GENERAL PRINCIPALS

Indemnity
Purpose: Prevents insured from profiting from events like fires or accidents.
Basis: Relies on financial evaluation of loss; not applicable in cases of life and disablement due
to inability to quantify losses precisely.
Limitations: Insurance may provide less than complete indemnity but not more. For example, in
a car insurance scenario, the insurer pays based on the current value of the car, not necessarily
the insured amount.
Definition:
“financial compensation sufficient to place the insured in the same financial position after a loss
as he enjoyed immediately before the loss occurred.”
Modern Policy Types Deviating from Indemnity Principle:
o Agreed Value Policy: Insurer agrees to accept the insured property's stated value in the
policy as the true value. It used for valuable items like art, jewelry, vintage cars, etc.
o Reinstatement Policy (Fire Insurance): Insured required to insure property for its current
replacement value. Insurer agrees to replace damaged property with a new one or pay for
full replacement in case of total loss.
Exceptions to Strict Indemnity Principle:
o Life and Personal Accident Policies: No financial evaluation possible.
o Insurance Policies: Subjected to strict indemnity; courts uphold this principle even if not
explicitly stated in policy documents.
Methods of Providing Indemnity:
o Cash Payment: Majority of claims settled through cash payments, directly to the insured
or third party in liability claims.
o Repair: Insurer authorizes garages to repair damaged vehicles, reducing costs.
o Replacement: Less preferred method, used in glass insurance or jewelry loss where
agreement on true value is lacking.
o Reinstatement: Rarely used in property insurance, as insurer undertakes to restore
damaged property to original condition. It involves inherent difficulties and high costs.
Limitations on Insurer's Liability:
o Maximum Amount Recoverable: Limited to sum insured mentioned on policy, not the
agreed value.
 o Condition of Average: If insured underinsures property, insurer's liability is
proportionally reduced based on sum insured and actual value.
Formula: Claim = Loss X (Sum Insured / Market Value)

Subrogation
Subrogation in insurance is a legal right of the insurance company to legally pursue a third-party
responsible for the damages/insurance loss caused to the insured. Subrogation is done to recover
the claim amount insurance company pays to the insured for the damages.
Purpose of Subrogation:
o Ensures insured doesn't profit from loss; maintains financial equilibrium.
o Allows insurer to recover from third party after indemnifying insured.
o Prevents insured from gaining more than indemnity.

Legal Basis:
o Originates from principle of indemnity in insurance contracts.
o Casletlan v Preston (1883) 1 judgment highlights subrogation as tool for enforcing
indemnity principle.
Scope:
o Not applicable to life and personal accident insurance, as they're not indemnity contracts.
o Legal heirs can pursue separate claims in addition to policy proceeds.

Mechanisms of Subrogation:
o Tort: Insurer entitled to recover indemnity paid from negligent third party.
o Contract: Insurer assumes contractual compensation rights of insured.
o Statute: Some laws permit insurers to recover damages from government agencies.
o Subject Matter of Insurance: Insurer's right to salvage property to prevent over-
indemnification.
Timing of Subrogation:
o Common law: Right arises after insurers admit claim and pay it.
o Policy Condition: Insurers include subrogation clause before claim settlement, allowing
them to pursue recovery from third party pending indemnity.
Significance:
o Prevents negligent parties from escaping liability due to insurance coverage.
o Insurers exercise rights on behalf of insured, with insured's cooperation.
 o Insured's duty to assist insurers in enforcing claims and not take actions detrimental to
recovery efforts.
1. The house in question was insured against fire, ensuring that if a fire caused damage to the
property, the insurance company would cover the costs. However, before the sale of the house
was finalized, a fire occurred, damaging the property. Despite this setback, the sale of the house
proceeded, and the owners received the full purchase price from the buyer. Unaware of the
pending sale, the insurance company paid the owners for the fire damage suffered by the
property. Subsequently, upon learning about the completion of the sale, the insurance company
sought to recover the amount it had paid to the owners. This desire to recoup the funds disbursed
for the fire damage stems from the principle that insurance policies are designed to provide
compensation for actual losses incurred, rather than to generate profit for the insured parties.
This legal process, where the insurance company pursues reimbursement from the responsible
party, is known as subrogation. In essence, the insurance company aims to ensure that it only
covers the genuine losses suffered by the insured, without enriching them beyond their actual
damages.

