TROPICAL INSURANCE CO. LTD VS ZENITH LIFE INSURANCE CO. LTD
AIR 1941 Lah 68
High Court of Lahore
Date of Judgement:
27 March 1940
The case is based on the Contract of Indemnity and Guarantee. The question raised in this case was whether reinsurance should be considered an independent contract of insurance or should be considered a contract of indemnity.
In this case, the appellant, issued a joint life policy in favor of Mrs. and Mr. Patel on 20th Dec 1932, for Rs 50,000. And there was a special provision reducing liability to Rs 25,000 in case of death occurring during the first year of insurance. The appellant re-insured this risk with various other companies including the Zenith Insurance Company for Rs 10,000 each. A special provision acc to lien reduced amount Rs 10,000 to Rs 5,000. Mrs. Patel died on 14th May 1933, which raised suspicion. Zenith suggested pro-rata costs. The suit was brought on 26th September 1934. The appellant fortified by their Solicitors, Little and Co., decided to compromise and made a payment of a smaller sum than the insured of Rs 22,000 on 13th Nov 1934 and a receipt was obtained by Mr. Patel. Then the appellant demanded a proportionate re-insurance amount from the companies. All companies paid but the respondent company resisted, the suit was brought on 13th November 1937.
In sec 124 of the Contract Act, the court said indemnity has been used in the narrow sense and the general law of contract is much wider than defined in it. In the case of life insurance, the contract is originally not a contract of indemnity. Therefore, it depends upon terms of reinsurance policy as to whether it is an independent contract ensuring the same life for the same sum or some proportion of that sum for which it was originally insured. Hence, Insurance contact in India is no a contract of indemnity, they are a contingent contracts.