Chapter 4 Flashcards
Define ‘insurable interest’
the legal right to insure arising out of a financial relationship recognised at law, between the insured and the subject-matter of insurance
What are the three features of insurable interest?
Subject-matter, legal relationship and financial value
What is subject-matter of insurance?
The item/event insured e.g. cars/houses/valuables/stock. It can be anything that results in a loss of legal right or the creation of legal liability.
What is subject-matter of the contract?
The financial interest a person has in the subject-matter of the insurance (Castellain v Preston 1883)
Legal relationship
The relationship between the insured and the subject-matter of the insurance must be recognised in law. If there is no legal relationship, there is no insurable interest.
Financial Value
The insurable interest in the subject-matter of insurance must have a financial value.
Insurers’ insurable interest
Insurers are able to share the risk with other insurers because they themselves have insurable interest in the risks that they have assumed.
Which classes have different timings for timing of insurable interest?
Marine insurance, Life Insurance, General Insurance
Insurable interest: Marine Insurance
The Marine Insurance Act 1906 stated that any marine insurance contract was void in the absence of insurable interest at the time of loss. The Marine Insurance Act 1909 made it a criminal offence to effect a marine policy where either there is no insurable interest, or there is no reasonable expectation of such an interest. SUMMARY: Insurable interest must exist at the time of a loss but not exist at inception, provided there is a reasonable expectation of interest.
Insurable interest: Life Insurance
There must be an insurable interest at the inception of a life policy, but there need be no valid insurable interest at the time of a claim.
Insurable interest: General Insurance Contracts
A general rule is 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 interest.
When is insurable interest created?
Common law, contract, statue
Common Law
We all owe duties to each other and have certain rights under common law which gives rise to insurable interest e.g. ownership
Contract
There are situations in which we accept greater liabilities than those imposed by common law. These occur when we enter a contract that gives us greater responsibilities.
Statute
There are a few acts of Parliament which impose and particular duty on, or grant some benefit to , certain groups of people and so creating or modifying insurable interest. Where these statues apply they make tenant responsible for the upkeep of the buildings they occupy.
