The Insurance Policy - Report Example

Commercial Law No: Referencing Style: Harvard Commercial Law Introduction The insurance policy in fact is a contract executes between the insurer and the insured. The insured is known as policy holder. The policy enumerates the claim of the insured for which the insurer is legally bound to pay. The policy holder may lodge claim for the damages if occurred in lieu the premium paid during the validity of insurance contract. Hence, the insurance contracts are designed in a manner by the insurance company to suit the requirement of their clients. Feature of each insurance contract differs from contract to contract. The insurance policy contains related forms to be filled and signed by the insurer and the insured. In few cases, where letter(s) sent to insurance company, after final agreement may convert integrated contract to non integrated contract. However, at the time of court proceedings, the court may examine prior negotiations / agreements and each term of contract besides the written communication that has sent after final agreement can be treated as part of policy to deliver a fair and just decision. Therefore, the policy should refer all relevant documents which are now part of policy. However, as per legal point of view, the oral agreement can not be considered as part of policy. Therefore the contract should be in black and white to comply with the terms and condition by the insurer. Compensation of Loss / Damages There can not be two opinions about the Insurance as a safety valve against any financial loss that might be happened in the future. In order to save ourselves from any financial losses we have to have insurance policy. It is an admitted fact that the insurance policy contains multi faceted benefits for the policy holder (AllInsuranceTexas.com, 2009). The prime benefit of insurance policy that enjoys a policy holder is to receive monetary compensation if an actual loss / damage happens. It provides a sigh of relief to the policy holder from all sorts of insurance related anxieties in future. The insurance policy provides a cushion to the policy holders in terms of monetary compensation that meet the cost of risk to be expected in future (AllInsuranceTexas.com, 2009). Some of the salient features of the insurance policy are as follows: Affordable Insurance Premium The main attraction of insurance policy in this modern age is that one has to pay low insurance premium for the safety and security of assets besides personal insurance to meet any eventualities. Due to stiff competition amongst the insurance companies the intending policy holder has the opportunity to choose the best insurance company to suit his or her requirement on payment of low premium in return of multiple benefits. It is rightly said, lesser the insurance rate, the more affordable insurance becomes (AllInsuranceTexas.com, 2009). Easy access to Insurance Companies Easy access to insurance companies to reap the benefits of having insurance policy is another advantage. In the age of computerization you may need not to visit the insurance companies to get the basic information about the different policies and the premium to be charged against it. You may have the information by one click of mouse from your place of residence (AllInsuranceTexas.com, 2009). Advantage of Pre-tax insurance benefits Policy holders have the advantage of Pre-tax benefits. These benefits surely help tax payers to save a considerable portion of tax payment to increase their disposable income. The saved income may be deployed by the policy holder at a saving scheme better suited to him to get lucrative return on his or her investments (AllInsuranceTexas.com, 2009). Risks of future losses Of course, Insurance policy helps policy holder a lot to mitigate the risk of future losses. The marketing and engineering department of insurance companies conducts survey of the property whose owner intends to get policy to protect their properties. Based on the experience and expertise the competent officials of the cited department advise the measures to be taken to safe the property from any hazard (AllInsuranceTexas.com, 2009). The insurance companies enjoy the benefit of insurance premium they received from policy holders. They deploy the money collected from the policy holders in profitable projects which may double and redouble their profits on their investment. The money deployed not only beneficial for the investing companies but for the boost of country’s economy. Insurance companies usually pass on the operational insurance benefit to their clients as part of their complete insurance package (AllInsuranceTexas.com, 2009). With the passage of time more and more companies will come forward to offer innovative products to their customers by offering competitive premium rates. The competition amongst them is increasing day by day. Each company is trying to market potential customers to increase the size of their income portfolio (AllInsuranceTexas.com, 2009). Before suitable answering to the questions raised in referred cases, we have to thoroughly study the relevant and applicable operational sections of the Insurance Contract Act 1984: Section 13 The insurance is based on troika of Principal, Agent and the Third Party. It is based on extreme good faith between the insurer and the insured. According to The Insurance Contracts Act 1984, it is incumbent upon an individual who intends to protect himself from unforseen loss to disclose any matte to the insurance company to mitigate the risks. During the course of discussion it is the bounden duty of insured person to disclose all sorts of material facts that relates to the proposed insurance. It is a matter of fact that the insurance company may set aside the claims of an insured on account of non-disclosure of material fact (Burling and Lazarus, 2012). The aims of disclosing the material fact enables the insurance company to apply its mind regarding acceptance of insurance proposal of an applicant or not keeping in mind the risk associated with it and the company has to bear the loss in case of any incident. It also includes premium to pay to the insurance company and other terms and conditions. We mention herein below the relevant law cases for ease of reference (Burling and Lazarus, 2012). a) Mayne Nickless Ltd v Pegler1974 b) Khoury v GIO (NSW) 1984 The insurance company takes into account the basic fundamentals under the common law and The Insurance Act 1984 (Cth) while analyzing the insurance proposal of an applicant or a company for approval (Burling and Lazarus, 2012): a) Insurance Policy and the track record of applicant b) Past history of criminal convictions c) Nature of business in case of company d) Occupation of an individual e) Health status f) Payment premium capacity of the insured. Conversely, the applicant or the