Topic 4 - Insurable Interest Flashcards
March v Pigggott
two young men wagered as to which of their fathers would live the longer. Unknown to the parties (one of whom was actually a mere assignee) one of the fathers in question had died before the time of the bet. A claim of total failure of consideration was dismissed and the wager upheld by a court headed by Lord Mansfield, but it must again be noted that although the question of enforceability was peripherally discussed the court was willing — albeit reluctantly — to assume the correctness of the jury’s finding that the intention of the original parties was not to wager but to protect their own future interests. Later courts, treating the case as one of wagering simpliciiter, regularly expressed their surprise at the result reached but could do no more than lay down the necessarily limited proposition that a wager affecting a third party was illegal only if it were a threat to public peace. However, there are signs that at turn of the nineteenth century the courts were more willing to bypass March and to hold that when a third party was in any way affected a wager was void and illegal. Uninhibited by March, it seems fairly certain that the courts would have reached this result far sooner
Le Cras v Hughes
the British seized a Spanish ship during wartime. Under the “Prize Act,” the British captain and crew believed they possessed certain rights, which entitled them to title of the ship and goods once it was sailed back to England. They insured the ship, and it was destroyed by a storm during the voyage. They made an insurance claim. The insurer denied the claim by reasoning that they had no right to the ship, only expectancy that they would eventually obtain the ship. A court reviewed the case, and the judge found that a factual expectancy existed, and an insurable interest was therefore supported.
Lucena v Craufurd
The Crown commissioners insured enemy ships seized by British vessels which were still on high seas. The statute which allowed seizure only permitted seizure when the vessels were in British ports or British waters. Some of these ships were lost on high seas. The issue was whether or not the commissioners had insurable interest in the ships.
The House of Lords held that at the time of the loss the commissioners had no insurable interest in the ships. Lord Eldon said as follows: “An insurable interest is a right in the property or a right derived out of some contract in the property which in either case may be lost upon some contingency affecting the possession or enjoyment of the property.
However, on appeal, 7 of 10 judges held that there was an insurable instetest adopting Lawrence J. Factual expectation of interest test.
Carruthers v Sheldon
A trustee is the legal owner of a property and thus has an insurable interest in the property and may insure such for its full value.
Rhind v Wilkinson
A trustee has an insurable interest in the trust property and may insure such for its full value.
A beneficiary however may only insure a trust property in respect of his or her interest in the property and not in full.
Houghton v Gribbles
A trustee has an insurable interest in the trust property and may insure such for its full value.
A beneficiary however may only insure a trust property in respect of his or her interest in the property and not in full.
Water v Monarch Fire and Life Assurance
Lord Pearce expressed his view that a bailee or a mortgagee or others in analogous positions have, by virtue of their position and their interest in the property, a right to insure for the whole of its value, holding it in trust for the
owners.
Tomlinson v Hepburn
carriers effected a cargo insurance policy. The cargo was stolen owing to the negligence of the owners’ own staff.
The owners of the cargo had been named in the policy. The House of Lords analysed the carrier’s (bailees’) insurable interest within the scope of agency law. It approved the decision in Waters v. Monarch Fire and Life Assurance Co
(1856).
Macaura v North Assurance
is authority for saying that mere possession without responsibility does not give insurable interest in the property to the person in possession. In Macaura’s case, the owner of the Killymoon Estate sold all the timber on his estate. There was no right of enjoyment of the property or some legal liability in respect of it”. It was held by the House of Lords that Macaura had no insurable interest in the timber. It has been pointed out that it would only be on facts as unusual as in Macaura’s, where the insured had no right to enjoy the timber, that possession would not give rise to insurable interest.*
Jia Enterprises (Electrical) Ltd. V. British Commonwealth Insurance Co. Ltd.
the creditor bank applied to be joined as co-plaintiff in a claim under a fire insurance policy effected by the bank’s debtor. The Federal Supreme court turned it down on the ground that the debt was supported by a floating charge.”
Bohen v bell
A trustee or beneficiary may insure a trust property subject to the extent of their interest without any reference to the beneficiaries or other beneficiaries
American Indemnity Co. v. Southern
Missionary College” presented such a scenario. In that case, the Supreme Court of Tennessee allowed the parent college of an insured college store which had a separate legal identity to recover under a burglary policy in circumstances very similar to Macaura’s case. The court regarded the separate legal personalities of the college and the store as a fiction which did not accord with the facts. The decision is indeed a common sense one which avoids the technicality and sometimes injustice of hiding behind the doctrine of separate legal personality to deny the obvious.
British Indian General Ins. Co. Nig. Ltd. v.
Thawardas,*
« a marine insurance case, is an interesting one.
