Chapter 3 Flashcards
Marine Insurance Act 1906 (Insurable Interest)
a person has an interest in a marine adventure if they have a legal or equitable relationship to it or any insurable property at risk
means they can benefit from it’s safety or suffer from its loss or damage
Life Assurance Act 1774 (Insurable Interest)
prohibits making insurance policies on lives or events where the PH has no interest, or for gambling purposes
Consideration - Currie v Misa (1875)
some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, sufferer, or undertaken by the other
Reasonable Misrepresentations
the insurer must pay the claim
Careless Misrepresentations
a proportionate remedy, based on what the insurer would have done had it known the facts
Deliberate or Reckless Misrepresentations
the insurer can avoid the contract and refuse all claims
Duty of Disclosure Requirements
• material circumstances
• clear and accessible information
• correct and good faith representations
Exceptions to Disclosure
if it diminishes the risk, the insurer already knows it, ought to know it, is presumed to know it or if the insurer waives the need for that information
Warranties
the insurers liability is in effect suspended until the breach is remedied
Fraudulent Claims
• the insurer is not liable to pay the claim
• the insurer may recover from the insured any sums paid by the insurer in respect of the claim
Enterprise Act 2016
all insurance contracts requiring insurers to ‘pay any sums due in respect of the claim in a reasonable time’
Factors to consider under Enterprise Act 2016
• the type of insurance
• the size and complexity of the claim
• compliance with any relevant statutory or regulatory rules or guidance
• factors outside the insurer’s control
Good Faith Concepts
• the positive duty of disclosure
• misrepresentation
Pan Atlantic Insurance Co v. Pine Top Insurance Co (1994)
“material information is that which a typical, reasonable underwrite would have wanted to know about when forming their opinion of the risk”
Recent law on Good Faith
• CIDRA and insurance act 2015
• avoiding the contract if the misrepresentation was deliberate or reckless
• if that information was known, they would not have entered to the contract
• if it was neither deliberate nor reckless, then it must return the premium
Notification of Breach
claims handlers must inform the insured promptly if they believe a policy term has been breached
Reservation of Rights
insurers may reserve their rights while investigating, meaning they might decline cover if a breach is found
Burden of Proof
if the insurer repudiates a claim, the insured must prove waiver
Court Stance on Waivers
courts are unlikely to uphold coverage defence if the insurer has promised not to rely on their rights and the insured has relied on that promise to their detriment
Kosmar Villa Holidays plc v. Trustees of Syndicate 2008
suffered serious injury in pool and didn’t notify for a year when policy required immediate notification
• insurers are allowed reasonable time to investigate without reserving rights
• brief handling of a claim does not imply a permanent waiver or acceptance of liability unless there is unequivocal acceptance
Leyland Shipping v. Norwich Union Fire Insurance Society Ltd (1918)
• a torpedo struck the ship Ikara. due to storm damage and orders, it sank at an outer berth
• house or lords ruled that the torpedo was the proximate cause
• the “chain of events” wasn’t broken, making the torpedo (a war risk) the dominant cause
• claim denied due to war risk exclusion
Midland Mainline Ltd & Others v. Eagle Star Insurance Co Ltd (2004)
• following the hatfield rail disaster due to fatigue cracking, emergency speed restrictions were imposed, disrupting rail services
• court of appeal found two proximate causes: wear and tear (fatigue cracking) and speed restrictions
• since speed restrictions were due to wear and tear, both were deemed proximate causes
• insurers could rely on the wear-and-tear exclusion to deny the claim
Warranties
• relating to past facts
• relating to present facts
• relating to a continuing state of affairs (a continuing warranty)
Bank of Nova Scotia v. Hellenic Mutual War Risks Association (Bermuda) Ltd (1992)
the house of lords held that a breach of warranty terminated cover automatically from the date of breach
Insurance Act 2015 - Breach of Warranty
the insurer can only avoid liability in certain circumstances
• the loss occurred while a warranty was breached and before it was remedied
• the warranty was designed to reduce the risk of a loss of a particular kind, location and time and the circumstances of the loss directly related to the breach
Conditions
A condition precedent in a policy means compliance with specific terms is essential for an obligation to be binding
Eagle Star Insurance Co Ltd v. Cresswell (2004)
a claims control clause in a reinsurance contract stated the insurer “will not be liable to pay any claim” if the condition was breached
• the policy did not explicitly label the clause a condition precedent
• intent was clear that the reinsurer should control negotiations or settlements
court of appeal conclusion:
wording was sufficient to classify it as a condition precedent
Aspen Insurance UK Ltd & Others v. Pectel Ltd (2008)
whether the notification clause was a condition precedent
• wording implied the insurer’s obligation to indemnify was conditional on compliance with notification
• citing Kidsons, the judge ruled timely notification allowed insurers to investigate claims early
outcome:
a notification delay invalidated coverage, as compliance was a condition precedent
Independent Peril
each peril can cause a loss on it’s own; insurer only covers the part attributable to the insured peril
Interdependent Perils
loss requires both perils acting together, if one is excluded, the claim may not be covered
Case Law on Independent and Interdependent Perils
Wayne Tank and Pump Co Ltd v. Employer’s Liability Insurance (1974)
• fire caused by defective equipment (uninsured) and employee negligence (insured)
• proximate cause was defected equipment, so claim denied
• if an excluded peril is involved, coverage is denied
J.J Lloyd (instruments) Ltd v. Northern Star Insurance (1987)
• yacht damaged due to bad weather (insured) and defective design (uninsured)
• insurer fully liable as neither cause alone would have led to the loss
I2C Tektrol Ltd v. International Insurance Co of Hangover (2004)
• source code lost due to a virus (excluded) and burglary
• both virus and burglary were causes of loss, making the claim excluded
Case Law on Exclusions
Bankers Insurance Co Ltd v Patrick South and Mark Ian Gardner (2003)
• jet ski collision injury claim; policy excluded waterborne craft
• decision - claim excluded
C A Blackwell (Contracts) Ltd v. Gerling Agllgemeine (2007)
• rain damage due to construction site without adequate drainage
• losses were deemed fortuitous and not excluded due to defects or wilful misconduct
