KSLU Solved Question Papers
Insurance Law
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 8
2015 Jun Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 8 Insurance Law 2015 Jun Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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Contents
The questions below are the paper as Karnataka State Law University set it at the 2015 Jun examination, in the order it was set.
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2015 Jun examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 100 · 13 questions answered
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1How contract of Insurance can be classified ? State the nature of contract of Insurance.[16]
Answer
For full marks, cover: Part I, the classification, each with its legal consequence: by the Act's classes of business (sections 2(11), 2(6B), 2(6A), 2(13A), 2(13B), 2(6C) of the Insurance Act, 1938); by the nature of the promise, indemnity or contingency (Castellain v. Preston; Dalby); by what is insured, person, property, liability, guarantee; by duty, compulsory or voluntary; direct insurance and re-insurance; Part II, the nature of the contract: the statutory definition (Explanation to section 2(6D)); a contract formed by offer and acceptance (Vasireddy Komalavalli Kamba), sometimes first by a cover note (Chandumull Jain); premium as consideration, paid before risk (section 64VB); a contingent contract (section 31 of the Indian Contract Act, 1872), not a wager (section 30); insurable interest (Macaura); utmost good faith (Satwant Kaur Sandhu); indemnity, except in life and personal accident; a personal, standard-form contract read by its words; a regulated contract; a table.
Part I: How contracts of insurance are classified
1. By the Act's classes of business
The Insurance Act, 1938 divides insurance business into classes, and an insurer needs a certificate of registration for each class (section 3(1)).
- Life insurance business (section 2(11)): contracts assuring money on death, other than by accident only, or on a contingency dependent on human life. It includes annuities and disability benefits.
- General insurance business (section 2(6B)): fire, marine or miscellaneous business, singly or together.
- Fire (section 2(6A)): loss by or incidental to fire, and the perils customarily covered by fire policies.
- Marine (section 2(13A)): vessels, cargo, freight and other interests at sea or in transit.
- Miscellaneous (section 2(13B)): everything else, such as motor, liability, burglary and engineering covers.
- Health insurance business (section 2(6C)): sickness benefits and medical expenses, including personal accident and travel cover.
Consequence: the class decides the insurer's licence, capital and solvency rules.
2. By the nature of the promise
- Contracts of indemnity. Fire, marine, motor and other property and liability covers pay the actual loss and no more. In Castellain v. Preston, (1883) 11 QBD 380, a house damaged by fire was later sold at the full agreed price. The insurer recovered the money it had paid the owner, because a fire policy is "a contract of indemnity, and of indemnity only".
- Contingency contracts. Life and most personal accident policies pay a fixed sum on an event, because a life cannot be valued. In Dalby v. India and London Life Assurance Co., (1854) 15 CB 365, a re-insurance on a life was enforced in full though the re-insured company's own policies had been given up. A life policy is a promise to pay a sum, not to make good a loss.
Consequence: subrogation, contribution and average apply only to indemnity contracts.
3. By what is insured
- Personal insurance: life, health and personal accident.
- Property insurance: fire, marine cargo and hull, burglary, engineering.
- Liability insurance: the insured's legal liability to others, such as motor third party, public liability and professional indemnity.
- Guarantee insurance: the default or dishonesty of another, such as fidelity guarantee and credit insurance.
4. By duty
- Compulsory: motor third party insurance (section 146 of the Motor Vehicles Act, 1988). Public liability insurance for handlers of hazardous substances is also compulsory (section 4 of the Public Liability Insurance Act, 1991).
- Voluntary: all other covers.
5. By the form of the policy
The policy itself may be classified, especially in marine insurance. A voyage policy covers a voyage, and a time policy a fixed period (section 27 of the Marine Insurance Act, 1963). A valued policy states an agreed value, which binds the parties in the absence of fraud (section 29). An unvalued policy leaves the value to be proved (section 30). Life policies are likewise whole life, endowment, term or unit-linked.
6. Direct insurance and re-insurance
Direct insurance is between the insurer and the policyholder. Re-insurance is between the insurer and a re-insurer, who takes part of the insurer's own risk.
