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Question

Sigma Ltd. took insurance cover of Rs. 3, 00,000 from company A and Rs. 7, 00,000 from company B, against the goods lying in the godown. Later goods were damaged due to fire and the loss was estimated at Rs. 1, 50,000.

(a) How much amount will be paid by Company A and B respectively to compensate Sigma Ltd?

(b) State and explain the underlying principle.


Solution

Company A will give Rs 45,000 and company B will give Rs 1,05,000 as compensation to Sigma Ltd. Fire Insurance is a contract, where by insurer agrees to make payment for the good that was lost due to fire during the specified period of time and up to a specified amount, in return of a premium. The principle of contribution allows the insurer the right to call on other insurers liable for the cost to share the claim payment.

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