On 21-02-2014 a sale deed was executed between Srivastava and Kulwant and Srivastava sold his house to Kulwant and the ownership was transferred by registration in the name of Kulwant. Just before selling the property Sr

CS Professional · Insurance - Law and Practice · PYQS · December 2020
On 21-02-2014 a sale deed was executed between Srivastava and Kulwant and Srivastava sold his house to Kulwant and the ownership was transferred by registration in the name of Kulwant. Just before selling the property Srivastava had taken a fire insurance cover for his house taken with insurer XYZ Ltd. and the period of insurance was 18-8-2013 to 17-8-2014. Kulwant and Srivastava came to mutual understanding and according to that 75% of the sale money was paid by the former to the latter at the time of execution of the sale deed and the balance was to be given within one year, which was agreed by means of a promissory note executed by Kulwant in favour of Srivastava. On execution of the sale deed, Kulwant obtained a fire insurance cover for the house in his name from his insurer ABC General Insurance Co. A fire accident took place on 13-5-2014 in which the whole house was destroyed by fire. When Kulwant filed a claim for the loss of the house with his insurer ABC General Insurance Co. and after insurance surveyor investigated the whole case, the insurer agreed to pay the loss to the extent of 75% of the value of the house only saying that as on the date of loss Kulwant has not paid 25% of the value of the house to Srivastava, so the claim cannot be paid to that extent and that the same has to be recovered by Srivastava under his policy. Discuss the eligibility of claim recovery under both the policies in the above case.

Answer & Explanation:

As long as the sale deed has been affected by Srivastava in favour of Kulwant evidencing the sale of the house by the former to the latter and the ownership transferred in his name, the insurable interest is said to exist with Kulwant. The insurer of the policy taken by Kulwant is liable to pay for the loss in full subject to the admissibility of the claim under the policy and subject to other conditions of the policy. Non-payment of 25% of the value of the house by Kulwant to Srivastava will not affect the former's claim under the policy with his insurer. Payment of the said 25% balance by Kulwant to Srivastava is guaranteed by means of a separate promissory note, which will not in any way interfere with the settlement of the claim of Kulwant under his insurance policy. Payment arrangement between the parties is of no concern of the insurer. As long as the house has been registered in the name of the new purchaser by virtue of the sale deed, there will be no liability under the policy taken by Srivastava and no benefit under the said policy can also accrue to the new purchaser as transfer of a fire insurance is not automatic unless the insurer is intimated of the transfer and request made transferring the insurance in the name of the purchaser and acceptance of change and confirmation of cover in favour of the new owner is confirmed by the insurer.

Topics: General Insurance

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