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CLASS: XI
SUBJECT: BUSINESS STUDIES
NAME OF CHAPTER: BUSINESS SERVICES
20 LO: Able to explain Study the following cases and answer the given questions: 6
Principal of (a) Chatan gats his oil-godown doubly insured against fire for Rs
Indemnity and 5,00,000 with insurer 'Easy General Insurance' and for Rs 15,00,000
Principle of Utmost with insurer 'Risk free Insurance (P) Ltd'. Due to
Good Faith a short circuit, an unforeseen loss by fire of oil stock worth Rs 6 Lakh
AO: To assess the occurred on 11th September. How much cornpensation can be claim
understanding of the from each of the insurers? Give reasons.
Principal of (b) Anand was suffering from terminal intestinal cancer disease,
Indemnity and which he did not disclose
Principle of Utmost while taking a medical cum health insurance policy from Star Health
Good Faith Insurance (P)Ltd.
Can he legally succeed to get claim for reimbursement of
hospitalization bills under the
Mediclaim policy? Why?
ANSWERS:
Q. NO ANSWER
1 Rs.2 lakh due to Principal of Indemnity.
2 The husband will get compensation from the insurance company, because in the case of a life
insurance policy, the insurable interest must be present at the time of talking policy. If the
husband is making regular payment of premium even after divorce, then he will get the
compensation for the death of his wife even after divorce.
3 A. Postal Services
4 B. Fixed – line services
5 C. Cable Services
6 A. VSAT services
7 C. customer can transfer funds using Bank Draft
8 C Real Time Gross Settlement
9 B. In RTGS, payment is not subjected to any waiting period
10 D Cash Credit
11 Ritesh is not right. The relevant insurance principle is ‘Indemnity’.
Fire insurance contract is based on the principle of strict Indemnity. In the given case, Ritesh
can recover the actual amount of loss, i.e., Rs.3,00,000 from the insurer. Under no
circumstances, Ritesh is allowed to make profit out of contract
12 a. No, Akshay cannot recover Rs.1,50,000 each from the two insurers as he has no right
to recover more than the full amount of his actual loss.
b. Principle of ‘Contribution’ has been highlighted in the given case.
13 The principle of insurance followed by Ankit is ‘Mitigation’. According to this principle, it is
the duty of the insured to take reasonable steps to minimize the loss or damage to the insured
property.
14 (i) No, Kapil cannot recover Rs.1,25,000 from the insurance company.
(ii) Principle of insurance highlighted in the given case is ‘Proxima Cause’. According
to this principle, the insurer is liable for the loss only when such loss is proximately
caused by the perils , which are stated in the policy. In the given case loss caused
due to rats is a remote cause and not the proximate cause.
15 Bank Overdraft, It refers to a facility in which a customer is allowed to overdraw his current
account upto an agreed limit
16 The principle of insurance applicable in the given case is ‘Subrogation’. According to this
principle the insurer gets all the rights against the third party with respect to the subject matter
insured, after compensating the loss of the insured. So, in the given case, Tata AIG has the
right over car.
17 Kamal – Current Account
Supriya – Savings Account
Shivam – Recurring Deposit Account
18 No, Naresh is not entitled to receive the claim because he has violated Principle of 'Good Faith'.
(a) Good faith or disclosure of all material facts : An insurance contract is a contract of good
faith. Both parties to the contract are bound to likely to affect the acceptance of the proposal
by the insurance company. It is known as a contract ubenimae fidie, i.e. contract requiring
absolute good faith and the disclosure of all material fads. In ordinary contracts, when consent
to an agreement is caused by mis-representation, the agreement is avoidable. But in an
insurance contract, there should not only be no mis-representation but also no concealment
of any material fact, otherwise, the policy becomes void. According to Lord Mansfield, 'Good
faith forbids either party by concealing what he privately knows, to draw the other into a
bargain from his ignorance of the fact and his believing the contrary".
The proposer is liable to disclose all material facts before the insurance company which are
known to him. Every fact which is likely to influence the mind of prudent insurers in deciding
whether to accept the proposal or not or in fixing the rate of premium is material fact.
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