January 10, 2018
This intriguing aspect of Insurance Policies or Contract of Insurance has been time and again taken up by the Indian Judiciary. Contracts of Insurance have been in common parlance rendered as Contracts of Indemnity i.e. a contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person.
The issue as to the amount that can be claimed i.e. the actual loss or the amount stipulated in the Policy was taken up by the Supreme Court in the case of United India Insurance Company Ltd. v. Kantika Colour Lab, wherein the Apex Court observed that except in case of contracts of Life Insurance, personal accident and sickness or contracts of contingency insurance, all other contracts of Insurance entitled the assured for the reimbursement of actual loss that is proved to have been suffered by him. The happening of the event against which insurance cover has been taken does not by itself entitle assured to claim the amount, stipulated in the Policy. It is only upon proof of actual loss that the assured can claim reimbursement of the loss to the extent it is established, not exceeding the amount stipulated in the Contract of Insurance which signifies the outer limit of the Insurance company’s liability.
Amount in Policy does not signify that company guarantees payment of said amount- In the case it was also remarked that the amount mentioned in the Policy does not signify that the insurance company guaranteed the payment of the said amount regardless of the actual loss suffered by the insurance.
Halsbury’s Laws of England– the happening of the event does not of itself entitle the assured to payment of the sum stipulated in the Policy; the event must, in fact, result in a pecuniary loss to the assured, who then becomes entitled to be indemnified subject to limitations of his contract. He cannot recover more than the sum insured for that sum is all that he has stipulated for by his premiums and it fixes the maximum liability of the insurers. Even with in that limit, however, he cannot recover more than what he establishes to be the actual amount of his loss. The contract being one of indemnity only, he can recover the actual amount of his loss would be likely to be and whatever the premiums he may have paid, calculated on the basis of that estimate.
Except in case of contracts of Life Insurance, personal accident and sickness or contracts of contingency insurance, all other contracts of Insurance entitled the assured for the reimbursement of actual loss that is proved to have been suffered by him.
 State of Orissa v. United India Insurance Co. Ltd. (1997)5 SCC 512
 Section 124 of the Contract Act
 Civil Appeal NO. 6337 OF 2001, decided on May 06, 2010
 4th Edition