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Question
Legal Principle: The insurer agrees to pay no more than the actual amount of the loss.
Fact Situation: Sunny insures his car worth rupees five lakh with X, an insurance company, for its value. He again insures the same car with Y, another insurance company, on the same terms. There is an accident and the car suffers a total loss. In his separate suits against X and Y, if Sunny recovers rupees five lakh from X, how much can he recover from Y?
Which of the following statements is the most appropriate in relation to the legal principle stated above?
Options
Sunny can recover rupees five lakhs from Y
Sunny cannot recover any amount from Y
Sunny must pay Y, the rupees five lakhs he received from X.
Sunny cannot insure his car with both X and Y at the same time.
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Solution
Sunny cannot recover any amount from Y.
Explanation:
The principle of indemnity asserts that on the happening of a loss the insured shall be put back into the same financial position as he used to occupy immediately before the loss. In other words, the insured shall get neither more nor less than the actual amount of loss sustained. This, of course, is always subject to the limit of the sum insured. Ongoing through the case we discover that Sunny had insured his car with two insurance companies and thus getting it insured at double the price of his car. on losing it completely he cannot claim more than 5lakh of rupees according to the above-mentioned rule thus option (b) is the most appropriate statement according to which if Sunny has claimed rupees 5lakh from x company then he cannot claim any amount from y company.
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