insurance, including insurance policies and claims.

Also we can define this branch as law deals with property, life, and liability insurance; fire and automobile insurance forms; and the regulation of insurance.

The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non-Indian lives as Indian lives were considered more risky for coverage.

The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to the Triton (Tital) Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies.

Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the provident fund Act of 1912. Several frauds during 20's and 30's sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create much needed funds for rapid industrialization. This was in conformity with the Government's chosen path of State lead planning and development.

The (non-life) insurance business continued to thrive with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped

into four companies- National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC).

Important milestones in the life insurance business in India:

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the Government of India.

Important milestones in the general insurance business in India are:

1907: The Indian Mercantile Insurance Ltd. set up- the first company to transact all classes of general insurance business.

1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.

1972: The general insurance business in India nationalized through The General Insurance Business (Nationalization) Act, 1972 with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies- the National Insurance Company Limited, the New India Assurance Company Limited, the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

The Insurance Act, 1972 and the General Insurance Business (Nationalization) Act, 1972 govern Fire and Marine Insurance, while the Indian Marine Insurance At, 1963 governs marine insurance in the country. These laws contain provisions relating to the constitution, management

and winding up of insurance companies and the conduct of insurance business of all types. All insurance business in India has been nationalized.

Contract of Insurance

A Contract of insurance is a contract by which one party undertakes to make good the loss of another, in consideration of a sum of money, on the happening of a specified event, e.g. fire accident or death. Law recognizes insurance as a system of sharing risk too great to be borne by one individual.

FUNDAMENTAL PRINCIPLES OF INSURANCE

Some useful terms in Insurance:

INDEMNITY

A contract of insurance contained in a fire, marine, burglary or any other policy (excepting life assurance and personal accident and sickness insurance) is a contract of indemnity. This means that the insured, in case of loss against which the policy has been issued, shall be paid the actual amount of loss not exceeding the amount of the policy, i.e. he shall be fully indemnified. The object of every contract of insurance is to place the insured in the same financial position, as nearly as possible, after the loss, as if he loss had not taken place at all. It would be against public policy to allow an insured to make a profit out of his loss or damage.

UTMOST GOOD FAITH

Since insurance shifts risk from one party to another, it is essential that there must be utmost good faith and mutual confidence between the insured and the insurer. In a contract of insurance the insured knows more about the subject matter of the contract than the insurer. Consequently, he is duty bound to disclose accurately all material facts and nothing should be withheld or concealed. Any fact is material, which goes to the root of the contract of insurance and has a bearing on the risk involved. It is only when the insurer knows the whole truth that he is in a position to judge (a) whether he should accept the risk and (b) what premium he should charge.If that were so, the insured might be tempted to bring about the event insured against in order to get money.

Insurable Interest - A contract of insurance affected without insurable interest is void. It means that the insured must have an actual pecuniary interest and not a mere anxiety or sentimental interest in the subject matter of the insurance. The insured must be so situated with regard to the thing insured that he would have benefit by its existence and loss from its destruction. The owner of a ship run a risk of losing his ship, the charterer of the ship runs a risk of losing his freight and the owner of the cargo incurs the risk of losing his goods and profit. So, all these persons have something at stake and all of them have insurable interest. It is the existence of insurable interest in a contract of insurance, which distinguishes it from a mere watering agreement.

Causa Proxima - The rule of causa proxima means that the cause of the loss must be proximate or immediate and not remote. If the proximate cause of the loss is a peril insured against, the

insured can recover. When a loss has been brought about by two or more causes, the question arises as to which is the causa proxima, although the result could not have happened without the remote cause. But if the loss is brought about by any cause attributable to the misconduct of the insured, the insurer is not liable.

Risk - In a contract of insurance the insurer undertakes to protect the insured from a specified loss and the insurer receive a premium for running the risk of such loss. Thus, risk must attach to a policy.

Mitigation of Loss - In the event of some mishap to the insured property, the insured must take all necessary steps to mitigate or minimize the loss, just as any prudent person would do in those circumstances. If he does not do so, the insurer can avoid the payment of loss attributable to his negligence. But it must be remembered that though the insured is bound to do his best for his insurer, he is, not bound to do so at the risk of his life.

Subrogation - The doctrine of subrogation is a corollary to the principle of indemnity and applies only to fire and marine insurance. According to it, when an insured has received full indemnity in respect of his loss, all rights and remedies which he has against third person will pass on to the insurer and will be exercised for his benefit until he (the insurer) recoups the amount he has paid under the policy. It must be clarified here that the insurer's right of subrogation arises only when he has paid for the loss for which he is liable under the policy and this right extend only to the rights and remedies available to the insured in respect of the thing to which the contract of insurance relates.

