A retrospective insurance contract is valid and enforceable provided that both the assured and the insurers are ignorant of the loss at the time of making the contract and that they both intend the contract to apply to such a loss.

Headnote:
FIRE INSURANCE - Retrospective Insurance - Cover Note - Intention of Parties - Section 20, Indian Contract Act - Applicability.
Fact of the Case:

The plaintiff insured colours and chemicals stored in a godown in Bombay with the defendant company. The goods were destroyed by fire on the evening of 16-6-1951, and the plaintiff filed a suit claiming the amount for which the goods were insured. The insurance company appealed against the decree in favor of the plaintiff.
Finding of the Court:

The court found that both the plaintiff and the insurance company were ignorant of the loss at the time of making the contract and that they both intended that the contract should apply to such a loss.
Issues: Whether the insurance effected on June 18 was a prospective or retrospective insurance.
Ratio Decidendi: The court held that the insurance was retrospective and that the risk attached from June 15, the date specified in the cover note, and not from June 18, the date on which the cover note was issued. The court relied on the fact that the cover note expressly attached risk from an earlier date and that both parties intended that the insurance should be retrospective.
Final Decision: The appeal was dismissed with costs.

Judgment - Chagla, C.J.

1. A rather interesting question relating to fire insurance arises on this appeal. The plaintiff insured colours and chemicals which were stored in a godown in Bombay with the defendant company. The goods were destroyed by fire on the evening of 16-6-1951, and the plaintiff filed the suit claiming the amount for which the goods were insured. The learned Judge of the City Civil Court, Mr. R. B. Mehta, in a careful and well considered Judgment dealt with the various contentions raised by the parties and passed a decree in favour of the plaintiff. The insurance company has now come in appeal.

2. The facts briefly are that the plaintiff came to Bombay on 4-6-1951, and he was in Bombay till June 9, and his evidence is that he told Natvarlal, who is his son-in-law, to insure the goods which were stored in the godown in Bombay. Natvarlals evidence is that he asked one Bakshi to get the insurance effected as he had to leave Bombay for Ahmedabad on June 12, and he left a note with this Bakshi to the effect that the goods should be insured promptly. Bakshi is another son-in-law of the plaintiff and he does insurance business.

Bakshi got this note of Natvarlal on June 14, and he got in touch with one Gordhanbhai Shah who was acting as a sub-agent of the defendant company, and he made a note at the back of the letter written by Natwarlal asking Gordhandas to effect the insurance of the goods either from June 14 or 15. Gordhandas in his turn placed the proposal with Lalji and Co. who were the head insurers of the defendant company, and the cover note was issued on 18-6-1951. The cover note states that the goods were insured from 15-6-1951, for the sum mentioned in that cover note. As already stated, the goods were destroyed by firs on the evening of 16-6-1951.

3. Now, in arguing this appeal Mr. Seervai has accepted the various findings of fact arrived at by the Court below. The most important finding is that neither the plaintiff nor the insurance company knew on June 18 that the goods had been destroyed on June 16 by fire. The contention urged by Mr. Seervai before us is that looking to the cover note and looking to the general principles of fire insurance law, the insurance that" was effected on June 18 was a prospective insurance and not a retrospective insurance.

In other words, Mr. Seervais contention is that the risk attached from June 18 and not from a point of time antecedent to June 18. Now, apart from authorities and apart from principles of law, it seems rather difficult for us to understand how, if an insurance company issues a cover note on June 18 and solemnly states in that cover note that the insurance is effected from June 15, the risk should not attach from June 15 but only from June 18. It is difficult to understand what could possibly have been the purpose of the insurance company in charging premium from 15-6-1951, and stating in the cover note that insurance was effected from 15-6-1951, if the goods were not covered by the policy from June 15.

Mr. Seervai says that there is a vital difference between the principles that apply to marine insurance and the principles that apply to fire insurance. Mr. Seervai pays that for historical reasons it is quite common in marine insurance to have policies which are described as policies of "loss" or "no loss" and that retrospective insurance is ordinarily effected under marine insurance, but, says Mr. Seervai, the position is different when we deal with fire insurance.

4. Turning to the principles of fire insurance, we have the statement of the law clearly set out in the recognized text book on Fire Insurance by Welford and Otter-Barry. In the fourth edition at page 26 it is staled:

"Where the assured seeks, in the event of loss by fire, to recover from the insurers the sum payable under his contract, it is essential for him to show that at the time of the loss he had an insurable interest in the object destroyed. This is the crucial date; for if he had then no int

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