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Question Bank
Question
What is the legal significance of a "surveyor's report" under the Insurance Act, 1938, and to what extent is it binding on the insurer and the insured?
Solution
Under Section 64(UM)(4) of the Insurance Act, 1938, an assessment by an approved surveyor is a mandatory prerequisite for the settlement of any claim exceeding twenty thousand rupees. This report serves as the foundational basis for the insurer to process the claim. However, the surveyor's report is not sacrosanct, conclusive, or the final word. It is not binding upon either the insurer or the insured. The law explicitly provides the insurer with the discretion to settle the claim for an amount different from the surveyor's assessment. Similarly, the insured can adduce independent evidence to challenge the report's findings, making it a piece of evidence that is subject to judicial scrutiny rather than a definitive determination.
Question
Explain the principle of "Uberrimae Fidei" and its role in governing the relationship between an insurer and the insured?
Solution
The principle of Uberrimae Fidei, meaning utmost good faith, is the cornerstone of every insurance contract. It is a foundational doctrine that imposes a positive duty of complete disclosure and honesty on both parties, but particularly on the insured. The insured must voluntarily disclose all material facts that could influence the insurer's decision to accept the risk or determine the premium. In return, the insurer assumes a fiduciary duty to act in good faith and honour its commitment to provide protection and indemnification. This mutual covenant of trust is essential, as insurance is a contract designed to provide security against uncertainty, and its sanctity relies entirely on the integrity and good faith of the parties involved.
Question
On what legal grounds can an insurance company repudiate a claim, and what is the consequence of introducing new grounds for repudiation at a later stage of litigation?
Solution
An insurance company can legally repudiate a claim only on the specific grounds explicitly mentioned in its letter of repudiation. The law, as settled by judicial precedent, prohibits the insurer from resisting a claim on additional grounds that were not cited in this initial repudiation letter during subsequent legal proceedings. This principle ensures procedural fairness and prevents the insured from being ambushed by new defenses. If an insurer were permitted to introduce new reasons for denial at a later stage, it would undermine the insured's right to a fair opportunity to address and rebut those specific allegations from the outset.
Question
What is the legal position regarding an insurer's liability when the precise cause of a fire is indeterminable or disputed among various reports?
Solution
When the exact cause of a fire is indeterminable or contested by multiple reports, the fundamental question for the court is whether the fire was intentionally caused by the insured. If there is no evidence to suggest that the insured was the instigator of the fire, the insurer cannot escape its liability under the policy. The precise cause—whether a short-circuit or any other accidental reason—becomes immaterial. The insurance company's obligation to indemnify the insured is triggered as long as the loss is covered by the policy and the insured is not proven to have deliberately caused the loss.
Question
How do the provisions of the Customs Act, 1962, particularly Sections 22 and 23, interact with an insurance claim for goods destroyed in a bonded warehouse?
Solution
Sections 22 and 23 of the Customs Act, 1962, deal with the remission and abatement of customs duty on goods that are lost or destroyed before clearance. However, these provisions typically extend their benefit to the importer of the goods. A custodian operating a bonded warehouse, who holds the goods in trust for their clients, is generally not classified as an 'importer'. Therefore, such a custodian may not be eligible for remission of duty under these sections. Consequently, the customs duty levied on the destroyed goods constitutes a genuine financial loss for the custodian. This amount can form a valid component of an insurance claim under a Customs Duty Package Policy, as the custodian remains liable to pay the duty to the authorities, and the insurance is intended to indemnify them against this exact liability.
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