Contribution - Where there are two or more insurance on one risk, the principle of contribution comes into play. The aim of contribution is to distribute the actual amount of loss among the different insurers who are liable for the same risk under different policies in respect of the same subject matter. Any one insurer may pay to the insured the full amount of the loss covered by the policy and then become entitled to contribution from his co-insurers in proportion to the amount which each has undertaken to pay in case of loss of the same subject-matter.

In other words, the right of contribution arises when (I) there are different policies which relate to the same subject-matter (ii) the policies cover the same peril which caused the loss, and (iii) all the policies are in force at the time of the loss, and (iv) one of the insurers has paid to the insured more than his share of the loss.

TERMS OF POLICY

Terms of policy mean the duration for which the policy will cover the risk. Except in case of life insurance, a contract of insurance is from year to year only and the insurance automatically comes to an end after the expiry of the years unless, of course, it is renewed.

RE-INSURANCE & DOUBLE INSURANCE

Every insurer has a limit to the risk he can undertake. If a profitable proposal comes his way he may insure it even if the risk involved is beyond his capacity. Then, in order to safeguard his own interest, he may insure the same risk, either wholly or partially, with other insurers, thereby spreading the risk. This is called -re-insurance. Re-insurance can be resorted to in all kinds of insurance and a contract of re-insurance is also a contract of indemnity. The re-insurers are liable to pay the amount to the original insurer only if the latter has paid to the insured. Re-insurance is

subject to all the conditions in the original policy and the re-insurer is entitled to all the benefits, which the original insurer enjoys under the policy.

When the insured insures the same risk with two or more independent insurers, and the total sum insured exceeds the value of the subject matter, the insured is, said to be over insured by double insurance. Both double insurance and over-insurance are perfectly lawful, unless the policy otherwise provides. A man may insure with as many insurers as he pleases and up to the full value of his interest with each one of them. If a loss occurs, he may claim payment from the insurers in such order as he thinks fit; but in no case he shall be entitled to recover more than his loss, because a contract of insurance is a contract of indemnity only.

FIRE INSURANCE

Fire insurance is a contract to indemnify the insured for destruction of or damage to property or goods, caused by fire, during a specified period. The contract specifies the maximum amount, agreed to by the parties at the time of the contract, which the insured can claim in case of loss. This amount is not, however, the measure of the loss. The loss can be ascertained only after the fire has occurred. The insurer is liable to make good the actual amount of loss not exceeding the maximum amount fixed under the policy.

CAUSA PROXIMA

It is a rule of law that in actions on fire policies, full regard must be had to the causa proxima. If the proximate cause of the loss is fire, the loss is recoverable. If the cause is not fire but some other cause remotely connected with fire, it is not recoverable, unless specifically provided for. Fire risks do not cover damage by explosion, unless the explosion causes actual ignition, which spreads into fire. The cause of the fire is immaterial, unless it was the deliberate act of the insured.

STEPS TO BE TAKEN IN FIRE INSURANCE CLAIMS

It is the duty of the insured, or any other person on his behalf, to give immediate notice of fire to the insurance company so that they can safeguard their interest, such as, deal with the salvage, judge the cause and nature of fire and assess the extent of loss caused by the fire.

Failure to give notice may avoid the policy altogether.

The insured is further required by the terms of the policy, to furnish within the specified time, full particulars of the extent of loss or damage, proof of the value of the property and if it is completely destroyed, proof of its existence.

Delivery of all these details to the company is a condition precedent to the claim of the assured to recover the loss. If the assured prefers a fraudulent claim, whether for whole or part of the policy, he would forfeit all benefits under the policy, whether or not there is a condition to this effect in the policy. Generally, the fraud consists in over -valuation, but over-valuation due to mistake is not fraudulent. In a majority of fire insurance claims, the expert assessors of the company are able to arrive at mutually acceptable valuation.

MISCELLANEOUS OR LIABILITY INSURANCE

'Miscellaneous Insurance' refers to contracts of insurance other than these of Life, Fire and Marine insurance. This branch of insurance is of recent origin and it covers a variety of risks.

1. Personal Accident Insurance - This means insurance for individuals or groups of person against any personal accident or illness. In India this type of insurance is done by the General Insurance Corporation. The risk insured in personal accident insurance is the bodily injury resulting solely and directly from accident caused by violent, external and visible means.

2. Property Insurance - Property risks relate to burglary, house breaking, theft, crop insurance, etc. Any property, movable or immovable, present or future, vested or contingent can be insured from my losses by accidents other than fire and marine adventure. The most popular in this branch is burglary insurance.

