Certificate of insurance - Motor Insurance

 

3. Certificate of insurance - Motor Insurance:

Section 147 (3) of Motor Vehicle Act, 1988 states: ‘A policy shall be of no effect unless a certificate of insurance is issued in the prescribed format containing the prescribed particulars’. Therefore, in motor insurance issue of a certificate of insurance along with policy is compulsory as per the Act. The wording is also designed by the Act. This certificate serves as an evidence of insurance to the police and registration authorities. A specimen Certificate of insurance for private car is appended hereunder

MOTOR VEHICLES ACT, 1988 CERTIFICATE OF INSURANCE
Certificate No. Policy No. 
1. Registration mark and Number, Place of registration, Engine No. / Chassis No. / Make / Year of manufacture. 
2. Type of Body / C.C / Seating capacity / Net Premium 
3. Name of Registration Authority, 
4. Name and address of the insured
5. Geographical area – India. ` 
6. Insured declared value (IDV) 
7. Name and address of the Insured, Business or profession. 
8. Effective date of commencement of Insurance for the purpose of the Act. From………. 'O' clock on ……… 
9. Date of expiry of insurance: midnight on …………… 
10. Persons or classes of persons entitled to drive. 
Any of the following: 
(a) The insured: 
(b) Any other person who is driving on the on the insured’s order or with his permission. provided that the person driving holds an effective driving license at the time of theaccident and is not disqualified from holding or obtaining such a license. Provided also that the person holding an effective learner's license may also drive the vehicle and such a person satisfies the requirement of Rule 3 of Central Motor Vehicles Rules 1989. 
LIMITATIONS AS TO USE 
The policy covers use for any purpose other than: 
(a) Hire or reward; 
(b) Carriage of goods (other than personal luggage) 
(c) Organized racing, 
(d) Race making, 
(e) Speed testing 
(f) Reliability Trials
(g) Any purpose in connection with Motor Trade. 
I/we hereby certify that the Policy to which this Certificate relates as well as this Certificate of Insurance are issued in accordance with the provisions of Chapter X and Chapter XI of the Motor Vehicles Act, 1988.
Examined by……. Signature of authorized insurer

As no motor vehicle can ply without insurance on public roads, it is essential to carry the certificate of insurance in the vehicle.

 

4. Policy Document:

A policy is an evidence of the contract of insurance. It is stamped in accordance with the Indian Stamp Act, 1899. Following details are provided in a general insurance policy:

a) The name(s) and address(es) of the insured and any other person having insurable interest in the subject matter;
b) Full description of the property or interest insured;
c) The location/s of the property or interest insured under the policy and where appropriate, with respective insured values;
d) Period of insurance;
e) Sums insured;
f) Perils covered and exclusions;
g) Any excess / deductible applicable;
h) Premium payable and where the premium is provisional subject to adjustment, the basis of adjustment of premium;
i) Policy terms, conditions and warranties;
j) Action to be taken by the insured upon occurrence of a contingency likely to give rise to a claim under the policy;
k) The obligations of the insured in relation to the subject-matter of 
Insurance upon occurrence of an event giving rise to a claim and the rights of the insurer in the circumstances;
l) Any special conditions;
m) Provision for cancellation of the policy on grounds of misrepresentation, fraud, non-disclosure of material facts or non-cooperation of the insured;
n) The address of the insurer to which all communications in respect of the policy should be sent;
o) The details of the riders if any;
p) Details of grievance redressal mechanism and address of ombudsman.

As no motor vehicle can ply without insurance on public roads, it is essential to carry the certificate of insurance in the vehicle.

 

E. Warranties:

Definition of warranty:
Warranty is a term of a contract which is collateral or subsidiary to the main purpose of the contract. It is therefore not so vital as to affect the discharge of the contract. Breach of warranty only entitles the innocent party to an action for damages. He cannot treat the contract as discharged. 
Warranties are used by insurers to limit their liability under the contract of insurance. Warranty plays an important role in managing and improving the risk. The very purpose of the warranty is to reduce the hazard. A warranty placed on the policy castes certain obligations to be complied with by the insured.
Warranty is a condition expressly stated in the policy and validity of contract depends on its compliance. It is a condition precedent to the contract. Any violation or breach of the contract leads the contract voidable. Insurers can avoid payment of loss but do not cancel the policy. However, if the breach is of a purely technical nature, and does not contribute or aggravate the loss, insurers may settle the loss on non-standard basis. 
Examples of warranties: 
1. Fire Insurance:
• Warranted that no hazardous goods be stored in the insured premises during the currency of the policy.
• Silent risk: warranted that no manufacturing activity is carried out in the insured premises for a consecutive period of 30 days or more.
2. Marine Insurance: 
In marine insurance a warranty is defined as ‘promissory warranty, that is to say, a warranty by which the assured undertakes that some particular thing shall or shall not be done, or that some condition will be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts’.
• Warranted that the goods (e.g. tea) shall be packed in tin-lined cases.
In marine Hull insurance: 
• Warranted that the ship is in seaworthy condition.
3. Burglary Insurance: 
• Warranted that the jewallery shop is guarded by a watchman for 24 hours.
Note: There will be no change in the rates, terms and conditions of the policy, as long as the warranties are complied with

