Essay: A critique of travel, marine and aviation insurance (India)

Including a consideration of Contract Law of Indemnity vis-a-vis Law of Marine Insurance in India.
RESEARCH METHODOLOGY
OBJECT
The main objective of this project is to analyze the aspects of Travel, Marine and Aviation and draw a critical analysis of three of them.
SCOPE
The scope of the project deals with the services which the insurance offers and the areas which have been included. Also the liability of the insurer has been discussed.
SOURCES
A CRITIQUE OF TRAVEL, MARINE AND AVIATION INSURANCE
Insurance, a protection from financial loss. A form of risk management which is used for reducing/substantiating any loss occurred against the risk of a contingent and loss which is not certain. An insurer, sells the insurance policy to customers.
TRAVEL INSURANCE
All over the world, travel and tourism is one of the largest service industries. Beginning with the Travel Insurance, it is an insurance which intends to cover medical expenses, luggage which is lost, flight accident, cancellation of trip and other losses which were incurred while travelling either in one’s own country or internationally. Policies related to travel insurance purpose to cover the risks associated with travel. Such policies may be taken out in connection with holiday or business travel. It can be arranged at the time while booking the trip to briefly cover the time period of the trip or a trip which involves multiple destinations which can cover unlimited number of trips within a particular time frame. Some of the policies offer higher and lower options for medical expenses. Alternatively, long-term policies are increasingly found as add-ons to bank accounts or credit cards. Travel law started as a relatively niche practice within the legal community of informing travel agents and trade associations how to avoid legal complications, while at the same time protecting the consumers. Today, practice is far more complex and regulated. Travel Insurance is sold on the back of another product. An essential and necessary expense.
RISKS COVERED
Risks covered by the policies of travel insurance usually covers the following-
1) Medical expenses;
2) Delay in travel
3) Personal accident
4) Loss of personal possession
5) Cancellation
6) Illness/Any other emergency
7) Death
TRIP INTERRUPTION & CURTAILMENT
It covers accommodation costs and unused travel, charges which were paid earlier, if a trip is cut short or cancelled owing to different kind of circumstances which varies from policy to policy. It also includes death, termination of employment, compulsory quarantine
SELLING OF TRAVEL POLICIES
The vast majority of sale in travel policies are sold by travel agents in conjunction with selling of the holiday. These agents won’t be the registered brokers, and many operatives have lack of training in insurance, mainly not aware with terms of the policy. This impression has been reinforced by the industry selling methods GISC code of practice stipulated that concentration should be drawn towards the essential features of the cover before entering into the contract. It is late when consumers discover that it doesn’t meet their needs.
LEGAL DUTY TO DISCLOSE
Insurance contracts are based on uberrinae fti which means utmost good faith’. If the good faith has n’t been exercised by one party, then the other party can avoid the insurance contract. In the case of Carter v Boehm , this legal principle recognized by the courts applies to all kinds of insurance. Eventually, person buying insurance should disclose all the material facts to the insurer which might have an effect whether or not insurance was provided and on what terms.
Law Commission Report in 1980 on “Insurance Law – Non-Disclosure and Breach of Warranty”. The commission gave the recommendation of stringent duty to disclose to be tempered so that consumers are expected to disclose facts which a reasonable individual would disclose in their position.
LONG-TERM POLICIES
Annual, multi-trip policies are offered by many travel agents. They’re offered as add-ons to credit cards and bank accounts and usually have clauses which requires the policyholder to notify any change in their health to the insurer includes a provision which says such notification may lead to the withdrawal of cover. These kind of clauses creates problems for two reasons, first being the policyholders have a liability to overlook them since they haven’t purchased the policy separately and there is lack of awareness. Second being, threaten to deprive the policy of its value.
MEDICAL EXPENSES
This is one of the most relevant section of the Travel Insurance mainly, for overseas holidays. It is essential for the policy to have immediate notification of any medical problem to a particular contact point. It benefits the insurer to assess and analyze the seriousness of the situation by ensuring the emergency assistance when required. Also, it helps the insurer for the overall reduction of claims by minimizing it. Taking the case of present scenario, policyholder should have been able to receive immediate medical help at no cost to the insurer. Therefore, failure to notify had caused no prejudice to the insurer.
Talking about the emergency centre, it is necessary to provide that insurer won’t be liable for the expenses which were incurred without the approval of centre. When the matter is urgent, and policyholder is not able to contact the centre then, it can be a bit problematic. Policyholder should be able to recover expenses in such circumstances on the condition that they have been reasonable enough in such situations.
