1) UTMOST GOOD FAITH: Contract of Insurance, is a contract of "uberrima fides" (utmost good faith) and strictest proof of good faith is required in courts of law. Subrogation means substituting one creditor for another. 5. the insured, by paying a definite amount, in exchange for an adequate consideration called as premium. The maxim is “Sed causa proxima non-remota spectature” i.e. When a result has been brought about by two or more causes, you must, in insurance law, look to the nearest cause, although the result would, no doubt, not have happened without the remote cause. From above example, we can conclude that, ownership plays a very crucial role in evaluating insurable interest. The burden, however, falls more on the insured than the insurer because he is in possession of the subject matter to be insured. Present code sections provide for either excluded risks or covered risks. Principle #7 – Principle of Causa Proxima (Nearest Cause) This is a very important principle of insurance which an insured person should be aware about. The real cause of the loss must be considered while payment of the loss. He contracted an infectious decease while undergoing the treatment. For example, if a trespasser opens a gate on another person's property, and a stray dog walks through the open gate and kills the property owner's dog, the trespasser is responsible for the dog's death, even though the trespasser did not kill the dog himself. 4. Origin . 14. The insured must take all possible measures and necessary steps to control and reduce the losses in such a scenario. This is usually brought up when something has gone wrong, such as an automobile accident in which someone was injured, and refers to the non-injured party’s legal responsibility for the event. 4.9 The principle states that to find out whether the insurer is liable for the loss or not, the proximate (closest) and not the remote (farest) must be looked into. Don’t waste Your Time Searching For a Sample, Get Your Job Done By a Professional Skilled Writer. say Rs.50,000 or more. 7. Types of Insurance Correspondence … Principle of Uberrimae fidei (Utmost Good Faith). I’ve insured my house.”, 7. PROXIMATE CAUSE(CAUSA PROXIMA):-According to this principle,when the loss is the result of two or more causes,the proximate cause of loss should be taken into consideration.The insurance company is not liable for the remote cause.e.g. Pursuant to this principle, the cause nearest in the order of causation, without any efficient concurring cause to produce the result, must be considered as the direct cause. For example, where a building worth 5,00,000 USD is insured for 8,00,000 USD and is completely destroyed by fire, the insurer is liable to pay only 5,00,000 USD. It was also held that even if a fire insurance policy had usual exemptions from loss or damage from the explosion of … The person to be insured knows everything, and the underwriter (insurer) They are: Conditions for Applying the Principle of Indemnity, Essentials of the Doctrine of Subrogation, Insurance | Origin & History | Meaning & Definition | Characteristics, Reinsurance & Double Insurance | Meaning | Differences, Challenges Encountered in Indian Rural Insurance Market | Collaborative Actions, 12 Differences between Insurance and Wagering Contract, Meaning & Essential Features of Economic Planning, Audit of Shares – Issued for Cash | Issued for Consideration other than Cash, Single Storey Industrial Building | Merits, Demerits, Suitability, Production Planning | Characteristics | Importance | Phases | Pre-Requisites, Localization of Industries | Meaning | Causes | Advantages | Disadvantages, Special Privileges of Private Company over Public Company in India. 1 lac. Both the insurer and the insured, of course, stand on the same footing in relation to the disclosure of material facts. insurance company or the insurer, agrees to compensate the loss or damage sustained to another party, i.e. 8. Thus, the doctrine of subrogation means effect in the substitution of the insurer in the place of the insured, as the rightful claimant of the rights, possession etc. They are Offer and Acceptance, Legal Consideration, Capacity to Contract, Free Consent, and Legal Object. Hence it is a responsibility of the insured to protect his insured property and avoid further losses. The consideration for the contract is the premium paid by the insured. It is important to know that here in the Philippines; they follow the theory of the Causa Proxima. In other words, the insurance company will pay compensation to the insured only when the cause of accident is directly related to the loss. Insurance Glossary Defines: Proximate Cause — (1) The cause having the most significant impact in bringing about the loss under a first-party property insurance policy, when two or more independent perils operate at the same time (i.e., concurrently) to produce a loss. Insurance is defined as the equitable transfer of risk of loss from one entity to another, in exchange for a premium. Here the proximate cause of his death is accident or falling from the horseback, the reason being that injury leading to unconsciousness, exposure to severe cold and then pneumonia are all-natural events developing gradually one after another without really being intervened by a new or independent source (The example is based on a judgment given in ETHERINGTON V. LANCASHIRE AND YORKSHIRE … The disclosure should also be true and full in form. Retrieved from http://studymoose.com/principles-of-insurance-essay, Copying content is not allowed on this website, Ask a professional writer to help you with your text, Give us your email and we'll send you the essay you need, Please indicate where to send you the sample. It applies to all insurance contracts, which are contracts of indemnity. Causa proxima non remota spectatur (The proximate and not the remote cause must be looked into) is a maxim of causation long applied in marine insurance and general insurance alike. Causa proxima, non remota spectator is a Latin phrase. The policyholder must have monetary relationship with the subject matter. If the real cause of loss is not insured, the insurance company is not liable to indemnify the loss sustained by the insured. The maxim Causa Proxima, Non Remota Spectatur is used to describe the proximate, not … also offered here. A principle of Causa Proxima. 5. For example – Virat took insurance policy for his house. So, if the insured claims full amount of compensation from one insurer then he cannot claim the same compensation from other insurer and make a profit. The risk can operate on such object and cause damage of destruction. If the cause is not fire but some other cause remotely connected with fire, it is not recoverable, unless specifically provided for. Premium once paid shall not be refunded. fire, marine and theft insurance and not to life insurance. Nature of contract: ADVERTISEMENTS: Nature of contract is a fundamental principle of insurance contract. It applies to all contracts of indemnity, if the insured has taken out more than one policy on the same subject matter. The important point to consider here is that proximate cause is the only nearest cause and not the remote cause. 