 

Condition

A condition is a term (oral or written) which goes directly 'to the root of the contract', or is so essential to its very nature that if it is broken the innocent party can treat the contract as discharged. That party will not therefore be bound to do anything further under that contract.
Example: The declaration in the proposal is based on the principle of good faith. But the insured concealed material fact and fraudulently wanted to gain monetary benefit under the policy. If this fact comes to the knowledge of the insurers, they can not only reject the claim but also cancel the insurance.
A practical example: (OCCURRED IN GOOD OLDEN DAYS)A fleet owner of motor vehicle had branches in major cities like Jaipur, Calcutta, Mumbai and Delhi. He used to insure some of the vehicles with 4 different public sector insurance companies and used to gain 4 times of actual loss arising out of a single accident. When this fact came to the notice of the 4 companies, all the 4 insurance companies they have cancelled the comprehensive cover granted to the party. He moved the matter in a court of law. Having noted the fraudulent act of the owner, the court upheld the decision of insurers. However, the court said third party insurance cover cannot be denied as per law.
Another practical example:A person has taken personal accident policies with various insurance companies to the extent of about Rs.2 on the life his working wife. He intentionally killed his wife and lodged claims with all insurance companies. Luckily the matter came to the knowledge of all insurers. He admitted his guilt. The claims were rejected and policies cancelled.
WarrantyA warranty is a term of the contract which is collateral or subsidiary to the main purpose of the contract. It is therefore not so vital as to affect a discharge of the contract. A breach of warranty only entitles the innocent party to an action for damages; he cannot treat the contract as discharged.
But you will note that if a warranty is breached the contract of insurance becomes voidable. Insurers may not entertain a claim but policy does not get cancelled.
Whereas in case of breach of a condition, the claim is not paid and the contract becomes void (policy gets cancelled).Both conditions and warranties are terms in a contract and it is for the court to decide in each contract whether, having regard to the intentions of the parties, a term is a condition or a warranty. The importance lies in the remedy in the event of breach..

 

F. ENDORSEMENTS:

Insurers issue policy in a standard and printed form mentioning the perils covered and excluded.
Definition:If the terms and conditions of a policy are to be modified at the time of issuance of policy or during the currency of the policy, they are effected through a separate document called an Endorsement and is attached to the policy forming part of the contract of insurance. Sometimes insurers arrange the endorsement on the back of the policy by putting a rubber stamp. 
Example: If nomination in a personal accident insurance policy is to be changed, the same can be done by putting a rubber stamp on the reverse of the policy mentioning the name of new nominee. Or it can be done on a separate paper and attached to the policy.
Whenever there are any material changes in the risk, such changes shall be informed to insurers so that they can take note of it and incorporate the same through anendorsement.Endorsements are generally passed in the following circumstances:
1. Variation / change in sum insured
2. Change of insurable interest on sale, mortgage etc.
3. Extension of period of insurance
4. Extension to cover additional perils
5. Change in the risk (Ex: construction/occupancy of a building)
6. Transfer of property to another location.
7. Cancellation of insurance 
8. Change in name and address or nomination.
SPECIMEN: For the purpose of illustration, specimen wordings of some endorsements are reproduced below:
Cancellation At the request of the insured the insurance by this Policy is hereby declared to be cancelled as from .......... The insurance having been in force for a period over ............. Months, no refund is due to the Insured.
Change of nomination: At the request of the insured, the name of the nominee under the policy is changed and recorded as Mrs. Radha in place Mrs. Lakshmi. 
Increase in Stock Value Cover:"The Insured having advised that the stock covered by this policy has been increased it is hereby agreed that the sum insured is accordingly altered to Rs..... from Rs……he increase is as under: 
On Raw material Rs.
On stocks Rs.
in consideration whereof an additional premium is hereby charged.
Further annual premium Rs..........
The total insurance now stands at Rs.......
Subject otherwise to the terms, provisions and conditions of this policy.
Extension of cover to include extraneous peril in a Marine Policy.At the request of the insured, it is hereby agreed to include the risks of breakage under the above policy.
In consideration, thereof an additional premium Rs….. is charged to the insured and received vide receipt No………dated………… 
Changes in Mode of CarriageThe assured having declared that out of the consignment under the above policy 2 barrels perfumery valued at Rs. ............... have been shipped on deck, it is hereby agreed to cover the same against jettison and washing overboard.
In consideration, thereof, an additional premium as under is charged to the assured.
Additional Premium ….Rs……….received vide receipt no…dt.