Effect of certificate of insurance
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Summary
When an insurer issues a certificate of insurance, that certificate stands in place of a full policy for the protection of third parties (anyone except the insured) until the insurer issues the formal policy. If the insurer does issue a policy but its actual terms are worse for third-party claimants than the certificate, the certificate's particulars prevail as against those third parties. The rule prevents insurers from defeating third-party rights by delaying or weakening the written policy.
Example
Ravi pays for motor insurance and receives a certificate before the insurer issues the formal policy. After a road accident a third party claims damages. The insurer must treat the certificate as if it were a policy matching its particulars and cannot refuse the third party on the ground that the formal policy was not yet issued.
Bare Act
Enacted textWhen an insurer has issued a certificate of insurance in respect of a contract of insurance between the insurer and the insured person, then—
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(a) if and so long as the policy described in the certificate has not been issued by the insurer to the insured, the insurer shall, as between himself and any other person except the insured, be deemed to have issued to the insured person a policy of insurance conforming in all respects with the description and particulars stated in such certificate; and
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(b) if the insurer has issued to the insured the policy described in the certificate, but the actual terms of the policy are less favourable to persons claiming under or by virtue of the policy against the insurer either directly or through the insured than the particulars of the policy as stated in the certificate, the policy shall, as between the insurer and any other person except the insured, be deemed to be in terms conforming in all respects with the particulars stated in the said certificate.
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