Insurable Interest Flashcards
What is the definition of 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 key elements of II? (4)
A subject matter
The PH must have an Economic or financial interest in it
Must be a current interest
Must be a legal interest
What is the subject matter of the insurance contract?
The property is the subject matter of the insurance but
The PH interest in the property is the subject matter of the contract
Can an expectancy of interest be insured?
No
e.g. an heir to property
Why does the law require II?
To reduce moral hazard
To discourage wagering
How is II created?
By Common Law
By contract
How does Common Law create II?
Ownership
Right to unlimited interest in own life
How does II by contract arise?
A person can agree to be responsible for something they would not normally be
e.g. landlord is normally liable for property but the lease could have a clause to say tenant is liable for maintenance and upkeep of the property. This creates a financial interest in the property for the tenant
What statute governs Marine Insurance?
The Marine Insurance Act 1906
When is II required on a Marine policy?
At time of loss only
No requirement at the start of contract
On a Marine Policy what happens if II has ceased since the time of the loss?
Nothing, still able to claim
What are the 4 major points in the Life Assurance Act 1774 with regards to II?
The person benefiting from the insurance must have II in the life or the event insured.
The name of the person to benefit must appear in the policy
The insured can recover no more than the amount of the value of their interest
The Act does not apply to insurances on ships, goods or merchandises
In Life Insurance, when is II required?
At inception only
Can insurers waive the requirement of II?
For Marine and Life insurance - no
Insurers can issue policies where there is doubt about the existance of II. These policies cannot be enforced in court e.g. PPI policies
What are the two relationship categories for II in Life insurance?
Family relationships - a natural tie of love and affection
Business relationships - a financial interest in the life of another arises from a non consumer contract or other non consumer dealings e.g. Business Partners
How much II do husbands and wives have in each other?
Unlimited
What are the main points of the Married Womens Property Act 1882?
A woman can insure the life of her husband for her own benefit, or her childrens
A policy taken out by one for the benefit of the other or their children creates a statutory trust
This means they will get the money free of any debts of the insured
Which business relationships give rise to II? (3)
Partners
Employer & employee
Creditor & debtor
How much II does one business partner have in another?
Up to the amount of any loss or expense if one died
How much can an employee insure their employer for?
Their salary for their notice period
Applies to personal contracts of employment only as ‘companies’ cannot die
What are ‘keyman’ or ‘keywoman’ policies?
Policies for large amounts taken out on senior employees. They reflect the cost of training a new employee
Does a debtor have II on their creditor?
No - only works other way round for the amount loaned + interest
Who could have II in property? (8)
Owners Part or joint owners Mortgagee & mortgagors Executors & trustees Landlord & tenant Bailees People living together Finders & people in posession
What II do Bailees have in property?
A bailee has legal posession of property e.g vehicle repairs, watch repairs, laundrette
They are repsonsible while its in their posession
