CONTRACT OF INSURANCE AND CONTRACT OF INDEMNITY: A STUDY IN INDIAN SCENARIO GENERAL
Insurance is meant to protect men against uncertain events which may otherwise be of some disadvantage to them. If it is an assurance that a sum of money will be paid to the person insured if a particular event happened. Insurance business and the need for the insurance cover are growing with the growing complexity of life, trade and commerce, and consequently, there is now bewildering variety of insurance covers. But marine, fire, and life are the most common varieties of insurance. Whatever be the kind of the insurance or the risk insured against there are certain principles of insurance law so fundamental that they impinge upon every variety. Every contract of insurance, except life insurance is a contract of indemnity, every contract of insurance is a contract of absolute good faith and requires some insurable interest to support it, without which it will be a mere wager.
PROPOSAL AND ACCEPTANCE
Like every other contract, a contract of insurance is also concluded through proposal and its acceptance. In Hindustan cooperative Insurance society V. Shyam Sunder after an oral understanding to insurance and the completion of the medical examination the company informed the proposer that if he submitted the proposal forum and deposited the half- yearly premium, his proposal would be accepted. He accordingly submitted a cheque but had not yet replied to him their acceptance of the proposal that the proposer died. The question was whether by in cashing the cheque the company had accepted the proposal without there being any formal acceptance. Harris C.J., referred to the English authorities and said:
“Mere mental assent to an offer does not conclude a contract either under the Indian- Contract Act or in English Law. The offeror may, however, indicate the mode of communication acceptance either expressly or by implication both in India and English Law. In the case before us it is clear from the facts that the deceased indicated clearly that of the appellant accepted his proposal. The cheque should be appropriated towards the first premium and that such appropriation would conclude the bargain. The cheque was received on that implied understanding.
Where on the other hand the insurer had received the proposed from along with the first premium and it was still awaiting acceptance when the proposed died, no liability to pay arose.
It was immaterial that the groundwork for acceptance was the under preparation and the agent had assumed that the proposal would be accepted[1].
[1] LIC V Vasi Reddy, (1984)2 SCC 719, AIR 1984 SC 1014.