Insurance Law notes 21/5/13 week 1 may 28,2013

May 21, 2013

Insurance Law consists of a few elements
First there is a person/individual or company who offers coverage known as the insurer
Individual who wants coverage known as the insured or the assured.
Uncertain event….usually as a consequence of a tort
Some type of payment ….this comes about when the uncertain event comes about.
Consideration…..which is the premium
Obligation
Insurable interest

What is insurance……in the absence of a statutory definition of insurance, case law

provides us with some description as to what constitutes an insurance.
One essential characteristics is that there is a contractual relationship between the parties
and this relationship is referred to as being upon or against specified subjects or risks

These general characterises were summarized in the often quoted judgment ofJustice
Channel in the case of prudential insurance v IRC which states as follows
1. There must be a contract for some consideration
2. Usually but not necessarily in periodic payment call premium
3. To secure some benefit which is usually but not necessarily the payment the sum of
money
4. Upon the happening of some event which involves some amount of
uncertainty….uncertainty is firstly whether the thing will happen in the first place,
secondly if the event is one which must happen, then there must be some certainty as to
the time in which the event will take place
5. the insurance must be against something

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Contract that forms
An insurance is essentially a creature of contract where the insurer indemnifies the
insured in certain circumstances. Therefore all contractual principles applies and the
insured contracts on the basis that his claim will be properly considered, rather than the
hope, that the insurer might exercise a discretion in the insured’s favour.

The contract is usually referred to as a policy and this policy is issued after the insurance
is entered into. An individual gets a proposal form which indicates the terms and
conditions upon which the contract of insurance will be entered into.

If the policy document does not accurately reflect the proposal information then it is
possible to rectify the policy (theoretically). One writer called Hudson considers that
insures much like bondsmen expend considerable injunity in drafting and designing
policies which on the surface appear to offer but on informed and in close analyses do
not the full protection expected and required by the insured. And also in implying any
devise of subrogation or of settlement of claims in return for assignment of rights in
order to transfer, reduce or eliminate their own liability.
As a result of the above, care must be taken in the interpretation of the policy because
the interpretation will turn upon the particular words that are used.

In the case of Pilkington United Kingdom Limited v CGU Insurance PLC 2004 civil at
page 23. In this case the appellant was the manufacturer of heatsoap, tuffened glass
panels that had been installed in the roof and vertical panelling of the Ero Star Terminal
at waterloo. Some of these glass panels proved to be defective. Ero star brought an
action against the contractor and his team and eventually joined the appellant pinkleton
to the proceedings. The appellants made what is called in law a contribution towards the
judgement and was able to recover some of this contribution from their professional
indemnity insurance.

Having gotten that sum, they sought a further sum from the respondent which is CGU

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under the terms of a product liability insurance policy. In order to make out the claim,
the appellant had to demeonstrate that their loss arose from “physical damage to physical
property not belonging to the insured”.

The panels which the appellants manufactured had not in fact caused any damage to the
terminal but because of the fractures in the panel they presented a further risk of damage
and possible injury to others. The court had to consider whether this potential future
damage was covered by the policy?

The appellant argued that a potentially dangerous or defective product could constitute a
loss of or physical damage to other property not belonging to the insured. The court of
appeal however did not agree with this argument and that the defects in the product was
not covered by the [policy.

May 28' 2013

Horbury Building Systems Limited v Hamdem Insurance……..in the case the extent of
the insurance cover offered by an insurance policy. The appellant erected ceiling within a
cinema complex, the ceiling to one collaped and the whole complex was closed for
several weeks. Clause 4.1 of the insurance policy noted that the respondent will
indemnify the appellants in respect to damage to the property. The appellants argued
given that cinema was closed for several weeks, the lost of profits caused by the closure
arose as a direct consequence of the cinema and fell within the indemnification that the
policy s suppose to provide. The insurance company/ respondent didn't agree and argue
they stated that damage to property related to a single cinema and not to the whole
complex. The judge agreed at 1st instant but it was appealed.