1. (See for example Diacon and Carter, Success in Insurance, and Hansell, Elements of insurance, and IISA study notes for course 042) The South African writers prefer to pursue the idea of proximate cause from the maxim lure non remota causa sed proxima spectatur, which means that an insurer will only be liable if the ‘fact’ for which a claim is brought, is the result of a proximate cause. For example :- Mr. John insures his house for $ 1 million. The question of nomination has particular importance only in case of life policies. Example 1: A tsunami starts in China Sea causing sky rising waves that reach over some parts of the Philippines towards shores and inland. Learn the meaning of Principle of Causa Proxima in Hindi in about 2 minutes. The rule is that immediate and not the remote cause is to be regarded. He should have called nearest fire station so that the loss could be minimised. The insurance is based upon certain principles like insurable interest, utmost good faith, indemnity, subrogation, causa-proxima, contribution, etc. The maxim is “ Sed causa proxima non-remota spectature ” i.e. The maxim "causa proxima non rempota spectature." Insurance is a contract based on utmost good faith. Causa proxima, non remota spectator is a Latin phrase. Principle of Causa Proxima (Latin phrase) or in simple English words, the Principle of Proximate Cause (nearest) means when a loss is caused by more than one causes, the proximate or the nearest or the closest cause should be taken into consideration to decide the liability of the insurer. In principles of insurance, a principle of Principle of causa proxima is the fundamental principle. proximate cause, all causes preceding the proximate cause being rejected as too remote. Principle of Causa Proxima (a latin phrase), or in simple English words, the Principle of Proximate or nearest cause , which means when a loss is caused by more than one causes, the proximate or the nearest or the closest cause should be taken into consideration to decide the liability of the insurer. The following case, Leyland Shipping v. Norwich Union Fire Insurance Society Ltd (1918) illustrates that the causa proxima may not necessarily be the last event to occur. Indemnity means security, protection and compensation given against damage, loss or injury. Therefore, the insured should fulfill the conditions and promises during the insurance contract, whether, it is important or not in connection with the risk insured. The following conditions must be fulfilled while applying the principle of indemnity: 1. Facts, which are embodied in the policy itself or facts governed by the conditions of the policy. Warranty is a very important condition in the insurance contract, which is to be fulfilled by the insured. The real cause of the loss must be considered while payment of the loss. Similarly, in case of life insurance the individual has unlimited financial interest in his own life. We've changed a part of the website. Over-insurance is automatically checked. 14. Every person has an insurable interest in his own life. If the insured received any money or compensation for the loss from any other third party after he has been indemnified by the Insurance Company, the insured should hand over the amount so received from such third party to the Insurance Company. In an cylinder blast, his house burnt. Just give us some more time, By clicking Send Me The Sample you agree on the, Malaysian Financial Reporting Standard 116, Financial Planning (Insurance) Case Study, Ask Writer For (309). In tort law, as Jewitt wrote in Dictionary of English Law: "Causa causans: the immediate cause; the last link or causation.Not the cause (causa sine qua non) of which the proximate cause is an effect, but the nearest cause of the damage or effect for which relief is being sought. Unless the cause is identified, the claim cannot be settled. This section provides a definition of proximate cause and explains how it should be determined in practice. In 1927, the Plaintiff, Mrs. Palsgraf, was standing at the end of a long train platform waiting for a train at the Long Island Railroad Station. The principle of indemnity shall apply only to general insurance i.e. If the loss is caused by more than one reasons, the nearest or the closest cause is taken into consideration. The students should note the following points in regard to subrogation. Insurable interest is essentially a monetary or pecuniary interest i.e. Whether insurance is of your health, property, business, vehicle, etc., it is important that you will be covered with adequate insurance. Example of Principle of proximate cause. For example an insured suffered injuries in an accident. The amount of compensations is limited to the amount assured or the actual losses, whichever is less. If the proximate cause is insured, the marine insurance … If one insurer pays full compensation then that insurer can claim proportionate claim from the other insurers. The insurance company will find the nearest cause of loss to the property. This maxim of causation is applicable for both marine and general insurance. Insurance. Proximate cause is a key principle of Insurance and is concerned with how the loss or damage actually occurred. For example :- The owner of a taxicab has insurable interest in the taxicab because he is getting income from it. According to this principle, the insurance contract must be signed by both parties (i.e insurer and insured) in an absolute good faith or belief or trust. The insured, however, can refuse to fulfill the warranty only when it is declared illegal and there shall no reverse effect on the contract. In a contract of insurance (other than life assurance) the insurer undertakes to indemnify or compensate the insured for losses occurring due to the risk covered. If the cause is not fire but some other cause remotely connected with fire, it is not recoverable, unless specifically provided for. The determination of the real cause depends upon the working and practice of insurance and circumstances to losses. 2 The amount of compensation will be the actual loss or the amount insured whichever is less. Not liable to indemnify the loss is the fundamental principle of Causa the transfer of risk of loss, only. Payment made by the insured as compensation from the insurance contract, principle. 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