Contribution
An individual may have more than one policy on the same property and in case there was a loss
and he were to claim from all the Insurers then he would be obviously making a profit out of the
loss which is against the principle of Indemnity. To prevent such a situation the principle of
contribution has been evolved under common law.
Definition:
o Right of insurers who paid a loss to recover a proportionate amount from other insurers
liable for the same loss.
o Insured can recover full loss within the sum insured from any insurer.

Conditions for Contribution:

o Existence of two or more indemnity policies.
o Policies covering a common interest.
o Policies covering a common peril causing the loss.
o Policies covering a common subject matter.
o Policies in operation at the time of loss.

Policy Overlap:
Policies need not be identical but should have an overlap in subject matter and covered perils.
Operation of Contribution:
o Common law allows insured to recover from any one insurer, who then recovers
proportionate amounts from other insurers.
o Insurers may modify common law by including a clause stating they will only pay their
rateable proportion of the loss.
For example, in a claim of Rs.6000, if insurers A, B, and C are liable in proportion 1:2:3, A pays
Rs.1000, B pays Rs.2000, and C pays Rs.3000.
Formula: Sum assured with a particular insurer (Actual loss / Total sum assured)
*Not applicable on life insurance policies
Considerations:
o Drawback of simplistic method: Policies may have different terms and conditions.
o Terms like average clause or excess clause may affect contribution share.
o Claims should be assessed based on individual policy terms to ensure fair distribution of
liability.
o If total liability of insurers exceeds claim amount, insurers pay in proportion to their
individual liabilities.

MARINE INSURANCE
Marine insurance, tracing back to ancient Babylonian records and the Code of Hammurabi
around 2250 B.C., finds its roots in practices like Bottomry. The first documented marine
insurance agreement dates to October 13, 1347, in Genoa, with legal regulation established there
in 1369. These early practices laid the foundation for structured risk management in maritime
trade.

Meaning:
A contract where the insurer indemnifies against transit losses.
Can extend to cover losses on inland waters or land risks incidental to sea voyages.

Features:
i. Offer & Acceptance:
Prerequisite for contract; insurance coverage begins upon acceptance.
ii. Payment of Premium:
Premium must be paid in advance; dishonored payments void coverage.
iii. Contract of Indemnity:
Insurer liable only for actual loss suffered; no payment if no loss.
iv. Utmost Good Faith:
Insured must disclose all relevant information; non-disclosure may void policy.
v. Insurable Interest:
 Coverage valid if insurable interest exists at the time of loss.
vi. Contribution:
If insured with multiple companies, loss is shared proportionately.
vii. Period of Insurance:
Policy duration typically matches transit time; usually not exceeding one year.
viii. Deliberate Act:
Damage or loss due to deliberate acts of the owner not covered.
ix. Claims:
Owner must inform insurer immediately to initiate claim process.
These principles govern marine insurance, ensuring clarity and fairness in coverage and claims
settlement.

Types of MI
Based on coverage area –
1. Cargo insurance:
Covers Cargo owners’ loss or damage to goods during transit by rail, road, sea, or air.
It applies to:-
i. Export and import shipments by ocean-going vessels.
ii. Coastal shipments by steamers, sailing vessels, mechanized boats, etc.
iii. Shipments by inland vessels or country craft.
iv. Consignments by rail, road, or air and articles sent by post.
2. Hull insurance:
Hull insurance deals with the insurance of ships, including hull and machinery.
3. Liability Insurance:
o Covers financial liability of the insured person.
o Primarily addresses liabilities arising from damages or injuries to third parties.

