6. Principle of Insurable Interest Flashcards
What is the definition of insurable interest?
Legal right to insure arising out of a financial relationship recognised at law between insured and subject matter
What are the 3 components of insurable interest?
- Subject matter (2 meanings)
- of insurance: item or event insured eg car
- of the contract: financial interest person has in SM of insurance. Castellain v Preston 1883 - Legal relationship eg ownership
- Financial value
When does insurable interest need to exist for Life insurance?
Must exist at inception but need not to at time of loss
When does insurable interest needs to exist for Marine insurance?
Must exist at time of loss but need not exist at inception, provided that there is a reasonable expectation of interest
When does insurable interest need to exist for General insurance?
Must exist at inception and time of loss
What is anticipated insurable interest?
Expectation of acquiring II at some time in the future is not enough to create II in general non-marine insurances - Lucena v Craufurd 1806
What are the 3 ways insurable interest arises?
- Common law
- Contact
- Statute
How does insurable interest arise through common law?
Owe duties to each other and have certain rights
Ownership - if own something stand to lose financially if lost or damaged
How does insurable interest arise through contract?
Imposition of responsibilities or potential liabilities
How does insurable interest arise through statue?
Some impose particular duty or grant some benefits
Some modify by restricting liability
How does insurable interest apply to property insurance?
- Full owner
- Part or joint owners (have to limit of their financial interest and trustee for any money paid that exceeds. Can insure full value
- Agents (principal has, agent can insure on their behalf)
- Bailees (holds property on temp basis for legal owner eg repairers or dry cleaners)
- Tenants (not owner but would be liable for cost of repairs)
How does insurable interest apply to liability insurance?
Common law - have II to extent of potential legal liability may incur to pay damages