CH 4 Insurable Interest Flashcards
What is Insurable Interest
This is the right to ensure arising out of a financial relationship recognized at law, between the insured and the subject-matter of insurance
What are the main features of insurable interest
- financial value
2. legal relationship
What are the two ways subject matter is used
- Subject matter of Insurance
2. Subject matter of the contract
Subject Matter of Insurance
The item or event insured. For Example car, building, or any event that can cause a legal liability
Subject matter of Contract
The financial interest a person has in the subject matter of Insurance
The Marine Insurance Act 1906(MIA 1906) stated
This was a codifying Act,it stated that any marine insurance contract was void in the absence of insurable interest at the time of any loss
The Marine Insurance (Gambling Policies) Act 1909 made what illegal
It made it a criminal offence to effect marine policy where either there is no insurable interest or no reasonable expectation for such an interest
For Marine Insurance Insurable interest is required
It must exist at the time of the loss, it does not need to exist at the inception as long as there is a reasonable expectation of interest
Before Life Assurance 1774 what practice did people effect
People had developed a practice of effecting life insurance policies on another person’s life simply as a form of wager
What did the Life Assurance Act 1774 state
The act stated that there must be insurable interest at the inception of a life insurance policy, and the name of the person effecting the policy has to be shown and they can only recover the value of their interest.
Is insurable interest required at the time of claim of a life policy
No, there is no need of insurable interest then
The Life Assurance 1774 Act excluded its applications on which insurance
It specifically excluded its application on insurances of goods,ships or merchandise
The Gambling Act 1845 stated that
The act made all contracts of gambling or waging null and void
Taking general insurance where there is no insurable interest treat the contracts as
This treats the contract as gambling and therefore will have no effect. Thus a general rule is if general insurance is taken without insurable interest it is void ab initio
For general insurance policies like property,motor,liability e.t.c when are they subject to insurable interest
These are contracts of indemnity so they are subject to the rule of insurable interest at the time of the claim and also actual or expected insurable interest is required at the inception of the policy
Which law supports that general insurance policies do not require insurable interest at the inception of the policy
Williams vs Baltic Assurance Association(1924)
Insurable Interest of the subject matter of an insurance policy arises from
- Common Law
- Contract
- Statute
Common law
we all owe duties to each other and have certain rights, that will give rise to insurable interest, like ownership of something, we stand to lose financially if it is lost or damaged or when you cause injury to someone through negligence, the financial aspect to this gives insurable interest
Contract as one of the features of insurable interest
When we get into a contract it gives us a greater responsibilities than those imposed by common law. These responsibilities/potential liabilities create insurable interest
Statute as one of the features of insurable interest
There are few statues/act of parliament, which impose a particular;llar duty/grant to certain groups of people, thus leading to creation or modification of insurable interest
Which statutes restrict liability thus limiting insurable interest
- Carriage of Goods by Sea Act 1971
- Hotel Proprietors’ Act 1856
- Carriers Act 1830
- Trustee Act 1925
Insurable Interest generally arises from
It generally arises from ownership
When does insurable interest of property arises when the insured is not the full owner of the subject matter
- Part or joint owners
- Agents
- Bailees
- Tenants
When a joint or part owner is paid in the event of a claim an amount that may exceed their actual interest, what are they considered
They are considered a trustee
Who is a bailee
When someone holds a property on a temporary basis on behalf of the legal owner
Bailee and Tenants interest are in respect of
They are in respect of possible liability
Insurable interest also includes of potential liability
The extent of any potential legal liability that may incur to pay damages awarded by court and other costs
Important principle concerning incurable interest for general non motor contract illustrated in the Luceva v craufurd (1806)
The expectation of acquiring insurable interest at some time in the future may not be enough to create insurable interest in general non-marine insurances