Example: A passenger on a cruise ship slips and falls, sustaining injuries. Liability insurance
would cover the cruise company's financial responsibility for the passenger's medical expenses
and any legal claims resulting from the incident.
4. Freight Insurance:
 o Covers liability of shipping companies or logistics providers.
o Addresses damage or loss to shipments during transit due to events beyond the company's
control.
Example: A shipping company transports a cargo of electronics overseas, but the ship encounters
a severe storm resulting in damage to the cargo. Freight insurance would cover the shipping
company's liability for the damage caused to the cargo during transit.
1. Voyage Policy:
Covers losses during a specific voyage, expiring upon reaching the destination. Insurer not liable
if ship unseaworthy or it deviates from course
Example: A small exporter occasionally ships goods by sea for specific orders. For each
shipment, they purchase a voyage policy to cover potential losses during that particular voyage.
2. Time Policy:
Issued for a fixed period, providing coverage for any number of voyages during that time.
Example: A shipping company secures a one-year time policy to cover their fleet for multiple
voyages over the course of the year.
3. Mixed Policy:
Combination of voyage and time policies, offering coverage for a specific voyage and a set
period.
Example: A shipping company obtains a mixed policy to cover a particular voyage and maintain
continuous protection for a defined timeframe.
4. Blanket policy
Insurance taken for fixed amound for a given time and pplace. Whole premium is paid in lump-
sum.
5. Single Vessel or Fleet Policy Policy:
Insures only one specific ship or Covers multiple ships of the insured. No time limit.
Example: A ship owner obtains a single vessel policy to protect their primary ship during its
voyages.
6. Unvalued Policy:
Does not assign a value to the insured property upfront; valuation occurs after a claim is filed.
Example: A cargo owner opts for an unvalued policy, where the value of the cargo is determined
only after a claim is made based on invoices or estimates.
 7. Valued Policy:
Specifies the value of the insured property at the time of policy issuance, ensuring a
predetermined payout in case of a claim.
Example: A jewelry manufacturer secures a valued policy to protect their inventory, ensuring a
fixed payout regardless of depreciation.
8. Block Policy:
All-risk policy covering various risks during transit, bailment, and on third-party premises.
Example: A furrier obtains a block policy to safeguard their high-value fur inventory from theft
and other risks during transportation and storage.
9. Floating/Open Policy:
Provides coverage for multiple transit journeys until canceled or payment is realized.
Example: A multinational corporation regularly ships goods worldwide. Instead of obtaining
separate insurance for each shipment, they opt for an open policy, ensuring continuous
coverage for all their transit journeys.
10. Currency policy:
Premium calculated in foreign currency, done to fight inflation.
Palmer v. Marshal: If policy states “at and from port” and ship at home port, ship is instantly
covered. If ship at home port them prepration time also included. If at another place
insurance coverage starts from when 1) ship in good safety 2) ship in possession of assured

Insured Perils
§55. Included and Excluded Losses (proximate cause):
o The insurer is liable for any loss that is proximately caused by a peril insured against,
unless the policy states otherwise.
o However, the insurer is not liable for any loss not proximately caused by a peril insured
against.
o Specific exclusions include losses attributable to the willful misconduct of the assured.
o The insurer is not liable for losses caused by delay, even if the delay is due to an insured
peril.
o Exclusions also cover ordinary wear and tear, leakage, breakage, inherent vice, damage
by rats or vermin, and injury to machinery not caused by maritime perils, unless
otherwise specified in the policy.
Canada Rice mills Ltd. v. Union Marine and General Insurance Co. 1941 ACC 55 (PC)
Where on account of rough weather, the ventilators and latches of the had to be closed and this
caused to be rice to be overheated and damaged, the loss was held to be proximately caused by a
perils of the sea.

Decision: for the Plaintiff

Held: Damage caused by preventive actions taken to avoid the incursion of seawater during
severe weather conditions is recoverable as a loss due to perils of the seas. The principle of
proximate cause in insurance law determines that the primary cause of the damage is considered,
not necessarily the last event in time. In cases where deliberate acts, such as scuttling a ship, lead
to loss, it is not deemed a loss by perils of the seas. However, if damage occurs due to necessary
actions to prevent sea-related perils, such as spoiling goods to extinguish a fire, it is considered a
loss due to perils of the sea and is recoverable under insurance policies.

o Marine insurance is a contract between insurer and insured, covering transportation of

goods by various means including ship, rail, road, air, and couriers.
o "Perils of the sea" refer to extraordinary forces of nature encountered during a voyage,
excluding actions resulting from human will.
o Examples of perils of the sea include stranding, sinking, collision, heavy wave action,
and high winds.
o These perils encompass everything that occurs to a vessel during a voyage due to acts of
nature, without human intervention.
o In marine insurance, perils of the sea only cover losses to goods onboard caused by
irresistible natural forces, excluding gradual natural actions on the vessel itself.
o Insurer liability is contingent upon the loss or damage being the direct result of a
fortuitous accident of the sea, such as storms, cyclones, or waves.

