Chapter 5- Insurance Contract Formation And Insurable Interest

Question 1

When will And insurance contract come into existence

Answer 1

Well the offer made by one party is on conditionally excepted by the other

Question 2

If The insured does not receive the renewal notice can I accept the offer of temporary cover which it contains

Answer 2

No

Question 3

If the insured just received the renewal notice how is it deemed

Answer 3

But they have accepted the offer if they simply continue to use the car on the road

Question 4

Insurance what three things that the parties have reached agreement on

Answer 4

The subject matter of the risk
The duration of the contract
The amount of the premium

Question 5

What happens when insurance contract is renewed

Answer 5

A fresh contract is formed normally on the same basis as the old one

Question 6

At renewal is offer and acceptance required

Answer 6

Yes the renewal notice which insurer issues can be regarded as an offer which the insured can accept by payment of the premium

Question 7

The risk may fail to run resulting in a total failure of consideration for what four reasons

Answer 7

The proposal may be withdrawn at the premium has been paid

The policy may be polite mistake because there is no consensus ad idem

The policy may be void because no insurable interest

The policy may have be avoided ab initio

In all these cases they must allow a full return of premium unless there has been fraud

Question 8

What insurance contracts that must be in writing

Answer 8

Marine insurance act

Question 9

What insurance contracts need to be evidenced in writing

Answer 9

Contracts of guarantee

Question 10

What insurance contract is written documentation required

Answer 10

Motor insurance (certificate of insurance)

Question 11

Is an insurer who grants cover to a minor fully liable to meet all valid claims

Answer 11

Yes, but an insurer can’t enforce an insurance contract against a minor by suing them for the premiums owed unless it’s a contest for necessaries (motor insurance)

Question 12

What is insurable interest

Answer 12

The legal right to insure arising out of a financial relationship recognised at law between the insured and the subject matter of insurance

Question 13

What are the key elements of insurance interest

Answer 13

The subject matter of insurance
Economic/ financial interest
Current interest
Legal interest

Question 14

Why does the law require insurable interest

Answer 14

To reduce moral hazard

To discourage wagering

Question 15

What two ways can creating of insurable interest arise

Answer 15

Under common law- where insurance interest if automatically presume to exist

Under contract- where a person will agree to accept responsibility for something for which they wouldn’t be originally liable (landlord/ tenant)

Question 16

Under marine insurance, when must insurance interest be required

Answer 16

At the time of the loss

Question 17

What are the main four provisions in the life assurance act

Answer 17

The person Benefiting from insurance must have an insurable interest

The name of the person whose benefit the policy has been affected must appear in the policy

The insured can recover no more than the amount of the value of interest

The act does not apply to insurances on ships goods or merchandises

Question 18

What is the gaming act

Answer 18

Made all contracts by way of gaming or

Wagering void

Question 19

What does it mean when property insurances a contract of indemnity

Answer 19

The insured cannot in any case recover more than the amount of their actual loss unless the insurance agreed to provide insurance on a more generous basis

Question 20

What happens if there is no insurable interest

Answer 20

The contract is generally void

Question 21

What happens if a contract is void because of no insurable interest

Answer 21

The policyholder who was paid a premium for avoid insurance policy should be able to recover it and payments made by an insurer under such a policy should also be recoverable.

However as life insurance is an illegal contract if there is no insurable interest the insured as a matter of law may not be able to recover the premium that it has paid

Question 22

What insurable interest do partners have in business

Answer 22

An interest in each other’s lives of the amount of any loss or expense that may arise on the death of a partner

Question 23

What insurable interest do employers and employees have

Answer 23

Employee can insure the life of their employer however their interest is limited to a sum representing their wage or salary
And employer had an insurable interest in a lot of their employee. Limited to a sum representing the value of the work to which the employer is entitled

Question 24

What is insurable interest for a creditor

Answer 24

Accreditor as an insurable interest in the life of the debtor because They may lose financially if the debtor dies before the money is repaid. They can insure for the amount of the debt plus interest payable on it

Question 25

What is the insurable interest of a debtor

Answer 25

A debtor has now corresponding insurable interest in the life of their creditor

Question 26

There are many examples of persons who have an insurable interest in property such as the following

Answer 26

Out right owners of property
Part or joint owners
Mortgages and mortgagors 
Executed and trustees
Landlord and tenant
Bailees
People living together
Finders and people in possession