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Thursday, November 6, 2014

Lincoln, Amistad - Spielberg : Principle of Indemnity in Insurance

Insurance is based on sound tenets… the founding principles are: Utmost Goodfaith, Insurable Interest, Indemnity, Subrogation, Contribution, Proximate Cause …….. the principle of Indemnity would generally mean that the Insurer place back the Insured is the position he was prior to the loss and that the policy holder does not gain by way of a claim……………..

A couple of weeks back, nominations for the Academy Awards were announced; while India had something to celebrate with Bombay Jayshree in the running for a place under the Sun in ‘85th Academy Awards’ for her piece in ‘Life of Pi’ – it was all about Lincoln.  It is going to be tough ~  Spielberg’s “Lincoln” will be a picture to beat.  However there are some cynics who feel that it might  end up more like “The Artist,” which last year established dominance (with help from its cheery Jack Russell terrier co-star, Uggie) and won best picture, or Mr. Spielberg’s own “Saving Private Ryan,” which seemed to lead through much of the 1999 awards season but lost out to “Shakespeare in Love.”

Jaws ; Close Encounters of the Third Kind ; Raiders of the Lost Ark; E.T. the Extra-Terrestrial; Indiana Jones and the Temple of Doom; Amistad; Jurassic Park; Schindler's List ; Saving Private Ryan; The Adventures of Tintin; …………….Lincoln  - not an exhaustive but domineering list  of the films of : Steven Allan Spielberg, American film director, screenwriter, producer, and studio entrepreneur. In a career of more than four decades, Spielberg's films have covered many themes and genres. Spielberg works have included: Adventure, Science fiction; issues  as the Holocaust, the Transatlantic slave trade, war, and terrorism.

Amistad, ran full houses in 1997 ~ a  historical drama film directed by Steven Spielberg based on the true story of an uprising in 1839 by newly captured African slaves that took place aboard the ship La Amistad off the coast of Cuba, the subsequent voyage to the Northeastern United States, and the legal battle that followed their capture by a U.S. revenue cutter. It shows how, even though the case was won at the federal district court level, it was appealed by President Martin Van Buren to the Supreme Court, and how former President John Quincy Adams took part in the proceedings. The film begins in the depths of the schooner La Amistad, a slave-ship carrying captured West Africans into slavery and is a touching story of the travails of the humans who were traded as slaves those days.

The Amistad, also known as United States v. Libellants and Claimants of the Schooner Amistad, 40 U.S. 518 (1841), was a US Supreme Court case resulting from the rebellion of Africans on board the Spanish schooner La Amistad in 1839. It was an unusual "freedom suit" which involved international issues and parties, as well as United States law.  The rebellion broke out when the schooner, traveling along the coast of Cuba, was taken over by a group of captives who had earlier been kidnapped in Africa and illegally sold into slavery. The Africans were later apprehended on the vessel near Long Island, New York, by the United States Revenue Cutter Service and taken into custody. The ensuing, widely publicized court cases in the United States helped the abolitionist movement.

In 1840, a Federal trial court found that the initial transport of the Africans across the Atlantic had been illegal, because the international slave trade had been abolished, and the captives were thus not legally slaves but free. Given that they were illegally confined, the Africans were entitled to take whatever legal measures necessary to secure their freedom, including the use of force. After the US Supreme Court affirmed this finding on March 9, 1841, supporters arranged transportation for the Africans back to Africa in 1842. The case influenced numerous succeeding laws in the United States.

Now coming to the avowed principle of Indemnity - An indemnity is a sum paid by A to B by way of compensation for a particular loss suffered by B. The indemnitor (A) may or may not be responsible for the loss suffered by the indemnitee (B). Forms of indemnity include cash payments, repairs, replacement, and reinstatement.

For getting reimbursed or being indemnified, the policy holder must have insurable interest i.e., must suffer a pecuniary loss arising out of an insured peril to the insured property : ~ and you many not imagine this on ‘Insurable Interest and Indemnity’.  In olden days, slave owners suffered a loss whenever their slaves or indentured servants were granted their freedom. Slave owners  were earlier paid Indemnity to cover their losses.

Indemnity in Insurance has a different connotation. Indemnity insurance compensates the beneficiaries of the policies for their actual economic losses, up to the limiting amount of the insurance policy.  This may not be applicable to Health and Life policies.  It generally requires the insured to prove the amount of its loss before it can recover. Recovery is limited to the amount of the provable loss even if the face amount of the policy is higher.

An insurance contract has been defined as an agreement between two or more parties in which one party, the insured, pays a specific sum to the other, the insurer, in exchange for the latter's indemnification for losses incurred as a result of certain risks, contingencies or occurrences specified under the contract.' For such an agreement to be judicially enforceable, the insured must have an insurable interest in the property insured. Insurance contracts are aleatory contracts, i.e., the insurer need to perform only if a condition occurs. To that extent the insurance contract is contingent upon the chance of an event.

And in most policies, the Sum Insured is more of the maximum loss that can be recovered under a Policy and may not be the amount that would be paid…… exception being Marine Policies where ‘Agreed value concept’ is in vogue. Under this, a total loss once proven, the indemnity will be the sum insured i.e., the value will not be reopened unless fraud is suspected.

In most other forms, the market value of the property will be determinant factor in arriving at the Indemnity, subject to deductions like – Depreciation, Salvage, Under Insurance [if any], Policy Excess etc., Thus the amount paid by the Insurance Company could be much less even though there could be a loss and the value of Insurance policy is much higher…..

With regards – S. Sampathkumar
5th Feb 2o13.

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