Part II: The nature of the contract of insurance
The statutory definition
Since 5 February 2026, the Act defines the contract itself. Under the Explanation to section 2(6D), an "insurance contract" is the contract by which the insurer, "on payment of premium, undertakes to assume risk". It promises to pay the insured "an agreed compensation for loss, damage or liability arising from a contingent event". This is on the terms and limitations agreed.
1. A contract like any other
It needs offer, acceptance, consideration and capacity. The proposal is the offer, and the insurer's acceptance must be communicated. In Life Insurance Corporation of India v. Raja Vasireddy Komalavalli Kamba, (1984) 2 SCC 719, the question was whether a life proposal had been accepted before the proposer died. The Supreme Court held that silence is not consent. Mere retention of the premium or preparation of the policy is not acceptance. The contract arises only when acceptance is signified.
Cover may begin before the policy, by a cover note. In General Assurance Society Ltd. v. Chandumull Jain, AIR 1966 SC 1644, cover notes insured houses on the Ganges against fire and flood. The insurer cancelled the risk as the river rose, and the houses were washed away. The Supreme Court held that a cover note is a temporary contract that may incorporate the terms of the policy to come. Courts must read the documents as the parties wrote them, without making a new contract.
2. Premium as consideration
The premium is the price of the risk. No insurer may assume any risk in India until the premium is received in advance (section 64VB).
3. A contingent contract, not a wager
The insurer's promise depends on an uncertain event. Section 31 of the Indian Contract Act, 1872 defines a contingent contract, and its illustration is a promise to pay ten thousand rupees "if B's house is burnt". But an agreement by way of wager is void (section 30). Insurance differs from a wager because the insured has something to lose.
4. Insurable interest
The insured must stand to lose by the event. In Macaura v. Northern Assurance Co. Ltd., [1925] AC 619, the owner of all the shares in a company insured the company's timber in his own name. When it burnt, the House of Lords held that he could not recover, because he had no legal or equitable interest in the company's property.
5. Utmost good faith
Each side must disclose every material fact. In Satwant Kaur Sandhu v. New India Assurance Co. Ltd., (2009) 8 SCC 316, a mediclaim proposal did not disclose the insured's chronic diabetes and kidney failure. He later died of kidney failure. The Supreme Court upheld the repudiation. A fact is material if it would influence a prudent insurer in accepting the risk or fixing the premium.
6. Indemnity, except in life and personal accident
General insurance pays the actual loss, capped by the sum insured. Life insurance pays the agreed sum (Part I, 2).
7. A personal and standard-form contract
It covers the person insured, not the property in the abstract, so it does not pass with the property without the insurer's consent. Its terms are usually drafted by the insurer and accepted as they stand. Courts read them by their words, as Chandumull Jain requires. They also make the insurer prove any exclusion it relies on.
8. A regulated contract
Its terms, premiums for some covers, claim timelines and the policyholder's remedies are controlled by the Act, the IRDAI and the Insurance Ombudsman. Freedom of contract is real but limited.
| Feature | Rule | Authority |
|---|---|---|
| Definition | Risk assumed for premium; compensation on a contingent event | Section 2(6D), Explanation |
| Formation | Acceptance must be signified; cover note is a temporary contract | Vasireddy Komalavalli Kamba; Chandumull Jain |
| Consideration | Premium before risk | Section 64VB |
| Contingency | Contingent contract, not a wager | Contract Act, ss.30, 31 |
| Feature | Rule | Authority |
|---|---|---|
| Interest | A stake in the subject | Macaura |
| Good faith | Disclose material facts | Satwant Kaur Sandhu |
| Indemnity | Property and liability, not life | Castellain v. Preston; Dalby |
Conclusion. Contracts of insurance are classified by the Act's classes of business: life, general and health. They are also classified by the nature of the promise (indemnity or contingency), by what is insured, and by whether the law compels them. Direct insurance is distinguished from re-insurance. Each class carries its own legal consequences. In nature, an insurance contract is a contingent contract, defined since 2026 in section 2(6D). It is formed by signified acceptance or a cover note (Vasireddy Komalavalli Kamba; Chandumull Jain) and supported by premium paid before risk (section 64VB). It rests on insurable interest and utmost good faith (Macaura; Satwant Kaur Sandhu). It is a contract of indemnity except in life and personal accident (Castellain v. Preston; Dalby).
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