Court of appeal
Issue : whether the closure of the complete cinema, as a result of 1 ceiling collapsing and
or was the closure of the complex consequential damage caused by the collapsed ceiling.
The judge at first instance was correct and the insurers need not indemnify the appellants

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for lost of profit arising from the closure of the whole complex. The other point the
court noted, the policy covered liability of the physical consequence of the collapse of the
ceiling in a single cinema, and the economic and financial loses caused by that physical
damage. It did not extend to the entire cinema especially given that the collapse of the
ceiling in one cinema, did not prevent the rest of the complex from operating.

This case demonstrates that insurance cover is only as wide as the terms of the policy as
here damage was cause to only one cinema and so the building was covered for the
financial loses arising from the lost of use from that particular cinema.

DEPARTMENT OF TRADE AND INDUSTRY v. ST. CHRISTOPHER

MOTORISTS' ASSOCIATION LTD.
The association existed to facilitate members who were disqualified from driving ie of
intoxication or suspension of license and in those instances the association provided a
chauffeur to take those members home.
W/n ( the benefit given was sufficient consideration in the wider context of insurance
and the court held that in fact the association provide insurance because although no
money was paid the members of the association received monies worth in terms of the
journey.

Generally, the consideration for an insurance policy takes the form of money. ( the case
above notes that you can have monies worth as well) however note the case of Hampton
v Toxteth corp. providence society limited 1915 1 Ch pg 721 in which the court held
that in the absence of a premium was not fatal to the formation of insurance though we
should note that in practice, policies state the payment of the premium, is a condition
precedent to the insurers liability.

FUJI FINANCE INC. v. AETNA LIFE INSURANCE CO. LTD. AND ANOTHER

In this case the insured entered into a contract of insurance with a lump sum payment of

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50 lb the terms of the contract of insurance were as follows. That a certain sum of money
will be paid if the insured died but not withstanding that the sum of money must be
payable within 5 yrs. the contract also provided that if the insured decided to cash in the
policy before five yrs. he will incur charges and will get a smaller pay out. The question
was : was this a policy of insurance or investment policy.
Held :the court at first instance the particular arrangement was an investment contract
basing this on the fact that the insured would have been able to cash in the policy
however the Court of Appeal took a different view, they noted that although there was
an investment the contract was contingent on life or death as the death of the insured
provided the point at which the insurance monies were payable so that the contract was
in fact a contract for an uncertain event. This case highlights is that the correct test to
determine whether or not a contract of insurance exist is not the dominate on the
primary purpose of the contract but rather whether the related benefit refers to life or
death.

Difference between prudential is that risk alone isn't the deciding factor, the trigger is the
uncertain death.

Illegal or Unauthorized policies

1. Where there exist speculation so that contact amounts to a waiver
2. Where the contract is concluded with persons who are unable to contract
Ie minors, mentally incapacitated
3. Where the contract is for an illegal purpose or one contrary to public policy
4. Where the insured has no possibility of financial loss, no insurance interest
5. Insurance to property is illegally held
6. Where the insurer is not authorized by statue or not registered under the
insurance act

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INDEMNITY
To put you back in the position that you were in before the lost occurs. Consequently,
and insured is not to profit from his or her loss. Locus classics case of Castellain v
Preston - a man sold a house to a purchaser the house was insured but was destroyed by
fire, the insurer was paid under the terms of the agreement for sale and the vendor who
was the insured sought to get money from the insurer as well as from the sale. Had this
been allowed he would have profited twice and consequently would have profited from
his loss.

The insurance company held back the company. The court agreed with the insurance.
The insurer usually contracts to indemnify the insured for what he or she would actually
lose in the happening of the event on which the insurer/ assured liability is premised.
However one should note that the strict principle of indemnity as mentioned in
Castellain may be modified by the expressed terms of the policy and in every exceptions
there is exceptions.

