Chapter 4

Question 1

Define Insurable Interest?

Answer 1

Financial relationship with recognised law, between the insured and the subject-matter of insurance,

Question 2

What are the three features of insurable interest?

Answer 2

Subject-matter
Legal relationship
Financial Value

Question 3

What two ways us “subject-matter” used?

Answer 3

of insurance (the item/insured)
of the contract

Question 4

Why would an insurer have to have insurers’ insurable interest?

Answer 4

To re-insure - they must have an insurable interest.

Question 5

What does “MIA 1906” mean?

Answer 5

Marine Insurance Act 1906

Question 6

In marine insurance does there need to be an insurable interest at the time of inception or claim?

Answer 6

Claim/Loss

Question 7

What did the Marine Insurance (Gambling Policies) Act 1909 make a criminal offence?

Answer 7

To effect a marine policy where either there is no insurable interest in or no reasonable expectation that there will be one.

This is no longer the case

Question 8

Which act made the following a criminal offence - To effect a marine policy where either there is no insurance interest or no reasonable expectation that there will be one?

Answer 8

Marine Insurance (Gambling Policies) Act 1909

Question 9

What were you able to insure prior to the Life Assurance Act 1774?

Answer 9

Being able to insure someone’s life as a wager by a disinterested party.

Question 10

Does there need to be insurable interest at inception of a life insurance policy?

Answer 10

It is not a straighforward area of law. There is generally no absolute requirement for actual insurable interest at inception.

Question 11

What act made all contracts of gambling or wagering null and void?

Answer 11

Gaming Act 1845

Question 12

When does there need to be an insurable interest on a life insurance policy?

Answer 12

Must exist at inception but need not exist at the time of a loss.

Question 13

When does there need to be an insurable interest on a Marine Insurance Contract? and what is the caveat to this?

Answer 13

Must exist at the time of a loss but need not exist at inception, provided that there is a reasonable expectation of interest.

Question 14

When does there need to be an insurable interest on a General Insurance Contract?

Answer 14

A general rule that insurable interest must exist both at inception and at the time of a loss, though some connection other than a full insurable interest may be sufficient at inception.

Question 15

As a general rule, when must insurable interest first exist in order for a private motor insurance policy to be enforceable at law?

Answer 15

At inception of the policy.

Question 16

Insurable interest in the subject-matter of an insurance policy may arise under what three ways?

Answer 16

Common law
Contract
Statute

Question 17

How does common law create insurable interest?

Answer 17

We all have duties to each other and certain rights under common law which give rise to insurable interest.

Example - if we own something or injury someone through our negligence.

Question 18

How does a contract give rise to insurable interest?

Answer 18

Where we have accepted liability’s greater than through common law through a contract.

EG. a landlord is liable for maintained of there property but they may make the tenant liable under the terms of a lease.

Question 19

What is Statute?

Answer 19

A written law passed by a legislative body or a rule of an organisation or legislative body.

Question 20

What insurable interest does a part or joint owner of a property have?

Answer 20

Insurable interest up to the limit of there financial interest in a property - they may be considered a trustee and be able to insure the full value of a property though.

Question 21

What insurable interest does a Agent have in a property?

Answer 21

An agent has no direct insurable interest however where a principle has insurable interest the agent can insure on their behalf

Question 22

What is a Bailee?

Answer 22

a person or party to whom goods are delivered for a purpose, such as custody or repair, without transfer of ownership.

Question 23

What insurable interest does a Bailee have on property?

Answer 23

If it is damaged or stolen they may have to replace it. Examples of bailees include shoe repairers, garage owners and dry cleaners

Question 24

What insurable interest do tenants have on a property?

Answer 24

In the event of damage to the property, the tenant may be liable for the cost of repairs

Question 25

What insurable interest is there in a liability insurance contact?

Answer 25

Under common law they could be liable for injuring someone else through the careless act.

