TMI Blog1966 (2) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... or that it had become so certain as to be inevitable or that the cancellation was done in anticipation and with knowledge of inevitable loss. The cancellation was done at a time when no one could say with any degree of certainty that the houses were in such danger that the loss had commenced or became inevitable. There is no evidence to establish this. The assurers were, therefore, within their rights under condition 10 of the policy to cancel it. As the policy was not ready they were justified in executing it and cancelling it. The right of the plaintiff to the policy and to enforce it was lost by the legal action of cancellations. Appeal allowed. - C.A. 886 OF 1963 - - - Dated:- 7-2-1966 - P.B. GAJENDRAGADKAR, K. N. WANCHOO, M. HIDAYATULLAH, V. RAMASWAMI AND P. SATYANARAYANA RAJU, JJ. JUDGMENT This appeal is taken from a judgment of the High Court of Calcutta, July 13 and 14, 1961, by which a Divisional Bench of the High Court, reversing the judgment of a learned single Judge of the same Court, decreed the respondents' claim for damages. The circumstances were these. The appellant is a general insurance company. On June 2, 1950 the respondents submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby held insured against ,damage by Fire, subject to the terms of the Applicant's proposal and to the usual Conditions of the Society's policies. It is, however, expressly stipulated that this protection Note cannot, under any circumstances be applicable for a longer period than Thirty Days, and that it is also immediately terminated before that date by delivery of the policy, or if the Risk be declined by the notification of such declinature. Prem : Rs. 892-8-0 Fire @ 28 as % Prem : Rs. 382-8-0 Flood and other risks 12 as% Premium : Rs. 1,275-0-0. On June 7, the assured sent the premia by cheque. As no policy was received by them, the assured wrote a letter on July 1 (Ex. A/g) asking for the policy or for extension of the cover notes. This was not done. On July 6, 1950 the Company wrote to the assured two identi- cally worded letters (except for changes in amounts and numbers of the policies) which read Calcutta 6th July, 1950 TO M/s Chandmull Lal Chand, P.O. Dhulian, Murshidabad. Dear Sir, In accordance with the inspection report lodged with this Co. we cancel the risk from 6th July, 1950 as noted below. The relative Endorsement is under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the risk had commenced. On 13th and 15th August the houses were washed away. After unsuccessfully demanding payment under the policies, the assured filed the present suit on the Original Side of the Calcutta High Court. It was dismissed with costs by G. K. Mitter J. but on appeal the claim was decreed to the extent of Rs. 1,10,000 with costs, the decretal amount to carry interest at 3%, per annum. The High Court certified the case as fit for appeal and the present appeal has been filed by the Company. Before we deal with the question in dispute we may say a few words about the position of the Ganges river. in relation to the Dhulian town in general and the insured houses in particular. The town of Dhulian is situated on the bank of the river which, for several years, has been changing its course and eroding the bank on the side of Dhulian. In 1949 there was much erosion and the river had come as close as 1- 1/2 to 2 furlongs from the town and a few of the godowns lying close to the bank had been washed away. There is ample material to show what the condition of the river in relation to the insured houses was between June 2, 1950 when the proposal for insurance was made an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the period of the cover note, the learned Judge held, the policy was bound to issue and the extent of the protection would thus be according to the company's usual terms and subject to the conditions in the policy. Relying, therefore, upon the dicta of the Judicial Committee in the Sun Fire Office v. Hart Ors.( (1889) 14 A. C. 98), the learned Judge gave a wide meaning to condition 10 and held that the Company was within its rights in cancelling the policy as and when it did. The learned Judge pointed out that the condition was a usual provision in a policy of fire insurance and an assurer cancelling the policy under that condition, need give no reasons and every defence was open to him and the reasons, if given, could not be examined in a court of law. Finally, the fact that no reasons were given or that the report of Ghose was not produced or that Ghose did not support Dangali, the Manager, was held to be immaterial because reasons like motives, were held to be immaterial. The suit was accordingly dismissed with costs. An appeal under the letters patent was filed against the judgment of the learned single Judge. The appeal was heard by P. B. Mukharji and S. K. Datta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een reproduced by us earlier. That endorsement did not state any terms and it did not refer to the terms or conditions of any policy. The cover notes, of which one has also been reproduced in full, held the property insured for a period of 30 days only subject to the terms of the applicants' proposal and to the usual conditions of the Societies Policies . The learned single Judge held that the letters of acceptance incorporated and attracted by reference the terms and conditions of the cover notes and through them the terms and conditions of the policy and further held that the relationship could be declined within 30 days under the terms of the cover note but if not so declined, the relationship would be governed by the terms and conditions of the policy for the whole of the period of insurance. In reaching this conclusion the learned single Judge held that the cover notes must have accompanied the letters of acceptance and in this way condition 10 was allowed to play its part. The Divisional Bench took a different view of the matter. The learned Judges noted that the letters of acceptance spoke of risk for a whole year and stated that the relative covers were enclosed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Divisional Bench reconsidered the matter and gave its own findings. Although the Divisional Bench went into a detailed discussion (some of which was perhaps not altogether necessary) the problem of liability in this case was well- scanned by counsel appearing for the parties. They argued the case under three distinct heads which are: (a) Did condition 10 apply to the facts; (b) If it did, how is it to be construed; and (c) Was the cancellation of the policy valid in law? We consider the matter under these three broad heads. The application of condition 10 depends on how far the terms of the policy can be