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TMI Blog1966 (2) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... ging its course and in 1949 a part of the town was washed away. The insurance was obviously effected with this risk in sight. The period of insurance was to be from June 3, 1950 to June 2, 1951. The Company accepted the proposals by two letters (Ex. D.) on June 3, 1950 and the letters stated that. in accordance with the proposal the assured was held covered under cover notes enclosed with the letters. At the back of these letters of acceptance, there was description of the houses and an endorsement which read: "Including Cyclone, Flood and/or loss by change of course of river diluvium and/or Erosion of River Landslide and/or subsidence. It is further noted that there is a thatched building of residence within 50 ft. of the above premises." Two interim protection cover notes Nos.118848 and 18850 in respect of the two proposals were filed by the insurance company along with the written statement and they were said to be copies of cover notes sent with the letters of acceptance, but they bore the date June 5, 1950. There is some dispute as to whether they were at all enclosed with the reply showing acceptance of the proposals. of the two cover notes, which are identical except for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the river was eroding the banks. They ended this letter by saying: "Now when the erosion and/or change of course of river and/or subsidence have commenced, it is quite impossible to take any precautionary measure or to rein sure the same with any other office of Insurance at this stage. On July 17, 1950 the Company prepared an endorsement for the 'policies cancelling the risk and sent the endorsements to the assured. The endorsement read: _ . . . . . . . . . . . _ . . . . . . . . . . . In the name of :-Messrs. Chandmull Lal Chand, P.O. Dhulian, Murshidabad. It is hereby declared and agreed that as from 6th July 1950 the insurance by this policy is cancelled by The General Assurance Society Ltd., Calcutta, and a refund premium of Rs.......... is hereby allowed to the assured on a pro rata basis. (Sd)/- Illegible. Ag. Manager & Underwriter. Calcutta, In reply the latter said that as the risk had already "commenced' and "taken place", there could be no cancellation as there was no time left for the assured to take precautionary measures by reinsuring. In reply the Company referred to condition 10 of the Fire policy under which the Company claimed to cancel the polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the river was quite calm (Q. 132). This continued to the second week of June (Q. 136). The river began to rise in the 3rd week of June but there was no erosion (Q. 137). Erosion began by the end of June (Q. 142) and the current was then swift (Q. 144) and the right bank started to be washed away. Houses within 10-50 feet of the bank were first affected in the last week of June (Q. 180). At that time the insured houses were 400/450 feet away. Even on July 15, 1950 the distance between these houses and the river was 250 feet (Q. 179). Surendranath Bhattacharjee (P.W.2), Overseer and Inspector, Dhulia Municipality stated that the erosion started four or five days after Rathajatra which took place on or about June 20, 1950. Bijoy Kumar (P.W.4), Retired Superintending Engineer is an important witness. He submitted three reports Exs. F, G and H to Government on May 27, 1949, November 4, 1949 and September 11, 1950. In these reports he gives a description of the scouring of Dhulian town on August 5, 1950. He said nothing about the state of affairs in the first week of July which he would undoubtedly have said if erosion had already begun then. With his report submitted on September 11, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its terms had ceased to be operative, a contract of insurance absolute for one year was spelled out from the letter of acceptance which was said to govern the relations of the parties between July 3, 1950 (the date of the expiry of the cover note) and July 6, 1950 (when the policy was cancelled) and till 13/15th August, 1950 when the houses were washed away. Condition 10 was thus held to be not applicable. However, assuming that it did, the learned Judge held that it was unreasonable and the cancellation having been lone when the loss had already commenced or became so proximate that it could be said to have almost commenced, the Company could not be allowed to invoke it. In reaching this conclusion the decision of the Judicial Committee was not accepted and the width of the condition was cut down. In the result the claim of the assured was decreed in the sum of Rs. 1,10,000 with costs in the appeal and the suit. There is a preliminary question of fact to which the courts below have addressed themselves. It is whether the cover notes accompanied the letters of acceptance of the proposals. The learned single Judge seems to imply that they did and the Division Bench holds that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d conditions of any policy would govern the contract. They found fault with the word 'policies' in the phrase 'usual conditions of the Societies policies' because the word indicated a plurality of policies and not a standard policy. They commented that the standard fire policy applied condition 10 to fire risk and not to risk by flood, cyclone etc. They found the expression 'the said properties are hereunder held insured for damage by fire' insufficient to cover other risks although they admitted that the cover notes spoke of loss or damage-by flood, cyclone etc. They next pointed but that the words of the cover note wore not "an the conditions of the policy" but only "usual conditions" and by referring to books on the law of insurance they concluded that condition 10 which gave a right to either party to terminate the policy at will, could not be considered a usual condition. They observed that this was not a condition usually included in English policies and appeared to be in vogue in colonial and underdeveloped countries. They felt that if the fire policy was extended to cover risk of flood, etc., the new risks should have been made expressly subject to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he acceptance. The cover notes could have been sent later without impairing the effect of the reference to them in the letters of acceptance. By the fortuitous chance of omission to enclose the cover notes the assured did not got any additional rights under the letters of acceptance. Insurance of property is not a bet but a well-known commercial deal. Acceptance of the proposal read with the cover notes clothed the assured with a right to demand a policy in relation to the kind of