INSURANCE

Question 1

Macaura v Northern Assurance Co Limited [1925] AC 619

Insurable Interest

Answer 1

• Macaura insured in his own name growing timber which was actually owned by a limited company (of which he was the sole shareholder.
• The timber burned down.
• Macauara claimed insurance proceeds in his own name, but was refused because the timber was owned by the company and HE PERSONALLY had no insurable interest in the growing timber.

Question 2

Fehilly v General Accident Fire & Life Assurance Corporation Ltd 1982 SC 163 (OH)
(Insurable Interest)

Answer 2

 Held, dismissing the action, that an obligation on a tenant to maintain a building in the condition it was in when the lease was entered into did not oblige the tenant to repair damage by fire provided it was not caused by his negligence, and therefore such an obligation could not give the tenant an insurable interest in the full value of the building.

Question 3

J J Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The “Miss Jay Jay”) [1987] 1 Lloyd’s Rep 32 (CA)
(Proximate Cause)

Answer 3

 Vessel was lost at sea due to unusual sea conditions and due to design defects.
 Perils of the sea were covered by the policy, design defects were not mentioned in the insurance policy.
 Held, the insurer had to pay out.

Question 4

Rausher v Borthwick [1894] 2 QB 548 (CA)

Proximate Cause

Answer 4

 A ship was insured against damage from collision with any object, but not against perils of the sea. The ship ran against a snag in a river, and, the collision causing a leak, the ship was anchored and the leak temporarily repaired, so that the ship was out of immediate danger. A tug was sent to tow the ship to the nearest dock for repairs; but the effect of the motion through the water was that the leak was opened again, and the ship began to sink, and was run aground and abandoned.
 Held that inasmuch as the injury to the ship remained throughout, the collision was the proximate cause of the damage, and that the loss of the ship was covered by the policy.
 The hole may have re-opened due to the waves of the sea but it was the collision which was the dominant cause of the sinking.

Question 5

If there are two independent causes, neither of which can be determined to be the dominant cause of the loss, and one is covered and the other is not mentioned in the policy…..

Answer 5

then the insurers must pay.

Question 6

If there are two dominant causes and one of them is excluded by the policy…

Answer 6

the insurer will not have to pay.

Question 7

Pan Atlantic v Pine Top Industries Co. Limited [1995] 1 AC 501
(Duty of Disclosure)

Answer 7

Held when determining whether something is material, there is no need for an insurer to prove that a prudent insurer would have acted differently had he known of the fact in question. The insurer only requires to show that it was one factor the prudent insurer would have taken into account.

*ALSO states that an insurer must show inducement AS WELL as material non-disclosure.

Question 8

Hussain v Brown [1996] 1 Lloyd’s Rep 627 (CA)

Warranty

Answer 8

 B, an underwriter, appealed against a refusal to dismiss H’s claim under a Lloyd’s fire policy. H completed a proposal form which contained a question as to whether he had a security alarm fitted in the premises, to which H answered in the affirmative. B submitted that this implied a continuing warranty that the alarm would be set when H left the premises and H’s failure to do so breached the policy.
 Held, dismissing the appeal,that no principle existed in insurance law which implied continuing promises from answers given on proposal forms. To impose a continuing warranty, breach of which would lead to the automatic cancellation of cover, was a draconian measure and if underwriters required such protection then it should be stipulated in clear terms on the proposal forms.

Question 9

Ansari v New India Assurance Ltd. [2009] EWCA Civ 93; [2009]

Warranty

Answer 9

 An insurance policy that had been agreed on the basis that the property in question was protected by an automatic sprinkler system had required that the system be properly functioning. Turning the system off indefinitely had amounted to a material change so as to bring into effect termination of the cover.

 Held that the situation of an automatic sprinkler system was different from that of the alarm in Hussain v Brown
 An automatic sprinkler was always supposed to be on whereas an alarm was to be turned on and off and was open to negligence on the part of employees.
 They held that a continuing warranty could be read into this contract, whereas in Husain it could not due to the human intervention.