§2(e). “maritime 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, pirates, rovers, thieves, captures, seizures,
restraints and detainments of princes and peoples, jettisons, barratry and any other perils which
are either of the like kind or may be designated by the policy;
Types of Perils (Schedule)

cl7. Perils of the seas: The term “perils of the seas” refers only to fortuitous accidents or
casualties of the seas. It does not include the ordinary action of the winds and waves.

cl8. Pirates: The term “pirates” includes passengers who mutiny and rioters who attack the ship
from the shore.

cl 9. Thieves: The term “thieves” does not cover clandestine theft or a theft committed by any
one of the ship’s company, whether crew or passengers.
cl 10. Restraint of Princes: The term “arrests, etc., of kings, princes, and people” refers to
political or executive acts, and does not include a loss caused by riot or by ordinary judicial
process. In 1963 princes were captured from england.

cl 11. Barratry: The term “barratry” includes every wrongful act wilfully committed by the
master of crew to the prejudice of the owner, or, as the case may be, the charterer.

cl 12. All other perils: The term “all other perils” includes only perils similar in kind to the perils
specifically mentioned in the policy.

Other Perils in class notes:

Floundering at sea – ship deviates from course and no news of weareablouts received

Shipwreak – Titanic

Stranding – Ship stranded at sea due to deviation

Collision – collides with other ship or other (including iceberg.)

Other Perils that can be included in Policy

Fire: if damage due to fire or due to water to prevent fire.

War perils: If direct war damage can be included in policy.

Jettiisons: In order to reduce weight of ship consignment thrown overboard.

What is NOT covered

Defect in goods, Death of animal transported due to natural causes, loss by rats or vermin.
Laho Ltd v QBE Insurance (Vanuatu) Ltd [2001] VUSC 130; Civil Case 24 of 2000 (2 April
2001)

Marine Insurance- Seaworthiness- Presumption of loss due to ‘perils of the sea’ if it can be
shown that vessel was seaworthy prior to setting out

The vessel owned by the plaintiff went down with 27 people on board. The events surrounding
the sinking were unknown. The plaintiff sought a declaration that the defendant insurer was
obliged to indemnify the plaintiff in respect of the loss. The vessel was insured for loss due to
‘perils of the sea’.

Decision: Action dismissed.

Held: If it is was known that the vessel was seaworthy when she set out and she disappeared with
crew, then on the balance of probabilities she must have sunk, and on the balance of probabilities
the sinking must have been due to the perils of the sea. If the vessel is not shown to be seaworthy
when she left on her last voyage, the presumption does not apply since it cannot be held on the
balance of probabilities that her presumed sinking was due to perils of the sea rather than to her
unseaworthy condition. The plaintiff was unable to prove on a balance of probabilities that the
vessel was seaworthy when she set out on her last voyage. The court dismissed the action on this
point, but went on to consider the defendant’s other claims.

The non-disclosure of material facts will void insurance coverage where the nondisclosure of the
material fact has induced the insurer to assume the risk. In this case the vessel had taken on water
and there had been substantial work done to the hull after the issuance of the safety certificate
which the insured had supplied to the insurer and before the issuance of insurance. The insured
had also applied to increase the passenger load form 20 to 25 and this also was not known to
insurer. The court found these to be material facts which had not been disclosed to the insurer
and would have voided coverage.

The court also found that the insured had breached express warranties in the policy. The express
warranties must be exactly complied with whether material to the risk or not. In this case the
plaintiffs had not complied with the strict manning of vessel requirements.

