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Utmost good faith Insurable interest Indemnity Subrogation Contribution Mitigation Causa proxima Co-operation Principles of warranties
6/25/2012

Every

contract of insurance is based on the principle of utmost good faith. It implies that the insurer and the insured must act in good faith and disclose all material facts concerning the subject matter of insurance. The material facts must be disclosed at the time of giving a proposal for insurance.

person is said to have insurable interest in the subject matter ,if he suffers financially , by its loss or destruction. Thus a person has insurable interest in his own life, in the life of his spouse or child or debtor. Similarly the owner of a property has an insurable interest in it.

All

insurance contracts ,except life and personal accident insurance, are based on the principle of indemnity. It means that the insured will be paid only the actual amount of loss or the amount of the policy whichever is less. That is, he will not be allowed to make a profit out of any damage to his property by taking an insurance policy.

The

principle of subrogation is an extension of principle of indemnity. According to this principle , when the insurer pays compensation to the insured for loss, the insurer will get all the rights of the insured in respect of the damaged property and against a third party who is responsible for the loss.

When

ever the same subject matter is insured with two or more insurers to cover the same risk, it is called double insurance. The principle of contribution applies to all double insurance contracts. Accordingly , when there is a double insurance , the insured is entitled to recover only the actual amount of loss, although he has taken two or more policies. He can recover the entire loss either from the insurer or from all insurers.

In

this principle reminds the insured of his duty to take all necessary steps to minimise or migrate the loss, in case of occurrence of the risk insured. The insured must be very careful and active to make every effort to minimize the loss.

According

to this doctrine ,when there are several causes ,only the approximate or nearest cause should be considered . There may be several causes for a loss. But an insurer is liable to indemnify the insured only when the loss is caused by peril insured against. When there is only one cause for a loss ,it is quite easy to settle the claim. But when there are several causes for a loss the doctrine of causaproxima applies.

In

insurance , the loss is shared by a group of persons who are willing to corporate. Insurance is a corporate device. If one person is providing for his own losses , it cannot be strictly called insurance.

warranty is a stipulation by which the assured undertakes that some particular thing shall or shall not be done. Warranty is a very important condition in the insurance contract to be full filled by the insurer from his liability. There are two classes of warranties. a. Express warranties b. Implied warranties

Express

warranties are expressly mentioned in the contract. Implied warranties are not mentioned in the contract.