said to be incorporated in this contract of insurance between the parties. The facts relating to the formation of the contract are clear except on the one point relating to the cover notes, and that, in our opinion, has been given undue prominence by the Divisional Bench. It makes no essential difference whether the. cover notes accompanied the letters of acceptance or were sent two days later. It is possible that the letters of acceptance themselves were sent on June 5. It often happens that two letters delivered at the same time bear different dates. The letters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance including the cover note. The incorporation of the terms and conditions of the policy may also arise from a combination of references, in two or more documents passing between the parties. Documents like the proposal, cover note and the policy are commercial documents and to interpret them commercial habits and practice cannot altogether be ignored. During the time the cover note operates, the relations of the parties are governed by its terms and conditions, if any. but more usually by the terms and conditions of the policy bargained for and to be issued. When this happens the terms of the policy are incipient but after the period of temporary cover, the relations are governed only by the terms and conditions of the policy unless insurance is declined in the meantime. Delay in issuing the policy makes no difference. The relations even then are governed by the future policy if the cover notes give sufficient indication that it would be so. In other respects there is no difference between a contract of insurance and any other contract except that in a contract of insurance there is a requirement of uberrima fides i.e., good faith on the part of the assured and the contract is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which the policy may be enforced on either side. Even if the letter of acceptance went beyond the cover notes in the matter of duration, the terms and conditions of the proposed policy would govern the case because when a contract of insuring property is complete, it is immaterial whether the policy is actually delivered after the loss and for the same reason the rights of the parties are governed by the policy to be, between acceptance and delivery of the policy. Even if no terms are specified the terms contained in a policy customarily issued in such cases, would apply.: There is ample authority for the proposition. In Corpus Juris Secundum (Vol. 44, p. 953) the following occurs: Where the contract to insure or issue a policy of fire insurance does not specify the terms and conditions of the policy, it is a general rule that the parties will be presumed to have contemplated a form of policy containing such conditions and limitations as are usual in such cases...... paragraph 390. In Eames v. Home Insurance Co. the Supreme Court of the United States observed: If no preliminary contract would be valid unless it specified minutely the terms to be contained in the policy to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the policy governed the relationship between the parties. We have already held that as there was only one standard fire-policy,the use of the plural word 'policies' made no difference and the delay in sending the cover notes, if any, was also immaterial. The terms and conditions of the usual policy accordingly governed the relations of the parties, and made condition 10 applicable. It was, however, contended that the policy itself never came into existence, because it was cancelled before it was issued and the endorsement of cancellation was engrossed and incorporated with the making of the policy. It was argued that condition 10 would not come into operation at all, because the policy itself was cancelled before it was engrossed. In other words, the contention is that condition (10) could not operate between the parties till the policy was signed and delivered to the assured and as this never happened the cancellation was improper. This argument is scarcely open, because, the assured is obviously basing his suit on the policy. In his plaint he invoked the policy. The assured cannot sustain the suit except by basing it upon the policy, because unless one reads the poli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mutual condition for the cancellation of the insurance. An assured nkay like to invoke sit a condition when the policy is found to differ from the policy he agreed to accept or it contained a term or condition to which he did not agree. He may not accept the same policy from another company to which he did not make a proposal. He may invoke this condition if the company transfers its assets and business to another. Just as the assured may like to terminate the policy without assigning any reasons and at his will, the assurer may also do likewise. Such a clause was considered by the Privy Council in Sun Fire Office v. Hart. That was a case of a policy of insurance against fire. Certain fields of sugar cane were insured against fire. After insurance 3 fires happened and an anonymous letter was received that more fires would take place. The policy contained a condition that the insurers might terminate the policy by notice 'by reason of such change, or from any other cause whatever' and the insurers cancelled the policy under that condition. The object of such a condition was stated by Lord Watson to be- their contract during its currency, leaving it in full vigour down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods were stored was looted and some goods were lost. The Hartford Office was informed and on August 7 1947 they wrote saying that the goods be removed to a safe place or the policy would stand cancelled after August 10, 1947, under condition 10 which was similar to condition 10 here. On August 15, 1947, the goods were lost by fire. The Hartford Office was held to be protected by the said condition. The reason of the rule appears to be that where parties agree upon certain terms which are to regulate their relationship, it is not for the court to make a new contract, however reasonable, if the parties have not made it for themselves. The contract here gave equal rights to the parties to cancel the policy at any time and the assurers could therefore invoke the condition to cancel the policy. it was contended (and it has been so held by the Divisional Bench) that this cancellation was ineffective, because risk had already commenced and the policy could not be cancelled after the liability of the company began. As a general proposition, this is perfectly right. Condition 10 is intended to cancel the risk but not to avoid liability for loss which has taken place or to avoid risk wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