Principles in which Indemnity can be modified

1. Contingency policy - not an indemnity insurance in the sense of the word, as it one in
which the insurers agrees to pay on the happening of an event irrespective as to whether
there is a lost
2. Valued Policies- at the commence of the contract of insurance the parties agree at the
value of the lost based on this the lost is predetermined and is unlike the regular
3. Sum Insured - the insured cannot recover more than the sum insured.
4. Insurance Value- what you recover is the commercial value and not the
sentimental value

Different Types of Insurance:

1. Marine Insurance: Principles which govern this type of insurance must not be applied

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to others in this instance, the sum insured becomes payable upon the happening of
marine peril ie loss incidental to a marine adventure. Marine Act section 1

Note- this insurance policy do not only cover the rest at sea but goods from one
warehouse from one point to the next. In marine insurance th policy can be assigned so
that if the goods on the ship are sold half way through the journey then the coverage still
applies. Marine policy only applies if the subject matter is consistent with maritime
customs so that a house per chance could not fall under a maritime policy but a car being
transported by ship can be.
Canada Rice mills ltd v Union Marian 1940 4 all pg 169 where cargo was on a voyage
from a place called Rangoon to British Columbia the cargo was insured by peril at sea.
The cargo was damaged by heating occasioned when the cargo hold ventilator was closed
to prevent the ingress of water on heavy weather. The cause of the lost was not a peril of
the sea because the weather was normal and what should be expected on a voyage of that
nature and that there was no weather bad enough to endanger the safety of the ship if the
ventilation had not been closed.
Court of Appeal - the court said any accidental ingress of water into the vessel was a peril
of the sea. The entry of sea water through an opening by which it was not suppose to
enter was accidental even if the sea conditions were entirely normal for those waters at
that time of the year.
Storms that are seasonal and frequent and are therefore to be expected, are outside the
ordinary accident of wind and sea. They may happen on the voyage but it cannot be said
that it must happen.

2. Fire Insurance :- The sum insured become payable on the happening of a fire, the
question is whether there needs to be an ignition of the property insured. Usually, policy
of this nature, there is such a requirement that even of the fire occurs in respect of other
property, and there is damage to your property without actual ignition then not
withstanding the insured is able to claim.

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Austin v Drewe - a covenant on a policy of insurance effected with the defendant,
provided for coverage against all the damage which the plaintiff should suffer and " fire
on their stock and utensils in there regular built sugar house " the plaintiff claimed that
there stock and utensils were damaged based on a fire at their sugar house. The
defendant argue that the stock and utensils were damaged through the carelessness,
negligence, and improper conduct of the plaintiff and their servants in regulating and
managing their fire in and about their sugar house . The evidence that the building
insured contained 8 th story and in each story sugar in a certain state of preparation was
deposited for the purpose of being refined. In order for refining to take place a certain
degree of heat is necessary and a chimney was used by which heat was communicated to
each of the story. On an occasion, the chimney was shut and fire lit the next day, without
the chimney being open as a result the business was full of smoke and spark and damage
occasioned to the walls, utensils and to the sugar that was being processed. Note: there
was no fire in the building that ought not to have been there the damaged was
occasioned by sparks, heat and smoke taking the wrong direction. The judge directed the
jury, that in as much as the damage was occasioned entirely by the increased heat, it was
not a loss by fire within the meaning of the policy but rather was occasioned by
improper management.

Harris v Polland 1941 1 KB pg 462 a lady hid her jewelry in the grate in the fire place
she forget, it lit sought a claim and the court held that it was a lost by fire. Under this
type of policy, you should note that fire damage to property includes damaged caused by
smoke as well as damage caused by water used to put out the fire.

