B.A. LL.B. (Five Years) Sem 8 Insurance Law 2022 Mar Question Paper with Solutions

For full marks, cover: the statutory definition of an insurance contract (Explanation to section 2(6D) of the Insurance Act, 1938, from 5 February 2026); insurance as a contingent contract (sections 10 and 31 of the Indian Contract Act, 1872); the judicial marks of insurance (Prudential, St. Christopher, Medical Defence Union); the classification by statute (section 2(5A) and registration under section 3); the classification by the nature of the promise, the subject-matter, the person whose loss is covered, compulsion, the number of insurers and the provider; a table.

Definition

Until 2026 no Indian statute defined the contract of insurance itself. The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 filled the gap from 5 February 2026. The Explanation to section 2(6D) of the Insurance Act, 1938 now says that an "insurance contract" means "the contract whereby the insurer, on payment of premium, undertakes to assume risk and to pay to the insured person an agreed compensation for loss, damage or liability arising from a contingent event".

A contract under the general law

An insurance contract is first a contract. It must satisfy section 10 of the Indian Contract Act, 1872: free consent, competent parties, lawful consideration and a lawful object. It is also a contingent contract under section 31. The illustration to section 31 is itself an insurance: A contracts to pay B Rs. 10,000 if B's house is burnt. Under section 32 such a promise can be enforced only after the event happens.

The marks of insurance in the cases

Prudential Insurance Co. v. Commissioners of Inland Revenue, [1904] 2 KB 658, arose over stamp duty. The court had to decide whether certain documents were insurance policies at all. Channell J. gave three marks. There must be a payment of money or some benefit on an event. The event must involve uncertainty. And it must be adverse to the interest of the person insured.

Department of Trade and Industry v. St. Christopher Motorists Association Ltd., [1974] 1 WLR 99, extended this. An association promised its members a chauffeur if they lost their driving licence. Templeman J. held this was insurance business. The benefit need not be money. It is enough that one person takes on risks for many members for a price.

Other ways of classifying

1. By the nature of the promise. Contracts of indemnity pay the actual loss and no more, as fire, marine and motor own-damage policies do. Contingency or benefit contracts pay a fixed sum on an event, as life and lump-sum accident policies do. Subrogation and contribution apply only to the first kind.
2. By the subject-matter. Personal insurance (life, health, accident), property insurance (fire, marine, burglary, crop) and liability insurance (motor third party, public liability, professional indemnity).
3. By whose loss is covered. First party cover protects the insured's own life or property. Third party cover protects the insured against claims by others.
4. By compulsion. Most insurance is voluntary. Some is compulsory by statute, such as motor third party cover under section 146 of the Motor Vehicles Act, 1988.

Conclusion. Since 5 February 2026 the Explanation to section 2(6D) defines an insurance contract. The insurer, for a premium, assumes a risk and agrees to compensate loss, damage or liability from a contingent event. The cases add that the benefit may be a service (St. Christopher) but must be enforceable (Medical Defence Union). The classification that binds insurers is the statutory one: life, general (fire, marine, miscellaneous), health and re-insurance business, registered class by class under section 3(1). The other classifications decide which principles apply, above all whether the contract is one of indemnity.