MI Act, 1963
§3. Marine insurance defined:
A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the
assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the
losses incidental to marine adventure.
Insurable Interest
Basically, who can get/buy insurance = anyone who has “insurable interest”. Without interest,
policy is void according to §6. of the Act.
PPI (Policy Proof of Interest) clause = Policy itself is proof of Interest.
London Country Commercial Reinsurance office (1922) 127 LT 20.
Detachable PPI clauses were attached to certain marine policies and by the time they became
claims, in some cases the clauses were detached but in others they still formed part of contract.

Decision: Action dismissed.

Held: The first question which arises on these policies is whether the fact that a detachable PPI
clause was gummed on to the policies does not render them void. In my judgement there is no
difference between those policies which still have the PPI clause attached to them and those from
which PPI clause has been detached. The proper time to judge whether these policies are valid or
void is at the time when they are issued. The subsequent tearing off of the PPI clause cannot have
the effect of rendering the policies valid if they were null and void when they were issued. The
statement that the PPI clause should be binding on the insurer in honour only does not affect the
position at all, as even without that statement the clause would not have bound the insurers
in any other way.
§7. Insurable interest defined:
Every person involved in a marine adventure has an insurable interest. A person has an interest in
a marine adventure, if they are related to the adventure or the insurable property at risk, allowing
them to benefit from its safety or arrival, or be affected by its loss, damage, detention, or liability.
§8. When interest must attach:
The assured must have an interest in the subject-matter insured at the time of the loss, but not
necessarily when the insurance is effected.
If the insurance covers something whether it's lost or not, the person can claim even if they got
involved after the loss, unless they knew about the loss when they bought the insurance.
§9. Defeasible or contingent interest:
Both defeasible1 and contingent interests2 are insurable.
For example, a buyer who has insured goods has an insurable interest, even if they could have
rejected the goods due to the seller's delay.
§10. Partial interest:
Any partial interest in the subject-matter is insurable.
§11. Reinsurance:
Insurers have an insurable interest in their risks and can reinsure.
“Original assured individuals have no right or interest in such reinsurance unless specified
otherwise.”
§17. Assignment of interest:

1
In marine insurance, a defeasible interest refers to an interest that may be voided or terminated under certain
conditions. For example, if a buyer purchases goods that are to be shipped but retains the right to reject them upon
arrival if they are damaged, their interest in insuring those goods is defeasible because it could be nullified if they
choose to reject the shipment.
2
A contingent interest in marine insurance is one that depends on the occurrence of a particular event. For instance,
if a buyer has ordered goods from abroad but their payment obligation is contingent upon the safe arrival of the
goods, their interest in insuring the shipment is contingent because it hinges on the arrival of the goods as specified
in the contract.
If the person getting the insurance gives away or sells their interest in the insured item, they don't
automatically transfer their rights under the insurance contract to the new owner, unless there's
an agreement saying they will. However, if the transfer of interest happens by operation of law
(like inheritance), this rule doesn't apply.
§18. Insurable value: How to ascertain the insurable value of the subject-matter insured.
Disclosure and Representations
§19. Insurance is Based on Utmost Good Faith:
o A marine insurance contract relies on utmost good faith.
o If either party fails to uphold this principle, the other party can avoid the contract.

§20. Disclosure by Assured:

o The assured must disclose every material circumstance known to them before the contract
is finalized.
o Material circumstances are those that would influence a prudent insurer in setting the
premium or deciding to take on the risk.
o Circumstances that diminish the risk, known to the insurer, waived by the insurer, or
covered by warranty need not be disclosed.
o Whether a circumstance is material or not is determined on a case-by-case basis.
o Communication made to or information received by the assured also counts as a
circumstance.
§22. Representations Pending Negotiation of Contract:
o Every material representation made by the assured or their agent during contract
negotiations must be true.
o Material representations are those that would influence a prudent insurer in setting the
premium or deciding to take the risk.
o Representations may pertain to facts or expectations/beliefs and must be substantially
correct or made in good faith.
o Representations can be withdrawn or corrected before the contract is finalized.