3. Life Insurance
The sum insured becomes payable usually on the death of the insured. In the Insurance
Act it defines a life insurance business as one which is the undertaking of liability under
policies of insurance upon a human life but does not include the business industrial life.
Industrial life insurance is one in which premiums are collected by the agent usually in an
intervals of 2 months either at your place of business, or residence and is usually done to

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facilitate persons in a factory setting who may not have the ability to establish standing
orders or other types of deductible arrangements. Note ( emphasis here ) that a life
insurance policy is any instrument by which the payment of money is assured on the
death or the happening of a contingency which is dependent on the duration of a human
life.
It is any instrument evidence in a contract which is subject to the payment of premiums
for a term which is dependent on a human life. Note that this type of policy, does not
include an instrument by which the payment of money is assured only by accidental
death.

Types of Life Insurance Policy:

1. Term policy -
A term policy is one where the insured pays the premium within a period of time and if
you die within that period, the named beneficiary gets that sum.
If you out live the period, then having paid the premiums neither you or your beneficiary
get any thing.

2. Whole Life Policy

You spend your whole life paying premiums. This type of policy there is no short period
as in the case of a term policy, however the policy has a maturity date. The principle is
that the policy exists to provide you with a benefit. Ie that your beneficiary get the
benefit. If at any time you die your beneficiary gets it. The maturity date is usually
dependent on age 60 and 70.

3. Endowment Policy
You pay a premium for a period of time similar to a premium policy but if you survive
the period the sum assured is paid to , not the beneficiary but the insured. Example
Omni at Ncb for children , retirement fund or just to collect a sum of money further in
life.

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Accident / sickness v term, whole life and endowment type policy
Sickness and accident type policies are also sold by life insurance companies but are
usually dependent upon a different set of criteria eg if you have a particular type of illness
or disabilities. Some jurisdictions these accident policies are not considered life policy
even though the sum assured becomes payable on death.

Major difference between life insurance v accident / sickness

A) accident / sickness usually last for 12 months when life insurance does not.
B) Life policy is contingent on the fact that once you are alive you must die but an
accident or sickness that may never happen.
C) at the end of the contingency period ( 12mths) the insurer has the option to renew or
not but the life insurance you do not have that option.
D) when the policy is a life insurance policy, if the assured decides to cancel or stops or
cancels the payment then you actually receive the surrender value on the policy . This
surrender value is what the insurer deems at the point in time as the worth in policy this
is usually based on the premiums paid so far, the interest and the penalty. Policy relating
to sickness there is no surrender value.
E) premiums for life insurance policies are calculated on inception while the premiums
for accident type can be reviewed yearly.

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Insurance Law June 11, 2013 June 9, 2013
Insurance Law:-Insurable Interest

This is a must and if it is that one does not have insurable interest then one’s policy will
be deemed void. English law lays down two criteria for the possession of valuable
insurable interest, briefly, in relation to property:

1. The insured/assured must be so situated to the insured property that he will suffer
pecuniary loss as the proximate result of its damage or destruction. The leading case for
this is Nucena v. Craufurd 1806 2 BOS & PUL 269 at p. 302: Lawrence J – a man is
interested in a thing to whom advantage may arise or prejudice may happen from the
circumstances which may attend it. Where a man is so circumstanced with respect to
matters exposed to certain risks or dangers as to have a moral certainty of advantage or
benefit but for those risks or dangers he may be said to be interested in the safety of the
thing. Finally, to be interested in the preservation of a thing is to be so circumstanced
with respect to it as to have benefit from its existence or prejudice from its destruction.
2. A legal relationship between the assured/insured and the subject matter of the
insurance. This legal relationship can either be a legal or equitable right in the property.
Insurable interest in relation to property is created by the existence of a legal obligation
to bare any loss arising from destruction of or damage to the insured property.

