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NATIONAL LAW SCHOOL OF INDIA UNIVERSITY, BANGALORE MBL EXAM- JUNE 2012 LAW OF INSURANCE Total Marks - 100 Time - 3 hours INSTRUCTIONS:
i. ii. iii.

iv. v.

Students are expected to rely upon the question paper as it is and respond to it; no clarifications can be sought. Answer must be briefbut covering all points on issue; Additional weight-age will be given to bring-in relevant case law on the point; Please develop your answer by making visible paragraphs; Mobile phones are strictly prohibited inside the Examination Hall. Anyone found in possession of the same will be subject to disciplinary proceedings;

vi.

Answer Any five questions. All questions carry 20 marks each.

1. "Insurance is a wagering contract", Do you agree? What are the differences

between a wagering and insurance contract? Insurable Interest, not wager contract Life Ins- at the beginning, a) By relationship by marriage, blood or adoption b) By contractual relationship, and c) By statutory duty Husband & Wife, Children & Parents, through contracts & Statutes- Creditor & Debtor, Lessor & Lessee, Balor & Balee, Landlord & Tenant, Mortgagor & Mortgagee Fire Ins- at the beginning and at the time of loss- Sec 135 of TP Act- Assignment of the policy along with sale.
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Marine'liIs- at the time of loss; Marine Insurance Act, 1963: Sec.7(2) Insurable Interest; sections 6 to 17 2. Define Insurable Interest and principles of good faith. At what time insurable interest shall be present in fire, marine and life insurance? Can a non relative have insurable interest? Ans: Insurable Interest; not wager contract Life Ins- at the beginning, d) By relationship by marriage, blood or adoption e) By contractual relationship, and f) By statutory duty Husband & Wife, Children & Parents, through contracts & Statutes- Creditor & Debtor, Lessor & Lessee, Balor & Balee, Landlord & Tenant, Mortgagor & Mortgagee Fire Ins- at the beginning and at the time of loss- Sec 135 of TP ActAssignment of the policy along with sale. Marine Ins- at the time of loss; Marine Insurance Act, 1963: Sec.7(2) Insurable Interest; sections 6 to 17

3. Define Special Doctrines of the Insurance and to what extent these doctrines are applicable to Life, Fire and Marine Insurance Contracts. Subrogation Concept: The insurer steps into the shoes of the insured. Once the claim has been honoured, the insurer can claim the same against the third party where the loss is caused to the insured by a third party. Limitation: The insurer will only get those rights which the insured would have had if there was no insurance policy. Only applies where loss is due to third party intervention (and not due to the insurerlhis servant). The insurer must make the claim payment before he can claim against the third party. Application: Not applicable to life insurance or personal accident policies as these are not covered strictly by the principle of indemnity. Randal v. Cockran; In Yorkshire Insurance Co v. Nisbet Shipping Co Contribution Concept: The loss is divided among policies in the same ratio as the sums insured. There is rateable distribution - each insurer contributes rateably to mitigate the loss. All policies must; relate to the same subject matter, cover the same interest of the same insured, cover the same peril which caused the loss and must in force at the time of the loss. Limitation: Only those policies under which a valid claim can be made by the insured will contribute. Application: This is applicable to fire and marine insurance and not life insurance and it is possible to have numerous policies on one life. North British and Mercantile v. Liverpool and London Globe; Reinstatement Concept: Anderson v. Commercial Union - The insurer has the option to either specifically undo the loss or to compensate the amount. Assured does not have the right to compel the insurer to reinstate. Limitation: Once the insurer has elected to reinstate the property he cannot subseS}uently change his mind should ~e realise that the costs that will be incurred will be'higher than had been estimated. Application: This is applicable to fire and marine insurance and not life insurance and it is possible to have numerous policies on one life. Anderson v. Commercial Assurance Co; In Young v New Zeland Insurance Co 4. The assured in the proposal form stated, that he has never been hoospitalized, while she was in fact admitted to a hospital for two months which she does not remember as she was suffering from insanity at the time of hospitalization. Discuss: a) If Insurer gets to know before 2 years of signing the policy - May cancel b) If the insurer gets to know after 2 years of filing the policy - Sec.4S 5. Life Insurance Policy has been issued with the condition that the risk will not start till the payment of the first premium, with the insurer reserving the right to terminate the policy till the risk starts. Before the first premium A is diagnosed with a rare lymph nodal cancer. A fails to disclose the information: a) In case of Life Insurance at which point does the protection coverage begin- After acceptance ofLIC

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b) In the present case can the insurer avoid the contract on grounds of non disclosure - Yes 6. George has taken a policy of fire insurance on building from Oriental Insurance Company. A quantity of gunpowder belonging to gunpowder factory of a third person Katrina K a half mile distance away from the insured property ignited and exploded and consequently the windows and window frames were shattered, and the structure was dumaged generally by the atmospheric pressure caused by the explosion, Decide the following questions? a) Is this loss is due to the fire or loss by fire? b) Is Oriental Insurance Company held liable for this loss? c) Can Oriental Insurance Company claims the loss against Katrina K. d) Can Oriental Insurance Company files a complaint before Consumer Forum against Katrina K ..
Ans- a- loss by fire b. yes- Zuari case- Everest Case not followed c. yes under letter of subrogation- Sec.79 d. Yes- SC case- 2010 INDLA W SC 122 Economic Transport Organization v

7. Distinguish the following with cases (anyone) a. Nomination and Assignment

Nomination -Sec. 39. IA 1938
Married Women's Property Act 1874, sec.6

Assignment:
L1e- Insurance Act 1938 : Sec 38.Assignment

and

transfer

of

insurance

policies and Married Women's Property Act 1874, sec.6

Fire Ins: Sec135 ofTP Act, 1882 Marine Ins: Secs. 17, 52 & 53 of MIA 1963
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b. Warranty and Representations

Warranty- Main conditions- Mandatory Representation- subsidiary- supportive statements until policy has been issued. *