3. Liability Insurance - Just as a person can insure himself against the risk of death and personal injury, or damage, determination or destruction of property, there can also be an insurance against the risk of incurring liability to third parties. The risk of liability arising out of the use of property comes under the category commonly called "liability insurance". It includes --

i. Public Liability Insurance: That is, insurance against a liability imposed by law. For example, a house owner may obtain an insurance against his liability to invitees or licensees, arising from body injury or damage to property.

ii. Professional Negligence Insurance: These policies give professional indemnity cover to accountants, solicitors, lawyers, from any loss or injury due to any negligence in the conduct of their professional duties.

iii. Compulsory Insurance: The ESI Act makes it compulsory for the employers (covered under that Act) to insure their workmen by providing certain benefits to them in the event of their sickness, maternity and employment insurance. The employees insured are entitled to (a) Sickness benefit, (b) Maternity benefit, (c) Disablement Benefit, and (d) Dependent's benefit.

iv. Employer's Liability Insurance: The liability of an employer under the modern labor laws, has considerably extended and the employers are tempted to take out insurances against such liabilities. For examples, when the employees retire, substantial amount become immediately payable by way of gratuity, commuted pension, leave salary, compensation, etc. and also the uncommitted pension becomes payable in future. Employers often take insurance policies which assure payment of such amounts, as and when these becomes payable.

v. Guarantee Insurance: The main types of policies included in guarantee insurance are a) insurance for performance of contract, policies, the guarantor / underwriter insures the promisee or employer against the loss arising by non-performance by the promisor or the dishonesty of the employee.

Fidelity policies are the most common type of guarantee policies, taken under contracts of employment where the employee has an opportunity to be dishonest. Such policies cover the risk of losses arising by theft or embezzlement of money or securities, or by fraud, on the part of employees.

4. Motor Vehicle Insurance - A policy for motor vehicle insurance is, ordinarily, a combined insurance against the damage to the motor vehicle and its accessories, death of or injury to the, occupant of the vehicle and also against the risk of liability for injury to, or the death of, third parties caused by the driver's negligence.

KIND OF INSURANCE POLICIES

Characteristics of various types of insurance policies, prevalent today are:

1) SHOPKEEPER'S INSURANCE POLICY

This is most comprehensive policy that covers almost every risk. The insured may not, however, opt for all risks except -those compulsory. The risks covered are :

a. Fire and Allied Perils: The insurer will indemnify in respect of loss of or damage to the building and / or contents whilst contained in the insured premises, by--

i. Fire, lightning, explosion of gas in domestic appliances,

ii. Bursting and overflowing of water tanks apparatus or pipes,

iii. Aircraft or articles dropped there from,

iv. Riot, strike or malicious act,

v. Earthquake, subsidence and landslide,

vi. Flood, inundation, storm, tempest, typhoon, hurricane, tornado or cyclone,

vii. Impact damage.

It, however, does not cover loss of or damage to livestock, motor vehicles, pedal cycles, money, securities, stamps, bullion, deeds, bonds, bills of exchange, promissory notes, stock and share certificates, business books, manuscripts, documents, unset precious stones and jewelry and valuables.

Average Clause - If the sum insured under this risk is less than 85% of the collective value of the property insured, the insured will bear a ratable proportion of the loss

b) Burglary and House breaking: The insurer will indemnity in respect of loss of or damage to the contents (except moneys and valuables) whilst contained in the insured premises by burglary and / or house - breaking.

c) Money Insurance: the insurer will indemnify in respect of --

i. Loss of insured 's money in transit between any two places within a radius of fifteen miles from he insured premises,

ii. Loss of money / valuables kept in safe steel cupboards/ cash box, etc. under lock and key, by burglary / housebreaking, and

iii. Loss of money from cashier’s till and / or counters during business hours, following assault, violence against the insured or his employee.

d) Neon Sign / Glow sign: the insurer will indemnify in respect of loss of or damage to Neon sign / glow sign, by

i. Accidental external means,

ii. Fire, lightning or external explosion or theft,

iii. Riot, strike or malicious act,

iv. Floods, Inundation, storm, typhoon, hurricane, tornado or cyclone.

e) Personal Accident: If the insured (or any named partner, director of member of managerial staff or employee permanently working with the insured) aged between 16 and 65 years, sustain bodily injury solely and directly caused by accidental, violent, external and visible means resulting in death or disablement, the insurance company shall pay to the victim or his assignee / legal representative, the specified sum.

f) Fidelity Guarantee: If the insured sustains direct pecuniary loss caused by act of fraud or dishonesty committed by any of his employees in the insured premises, the insurer will indemnify in respect of such loss.

g) Liability: The insurer will indemnify in respect of sums which the insured becomes legally liable to pay as

i. Compensation and litigation expenses incurred by the insured , in connection with accidental death of or bodily injury to any person other than an employee, and / or accidental damage to property caused by or through the fault or negligence of the insured or his family member,

ii. Compensation to the insured employees under the Fatal Accident Act/ Workmen's compensation Act,

h) Business Interruption: The insurer undertakes to indemnify for losses arising out of business interruption i.e. cessation of normal commercial activity on account of or as a direct result of fire and allied perils (covered in clause "a" above)

2) FIRE POLICY "A"

Under this policy the insurer undertakes to indemnify in respect of any loss of, or damage to, the property insured, caused by --

a. Fire

b. Lightning

c. Explosion / Implosion excluding damage to boilers, economizers or other vessels in which steam is generated,

d. Riot , strike and malicious damage,

e. Impact damage by any rail/road vehicle or animal,

f. Aircraft and other aerial and / or space devices and / or articles dropped there from,

g. Storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation,

h. Subsidence and landslide ( including rockslide) damage,

i. Earthquakes fire and shock.