Case: Stock v. Inglis 1884 12 QB 564

Case: Glengate KG Properties Ltd v. Norwich Union First Insurance Society 1996 1
Lords Report 614
Marine Insurance:- In relation to marine insurance, the Marine Insurance Act speaks
about marine insurance and in particular speaks about it in this way:

A person has an interest in a marine adventure when he stands in any legal or equitable

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relation to the adventure or to any insurable property at risk therein in consequence of
which he may benefit by the safety or due arrival of the insurable property or may be
prejudiced by its loss or damage thereto. Example: Where there is a sub-contractor to a
shipbuilder, the sub-contractor can be said to have insurable interest in the main contract
since if the main contract goes wrong he will also be affected. Case: Stone Vickers v.
Appledor Ferguson Shipbuilders 1922 2 Lords Report 578.

Insurable interest can also arise as a consequence of a contract. For example, in the
instance of a bailment where the bailee contracts to carry the bailment from point X to
point Y (eg. Guardsman or Hawkeye) and during this transition the bailee is held up by
someone with a bigger shotgun and the bailment taken. By virtue of the contract, which
makes the bailee liable for the bailment, it also creates an insurable interest. The bailee in
such a contract has a personal insurable interest to the extent of (a) the value of any lien
or charge he may have on them eg. rent or a service charge and (b) his personal liability
to its owner. Case: Stephens v. Australasian Insurance Co. 1872 LR 8 CP 18. The bailee
may insure the goods to their full value on behalf of the owner’s interest in them.

Once there’s a risk of financial loss there is an insurable interest. Therefore a creditor can
have an interest in a loan that a debtor has to repay. Case: Bank Leumile Isarel BM v.
British National Insurance 1988 1 LR 71. The insurable interest that we are speaking
about must have some type of pecuniary value and therefore love and affection are not
insurable interest despite its value to you. Insurance interest need not be permanent or
continuing and although the interest may be what we call in law defensible it is valid until
it is defeated. For example Claude Denbo (Life Insurance Law in the Commonwealth
Caribbean) argues that the defense of lack of insurable interest only avails an insurance
company where it chooses to rely on it since there is nothing to preclude an insurance
company from paying a claim under a policy devoid of insurable interest.

Case: Geismar v. Son Alliance: The policy holder had submitted a claim under his
‘Contents Policies’ from the theft of his house of various articles including a number of

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items which he had brought into the country deliberately without declaring them for the
payment of customs duty (uncustom goods). The Court held that although the policies
are not illegal, it would be contrary to public policy to have required the insurers to have
indemnify the policy holder for the stolen articles for they would have thereby assisted
him to deriving profit from his deliberate breach of the law. Note: In relation to
property, insurable interest is determinable at the point of a loss and this differs from a
life insurance policy which is determinable at the point of contract. The aforementioned
case highlights this as this was its approach. As a result there is a large volume of case in
the United States concerning whether or not the innocent purchaser of stolen good has
an insurable interest in them. While the authorities seem to conflict, the majority seems
to favour the existence of an interest.

Cases:
Scarola v. Insurance Company of North America 292 NE 2D 776 [1972]
Reznich v. Home Insurance Company 360 NE 2D 461 [1977]
Insurance Company of North America v. Cliff Petit Motors Inc. 513 SW 2D 785 [1974]

The Canadians seem to think a little bit differently that is you cannot have an insurable
interest in stolen goods. Case: Chadwick v. Gebroulta Insurance 1931 34 OR 2D 488: the
case seem to turn upon the assured being under an obligation to surrender the insured
car prior to the loss having been told that it was stolen; Thompson v. Madill 1986 13
CCLI 242; Mackender v. Feldia 1966: held that although an insurance contract effect to
cover good which were to be smuggled into a friendly country was not itself illegal
however it would have been against public policy to enforce it.

