Page 26 - The Insurance Times July 2025

Insurance Demystified

The Dilemma of

Settling a Claim -- For

want of the Proper

Understanding of Policy

Conditions Prof (Dr) Abhijit K. Chattoraj
Chartered Insurer

The problem in India is that the conditions and warranties are treated alike. Everything is treated
as a breach of condition. A breach of warranty has the same effect as a condition. As a result,
remedies for a breach of contract do not benefit Indian customers. There is no scope for collateral
or mere conditions.
I magine a scenario: A claims manager, in a Standard otherwise be payable under the Policy. A violation of a

condition can prejudice the validity of a liability for a
Fire and Special Perils Policy, observed during the
claim(insurance) or the Policy itself.
processing of the claim that the insured didn't have
an insurable interest in the subject matter of the
insurance at the material time of the accident. The insured, The terms of the contract are exhaustive provisions
contained in the agreement. The terms of a contract must
however, had an insurable interest at the time the insurance
be specific; that is, an essential term should not be missing
commenced. The claim manager had no option but to
from the contract, and the meaning of a critical term should
repudiate this claim. However, he could not cite a policy
not be uncertain or nebulous.
condition that would allow him to deny the claim.
Certain conditions are integral to all insurance contracts.
He meticulously examined every condition printed or endorsed They are called Implied Conditions and are effective even
on to the Policy. He could find the mention of conditions though they don't appear on the face of a policy. Implied
related to contribution, subrogation, indemnity, average terms express themselves in three ways: In fact, in law and
Clause, arbitration clause, misrepresentation, mis-description by custom or usage.
or non-disclosure of any material particular and fraudulent 'A term implied in fact' is not stated expressly but reflects
declaration and means. But he could not find any condition
the intentions of the parties. They are so obvious that they
related to insurable interest. He was therefore in a fix on how go without mentioning. When you visit a restaurant and
to deny the claim by citing a proper policy condition. order a cup of hot coffee, it is evident that you have to pay
for the coffee. The implied term lends 'business efficacy' to
In this context, it is imperative to understand the word the contract.
'Conditions'. Every insurance contract has terms known as
"Conditions" or the terms of the Policy. Any breach of the 'Terms implied by custom or usage' can be implied by (the
contractual terms by the assured will allow the underwriters reasonable and consistent) custom and the usage of the
to raise a defence under the Policy for a claim that would market or trade where the contracting parties operate.

The Insurance Times July 2025 23