Duty of Continuing Nature

The duty of continuing nature in marine insurance contracts, as highlighted in Manifest Shipping
Co Ltd v Uni-Polaris Shipping Co Ltd, distinguishes between lack of utmost good faith at the
time of making the contract and lack of good faith during its performance.
o Lack of utmost good faith at contract inception allows the aggrieved party to rescind the
contract from the beginning.
 o Lack of good faith during contract performance, however, pertains to breaches of express
or implied terms and is remedied under contract law.
This distinction emphasizes that the obligation to disclose all material facts at the outset does not
imply an ongoing duty to disclose all facts that may affect the insurer's conduct during the
contract.
Warranties
§35. Nature of Warranty
A warranty is a promissory statement by the assured regarding some specific aspect of the
insured subject matter.
It can be express or implied.
It must be strictly complied with, regardless of its materiality to the risk.
§36. Excuses for Breach of Warranty
Non-compliance with a warranty is excused if circumstances change or compliance becomes
unlawful after the contract's inception.
Even if a breach is remedied before loss, the assured cannot use this as a defence.
The insurer may waive a breach of warranty.
§37. Express Warranties
An express warranty can be inferred from any wording indicating an intention to warrant.
It must be included in or attached to the policy.
§38. Warranty of Neutrality
Implied condition that neutral property must maintain neutrality during the risk.
For ships, it includes proper documentation and no falsification of papers.
§39. No Implied Warranty of Nationality
No warranty regarding the nationality of a ship or its change during the risk.
§40. Warranty of Good Safety
Subject matter must be safe at any time during the specified day.
§41. Warranty of Seaworthiness of Ship
Implied warranty that the ship is seaworthy at the commencement of the voyage or stage of the
adventure.
Time policies exclude seaworthiness warranty, but the insurer is not liable if the ship is sent to
sea in an unseaworthy state with the assured's knowledge.
§43. Warranty of Legality
Implied warranty that the insured adventure is lawful and will be carried out lawfully by the
assured.
Qube marine insurance
Kingdom of Tonga & Shipping Corporation of Polynesia Ltd v Allianz Australia Insurance
Ltd [2005] TOSC 8; CV 723 2003 (25 February 2005)

Marine Insurance - Voluntary removal from ‘class’- breach of express warranty suspension of
insurance - renewal of insurance constitutes a fresh contract- no automatic renewal

The plaintiff’s vessel, the MV Olovaha sustained severe damage in a cyclone on January 15,
2003. The plaintiff looked to its insurer to cover its loss, but the insurer denied coverage. The
plaintiff sued to recover.

Decision: Action dismissed.

Held: The defendant was the insurer for 3 of the plaintiff’s vessels including the MV Olovaha.
However, in July 2002 the plaintiffs had removed the MV Olovaha from ‘class’, such class
referring to a classification by Germanischer Lloyd, a world leading classification Society. A
vessel in class is subject to the Society’s rules including periodic surveying and maintenance.
The plaintiffs had voluntarily removed the vessel because of its age and were aware that the
insurance would be suspended as a result because removal from class was contrary to a warranty
in the policy. The defendant claimed that the coverage had not been renewed for 2003, but even
if it had, it would have been subject to the same warranty and at the date of the occurrence the
vessel was not class. The plaintiffs argued that the defendant had agreed to reinstate cover upon
certification that the vessel was up to requisite standard for Local Class certification- a much less
stringent classification. The plaintiff’s case relied upon various oral discussions and written
communications between the plaintiff’s broker and the defendant’s underwriting manager. The
court decided that any decision regarding reinstatement of coverage could only be made by the
underwriters after proper consideration of all the material facts and there was no evidence that
the underwriter had received a vessel report. Each renewal constituted a fresh contract and any
agreement reached in July 2002 would have no relevance to the 2003 contract unless that had
been expressly agreed to in the negotiation of the 2003 contract. There was no evidence of a
promise to automatically renew coverage in 2003 after the plaintiffs had voluntarily suspended
coverage in July 2002. This was especially true where the vessel had been removed from class so
the former coverage could not be renewed.
The Voyage
§44. Commencement of Risk
Subject-matter insured by voyage policy doesn't require ship at specified place during contract.
Implied condition: Adventure must commence within reasonable time.
Insurer may avoid contract if adventure not commenced timely.
§45. Alteration of Port of Departure
Risk doesn't attach if ship departs from different place than specified.
§46. Sailing for Different Destination
Risk doesn't attach if ship sails for different destination than specified.
§47. Change of Voyage
Change occurs if ship's destination voluntarily changed after risk commencement.
Insurer discharged from liability from time of change.
§48. Deviation
Deviation without lawful excuse discharges insured from liability from time of deviation.
Deviation occurs if designated or customary voyage course departed from.
§49. Several Ports of Discharge
Ship may proceed to specified ports of discharge in order designated by policy.
Failure to proceed in designated order constitutes deviation.
§51 Excuse for Deviation or Delay
Deviation or delay excused if authorized by policy terms or due to circumstances beyond control.
Excused for safety, saving life, medical aid, or barratrous conduct.
Ship must resume course when cause for deviation or delay ceases.
Drisol v. Bovil
Fearing pirates, ship deviated – retuned to home port – excusable deviation.
 Explain the role of Insurance companies in preventing loss and providing
benefits in case of Accidents
Personal accident insurance provides fixed compensation for death or disablement resulting from
accidental bodily injury. If the insured sustains bodily injury solely and directly from an accident
caused by external, violent, and visible means during the policy period, the insurance company
pays the specified sum to the insured or their legal representative for specified contingencies
such as death or permanent disablement.
Coverage
Death: If a person dies due to an accident the risk is covered under the personal accident policy.
His legal heirs are entitled to get the sum insured.
Disability: Disability can be classified further as follows:

 Permanent Total Disability(PTD)

 Permanent Partial Disability(PPD)
 Temporary Total Disability (TTD)

Permanent Total Disability: As the name indicates the disablement is of permanent and
irrecoverable nature and is absolutely total and the insured is unable to engage in the gainful
employment.
Permanent Partial Disability: The disability is not total but partial. e.g. Loss of toe or a finger.
The compensation will be based on the percentage of the disability.
Temporary total disablement: As the name implies this is a disablement which is total but for a
temporary period only.
Procedure
a) Submission of proposal form-. The person who is interested to insure himself under this policy
will submit the information in the prescribed proposal form as follows:
i. Personal details i.e., age, height and weight, full description of occupation and average
monthly income.
ii. Physical condition
iii. Habits and pastimes
iv. Other or previous insurances
v. Previous accidents or illness
vi. Selection of benefits and sum insured
vii. Declaration
b) Assessment of the proposal form and premium rate.
While the assessing the proposal form the sum insured is selected by the insured but insurers
exercise some control. The sum insured is compared with the average monthly income of the
insured. The age of a person should be between 5 year to 70 years.
Rating and Premium based on occupation
Risk Group I: (Lowest Premium rate)
Accountants, Doctors, Lawyers, Architects, Consulting Engineers, Teachers, Bankers, Persons
engaged in administration functions. Persons primarily engaged in occupations of similar
hazards.
Risk Group II: (Higher Premium rate)
Builders, Contractors and Engineers engaged in superintending functions only, Veterinary
Doctors, paid drivers of motor cars and light motor vehicles and persons engaged in occupation
of similar hazards and not engaged in manual labour.
Risk Group III : (Highest Premium Rate)
Persons working in underground mines, explosives, magazines, workers involved in electrical
installation with high tension supply. Jockeys, Circus Personnel, Persons engaged in activities
like racing on wheels or horseback, big game hunting, mountaineering, winter sports, skiing, ice
hockey, ballooning, hang gliding, river rafting, polo and persons engaged in
occupations/activities of similar hazard.
d) Issue of Policy Document:
Based on the proposal form and the premium amount is received the policy document is issued
which contains the following information
a) Name of the person and address
i) Age
ii) Occupation
iii) Sum insured
iv) Nominee
v) Policy Conditions
Chat GPT Answer
Insurance companies play a pivotal role in both preventing loss and providing benefits in the
context of personal accident insurance, as governed by Indian insurance laws. Here's how they
fulfill these roles:
Risk Assessment and Prevention: Insurance companies assess the risks associated with insuring
individuals based on factors such as their occupation, health condition, and past medical history.
They use this information to determine appropriate coverage and premiums. Additionally,
insurers provide guidelines and recommendations to policyholders to prevent accidents and
minimize risks. For example, they may offer safety tips and encourage individuals to adopt
healthy habits to reduce the likelihood of accidents.
Coverage for Losses: In the event of an accident resulting in death or disability, personal accident
insurance provides fixed compensation to the insured or their legal representative. Insurance
companies ensure that policyholders receive the benefits specified in their policies promptly and
fairly. This coverage helps alleviate the financial burden on individuals and their families during
challenging times.
Procedure for Insuring: Insurance companies follow a structured procedure for insuring
individuals under personal accident insurance. This includes the submission of a proposal form
with detailed personal information, assessment of the proposal form and determination of the
premium rate based on factors such as occupation and risk group, and issuance of the policy
document containing all relevant details.
Premium Calculation: Insurers calculate premiums based on various factors, including the
insured's occupation and associated risk level. Indian insurance laws classify occupations into
risk groups based on their inherent hazards, with corresponding premium rates. For instance,
occupations categorized under Risk Group I, such as accountants and teachers, have lower
premium rates compared to Risk Group III occupations like miners and circus personnel due to
their higher risk levels.
Policy Document Issuance: Once the premium is paid and the proposal form is assessed,
insurance companies issue a policy document to the insured. This document outlines key details
such as the insured's name, address, age, occupation, sum insured, nominee information, and
policy conditions. It serves as a legal contract between the insured and the insurer, ensuring
clarity and transparency in the insurance transaction.
By adhering to Indian insurance laws and implementing robust risk assessment measures,
insurance companies in India fulfill their responsibilities of preventing loss through risk
mitigation strategies and providing timely benefits to policyholders in case of accidents or
disabilities. This contributes to the overall stability and reliability of the insurance sector in the
country.