Although the insurance was taken out in the name of “SHAMCO” the business name of the respondent, this SHAMCO had no separate legal personality. The Supreme Court had no difficulty dismissing the contention of the insurers that the plaintiff had no insurable interest in the cases of sardine. The insurable interest argument was raised for the first time in the Supreme Court. If the court had upheld that contention, it would have meant that there was no one to whom the insurance money could have been paid. The Insurance company would have collected premiums in respect of a risk that was non-existent since ‘SHAMCO’ could not sue in its own name, not being an incorporated company.
Constitution Insurance Company of Canada v. Kosmopolous,’
the Supreme Court of Canada held that where there was a “moral certainty” of loss to a shareholder from damage to company property, the shareholder possessed an insurable interest in it. In doing so, the court departed from the narrower definition on which Macaura was based in favour of a broader definition advocated by Lawrence J.* Like Macaura, Kosmopoulos was the sole shareholder and director of a company that manufactured and sold leather goods in Toronto. Like Macaura, he effected a fire policy in his own name. Fire broke out in the adjoining premises and damaged the assets and premises of the company.
Wilson J. took time to reexamine the judgment of Lawrence J and Lord Eldon’s speech in Lucena v Craufurd, and came to the conclusion that the reasoning of Lord Eldon was faulty and that that of Lawrence J was to be preferred. “In summary”
“, he said, “it
seems to me that the policies underlying the requirement of an insurable interest do not support the restrictive definition: If anything, they support a broader definition than that set out in Macaura.” The learned judge also noted that many jurisdictions in the United States had abandoned the narrow legal interest requirement established in Macaura without opening up the floodgate to all manner of insurers.
Sosu v Royal Exchange Assurance
Principle
- A vendor has an insurable interest in a sold good which remains within his possession provided he will be adversely affected by a damage to the goods. E.g where the buyer has not paid, he therefore, owns a lien in the good or where property has not passed to the other party.
- A buyer who has purchased a goods has an insurable interest in the goods even where such goods remain within the possession of the seller, provided the property in the goods has passed to him.
Royal Exchange Assurance v Tailor
In circumstance of hire purchase, the vendor does not lose his insurable interest since he remains the owner of the property until the hirer completes the payment of all installments and exercises his right to purchase.
Grover v. Mathews,
the agent insured the principal’s factory against fire without the principal’s knowledge.
The purported ratification after the loss had occurred was held to be invalid. In marine insurance, ratification after loss is a good ratification.
Sadler v Badock
Principle: and insured must have an insurable interest at the time of entering the contract and at the time of loss
- A house tenant took a lease for just under 7 years. She insured the premises for 7 years, and at the expiry of the lease, the policy had not run out.
• House was destroyed by fire just after the lease ended.
> After the fire, she assigned the policy to the landlord. - Insurers: At the date of the fire, the insured had no interest in the property so there was nothing she could assign to the landlord.
- Landlord does not stand in a better position.
Barnes v. London. Edinburgh & Glasgow Life Assurance Co. Ltd
A step-sister who acted as guardian to her
younger step-sister was held to have insurable interest in the little girls’ life,
is indeed an anomaly.
decided. The generally accepted rule under English law is that a parent or guardian cannot insure his child or ward unless he can prove that some form of pecuniary interest exists. Mere expenditure on a child with the expectation of future reimbursement will not do.
Hebdon v West
Facts of the Case
In the case of Hebdon v West (1863), the plaintiff, Mr. Hebdon, took out a contingency insurance policy with the defendant, Mr. West. The policy was for a horse race, and the insurance was to be paid if a particular horse, named “Eleanor,” did not win the race.
Issue
The main issue in this case was whether the plaintiff had an insurable interest in the outcome of the horse race. In other words, the court had to determine whether Mr. Hebdon stood to lose something of value if the horse did not win the race.
Ruling
The court ruled in favor of the defendant, Mr. West. The court found that the plaintiff, Mr. Hebdon, did not have an insurable interest in the horse race. The court reasoned that Mr. Hebdon did not stand to lose anything of value if the horse did not win the race. Therefore, the insurance policy was deemed to be a wagering contract and was thus unenforceable.
Significance
The case of Hebdon v West (1863) is significant because it established a key principle in insurance law: for an insurance contract to be valid, the policyholder must have an insurable interest in the insured event. This means that the policyholder must stand to lose something of value if the insured event does not occur.
Godsall v. Boldero”,
, it was held that such a contract
was substantially a contract of indemnity against the loss of the debt and therefore invalid if the dent was liquidated by the debtor of his executors.
Dalby v. India & London Life Ass. Co.,
78 it was held that the policy was not invalidated by
the debtor’s death (the deceased was a Duke),
Harse v Pearle Life Assurance
A don entered into two contracts on life of the mother - One to Cover funeral expenses to be insured by him on her death, and the other on her life. It was held that the obligation to pay for her funeral expenses is moral and not legal and so does not create insurable interest in the mother’s life.
