principle, when the loss is the result of two or more cause, the proximate cause, i.e. the direct. The direct, the most dominant and most effective cause of loss should be taken into consideration. The insurance company is not liable for the remote cause.
Material Fact A material fact is one which goes to the root of the insurance contract i.e., a fact is material if it can influence the insurer in accepting or declaring the risk or in fixing conditions of insurance or rate of premium. commerce - - . . PM In the previous example,where ‘fire’ is accepted as the proximate cause of loss and if there is no fire and goods are destroyed due to excessive heat, the insurance company would not be liable to pay compensation.
. Contribution The same subject matter may be insured with more than one insurer then it is known as ‘Double Insurance’. In such a case, the insurance claim to be paid to the insured must be shared on contributed by all insurers in proportion to the sum assured by each one of them. It may be noted that in case of multiple insurance, the insured can claim the loss from any of the insurers subject to the condition that the insured cannot recover more than the amount of actual loss from all taken together.
Example: A businessman gets his factory insured against fire for ₹ , , with insurer A and ₹ , , with insurer B. Due to fire, a loss of ₹ , , occurred. Then, insurers A and B will contribute the loss in the ratio of : . A will pay ₹ , , and B will pay ₹ , .
. Subrogation Subrogation means ‘stepping the shoes on others’. According to this principle, once the claim of the insured has been settled, the ownership right of the subject matter of insurance passes on to the insurer. Otherwise, the insured will realize more than the actual loss which goes against the principle of Indemnity.
This is because the insured cannot make any profit by selling the damaged property Example: Mr. B gets his motor car