Question

Ramesh gets his factory insured against fire of 10 lakhs with insurer ‘A’ and 05 lakhs with insurer 'B'.
Ramesh's factory is caught by fire and suffered a loss of C5 lakhs.
(a) Name and explain the principle of insurance highlighted in the above case.
(b) How much compensation can be claimed from 'A' and 'B' separately and why? Show calculations.
(c) The residues of the factory were sold for 30,000. Who will rightly avail the amount? Show calculations.
(d) Name and explain the principle of insurance identified in part (c) above.​

Answer 1

Explanation:

Aditya can claim compensation for loss by fire (₹ 3 lakh) from the insurers A and B in the ratio of 2:1 (10 lakh : 5lakh), i.e., ₹ 2 lakh from insurer A and ₹ 1 lakh from the insurer B. This is because of the principle of contribution. According to the principle of contribution, if a person has taken more than one insurance policy for the same risk, then all the insurers will contribute the amount of loss in proportion to the amount assured by each of them and compensate him for the actual amount of loss. Separately, the insured cannot clain total loss from each insurer because he has no right to recover more than the full amount of his actual loss.