Thursday, 6 March 2014

What Constitutes Material Circumstance

 Two container ships pass in San Francisco Bay


The term "Circumstance" includes any communication made or information received by the assured . Every circumstance is deemed to be material which would influence the judgment of an insurer in determining the risk of fixing the premium . The assured is under obligation to tell every material fact and the change in circumstance , if any , to the insurer . Further if the assured is asked a question whether a material fact or not , by the underwriter , he must answered it truly otherwise it may vitiate the policy . However , the following circumstances need not be disclosed :-

a)  -----  Any circumstance which diminishes the risk .

b)  -----  Any circumstance as to which information has been waived of by the insurer while taking the risk.

c)  -----  Any circumstance which is known or presumed to be known to the insurer in ordinary course of the business ;
    Matters presumed to be known by underwriter are the matters falling in the category of trade usages such as routes being adopted by the ship , methods of loading , discharge, stowage, packing of cargo and general nature of cargo .
    For instance the chemicals are not to be carried as less than container load cargo (LCL) with goods for human consumptions or edible quality . These need not be communicated .

d)  -----  Matters not affecting the risk .

e)  -----  Excessive valuation of cargo must be communicated to the underwriter but an insurance for an excessive sum under the unvalued policy would not be necessary  to be disclosed because in case of loss of the consignment the assured would be entitled to recover only the true value of goods, i.e. the insurable value.



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