9911796707
TMI Blog1966 (2) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... by cyclone, flood and/or change of course of river or erosion of river, landslides and subsidence. The town of Dhulian is situated on the banks of the Ganges and for several years the river had been changing 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 (exhibit 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. 2. Two interim protection cover notes Nos. 18848 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 accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Nature of Alteration : The above cover note is cancelled by the General Assurance Society Ltd. as from 6th July, 1950. 5. On July 15, 1950 the assured wrote to say that they held the Company bound because although there was no erosion by the river when the proposals were submitted and accepted, the Company was trying to get out of the contract when 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 reinsure the same with any other office of Insurance at this stage. 6. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Dhulian to make local inquiries on behalf of the Company and the 6th July when the Company cancelled the risk and withdrew the cover. The evidence comes from both sides but is mostly consistent. Lalchand Jain (P.W. 1) for the assured stated that on the 2nd of June the houses were 400/450 feet away from the bank of the river. (Q. 73) and on that date there was no erosion because 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, Dhulian 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Judge considered the matter with and without condition 10. He first considered whether condition 10 of the policy at all applied. The learned Judge gave eight reasons why it did not. To those reasons we will come presently. The conclusion of the learned Judge was that the policy had not come into existence and did not govern this contract of insurance. As the cover note was only for a month and 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 expire 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 done when the loss had already commenced or became so proximate that it could be said that to have almost commenced, the Company could not allowed to invoke it. In reaching this conclusion the decision of the Judicial Committee was not accepted and the width of the condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an June 3rd, the date of the acceptance of the proposals. The learned Judges observed that the relative cover ought to have been a cover for a whole year and if it was for a month only it could not be a relative cover because the letter of acceptance undertook the risk for the whole year. Next they held that as the cover notes did not accompany the letters of acceptance, there was no notice to the assured that the terms and conditions of any policy would govern the contract. They found fault with the word 'policies' in the phrase 'usual conditions of the Society's 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 out that the words of the cover note were not all the conditions of the policy but only usual conditions and by referring to books on the law of insur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;relative' is not to be stretched too far. Its use here is an instance of unnecessary legalese and it does not add to the purport of communication that a cover note was being sent. It is obvious that if in the period during which the cover note was operative there was refusal to insure, the assured could not have demanded a policy or insisted that there was insurance without a policy, standard or otherwise, and not subject to any conditions by reason of the 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 get 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 the behalf of the assured, faintly suggested that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any in case of ambiguity or doubt. A contract is formed when there is an unqualified acceptance of the proposal. Acceptance may be expressed in writing or it may even be implied if the insurer accepts the premium and retains it. In the case of the assured, a positive act on his part by which he recognises or seeks to enforce the policy amounts to an affirmation of it. This position was clearly recognised by the assured himself, because he wrote, close upon the expiry 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 the 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. 18. The letters of acceptance clearly mentioned that cover notes were being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contained in the policy to be issued, no such contract could ever be made or would ever be of any use. The very reason for sustaining such contracts is, that the parties may have the benefit of them during that incipient period when the papers are being perfected and transmitted. It is sufficient if one party proposes to be insured, and the other party agrees to insure, and the subject, the period, and the amount and the rate of insurance is ascertained or understood, and the premium paid if demanded. It will be presumed that they contemplate such form of policy, containing 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. 20. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause unless one reads the policy and the terms on which it was effective, mere reading of the proposals and the letters of acceptance would not give any terms. Further when a contract of insuring property is complete, it is immaterial whether the policy is delivered or not for the rights of the parties are regulated by the policy which ought to be delivered. In this way also the terms and conditions of the standard fire-policy would apply even though the policy was not issued. 23. It was next contended that the expression usual conditions of the Society's policies could 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. Such 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.) Volume 2, page 963, paragraph 1981; Welford and Otter-Barry's Fire Insurance (4th Edition.) pages 178, 179; and Richards on Insurance (5th Edn.) Volume 3, page 1759, paragraph 531. In The Sun Fire Office v. Hart and Others (1889) 14 A.C. 98 such a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated by Lord Watson to be - ... to enable the insurers to release themselves from their contract during its currency, leaving it is full vigour down to the time of notice. The words in which the power of determination is expressed, taken by themselves, are very wide and comprehensive. According to their primary and natural meaning, they import that, in order to justify the exercise of the power, nothing is required except the existence of a desire, on the part of the insurers, to get rid of future liability, whether such desire be prompted by causes which prevent the policy attaching, or by any other cause whatever. 26. In dealing with the further question whether any reasons should be assigned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As a general proposition, this is perfectly right. Condition 10 is intended to cancel the risk but not to avoid liability for loss which has taken place or to avoid risk which is already turning into loss. It is obvious that a fire policy cannot be cancelled after the house has caught fire. But it is equally clear that unless the risk has already commenced or has become so imminent that it must inevitably take place, such a clause can be invoked. If property is insured against flood, it is not open to the insurance company to send couriers on motor cycles ahead of the floods to cancel the policy. But if it is thought that a particular dam was not quite safe, the insurance company will be entitled to cancel the policy against 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. 29. 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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