3) FIRE POLICY "B"

This policy is similar to Fire Policy "A" and provides insurance from all risks enumerated therein except subsidence, landslide and earthquake.

4) CONTRACTOR'S ALL RISKS INSURANCE POLICY

This policy provides insurance against -

a. Loss, damage or destruction of property insured in a manner necessitating replacement or repair,

b. Cost of clearance and removal of debris.

The risks covered under the policy are -

I. Earthquake -- fire and shock,

II. Landslide / Rockslide / Subsidence,

III. Flood / Inundation,

IV. Storm / Tempest/Hurricane /Typhoon /Cyclone,

V. Collapse

VI. Water damage in contracts involving work in rivers, canals, lakes or sea.

c. Liability for accidental loss or damage caused property of other persons or for fatal or non-fatal injury to any person other than the insurer's own employees or the employees of the owner of the works or premises.

d. Cost and expenses of litigation recovered by any claimant from the insured or incurred by the insured.

5) MOTOR CAR INSURANCE POLICY

This policy covers the same risks as stated under "Motor Cycle / Scooter Insurance Policy' in respect of cars used solely for private or professional purposes.

6) COMMERCIAL VEHICLES INSURANCE B POLICY

This policy covers the same risks as stated under "Motor Cycle / Scooter Insurance Policy', in respect of motor vehicles used for carrying goods.

7) PERSONAL ACCIDENT INSURANCE POLICY

Under this policy the insurer pays the specified sum, if the insured sustains any bodily injury resulting solely and directly from accident caused by external violent and visible means.

Is motor car insurance compulsory in India?

Under the provisions of Motor Vehicles Act all the vehicles which are plying in public places shall have at insurance policy at least to cover third party liability as specified under the Act.

What types of policies are available for motor vehicles?

There are two types of policies available for motor vehicles - third party insurance -policy A and comprehensive insurance policy- policy B.

What is the difference between these two policies?

Third party insurance policy covers only the inter-alia liability of the vehicle owner for loss or damage to life or property of the third parties whereas comprehensive insurance policy covers in addition to third party liability, loss or damage to the vehicle itself by way of accident, theft, etc and specified perils.

Whether the insurance premiums are same or different amongst four Indian companies?

The premium rates for motor vehicle insurance in India are governed by Tariffs which is same for all the companies operating in India.

For what value the car is to be insured - Depreciated value or reinstatement value?

The car is neither to be insured for reinstatement value nor for depreciated value. It is to be insured for second-hand value in the local market for a similar type of car for a similar model. In the event of loss, the liability of insurance company is the maximum compared to the market value or the amount of insurance whichever is less.

What factors influence the premium for car insurance?

The cubic capacity, use of car, normal area of operation and the value of car proposed for insurance decide the premium payable and also various extensions opted for.

How much would the insurance company pay in the event of an accident?

In case of an accident, the insurance company pays for cost of damaged parts which are replacing and the labour cost to repair the vehicle. As per the revised regulations, depreciation is not deducted from the cost of the parts except for the tyres and tubes for which 50 percent depreciation is deducted.

What are the different types of covers that are granted under Motor Insurance?

There are two types of insurance cover for each class of vehicles:

“A” Policy:

This covers the insured’s liability to third parties for death and bodily injury caused by an accident involving the motor vehicle. This refers to the minimum risks that are to be covered under the Motor Vehicles Act 1938 (Act Liability).

“B” Policy:

Is wider in scope and covers not only accidental damage to the insured’s own vehicle, but also liability to third parties for bodily injury and / or property damage caused as a result of an accident involving the insured vehicles (Own Damage Losses and Act Liability). The policy can also be extended to cover additional liabilities (as provided in the Tariff)

What briefly is the risk covered under the Own Damage Policy?

The insurance company will indemnify the insured persons against loss or damage caused to the insured vehicle by any of the following:

fire, explosion, self ignition or lightningburglary, housebreaking or theftriot and strikeearthquake (fire and shock damage)flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost,accidental external meansmalicious actwhile in transit by road, rail, inland waterway, lift, elevator or airland or rockslide

What are the risks covered under Third Party Policy?