PERSONAL ACCIDENT
Taking the case of sudden and unexpected death will usually presumed to be accidental in case of absence of any evidence to the contrary. Another issue arises of the mountaineering, when policyholders go on adventurous holidays where they were seized with a desire to do something crazy. Few of them bother to read their respective policies before committing such act. Two situations creates two different problems, in first case it may be found that policy has some exclusions for the activities in doubt. If the activity has been excluded specifically, or similar terminology, question will arise as how this policy can be sold to the holder. It may be argued that intermediary or the travel agent is in breach of the duty by mere act of the sale given the unsuitability of the event.
LOSS OF PERSONAL POSSESSIONS
This clause creates complexities due to the circumstances in which personal possessions are lost. Mainly, insurer have two objections while doing the payment. First being, some cases where circumstances makes it difficult to decipher the loss which has taken place which becomes problematic to prove. Second, when insurers have a belief that property has been exposed to unnecessary danger, by being left unattended in a place which is dangerous. However, the approach has been changed over the decade. Practice has grown from the property which has been left “unattended”.
CANCELLATION
The section specifies cancellation takes place due to the reasons which are beyond the control of policyholder. Also, it excludes which is often referred as “mere disclination to travel”. It is hard to define “disclination”. Problem arises when it appears policyholder have made a choice to cancel the travel but states that in effect he had no choice. Taking the case of govt. officers, where they book a holiday, but later they have been posted to different location In these cases, it’s their duty and they can’t afford to continue the holiday.
DELAY IN TRAVEL
Travel policies offers compensation if the traveler has delayed the trip for more than a particular period of time on fixed rate. This part has been considered as a contingency provision, since it is given on a fixed rate bearing the least relationship to the expenses which are incurred.
ILLNESS/ANY OTHER EMERGENCY
It raise a concern over the reasonability of the decision to return taking the case of staying abroad and receiving treatment .
TRAVEL INSURANCE: A CRITICAL ANALYSIS
Travel and tourism industry has been one of the booming industry in the commercial sector. Essentially, travel insurance is the backbone of every travel plan which helps in getting compensation in case of any unforeseen situation or danger. Over the years, travel insurance policy has been evolved to provide some of the security an overseas traveler foregoes: usual cover, though by no means covering the tourist in every circumstance where loss may take place or any expense incurred which is unseen, it does guarantee the traveler a financial assistance in those situations where he needs it the most. Pertaining to travel law, some basic things needs to be taken into consideration while buying it.
• Reasons for purchase
• Exclusion in the policy
• Reasonable discretion
For claiming the insurance, proof is required, in case of illness or hospitalization it’s from the doctor and in loss of any personal possession like baggage claim, receipt from the airport is required. But, in case you’re on a holiday and while doing any kind of adventurous sports and in lack of exercising reasonable discretion, then you’re in trouble if your policy has mentioned exclusively no claim for “dangerous” sports. Moreover, after a brief analysis of Travel Insurance I feel “utmost faith” should be exercised while selling the travel policy and all the material facts should be disclosed which are crucial while taking the policy. While purchasing the policy insurer should approach the appropriate source or company who has expertise in selling the policy. They shouldn’t be unauthorized travel agents who reach through them any indirect source or which is not recognized.
INDIAN SCENARIO
There is a legal duty on part of one party to disclose all the material facts to another for the establishment of a successful relationship between the two parties. Taking the scenario of India, Travel Insurance is referred as visitor or overseas medical insurance, which is a special facility offered by insurance companies in India basically to cover against any unforeseen situation while travelling to abroad. Any claim regarding pre-existing medical condition whether it is declared or undeclared doesn’t cover the policy. Therefore, investment in right plan proves beneficial to the party. It ensures full protection while travelling between countries. Also, it’s unfortunate that still a major part of population doesn’t believe in investing in travelling policies owing to the lack of awareness of such policies among them which makes them think it’s a sheer wastage of money and time. It’s the opposite in reality where the plan works to ensure safety and protection towards them.
MARINE INSURANCE
INCEPTION OF INDIAN MARINE INSURANCE LAW
Since 1947, Indian shipping had experienced an impressive extension, and it got to be compulsory for an Indian enactment predictable with Indian conditions, for the smooth advancement of Indian marine insurance. Before enactment, questions turning on this branch of law must be chosen by the general law of contract and the English choices in view of the regular law tenets of contract. The Indian legislation is a substantial multiplication of its English partner, taking after its arrangement nearly and straying from it at a few spots, just superfluously.
The preamble to the Indian Marine Insurance Act states
“an Act to codify the law relating to marine insurance.” The canon of construction generally applicable to a codifying statute is well known: the language of the statute must be given its natural meaning, regard being had to the previous state of the law only in cases of doubt or ambiguity.”
In any case, as on account of its English counterpart, the Indian Act epitomizes just a few and not the greater part of the legitimate principles and tenets of marine insurance, and its dialect is so to a great degree succinct and general that its full import and significance can hardly be comprehended without alluding to the current law which it was proposed to express or to the chosen cases from which that law was developed.
