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Explain Proximate Cause , Subrogation and Contribution in Insurance.

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Proximate Cause: According to

this principle, an insurance policy is

designed to provide compensation only

for such losses as are caused by the

perils which are stated in the policy.

When the loss is the result of two or

more causes, the proximate cause

means the direct, the most dominant

and most effective cause of which the

loss is the natural consequence. In case

of loss arising out of any mishap, the

most proximate cause of the mishap

should be taken into consideration.

Subrogation: It refers to the right

of the insurer to stand in the place of

the insured, after settlement of a claim,

as far as the right of insured in respect

of recovery from an alternative source

is involved. After the insured is

compensated for the loss or damage to

the property insured by him/her the

right of ownership of such property

passes on to the insurer. This is

because the insured should not be

allowed to make any profit, by selling

the damaged property or in the case of

lost property being recovered.

 Contribution: As per this principle

it is the right of an insurer who has paid

claim under an insurance, to call upon

other liable insurers to contribute for

the loss of payment. It implies, that in

case of double insurance, the insurers

are to share the losses in proportion to

the amount assured by each of them.

In case there is a loss, when there is

more than one policy on the same

property, the insured will have no right

to recover more than the full amount

of his actual loss. If the full amount is

recovered from one insurer the right to

obtain further payment from the other insurer will seize .