Explain the concept of double insurance and Reinsurance

Double insurance and reinsurance are two distinct concepts within the insurance industry, each
serving different purposes and involving different parties.
Double insurance occurs when the same person or entity insures the same risk with multiple
insurers. This is possible across all types of insurance contracts, including life insurance. In the
event of a loss, the insured can only claim the actual loss amount from the insurers. Insurers are
liable to pay the assured sum proportionately if multiple insurers cover the same loss. Key
principles of Contribution apply to determine the liability of insurers in double insurance
scenarios. These principles include the interpretation of notification, rateable proportion, escape,
and excess clauses.

Case law, such as New India Assurance Co. Ltd. v/s Krishna Kumar, illustrates how courts
interpret insurance policy clauses in double insurance disputes. In this case, the court dismissed a
complaint for the return of premium due to a communication gap between the insured and the
financing bank.
Reinsurance, on the other hand, is a contract between two or more insurance companies whereby
a portion of risk of loss is transferred from one insurer (the ceding company) to another insurer
(the reinsurer). This occurs when an insurance company has undertaken more risk burden than its
bearing capacity. Reinsurance contracts are governed by regulations and aim to maximize
retention within the country, develop adequate capacity, secure protection for the reinsurance
cost, and simplify the administration of business. Reinsurance is a contract of indemnity, and the
relationship of the assured remains with the original insurer only.
The differences between double insurance and reinsurance are as follows:
Parties Involved: In double insurance, the relationship exists between the insured and the
insurers, with each insurer being liable to the insured. In reinsurance, the relationship exists
between the original insurer (ceding company) and the reinsurer, and the insured has no direct
relationship with the reinsurer.
Contribution: In double insurance, every insurer is bound to contribute towards the loss in
proportion to the policies issued. In reinsurance, the reinsurer contributes in proportion to the
amount of reinsurance undertaken.
Claim Process: In double insurance, the insured has the right to claim from every insurer up to
the limit of the actual loss. In reinsurance, the insured can only demand compensation from the
original insurer, not directly from the reinsurer.
In summary, while double insurance involves insuring the same risk with multiple insurers,
reinsurance involves the transfer of risk from one insurer to another. Both concepts play crucial
roles in managing and mitigating risks within the insurance industry.
Motor Vehicles Act, 1988
140, 141, 142, 144, 145(g), 146