The objective behind marine insurance has been to empower the ship proprietor and the purchaser and merchant of goods to work their individual business while relieving themselves, in any event incompletely, of the oppressive financial outcomes or consequences of their property being lost or harmed as an after-effect of the different risks of the high oceans. Marine insurance is a significant old insurance term which is intended to cover the loss relating to shipment; ship and so forth. Marine insurance ordinarily satisfies all your abroad transportation necessities and give them peace of mind.
CONTRACT LAW OF INDEMNITY VIS-A-VIS LAW OF MARINE INSURANCE IN INDIA
The majority of the law of marine insurance is generally unadulterated elucidation of the contract contained in the regular type of marine policy. The fundamental rule of a contract of insurance is that the indemnity recoverable from the insurer is the financial loss endured by the guaranteed under the contract. Hence, according to the order, a contract of marine insurance is a contract whereby the insurer attempts to repay the guaranteed, in way and to the degree in this way concurred, against marine losses, that is to say, the losses occurrence to marine enterprise. A contract of marine insurance might, by its express terms, or by use of trade, be stretched out in order to ensure the guaranteed against losses on inland waters or any area risk that might be accidental to any ocean voyage.
Where a ship in course of building, or the dispatch of a ship, or any adventure closely resembling a marine adventure, is secured by a policy as a marine policy, the procurements of this Act, in so far as applicable, might apply thereto; in any case, with the exception of as by this segment gave, nothing in this Act should adjust or influence any guideline of law applicable to any contract of insurance other than a contract of marine insurance as characterized, by the Act.
The formal instrument embodying the marine insurance contract is called “the policy”; and “the slip” or “covering note” , is the informal memorandum that is drawn up when the contract is entered into. The subject matter insured and the consideration for the insurance are respectively known as “the interest insured” and “the premium”. The person who is indemnified is “the assured” and the other party is styled “the insurer” or “the underwriter” so called because he subscribes or underwrites the policy. “Loss” includes damage as well as actual loss of property resulting out of from maritime perils.
“Maritime perils” means the perils consequent on, or incidental to, the navigation of the sea, that is to say, perils of the sea, fire, war perils, pirates, rovers, thieves, captures, seizures, restraints, and detainments of princes and peoples, jettisons, barratry, and any other perils, either of the like kind or which may be designated by the policy.
Section 2(d) of the Act says
A “marine adventure” includes any adventure where-
a. Any insurable property (any ship, goods or other movables) is exposed to maritime perils; b. The earning or acquisition of any freight, passage money, commission, profit, or other pecuniary benefit, or the security for any advances, loan, or disbursements, is endangered by the exposure of insurable property to maritime perils; c. Any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property, by reason of maritime perils.
The very establishment of each guideline which has been connected to insurance law is this, to be specific, that the contract of insurance contained in a marine or flame policy is a contract of indemnity, and of indemnity just, and this contract implies that the assured, if there should be an occurrence of a loss against which the policy has been made, might be completely indemnified, however might never be more than completely indemnified. That is the crucial principle of insurance, and if at any time a suggestion is presented which is at fluctuation with it, that is to say, which either will keep the assured from acquiring a full indemnity, or which will provide for the assured more than a full indemnity, that recommendation should absolutely not be right. In principle, marine insurance is a contract of indemnity, in any case, by and by it in no way, shape or form comes about dependably in a complete indemnity.
THE MARINE INSURANCE ACT, 1963
An insurer guarantees to a risk consequently of premium by assured, premium here is compensation in lieu of risk to a protected property. The measure of premium relies on upon level of risk to property of guaranteed. The matter of insurance is typically completed by spreading of potential liabilities in littler sum over various persons. The risk here should incorporate the genuine property as well as the financial losses those brought about to outsider. The marine insurance covers just certain sort of risks which incorporates risks relating to setbacks of the ocean, fire, war hazards, pirates, seizures and jettison. The sorts of marine insurance are Hull Insurance, Cargo insurance, Freight Insurance and Liability Insurance. The marine insurance is a standard type of contract since it epitomizes terms and conditions which might be standard for all the insured. Segment 25 of the Act gives certain negligible prerequisites of the Act which should incorporate the name of assured, topic, risk insured, voyage-its time or period, total insured, names of the insured.
Segment 28 of the marine Insurance act manages the subject matter and the same might be considered with most extreme care and alert. According to Section 28(2), the nature and degree of subject matter not be indicated in policy, where policy determines subject matter when all is said in done terms it should apply to the interest planned by the assured. Under the Act there might be three sorts of policy esteemed policy, unvalued policy and drifting ship policy under Sections 29, 30 and 31 separated from this there should be time policy, voyage policy and mixed policy.