The insurance company covers any amount which is legally required to be paid by the insured person, to third parties on account of their death, bodily injury or damage to their property arising out of the use of the insured car. The insurance company also indemnifies the legal costs and expenses incurred by the claimant, if the insured becomes legally liable to pay them.

The insurance company will further indemnify any legal liability payable by the insured to the occupants in the car (insured vehicle) provided they are not carried for hire or reward and are not employees / family members of insured. The indemnity under this policy is available to any driver who is driving the car if he has been permitted to do so by the insured and provided such driver does not have any other similar cover.

What is the significance of a certificate of Insurance?

The Certificate of Insurance issued by the insurers in relation to every vehicle is the only evidence acceptable to the police authorities to show that valid insurance exists. This document has to be produced when demanded by an authorized police officer.The Certificate of Insurance cannot be backdated. Hence, if a Policy is not renewed on or before the expiry date, the Certificate of Insurance in respect of new Insurance will be effective only from the date of New Insurance. For every renewal, a fresh certificate must be obtained. If there is any alternation in the risk during the currency of the insurance, the old certificate should be surrendered and a fresh one to be obtained. Duplicate Certificate in lieu of defaced, mutilated or lost certificates can be obtained on payment of prescribed fee and after production of an affidavit to that effect.

What is expected of the insured in the event of an accident involving damage to the vehicle and/or injury to third party?

Damage to the Vehicle:

When an accident takes place, a report should be immediately filed with the insurance company and a set of claim forms submitted to them. An estimate for repairs and/or replacements has also to be prepared and submitted. The insurance company may then appoint an independent Surveyor who will also value the damage and hold discussions with the repairers and arrive at the amount at which the claim will be settled.

On completion of the survey, the repair work can be undertaken. When the relevant bills are produced, settlement will be made under the Policy. The claim amount may be paid either directly to the repairer or to the Insured if the latter has already made payment to the repairer and holds proof of the same.

In case of settlement of claim either for total loss of the vehicle or for replacement of certain items, such damaged vehicle or parts belong to the insurance company. They may arrange for disposal of the same in the best manner possible.

Death or Injury to Third Party:

The moment an accident takes place and a third party is involved, a report should be immediately filed with the police. Simultaneously, notice should be sent to the Insurance Company.

No settlement should be made with the third parties for any compensation to the latter and no commitment should be entered into with regard to the Insured’s liability with the third parties.

All dealings with the third parties will be only with the knowledge and approval of the Insurance Company. Any claim from third parties will have to be suitably defended in consultation with the Insurance company and expenses for such defense will be payable by the insurance company if incurred with their consent.

MARINE INSURANCE

The contract of marine insurance is generally affected through the agency of insurance brokers employed by the insured. The broker prepares a brief memorandum of the risks to be covered and takes it to a number of individual insurers, called underwriters, each of whom initial the note for the amount he is prepared to underwrite. The document, known as "The slip, " contain information such as the name of the ship, the date of voyage, the description of the risk, the sum insured and the rate of premium. "The Slip" is in practice a complete and final contract. However, a contract of marine insurance must be embodied in a marine policy in accordance with the Act.

KINDS OF MARINE POLICIES

The document containing the terms and conditions of the contract is called the Marine Policy. It must contain the names of the assured and the insurer or insurers. The subject-matter insured and the risk covered the voyage or period of time or both and the sums insured. It must be duly signed by the insurer and stamped under the Stamp Act, 1899. The Marine Insurance Act deals with the following types of policies:

Voyage Policy

When the contract is to insure the subject matter at and from one place to another, the policy is called a "Voyage policy". In this case the risk attaches only when the ship starts on the voyage.

Time Policy

Where the subject -matter is insured for a definite period of time, it is called a "Time Policy. The ship may pursue any course it likes; the policy would cover all the risks from perils of the sea for the sated period of time. A time policy cannot be for a period exceeding one year, but it may contain a continuation clause.

Mixed Policy

It is a combination of voyage and time policies and covers the risk during particular voyage for a specified period of time.

Valued Policy

It is a policy, which specifies the agreed value of the subject-matter insured. If there is no fraud or miss-representation, the value in a valued policy is conclusive as between the insurer and the insured, whether the loss is partial or total.

Open or Un-valued Policy

In this policy the value of the subject-matter insured is not specified. Subject to the limit of the sum assured, it leaves the value of the loss to be subsequently ascertained.

Floating Policy

The practice of taking out floating policies has come in vogue because of the difficulty of knowing by which ship or ships the goods are to be shipped. Such a policy therefore only mentions the amount for which the insurance is taken out and leaves the name of the ship(s) and other particulars to be defined by subsequent declarations.

