Fire insurance is an agreement where by one party in return for a consideration undertake to indemnify the other party against the financial loss for the goods damaged or destroyed by means of fire.
Characteristics of fire insurance’s
- Contract of indemnity
- It is the contract of indemnity where one party called insurarer has undertaken the resposibility to indemnify the other party called insured in case of any loss or damaged caused by fire.
- offer and acceptance
- like any other contract of insurance’s in fire insurance also the offer is made by the insured and accepted by the insurer.
- lawful consideration
- the consideration in exchange of promise to indemnify paid by the insured is called premium and it is important thet such premium must be a lawful premium. It must not be prohibited by the law or a lawful or aginst public policy.
- period of insurance
- It’s normally given for period of one year only, it is renewal every year on fullfillment of formalities.
- cause of accident
- the fire insurance’s the fire must be the outcome of fire or ignition only then the insurer could be held liable.
Scope of fire insurance
Oridianry scope: At first must be actual fire or ignition and second the fire must be accidental and unintentional then only the insurer is liable to indemnify the losses, normally risks such as fire or ignition, blasting of gas cylinder for household purpose, lighting and heating where fire is used for in any building are covered under fire insurance’s.
Goods and properties like: precious stones, stamp, books, cheques etc are not covered by loss caused by fire like: earthquake , flood etc, are not covered under this insurance.
Broader scope: Under these types of fire insurance some special types of policies are made may cover the losses not covered under ordinary fire insurance like: loss of precious stones, stamp, cheque, books, etc.
Loss arising of any other circumstance not to be compensated under fire insurance.
Claim for fire settlement
If the fire is result of fraud or misconduct on the part of isured the loss cannot be indemnified, but if the loss occured due to negligence of the insured it may be admitted for indemnifying the loss.
What is Meaning of Insurance’s contract
Insurance contract is an agreement bteween two parties which one party agree to compensate the other party for any future loss suffered by him and he does so by accepting a premium. The parties who promises to save other is known as “insurer” and the party in whose favour such promise was made is known as ” Insured”.
The contract of insurance must be in writing and in India they regulated by “insurance act, 1938″ and rules made by ” insurance regulatory and development authority (IRDA).
Essential of Insurance’s contract
- Agreement
- offer+acceptance+consideration.
- free consent
- without, coercoin, fraud, undue influence, mistake and misrepresentation.
- competent parties
- who are of sound mind and major.
- lawful object and lawful consideration.
- section 23 of the indian contract act 1872.
- not expressly void.
Gerneral principle of insurance contract
- Insurance interest.
- utmost good faith- uberima fides.
- contract of indemnity
- all contract are contract of indemnity except life insurance.
- principle of causa proxima
- principle of subrogation.
- replace or substitution the liabilities.
- company give compensation to B and then can recover it’s loss to c. Where b can also suit c for the compensation but he claim his loss to company . Now company can take or recover its loss from c.
- principle of loss minimization
- it is the duty of insured to minimise his loss if he can do so.
- principle of contribution.
Nature of Insurance’s
The nature of insurance depends on the nature of risks to be protected and insurance contract makes available the risks coverage to the insured. the buyer of insurance pays a premium in exchange of financial risk to be covered.
Law of insurance forms part of general law of contract and whatever type of contract of insurance may be, it always represents the agreement between the insured and the insurer. The essential ingrediants of a contract of insurance : offer and acceptance, consideration , capacity of the parties, leagality of the object and consideration.
General principle of insurance contract
Insurance interest : the test for a vlid insurance contract is the existence of the insurable interest. The insurable interest is nothing but an interest of such a nature that, the occurance of an event insured against would cause financial loss, to the insured and such interest can be protected by a contract of insurance. This interest is considered as a form of ” property in the eyes of law“.
The insurable interest should exist at the time, of happening of the event in the ” general insurance contract”, but it is not necessary so in case of ” life insurance contracts”. This is because general insurance is the contract of indemnity while life insurance is the contract of assurance.
Example: in case of fire insurance person suffers more loss under a ploicy if at the time of loss or damage he has no interest in the property either full or partial.
If the insured has no interest at the time when event happens, it is clear that he cannot recover any thing because he sufferes no loss and therefore has no claim to an indemnity.
Similarly, if he has an interest which is limited to something less than the full value of the subject matter, he suffer no greater loss than the value of this interest at the time of the loss and therefore his claim to indemnity cannot exceed the value of his interest.
Insurable interest in life insurance contract
Life insurance stands on different grounds as compare to general insurance’s, no value can be assigned to human life in the same way as it is done in respect of tangible property, but at the same time it is also possible to measure the extinct of loss that would be caused by the failure of the particular life.
The guiding factor in this regard is that an insurable interest, in case of life life insurance, is a reasonable expectation of finacial benefit from the continued life of the subject or an expectation of the loss if the subject dies.
Example; A father has a clear insurable interest in the life of minor child, because the father is entitled to services and earning of the child.
what is insurable interest in life insurance
- It is important to note that insurable interest of some kind is necessary in case of every contract of insurance’s whether general or life.
- Any insurance’s made without such interest is illeahl and void. The presence of insurable interest is required for two reasons;
- An insured cannot be taken to have suffered any damage if he no interest in the property insured at the time of loss.
- If the interest of insured is limited to something less than full value of the subject matter, no grater damage than his interest in the subject matter will result.
Life insurance contract
- In both the cases, the interest in the subject matter is required by the term of the contract since, the promise of the insurer will be only to compensate the actual loss.
- Contract of insurances is different from contract of indemnity in Indian law that in contract of India there is a loss with a person himself or any other person but in insurances there is compensation for any loss done anything.
The Life insurance’s contracts
- Utmost good faith/ uberima fides
- the observation of utmost good faith by the parties is vital to the contract of insurance,
- the contract of insurance is also known as uberima fides contract because the parties are required to confirm a higher degree
- of good faith than in the general law of contract.
Good
- Good faith, although , equally applicable to every agreement, yet in contracts other then insurance’s ,
- the parties are free to settle their own terms.
- In a ontract of sale of goods coviat emptor is the principle and seller is under no obligation
- to make known to the purchaser all the facts that might affect his decisions.
- But in insurance their is something more than an obligation to treat the insurer honestly and fairly.
- Non-disclosure of a material fact by the insured whether fraudulant or innocent has the effect of avoiding the contract,
- on the part of insurer.
- A duty is imposed upon the insured to provide all material facts which may influence the decision of the insurer.
Reference: Notes United university Prayagraj