PRINCIPLES OF INSURANCE – Part 2

CONTRIBUTION - Whenever 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. He cannot claim anything more than 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. If the insured chooses to recover the entire loss from one insurer alone, then the insurer, who has paid the actual loss, has a right to recover proportionate amounts from the other insurers. In other words, each insurer is bound to contribute to the loss of the insured in proportion to the policy amount.
MITIGATION OF LOSS – This principle reminds the insured of his duty to take all necessary steps to minimize or mitigate 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. His claim may be lost, if he merely waits for the insurance company to make good his loss without taking necessary action. He must act just like any other person who has not insured his property in the event of the occurrence of the mishap.
CAUSA PROXIMA (Proximate Cause) - There may be several causes for a loss. But an insurer is liable to indemnify the insured only when the loss is caused by the 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 causa proxima applies. According to this doctrine, when there are several causes, only the proximate or the nearest cause should be considered. The distant and remote causes shall be ignored. Proximate cause is the nearest and most effective cause which is responsible for the loss. If the proximate cause of loss is insured, then the insured will get compensation for the loss, otherwise he will not be compensated.
CO-OPERATION - Insurance is a co-operation device. If one person is providing for his own losses, it cannot be strictly called insurance. In insurance, the loss is shared by a group of persons who are willing to co-operate. The accumulation of funds and charging of the share from the member in advance became the job of one institution called insurer.
PRINCIPLE OF WARRANTIES - A warranty is a stipulation by which the assured undertakes that some particular thing shall or shall not be done. Those certain conditions shall be fulfilled. That assured affirms or negates the existence of certain state of factors. Warranty is strictly enforced in case of marine insurance, Warranty is a very important condition in the insurance contract to be fulfilled by the insured, the breach of which relieves the insurer from his liability. There are two classes of warranties as given below: (a) Express warranties (b) Implied warranties.

Express warranties are expressly mentioned in the contract. Implied warranties are not mentioned in the contract. But non-compliance with any of them is fatal to the contract. For example, in marine insurance the implied warranties will be:

1.In every voyage policy the vessel shall be seaworthy

2.That the voyage shall in all respects be a lawful one

3.That there will be no deviation from the agreed course of voyage.