A factory owner took a fire insurance policy for his factory without informing the insurance company that he received notice from the electricity department to get the wiring of the factory repaired. After six months of taking policy, the factory caught fire due to faulty wiring. Will the factory ower get compensation for the loss due to fire? Which principle of insurance can be related to the above passage?

Principle of Indemnity

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Principle of Causa Proxima

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Principle of Contribution

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Principle of Utmost Good Faith

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Solution

The correct option is D
Principle of Utmost Good Faith

There is a breach of principle of utmost good faith. The principlemeans that every person who enters into a contract of insurance has a legal obligation to act with utmost good faith towards the company offering the insurance.

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Similar questions

A factory owner gets his stock of goods insured but he hide the fact that the electricity board has issued him statutory warning letter to get his factory. Wiring changed later on, the factory catches fire due to short-circuit which principle is violated in the case.

Naresh took a fire insurance policy from NICL of Rs 50 Lakhs for his factory at the annual premium of Rs 75,000 in order to avoid premium more than his amount he did not disclose that highly explosive chemicals are being manufactured in his factory, due to a fire his factory gets damaged. The insurance company NICL refused to make the payment for the claim as they were aware of the highly explosive chemicals. Is Naresh entitled to claim? Explain the principle of insurance violated by Naresh.

A company took fire insurance policy for 10 lakhs. After four months, due to fire, insured suffered a loss of 3 lakhs. How much money will the company get as compensation?

State the following statement is True or False:

The principle of insurance under which the compensation paid to the insured which is equal to the actual loss is indemnity.

Fill in the blank:

The principle of indemnity is not applicable to ______ insurance.

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The correct option is D Principle of Utmost Good Faith There is a breach of principle of utmost good faith. The principlemeans that every person who enters into a contract of insurance has a legal obligation to act with utmost good faith towards the company offering the insurance.

The correct option is D
Principle of Utmost Good Faith

There is a breach of principle of utmost good faith. The principlemeans that every person who enters into a contract of insurance has a legal obligation to act with utmost good faith towards the company offering the insurance.