WARRANTIES

A warranty in a contract of marine insurance is substantially the same as a condition in a contract of sale of goods. It gives the aggrieved party the right to avoid the contract. A warranty may be express or implied. These are discussed below in brief:

Express warranties

An express warranty is one, which is expressly stated in the policy of insurance it must be included in or written upon the policy. There is no limit to the number of express warranties, but those generally included in a marine policy are that the ship is seaworthy on a particular day, that the ship will sail on a specified day, that the ship will proceed to its destination without any deviation and that the ship is neutral and will remain so during the voyage.

Implied Warranties

Implied warranties are conditions not incorporated in a policy but assumed to have been included in the policy by law, custom or general agreement. These warranties are:

a. Seaworthiness: A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the sea or the adventure insured. This warranty attaches only up to the time of the sailing of the ship. In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure. In a voyage policy where the voyage is to be performed in stage, the ship must be seaworthy at the commencement of each stage, it must be fit to encounter the ordinary perils of the part and if the voyage policy is on goods, it must be fit to carry the goods to the destinations contemplated by the policy:

b. Legality of the Voyage: There is an implied warranty that the adventure insured is a lawful one and that the adventure shall be carried out in a lawful manner.

c. Non -deviation: The warranty that the ship shall not deviate from its prescribed. Usual or the customary route is also an implied warranty. The risk does not attach if the places of departure or destination of the ship are hanged, or if the ship takes the ports of call by an order different from the one mentioned in the policy. The insurer is discharged from his

liability as from the time of deviation, and also if there is unreasonable delay is excused under certain circumstances.

ASSIGNMENT OF POLICY

A marine policy is assignable by endorsement, or in any other customary manner, and the assignee can sue on it in his own name subject to any defense which would have been available against the person who affected the policy. The assignment may be made either before or after the loss, but an assured who has parted with or lost his interest in the subject-matter insured cannot assign.

Loophole:

Loophole means a way of escaping a difficulty, especially an omission or ambiguity in the wording of a contract or law that provides a means of evading compliance, or simply we can say loophole means an ambiguity (especially one in the text of a law or contract) that makes it possible to evade a difficulty or obligation;

Contract - a binding agreement between two or more persons that is enforceable by law.

Ambiguity - an expression whose meaning cannot be determined from its context.

As for as insurance is concern we have seen many cases of loophole while a person escape from law (especially insurance law) by cheating.

Home Insurance Loopholes - You May Not Get What You Think You're Paying For:

If you have home insurance, it is likely that your plan is a standard one that resembles most home insurance plans around the country. Generally, it will most likely cover structural damage to your home and other structures on the property (such as a shed or garage), personal injury liabilities you incur if someone is hurt on your property, damage to objects you store in your home, and extra costs of living that you might incur if your home becomes uninhabitable.

These basic home insurance plans, however, are not without loopholes. Certain events that may fall under one of the categories listed above may not be covered if the cause is one that the insurance company specifically excludes.

Unfortunately, most people are unaware of home insurance loopholes until it's too late and they are trying to get reimbursement for a claim.

Some Common Home Insurance Loopholes

A common loophole in your home insurance plan has to do with structural damage caused by termites.  Perhaps you just learned that the foundation of your home has been destroyed by termites and needs to be replaced.  Most insurance companies will not cover this because the termites were most likely there before you purchased your home.

Another loophole has to do with coverage of your personal belongings.  You need to make sure that your home insurance policy covers personal effects in the first place.  Many policies do not.  Even if your homeowner’s insurance policy does cover personal property, people who have lost everything due to a disaster are shocked to find that the insurance company will not reimburse them because they could not produce receipts for their personal property. Sometimes the home owner did have receipts, but the receipts were destroyed along with the home.

Insurance Jargon Explained

1. Excess

A technique used to bite you where it hurts just after the ceiling comes down… You have an excess of Rs.5000 on some of your policy but Rs.12500 on other parts… watch out for different excesses on different parts of your cover! Also used to keep the price low. Go to a price comparison site (you know the ones!) and look for the lowest price… check what excess it has then go to the site… is it still the same?

2. Premium

Once this used to mean the correct payment to cover your risk, now it just means price!

3. Comprehensive Cover

Comprehensive. It’s just a word… this sort of cover doesn’t cover a lot of things … “acts of God” for example, and “Riots and civil commotion”. That’s because insurance companies are not prepared to go bust just to make a point. The onus is on you to check what is covered.

Also watch out for little things like spectacles cover on your home policy or how much your stereo is covered for on your motor policy… Some companies give you a very low level of cover for this sort of thing and you need to get it right. After all, ever tried getting a new car stereo in your Merc for Rs.3500?

4. Continuous Authority

A good one to watch out for, this means they will just carry your policy on at renewal instead of cancelling it, so you had better tell them if you want them to stop taking your cash. A phone call should do, though, even after renewal they will still let you cancel so long as you call in the first few weeks.