Life Insurance:- In practice it is uncommon for insurance companies to deny payment of

policy proceeds on the ground of lack of insurable interest at the time the policy was
effected. This practice by insurance companies received judicial recognisition in the UK
as far back as 1875. Case: Worthington v. Curtis 1875 1 ChD 419. The rationale for this
derives from the fact that the question insurable interest is of legal consequence is at the

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time of the proposal and not of the time of the claim. In other words, it is the proposal
form which would disclose whether the person applying for the policy has an insurable
interest in the life about to be insured. If the insurance company is satisfied as to the
existence of such an interest, issues a policy and then receives the premium thereunder
the company cannot then heard to say when the policy becomes acclaim that it is null
and void for lack of insurable interest. In fact Albert Lester (The Revised Uniformed Life
Insurance Act of the Provinces of Canada) says that the insurance company in such a
case would be estopped from setting up a defense of want of insurable interest provided
of course that there is an entire absence of fraud.

A policy effected without insurable interest is illegal and void and the general rule is that
the premiums paid thereunder are not insurable. Case: Howard v. Refugee Friendly
Society 1886 54 Law Times 644. The Court will give relief to either party because of the
illegality of the transaction and the maxim “in pari delicto potior est conditio possidentis”
that is “the party who has the money must keep it”. This rule applied even though the
illegality arose because the assured was induced to effect the policy by reason of the
innocent misrepresentation of the insurers agent that an insurable interest existed in the
life which was insured. Case: Harse v. Pearl Life Assurance Company 1904 1 KB 558.
However, there are certain circumstances where notwithstanding the fact that the policy
was effect without insurable interest and is therefore illegal and void, the assured may
nevertheless recover the premiums in circumstances where:

1. Where the assured was induced to effect the policy because of the fraudulent
misrepresentation of the insurer’s agent that he had insurable interest in the life proposed
to be insured. Case: Hughes v. Liverpool Victoria Legal Friendly Society 1916 2 KB 482.
2. Where the policy is illegal and void by reason of the form in which it has been issued
by the insurance company. Example: A policy is rendered illegal if the name of the
person for whose benefit it is effected is not inserted therein. Now where through the
fault of the insurance company such an illegal policy is issued, the premiums paid by the
assured will be recoverable. Case: Dowker v. Canada Life Assurance Company 1865 24

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UCQB 591.
3. Where the assured rescinds the contract before any risk under the policy has been
attached. This exception illustrates the general rule in insurance law that the premium is
refundable if no risk is run.
Other Instances of Insurance Interest

Possession (property): The mere possession of property is probably sufficient to give the
person in possession an insurable interest. Case: Nucena v. Craufurd 1806 2 BOS & PUL
269 at p. 302. Possession is, in English Law, a root of legal title and even if a possessory
title must be defeated by a claim brought by the true owner nonetheless it is a legal title
good against all others in the absence of special circumstances. Example: A person who
has found valuable chattel (known as a ‘finder’) may insure it for its full value. His right is
considered to be similar to that of a person with a voidable title to goods. However,
possession of property to which there is not right of enjoyment and in respect of which
no liability is owed at all will not suffice. Note: The American and Canadian Courts have
not accepted that wrongful possession can ground insurable interest.

Mere License to Use and Enjoy Property: Where a person has a mere license to use and
enjoy any property jointly with the owner there can be no doubt that he has an insurable
interest if the license is contractual. Note: A license coupled with a grant. However,
where he has a license which is revocable at the instance of the grantor, the situation is
less clear. Case: Goulstone v. Royal Insurance Company 1858: Pullock CB held that a
husband had an insurable interest and could recover the full value of a house as well as
the household furniture therein which had been previously given for the wife’s separate
use but which both spouses enjoyed the actual use and occupation; Case: KLUDT v.
Germany Mutual Fire 1951 (US) approved the reasoning in the above case and there held
that a husband living with his wife had an insurable interest by virtue of occupation in the
matrimonial home, the title to which was in his wife’s name.

