Divya Garments Ltd. has a loan of Rs. 10,00,000 to pay. They are short of funds so they are trying to find means to arrange funds. Their manager suggested to claim from insurance company against stock lost due to fire in the ware house. He actually meant that they can put their warehouse on fire and claim from Insurance company against stock insured. They will use the claim money to pay loan.
(a) Will the company receive claim if the surveyer from company comes to know the seal cause of fire?
(b) Which values did company ignore while planning to arrange money from false claim?
(c) Explain three elements of fire insurance
Divya Garments Ltd. has a loan of Rs. 10,00,000 to pay. They are short of funds so they are trying to find means to arrange funds. Their manager suggested to claim from insurance company against stock lost due to fire in the ware house. He actually meant that they can put their warehouse on fire and claim from Insurance company against stock insured. They will use the claim money to pay loan.
(a) Will the company receive claim if the surveyer from company comes to know the seal cause of fire?
(b) Which values did company ignore while planning to arrange money from false claim?
(c) Explain three elements of fire insurance
a) No the company will not receive claim if surveyor come to know the real cause of fire and the contract will become null and void.
b) Principle of Utmost good faith is ignored while planning to arrange money from false claim. Insurance contracts also require that both parties act with the utmost good faith. This means that both parties must accurately and fully disclose all material information. This not only ensures fairness, but also helps insurance companies accurately price premiums for insurance applicants. Insurance policies can be declared null and void if an applicant made a misrepresentation of material fact that was relied on by the insurance company.
c) Three elements of fire insurance are :
- The insured must have insurable interest in the subject matter of the insurance. Without insurable interest the contract of insurance is void
- The insured should be truthful and honest (Utmost Good Faith) in giving information to the insurance company regarding the subject matter of the insurance
- The contract of fire insurance is a contract of strict indemnity. The insured can, in the event of loss, recover the actual amount of loss from the insurer. This is subject to the maximum amount for which the subject matter is insured
a) No the company will not receive claim if surveyor come to know the real cause of fire and the contract will become null and void.
b) Principle of Utmost good faith is ignored while planning to arrange money from false claim. Insurance contracts also require that both parties act with the utmost good faith. This means that both parties must accurately and fully disclose all material information. This not only ensures fairness, but also helps insurance companies accurately price premiums for insurance applicants. Insurance policies can be declared null and void if an applicant made a misrepresentation of material fact that was relied on by the insurance company.
c) Three elements of fire insurance are :
- The insured must have insurable interest in the subject matter of the insurance. Without insurable interest the contract of insurance is void
- The insured should be truthful and honest (Utmost Good Faith) in giving information to the insurance company regarding the subject matter of the insurance
- The contract of fire insurance is a contract of strict indemnity. The insured can, in the event of loss, recover the actual amount of loss from the insurer. This is subject to the maximum amount for which the subject matter is insured
