Indemnity: From Ancient Assurances to Modern Risk Management

was not the owner, and subsequently, the actual owner sued Adamson for selling the cattle without permission. Consequently, Adamson had to compensate the real owner for the loss. So, he asked Jarvis to cover this loss because his act of selling followed the instructions from Jarvis. The Hon’ble Court ruled in favour of Adamson, upholding this right to expect Jarvis to compensate if things go wrong. This encompassed varied forms of insurance, excluding life insurance. But post enactment of the Indian Contract Act, 1872, the ambit was narrowed down by covering only those losses caused by the conduct of the promisor or any other person. In the case of a contract of indemnity, several small factors play a major role; for instance, existence of a loss, the specified cause of that loss, and the contingent nature of the contract. Both the indemnifier and indemnity holder have certain set of rights,5 but in terms of liability, the indemnity holder cannot hold the indemnifier liable until and unless he/she has suffered an actual loss. This becomes unfavourable for the indemnity holders when a loss is imminent and they don’t have any option to manage that financial turmoil.