Vendors/Purchasers: A person who has entered in a valid contract for the purchase of

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any property has an insurable interest in it. The contract must be valid and subsisting in
order to give the purchaser an interest but the fact that it is voidable does not affect his
insurable interest. The purchaser’s insurable interest is commensurate with the loss which
he may suffer as a consequence of the damage to the property which may either
extinguish or diminish the value of his contractual right. The vendor of any property
retains an interest in it for so long as he is in such a legal position with regard to it that
any loss or damage to the property might result in loss to him.

A valid contract for the sale of land passes the risk immediately to the purchaser unless
the contract is expressed otherwise. The passing of the risk gives the purchaser an
insurable interest and he may at once insure for the full value. If the sale is subject to a
contingency or the performance of certain conditions by the purchaser, that does not
diminish the value of the purchasers insurable interest.

Contract for the Sale of Goods: The acquisition an insurable interest by a buyer depends
principally upon when the risk passes. The risk passes when the property in the goods
passes however, it is important to note that the two are not inseparable and it depends on
the interpretation of the particular contract whether (a) the property passes without the
risk or (b) the risk passes before the property. In the case of (a) that is if the property
passes without the risk, the buyer can insure because he is the owner of the goods. In the
case of (b) the buyer can also has an insurable interest because the passing of the risk
without the property gives him an insurable interest because in the event of subsequent
loss of damage he must nevertheless pay the contract price and so the whole loss falls on
him. If neither property nor risk has passed payment or part-payment of the purchase
price will give the buyer an insurable interest because if the goods are lost or damaged
and the seller is insolvent, the buyer might not be able to recover the money which he
paid for them; the seller retains an insurable interest even when the risk and the property
have passed while he is still in possession of the goods because if he is unpaid in whole
or part on account of the buyer’s insolvency, he has an interest in respect of his lien
against the goods to the extent of the purchase money or the rest of his money.

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Insurable interest

 Insurance interest is a requirement for the existence of a valid insurance policy. If

absent then the policy is deemed void. English law lays down two criteria for the
possession of valuable insurable interest, briefly, in relation to property:
1. The insured/assured must be so situated to the insured property that he will suffer
pecuniary loss as the proximate result of its damage or destruction. The leading case for
this is Nucena v. Craufurd 1806 2 BOS & PUL 269 at p. 302: per Lawrence J – a man is
interested in a thing to whom advantage may arise or prejudice may happen from the
circumstances which may attend it. Where a man is so circumstanced with respect to
matters, exposed to certain risks or dangers as to have a moral certainty of advantage or
benefit but for those risks or dangers he may be said to be interested in the safety of the
thing. Finally, to be interested in the preservation of a thing is to be so circumstanced
with respect to it as to have benefit from its existence or prejudice from its destruction.
2. A legal relationship between the assured/insured and the subject matter of the
insurance. This legal relationship can either be legal or equitable.
 Insurable interest in relation to property is created by the existence of a legal obligation
to bare any loss arising from destruction of or damage to the insured property.
See: Stock v. Inglis 1884 12 QB 564
Glengate KG Properties Ltd v. Norwich Union First Insurance Society 1996 1 Lords
Report 614

 Marine Insurance
In relation to marine insurance, the Marine Insurance Act speaks about insurable interest
in this way:
A person has an interest in a marine adventure when he stands in any legal or equitable
relation to the adventure or to any insurable property at risk therein in consequence of
which he may benefit by the safety or due arrival of the insurable property or may be
prejudiced by its loss or damage thereto.

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For example: Where there is a sub-contractor to a shipbuilder, the sub-contractor can be
said to have insurable interest in the main contract since if the main contract goes wrong
he will also be affected.

See: Stone Vickers v. Appledor Ferguson Shipbuilders 1922 2 Lords Report 578.

 Insurable interest can also arise as a consequence of a contract.

For example, in the instance of a bailment where the bailee contracts to carry the
bailment from point X to point Y (eg. Guardsman or Hawkeye) and during this
transition the bailee is held up by someone and the bailment taken. By virtue of the
contract, which makes the bailee liable for the bailment, it also creates an insurable
interest. The bailee in such a contract has a personal insurable interest to the extent of (a)
the value of any lien or charge he may have on them eg. rent or a service charge and (b)
his personal liability to its owner.

