Fidelity insurance - Indian Laws - General

Fidelity insurance In Black s Law Dictionary fidelity insurance is explained as under: Fidelity Insurance - Form of insurance in which the insurer under takes to guaranty the fidelity of an officer, agent, or employee of the assured, or rather to indemnify the latter for losses caused by dishonesty or a want of fidelity on the part of such a person. In Halsbury s Laws of England, Vol. 25, 4th Ed. A Fidelity Guarantee Insurance is described as pecuniary loss insurance, not falling within normal class related to contingency but, for making payment in the event of a specified event occurring, the payment representing either the loss or the possibility of loss which that event entails.... A Fidelity Policy which insures the assured against losses which he may sustain by the default of his employee is a policy of pecuniary loss. It is a policy, intended to protect the assured against contingency of a breach of fidelity on the part of a person in whom confidence has been reposed. In paragraph 798 dealing with time and notice it is stated, The duty of giving notice of the loss to the insurers does not arise until the employer has satisfied himself of his employee s dishonesty; the employer is under no duty to notify mere suspicion. However, if the policy fixes a time from the date of loss for giving notice to the insurers, the assured will be unable to recover if the time has expired before he becomes aware of the loss. Fidelity Guarantee is thus different from contingency guarantee. The insurance under it is for honesty, against negligence or for being faithful and loyal. The protection afforded is different than normal insurance policies. Its consequences and enforcement are also not the same. The employer or the principal has first to be satisfied about the breach. No action can be taken on suspicion. THE FOOD CORPORATION OF INDIA VERSUS THE NEW INDIA ASSURANCE CO. LTD. AND OTHERS - 1994 (2) TMI 314 - SUPREME COURT