5. The FSA – Financial Services Authority

The theory is the FSA are there to protect the consumer. It’s a big job though. I mean, really big! So the FSA are trying hard but you shouldn’t expect them to save you the bother of being careful on your own behalf!

6. Assumptions

Assumptions are a tactic used by many insurers to keep their headline premium low… they may “assume” you have thirty grand of contents or that your house is not near water or near a tree. They may also assume your car has never been modified and that you have never had a speeding ticket.

The thing is, they don’t expect you to accept their assumptions. You are still legally required to declare all these things to them, so you had better keep an eye out for what they assume because if you don’t correct them you will get a nasty surprise when you come to claim!

7. The Loss Adjuster

This fellow may come to see you when you make a claim – his sole purpose is to keep the cost of the claim as low as possible.

These guys always know where you can buy a genuine Picasso for a fiver! Be careful not to upset one, make them tea and co-operate because it’s like having the Customs men round. You are in their hands.

8. Protected NCD

Means you don’t take a step back from your full NCD if you have to make a claim. The question is:- how often do you claim and how much does it cost? It’s worth looking back over your last 10 years record to work out whether you are going to benefit.

9. Comparison Sites

These advertise on the TV and it looks perfect. You enter one quote and get 30 prices. The trouble is, the prices often change when you click any of the links. You get to the insurer’s site and the premium goes up, up and away! So… do they live up to the hype? Not yet, says InsuranceStall!

Insurance bad faith

Insurance bad faith refers to a claim that an insured person has against an insurance company for bad acts. Under the law of nearly every U.S. jurisdiction, Insurance companies owe a duty of good faith in dealing with the persons they insure. If they violate that obligation, many states allow the insured person (or "policyholder") to sue the insurance company.

Claims explained – The Top 5 Loopholes

1. What’s it worth?

Meet the Loss Adjuster. She’s a normal person. Usually they work for specialist Loss Adjuster companies so you might meet the same fellow irrespective of who the insurer is.

Loss adjusters look and act like normal people. At Insurance Stall we used to live next door to one.The only difference is a loss adjuster always knows a place you could get that Moorcroft vase replaced for £25.

She also knows a dealer on the Portobello Road who can replace your chandelier for a fiver. She can basically always knock down the cost of your goods, and if the Insurer wants to offer you a cheque for the lot, her job is to keep that cheque down to a minimum.

2. Who is managing the repair?

An innocent enough question, you may think. It’s the insurance company, right?

Not always, sadly.

Many insurance companies offer a full service. You call them up with your claim and they get someone over immediately who organizes all the workmen and everything gets moving.

Many other companies, however, will just send you a claim form and leave the rest to you. Let me tell you if your ceiling has caved in and you need a plumber, a builder and an electrician in the next 24 hours; you may need to have crossed paths with a dozen black cats to make this happen. You may also need a copy of the Yellow Pages and a lot of 20 pence pieces…. Well, you get the idea. In short, it may be wiser to find out which type of company you are dealing with before you hit “Buy Now” button.

3. “It’s not covered”

Often people find this out when they want to make a House claim. Let’s say your spectacles got damaged when the roof fell in. No problem if you added spectacles cover but usually spectacles are not covered in the base policy.

You only find out when you claim. For Motor it can be even worse. Your car is stolen with your camcorder in the boot but when you claim for the cam they say “it’s not covered, you should claim for that on your House policy” and then you go back and, may find it’s not covered there either.

4. “That’s a high risk item!”

When you buy your House cover look really carefully to see what they call a high risk item. Almost every company seems to differ. At one company a high-risk item can be anything over Rs.200, 000 at another it’s anything that is highly prices AND easy to steal, so your piano doesn’t fall into that category.

5. Collections

This is a great one. So, you have a couple of hundred CD’s and some kid comes along and steals the lot. Are they covered? Well, at some companies they will only be covered if you declared them as a collection when you bought your policy. Do you think the sales agent point that out and asks how many CD’s have you got? Not always.

Life InsuranceLife insurance contract may be defined as the contract, whereby the insurer in consideration of a premium undertakes to pay a certain sum of money either on the death of the insured or on the expiry of a fixed period whichever is earlier. The definition of Life insurance contract is explained in Insurance Act, 1938 by including annuity business.

Features of Life InsuranceIn Life Insurance and in accident insurance, the principle of indemnity is not involved, the value of life is in capable of estimation and except in a limited sense cannot ‘be made good’ by insurance. Therefore, Life Insurance is not a contract of indemnity. There is no question of actual loss in it. Consequently the question of proof of actual loss does not arise, whether the assured suffered any financial loss or not. The insurer must pay the policy amount on the maturity of the policy. A person can take any number of policies of any amount on his own

life.There is no limit in law. In life Insurance policy, the insurer has to pay the insured amount one day or other, because the death of assured or his attaining a particular age is certain to happen.

