Question

Legal Principle: The insurer agrees to pay no more than the actual amount of the loss.
Fact Situation: Sunny insures his car worth \rupee 5 lakh with X, an insurance company, for its value. He again insures the same car with Y, another insurance company, on the same terms. There is an accident and the car suffers a total loss. In his separate suits against X and Y, if Sunny recovers \rupee 5 lakh from X, how much can he recover from Y?
Which of the following statements is the most appropriate in relation to the legal principle stated above?

• A. Sunny can recover \rupee 5 lakh from Y.
• B. Sunny cannot recover any amount from Y.
• C. Sunny must pay Y the \rupee 5 lakh he received from X.
• D. Sunny cannot insure his car with both X and Y at the same time.

Hint:

In indemnity-based insurance, you can have multiple policies but your total claim cannot exceed the actual loss — no profit is allowed from insurance claims.

Answer 1

The Correct Option is B

Step 1: Understanding the legal principle
- In insurance law, the indemnity principle ensures the insured cannot profit from a loss.
- The insurer compensates only for the actual loss suffered, not more.
Step 2: Applying to the facts
- The car’s value is \rupee 5 lakh and it has been completely destroyed.
- Sunny has already received \rupee 5 lakh from X, which is the total loss amount.
Step 3: Consequence for claim from Y
- Since the loss has been fully compensated by X, Sunny has no further loss to claim from Y.
- Claiming from Y would result in overcompensation, which is prohibited under the indemnity principle.
Step 4: Eliminating incorrect options
- Option (1) is wrong because it would lead to double recovery.
- Option (3) is irrelevant; there’s no need to pay Y anything since no payout from Y is required.
- Option (4) is incorrect — multiple insurance is allowed, but recovery is limited to actual loss.
Step 5: Conclusion
- Sunny cannot recover any amount from Y after full recovery from X.
\[ \boxed{\text{Sunny cannot recover any amount from Y.}} \]