company intending to buy insurance policy should look at the absorption capacity of insurance company to bear the shock of losses. Section 21 As per section 21 of Insurance Act 1984, the insured has the responsibility to disclose material information / facts to the insurer before being entered into an agreement with the insurance company. The disclosure in both ways is beneficial for the insured and the insurer. The insurer should make up his, her / its mind to accept the risk of futuristic loss and the insured to satisfy himself / itself the absorbing capacity of the insurance company to claim the loss (Ministry of Legal Affairs, 2009). In compliance of the duty of disclosure by the insured, the insurance company has the right to ask specific questions that helps the insurer to determine the risk of proposed contract of insurance. In case the insurer fails to meet the requirement, it is presumed that the waiver of duty of disclosure was allowed (Ministry of Legal Affairs, 2009). The common law treats the relationship between the insurer and the insured an integral part of law of contract. Ambiguous terms of a contract may jeopardize the interest of an insurance company and the insured (Ministry of Legal Affairs, 2009). Under section 54 of the Insurance Act 1984, breach of warranty empowers the insurer to reduce the amount of claim lodged by the insured. Usually the valuation is a representation of policy and cannot be considered as warranty. However, Section 21 applies where insured considered being true (Ministry of Legal Affairs, 2009). Section 28 Above mentioned section is applicable to insured person who inked agreement with the insurance company. Failed to comply with the disclosure requirement or misrepresented the facts with the insurer before signing the contract amounts to ill intention. However, it does not applicable to insurer who has entered into an agreement with the same premium and similar terms and condition even if it failed to comply with the duty of disclosure or had not misrepresented the true picture before being entered into an agreement (Ministry of Legal Affairs, 2009). The insurer may avoid the insurance contract provided the insured misrepresented / distorted facts with the intention of frauds. Under section 28 and 31 the insured has to give complete information about his personal details / assets details that enables the insurer to determine the risk of loss and its mitigation (Ministry of Legal Affairs, 2009).   Section 31 In accordance with section 31, the competent court of law may set aside avoidance in certain circumstances (Ministry of Legal Affairs, 2009): 1. In any court proceedings initiated by the insured in connection with contract of insurance relating to avoidance on account of fraudulent failure or misrepresentation, the court may at its discretion set aside the avoidance. In that case the insured may recover the whole or partial amount that would have been paid if contract had been avoided. 2. Further, the power delegated by subsection (1) can only be exercised provided the court of the view that the loss requires court proceedings. Therefore, the interest of the insurance company on account of failure of performing disclosure duty or misrepresentation may not be jeopardized. Moreover the discretionary power enjoys by the competent court of law under sub section (1), the court (a) shall feel the need to deter fraudulent conduct with regard to insurance and (b) shall measure the extent of fraudulent conduct against the expected loss that can be had by the insured in case the avoidance not disregarded. The powers delegated to the court of law vide subsection (1), only applicable to the loss linked with the court proceedings. Any disregard will not reinstate the contract (Ministry of Legal Affairs, 2009). Section 54 With regard to cited section, the Insurer may not refuse to pay claims in certain circumstances (Ministry of Legal Affairs, 2009): 1. Vide cited section, the insurer may not entertain the claim of payment of the insured in whole or in partial on account of some other person, acted on behalf of insured after the contract was signed. However, as per subsection (2), the insurer may not refuse to pay the claim to the claimant. Nonetheless the claim is reduced to that amount which fairly represents the insurers interests prejudiced due to resultant act. 2. Again vide aforementioned section, where the act caused or contributed to a loss against which insurance cover is provided under contract, the insurer may deny paying the claim amount. 3. If the insured satisfies that no part of the loss justifies the claim caused by the act, the insurer may accept to pay the claim by reason only of the act mentioned. 4. In case an insured proves that minor part of loss claimed not because of the act, the insurer may entertain payment of claim up to the extent of loss by reasons only. Wherever the act ensures safety and security of a person, protect property or it was not possible for the insured / any other person to do the act, the insurer may not refuse the claim lodged by the insured on the grounds of only reason of the act. Conclusion In the referred cases, you will please observe that under the given circumstances and the cited applicable sections of the Insurance Contract Act 1984, the insurance company has no other option but to reject the damages claim of USD 5000/- if lodged by Jason, on the grounds of illegal activities of the lessee, although the lessor did not know about the illicit activities (planting and growing marijuana at bed room) of the lessee. However, as per the relevant laws which deal with the property, the prime responsibility lies on the shoulder of the owner of the rented premises who has to take care of his property and ongoing activities in it. Had he taken due care of it, the situation would have been the other way round. In another referred case, the Jason did not make full disclosure of material information / facts to the insurance company regarding renting a room / making food to sell in the market place in the days ahead. Therefore, the insurance company has the right as per the mentioned Sections of the Insurance Contract Act 1984, to refuse to pay any claim of the losses that comes to USD 4500/- in total, suffered by the insured. Bibliography AllInsuranceTexax.com, 2009. Benefits Of Insurance-Facilities Associated With Buying Insurance. [Online] Available at: http://www.allinsurancetexas.com/benefits-of-insurance-facilities-associated-with.html. [Accessed 6 May 2012]. Burling, J. and Lazarus, K., 2012. Research Handbook on International Insurance Law and Regulation. Massachusetts: Edward Elgar Publishing. Ministry of Legal Affairs, December 2009. National Insurance Act. [pdf] Available at: http://rgd.legalaffairs.gov.tt/Laws2/Alphabetical_List/lawspdfs/32.01.pdf. [Accessed 6 May 2012]. Read More