Marine Insurance depends on couple of principles which are likewise its essentials these are principle of most extreme good faith; principle of insurable interest; principle of indemnity and principle of subrogation. Here most extreme good faith might imply that the insured depends completely on the insurer, a contract of marine insurance is nothing not quite the same as some other type of contract. In case either insured or insurer commits fraud the other party can avoid such contract. It must be a prima facie duty of both the parties to act in good faith and thus, disclose every material circumstance known in accordance with Section 20 and 21. Insurable interest here would mean, at the time of insurance the insurer should have interest in subject matter. The insurer is liable to indemnify the insured in case a loss occurs. Subrogation means substitution of the insurer in place of the insured for the purpose of claiming indemnity from a third person for loss covered by insurance, and the insurer is entitled to recover from a negligent third party for any loss payment made to the insured.
AVIATION INSURANCE
The insurance coverage which is geared specifically to the operation of aircraft and the risks which were involved in insurance is known as Aviation Insurance. They are basically different from other areas of transportation and tend to involve terminology, limits and clauses which are specifically linked to aviation insurance.
Going by the history, about three centuries ago, Queen Elizabeth’s first parliament, Sir Nicholas Bacon remarked, “Wise merchants, in every adventure of danger, pay part of the value of their cargo to have the rest insured. And since then, insurance has become a universal necessity and the foundation upon all kind of industry are built. Aviation has been divided into different types of insurance.
PUBLIC LIABILITY INSURANCE
Often known as third party liability, it ensures insurance protection against all the sums which the insurer is legally liable to pay as compensation for damages and for that insurer is indemnified in relation with any kind of bodily injury resulted from any kind of occurrence, damage to property caused by the plane or person/object fallen.
IN-FLIGHT INSURANCE
Protection of an insured aircraft against damage during all flight phases and the ground operations while parking and stored. Due to its expensive nature, most of the aircrafts are mostly damaged while in motion
PASSENGER LIABILITY INSURANCE
This insurance ensures the protection of passengers who are killed or injured riding the accident aircraft. Usually, in countries it is sold on a per seat basis with a mentioned limit for the passengers.
Insurance has seemed the pragmatic means of preparing basis for getting together the various parties, with opposed interests. The liability of the carrier is based on risk, against which the insurance is designed to protect the consequences, legal scholars have always perceived insurance along with the liability. There were following reasons for the adoption of insurance law –
• Absence of any liability in air accidents.
• It is necessary to protect the interest which is left without any such redressal for injuries, either because of the absence of fault .
• The advantage of familiarizing passengers with insurance and giving them permission to take in addition where they regard the fixed indemnity very small. According to passengers, compulsory insurance would prove to be a boon not only to them, but also to their families to avoid the difficulties as a proof of liability of tort
CONCLUSION
Insurance Law being a historical and long practiced law in India, since colonial rule, the inconsistency in the legitimacy of laws still lies in this country as it does in platforms of all facets of the law. It can often be seen that such discrepancies arise when the investor claims insurance. Insurance companies take this as an advantage on their part and creates problems for investors who demand to be insured. To solve such problems, there should be a proper framework of insurance law which states the various and almost every anticipated circumstance where the insured can claim his money so that this is not left to further interpretation in future and thus, more problems. Travel insurance is one of the major aspects of insurance law and travel being the largest industry in the world, this aspect of this industry, that is, insurance law, should be smooth enough.
Insurance law has been a boon not only to the insurer but also to their families. Travel Insurance has been a security to the travellers across the globe. It is a security for any unforeseen danger/risk while travelling. Marine Insurance covers intends to cover the loss of ships, terminals, cargo by which the property has been transferred. Cargo, which comes under marine includes offshore and onshore property which has been exposed , marine liability and casualty. Aviation Insurance is the coverage which has been created specifically to the aircraft operation and the risks which are involved in aviation. The project briefly analyses the aspects of all the insurance and tries to draw the analysis weighing pros and cons of every aspect of them. They have been created for any kind of risk, danger involved in various branches of insurance.
BIBLIOGRAPHY
PRIMARY SOURCES
1. GISC General Insurance Code replaced the ABI Code of Practice for Non-Registered Intermediaries
2. The Marine Insurance Act, 1963.
3. Francis Rose, Marine Insurance: Law & Practice, 2nd Ed.
4. Lexis Nexis, Andrew McGee The Modern Law of Insurance, Third Edition,2011
SECONDARY SOURCES
1. Ripert, Assurances et Aviation, (1925) 9 REVUE JURIDIQUE INTERNATIONALE Dr LA Locomo
2. Insurance law Regulations in India, Nishith Desai Associates
3. The Marine Insurance Act, Lawyerslaw.org
4. Ruturaj Shinde, Development of Laws Relating To Marine Insurance in India, Legal Services India
CASES
1. Carter v Boehm (1766) 3 Burr. 1905
2. General Assurance Society v. Chandumull Jain, AIR 1966 SC 1644