Kinds of Life PoliciesThe life insurance contract provides elements of protection and investment. After getting insurance, the policy - holder feels a sense of protection because he shall be paid definite sum at the time of death or maturity.The life insurance policies can be divided on the basis of1. Duration of Policy2. Method of Payment of Premium3. Participation in profit4. Number of lives covered5. Method of Payment of Claim amountThe life insurance policies according to the duration may be wholelife policy and term Insurance policy

1.Whole Life PolicyIn whole life policy the sum assured is payable to the legal heir only on the death of the assured. It is to protect and support the family of the assured after his death. Under this scheme, premium may be payable throughout the life of the assured or for a limited number of years.

2. Term PolicyThis policy covers the risk only, during a particular period. The sum assured is payable only if death happens during the term. Under this policy premium rate is lower than any other policy. Nowadays in order to attract more people, policies are issued with the condition that the premium paid will be returned after the term is over, if death does not occur.

3. Policies according to payment of PremiumThe policies according to the payment of premium may be of the following types are: Single Premium policy and Limited payment whole life policy.4. Policies according to participation in ProfitsPolicies according to participation in profits may be Without profit policies, With profit policies.

Nomination

A policyholder would like that in the case of the death, the policy money should not be held up for want of succession certificate or letters of administration. This would take much time and cost. This problem can be solved by effecting nomination or assignment of life insurance policy in the name of any one in his family or relatives. Section 39 of the Insurance Act, 1938 has regulated nomination of life policies to enable the policyholder to

seek prompt payment of claim in the event of his death. According to Section 39 of the Insurance Act, 1938, nomination is the process of appointing or nominating a person or persons by the insured, to receive the payment of the policy, in the event of death. The person who is authorized to receive the payment of the policy is called nominee. If the policy matures by expiry of time, the policy amount is payable to the insured himself and not to the nominee. The nomination can be done only by the insured. If a policy is insured on the life of another person on a proposal made by a third person, such a proposer is not entitled to make a nomination. It enables the insurer to know in advance to whom he should make the payment of claim in the event of death of the insured. Further, the nominee need not obtain a letter of administration from the court to claim the policy money.

Real Life Cases:

Ms. Natasha Derek vs. her relative

Real facts of the case

The case of Ms. Natasha Derek and her relative. She says; my car was hit by a relative when it was parked in my driveway. This relative doesn't carry any insurance on her car. So, I have filed the claim with my insurer. They now want me to pay the Rs.40, 000 deductible. This is quite a big amount for me and I wasn't at-fault. Can I avoid paying this high deductible? Can I sue my relative who doesn't have a carrier?

Solution to the case:Her 'relative' of course should've made some attempt to take care of these damages. But actually, she simply stands two chances either pay high deductible and low premium or low deductible and high premium. She has agreed upon paying the deductible at the time of signing for the policy and the policy premium was decided accordingly. IMO, if the damage is worth less than Rs. 40, 000 then she better pay it personally. These small claims may upset her future premium rate too. Therefore, she is legally bound to pay the deductible for the damages and her carrier will pay the rest amount.

Case of Atal Yassenzai Vs. an insurance company

Atal Yassenzai says; if the insurance company is putting stress on me and withholding information from me, it was their client who hit my vehicle he was cited a ticket. For being left of center he was flying down the road in a double yellow zone traffic was stopped 2 lanes and he had to go around them in order to hit me. He has a witness and he and his so called witness are saying that I pulled out of a lot that I was never in. Lucky for me I kept my proof of purchase and they even have me on camera with the traffic stopped. Anyway his insurance company is treating me like I am a criminal and will not tell me anything which in turn is really stressing me out. So can I sue if I want to .I did try to be nice but his agent really makes me angry and stresses me out. I am just worn out from dealing with her.

Solutions to the case:

Stop talking to the insurance adjuster who is stressing you out. You are under no legal obligation to communicate with him/her. All information they need, they can obtain from the crash report. Further, they are under no obligation to tell you anything since you are not their client. Deal with your own insurance company and let them handle it on your behalf; that's why you pay them.

As far as suing them probably not, because you have no element of damages unless communicating with them has sent you to the doctor with stress-related issues and you're on medication, simply saying "it stresses me out" will get you nothing. In most cases you can only sue the person that hit you, the insured. The insurance company hires a lawyer to defend them, and then pays any settlement or verdict. Some places allow you to sue the insurance company directly for negotiating in bad faith. For example: a person rear ends you, the cops show up and cite the person, and you have 4 crore in med bills and the insurance company offers you $5. Then you could sue the person that hit you and the insurance company (for bad faith).

Bibliography & Web resources;

1. www.dwrInsurance.com

2. www.bogoroch.com

3. www.ampminsure.com

4. www.google.com

5. Business Law book “ Nabhi Publication”

6. AIR Book “ All India Reporter” Aug 2008