Question 26

As a general rule, if a general insurance contract is effected when there is no insurable interest:

Answer 26

it is void ab initio (from the beginning).

Question 27

The case of Castellain v Preston (1883) laid down an important principle with regard to which features of insurable interest?

Answer 27

The subject-matter of the contract.

Question 28

The roof of Howard’s house is poorly maintained. A loose tile falls and hits Derek on the head when he calls to read the gas meter. The injury caused to Derek as a result of Howard’s negligence is an example of insurable interest arising under what heading?

Answer 28

common law

Question 29

The insurable interest of a shareholder in a limited company is limited to what?

Answer 29

the value of the shares that they own

Question 30

Insurable interest in the subject-matter of an insurance policy can be created in which three ways?

Answer 30

Under common law, contract and statute.

Question 31

ABC Insurance Company arranges reinsurance on a large shopping centre they insure. What is the subject matter of the reinsurance contract?

Answer 31

ABC’s financial interest in the original insurance.

Question 32

Which of the following is an example of a statute restricting liability and therefore insurable interest?

a. The Hotel Proprietors’ Act 1956.
b. The Settled Land Act 1925.
c. The Marine Insurance Act 1906.
d. The Life Assurance Act 1774. Incorrect

Answer 32

a. The Hotel Proprietors’ Act 1956

Question 33

Which of the following statutes makes tenants responsible for the upkeep of the buildings they occupy, giving them an insurable interest?

a. The Hotel Proprietors’ Act 1956.
b. The Trustee Act 1925.
c. The Settled Land Act 1925.
d. The Contracts (Rights of Third Parties) Act 1999.

Answer 33

The Settled Land Act 1925.

Question 34

A tenant is most likely to have an insurable interest in the property they rent:

a. under statute.
b. under contract.
c. at common law.
d. under legislation.

Answer 34

Under Contract

Question 35

At common law a person’s insurable interest in their potential legal liabilities includes?

Answer 35

the claimant’s damages and legal costs.

Question 36

Raman hits the back of Hamish’s car which is stopped at traffic lights, damaging the rear of Hamish’s vehicle. Hamish also suffers whiplash injuries. The requirement for Raman to pay compensation to Hamish for the injuries and damage caused is an example of insurable interest arising out of:

a. statute.
b. both common law and statute.
c. contract.
d. common law.

Answer 36

common law.

Question 37

John and Edward have bought a property together which would cost £400,000 to rebuild. John owns 25% of the property and Edward 75%. For how much is Edward legally entitled to insure the property on a reinstatement basis.

Answer 37

£400,000

Question 38

For insurable interest to exist, what sort of relationship must there be between the insured and the subject-matter of insurance?

a. Particular.
b. Fortuitous.
c. Material.
d. Financial.

Answer 38

Financial.

Question 39

Nick buys a house for £200,000 with a mortgage of £150,000 from the Helpful Bank. What is the extent of the Helpful Bank’s insurable interest in Nick’s property?

Answer 39

£150,000.

Question 40

Tamsin sells her car to her best friend Jeremy, but omits to cancel her insurance policy. Two weeks later the car is stolen and Tamsin decides to make a claim on her insurance policy. How much, if anything, will Tamsin receive from her insurers?

Answer 40

Nothing, as she no longer has insurable interest.

Question 41

Which important principle concerning insurable interest under a general non-marine contract of insurance is illustrated by the case of Lucena v Craufurd (1806)?

Answer 41

The expectation of acquiring insurable interest at some time in the future (however certain) may not be enough to create insurable interest.

Question 42

Which of the following is a requirement of the Life Assurance Act 1774 for a life insurance policy to be valid?

Select one:
a. The name of the person effecting the policy must be shown.
b. Insurable interest must exist at the time of a claim.
c. There must be a reasonable expectation of acquiring an interest in the life assured.
d. A certificate of insurance must be issued as proof that valid cover exists.

Answer 42

The name of the person effecting the policy must be shown.