insurance he had bought and he could only claim to be covered against risk in the manner laid down in the policy. To avoid this consequence the learned Additional Solicitor-General, arguing on behalf of the the assured faintly suggested that the endorsement at the back of the letter of acceptance was the cover note and it did not refer to any policy. This position was clearly unsustainable. The cover notes were an integral part of the acceptance of the proposals and the two had to be read together. A contract of insurance is a species of commercial transactions had there is a well-established commercial- practice to send cover notes even prior to the completion of a proper proposal or while the proposal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the time of the cover notes, that either a policy should be issued to him before that period had expired or the cover note extended in time. In interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves. Looking at the proposal, the letter of acceptance and the cover notes, it is clear that a contract, of insurance under the standard policy for fire and extended to ,cover flood, cyclone etc. had come into being. The letters of acceptance clearly mentioned that cover notes were being sent. The contract of insurance was based upon the cover notes for the period covered by the cover notes. Nothing happened in the 30 days during which the cover notes operated. It is true that the letters of acceptance showed that the risk was covered for the whole year and not for 30 days. This was an unfortunate way of expressing that the acceptance of the proposal would operate in the first instance for 30 days only during which the company would be free to decline the policy. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontaining such conditions and limitations as are usual in such cases, or have been used before between the parties. This is the sense and reason of the thing, and any contrary requirement should be expressly notified to the party to be affected by it. In General Accident Insurance Corporation v. Cronk ([1901] 17 T.L.R. 233), it was also ruled that a person making a proposal must be taken to have applied for the ordinary form of policy issued by the company. It is only when there is a condition precedent that the policy must be delivered that the assurer is not on the risk otherwise he is. See Macgillivray (Vol. 1, p. 325, paragraph 675). In such a case acceptance is merely an intimation that the assurer is willing to issue a policy but there will be no binding contract (ibid paragraph 679, p. 328). In the present case, there was no such condition precedent and the company was on risk throughout. As insurance was asked for on the policy of the company the usual policy would have issued and as the insurance was from June 3, 1950 the policy would have related back to that date. The insurance of the policy does not add to the contract. The incipient terms and conditions of the contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be read to include condition 10 which was not a usual condition where it gives a right to terminate the policy at will to the company. This is not correct. Suck a condition is mentioned in almost all the books on the law of Insurance. See Halsbury's Laws of England (3rd Edn.) Vol. 22, page 245 paragraph 474; Macgillivray on Insurance Law (5th Edn.) Vol. 2, page 963, paragraph 1981; Welford & Otter-Barry's Fire Insurance (4th Edn.) pp. 178, 179; and Richards on Insurance (5th Edn.) Vol. 3, p. 1759, paragraph 531. In The Sun Fire Office v. Hart and Others([1889] 14 A.C. 98) such a condition is not only mentioned but also discussed. An identical condition in a fire policy was also mentioned and discussed in a decision of this court reported in The Central Bank of India Ltd.v.Hartford Fire Insurance Co.Ltd.( A.I.R. (1956) S.C. 1288.). Therewas thus nothing unusual in the inclusion of such a condition in the policy and the reference to the usual conditions would, therefore, include a reference to condition (10). This condition gives mutual rights to the parties to cancel the policy at any time. To the assurer it gives a right to cancel the policy at will. It was contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and if so assigned whether they should be such as must satisfy a court of law, it was further observed: "The question remains whether the clause gives the insurers the right to act upon their own judgment, or whether they are bound, if so required, to allege and prove to the satisfaction of a Judge or Jury, not only that a desire exists on their part, but that they have reasonable grounds for entertaining it. If the determination of the policy would be for the advantage of its business, that would obviously be a reasonable ground for the office desiring to put an end to it; and a priori, one would suppose that the insurers themselves must be the best if not the only capable judges of what will benefit their business. An insurance office may deem it prudent, and resolve to limit its outstanding engagements, and, unless the words of the clause clearly imply the contrary, it cannot be presumed that the parties meant to make such a question of prudent administration the subject of inquiry in a court of law." The learned Judges of the Divisional Bench did not follow the decision of the Judicial Committee because they found it unacceptable. But a similar view of an identical conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st flood before the dam has actually started to crumble or has crumbled. Cancellation is reasonably possible before the liability under the policy has commenced or has become inevitable and it is a question of fact in each case whether the cancellation is legitimate or illegitimate. In the present. case, it was always clear that the Ganges would get into the floods in the rainy season, but it was not clear that it would begin to erode the bank in such a way that these houses, which were at a distance of 400/500 feet from the bank would inevitably be washed away. The question thus is whether the cancellation was done after liability of the assurer under the policy had commenced or the loss had become inevitable. Here we must look at the evidence which was summarized earlier. We are concerned with two dates in particular and they are June 18, 1950 when Ghose visited Dhulian and July 6 when the policy was cancelled. The houses according to Lalchand Jain (P.W. 1) were 400/500 feet away when the proposal was made. The river remained calm till the second week of June. It only began to rise in the third week of June. Thus on June 18, when Ghose visited the place, there was no flood and n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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