Chapter 4 Flashcards
What are the features of insurable interest?
Subject Matter - Subject matter can be used in two ways, subject matter of insurance, and the subject matter of the contract. The subject matter of insurance is the item or event insured. The subject matter of a contract is the financial interest the insured has in the subject matter of insurance.
Legal Relationship - The relationship between the insured and the subject matter of insurance must be recognised in law.
Financial Value - The subject matter of insurance must have a financial value.
When must insurable interest exist in different classes of business?
General insurance contracts – It is a general rule that insurable interest must exist at inception and at the time of a loss.
Life insurance contracts – Insurable interest must exist at inception but need not exist at time of a loss.
Marine insurance contracts – Insurable interest must exist at time of a loss but need not at time of inception, provided there is an expectation of interest.
What is anticipated insurable interest?
Anticipated insurable interest, the expectation of acquiring interest at some time in the future, may not be enough to create insurable interest in general insurances.
How is insurable interest created?
Common law
Contract
Statue
What is common law?
We all owe duties to each other and have certain rights under common law. These give rise to insurable interest. The most straightforward is ownership. If we own something, we stand to lose financially if it is lost or damaged. Equally we may be in care of something, and we also stand to lose.
In terms of insurable interest, what can contracts do?
Contracts can be worded to impose greater liabilities on individuals, a landlord may pass over the responsibility of maintenance to the tenant.
How can the government impose insurable interest?
There are some acts of parliament (statutes) to certain groups or individuals, thus creating or changing some forms of interest.
How can insurable interest be applied in property insurance?
This generally rises out of ownership where the insured is the owner of the subject matter of insurance. However, it might not arise from full ownership:
Joint or part owners
Agents
Bailees
Tenants
How can insurable interest be applied in liability insurance?
Under common law a person has insurable interest to the extent of any potential legal liability that they may incur to pay damages awarded by a court and other costs.
Our definition of insurable interest included not only loss and damage but potential liability