See: Stephens v. Australasian Insurance Co. 1872 LR 8 CP 18.

The bailee may insure the goods to their full value on behalf of the owner’s interest in
them.
 Once there’s a risk of financial loss there is an insurable interest. Therefore a creditor
can have an interest in a loan that a debtor has to repay.
See: Bank Leumile Isarel BM v. British National Insurance 1988 1 LR 71.
 The insurable interest must have some type of pecuniary value and therefore love and
affection are not insurable interest despite its value to the individual. Insurable interest
need not be permanent or continuing and although the interest may be what we call in
law defeasible it is valid until it is defeated.
For example Claude Denbow - Life Insurance Law in the Commonwealth Caribbean
argues that the defense of lack of insurable interest only avails an insurance company
where it chooses to rely on it since there is nothing to preclude an insurance company

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from paying a claim under a policy devoid of insurable interest.

 What if the pecuniary value is in stolen property?

See: Geismar v. Son Alliance:

The policy holder had submitted a claim under his ‘Contents Policies’ from the theft of
his house of various articles including a number of items which he had brought into the
country deliberately without declaring them for the payment of customs duty
(uncustomed goods). The Court held that although the policies are not illegal, it would be
contrary to public policy to have required the insurers to have indemnify the policy
holder for the stolen articles for they would have thereby assisted him to deriving profit
from his deliberate breach of the law.

Note: In relation to property, insurable interest is determinable at the point of a loss and
this differs from a life insurance policy which is determinable at the point of contract.
The aforementioned case highlights this approach.
See also: Mackender v. Feldia 1966:
Held: that although an insurance contract effect to cover good which were to be
smuggled into a friendly country was not itself illegal however it would have been against
public policy to enforce it.
There is a large volume of cases in the United States concerning whether or not the
innocent purchaser of stolen good has an insurable interest in them. While the authorities
seem to conflict, the majority seems to favour the existence of an interest.
See:
Scarola v. Insurance Company of North America 292 NE 2D 776 [1972]
Reznich v. Home Insurance Company 360 NE 2D 461 [1977]
Insurance Company of North America v. Cliff Petit Motors Inc. 513 SW 2D 785 [1974]
The Canadians approach the issue a bit differently - that is one cannot have an insurable
interest in stolen goods.
See: Chadwick v. Gebroulta Insurance 1931 34 OR 2D 488: however this case seems to

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turn upon the assured being under an obligation to surrender the insured car prior to the
loss having been told that it was stolen;
Thompson v. Madill 1986 13 CCLI 242;
 Life Insurance
In practice it is uncommon for insurance companies to deny payment of policy proceeds
on the ground of lack of insurable interest at the time the policy was effected. This
practice by insurance companies received judicial recognition in the UK as far back as
1875. Case: Worthington v. Curtis 1875 1 ChD 419.

The rationale for this derives from the fact that the question insurable interest is of legal
consequence is at the time of the proposal and not of the time of the claim. In other
words, it is the proposal form which would disclose whether the person applying for the
policy has an insurable interest in the life about to be insured. If the insurance company
is satisfied as to the existence of such an interest, issues a policy and then receives the
premium thereunder the company cannot then heard to say when the policy becomes
acclaim that it is null and void for lack of insurable interest.

In fact Albert Lester - The Revised Uniformed Life Insurance Act of the Provinces of
Canada says that the insurance company in such a case would be estopped from setting
up a defense of want of insurable interest provided of course that there is an entire
absence of fraud.
 NOTE: A policy effected without insurable interest is illegal and void and the general
rule is that the premiums paid thereunder are not refundable.
See: Howard v. Refugee Friendly Society 1886 54 Law Times 644.

The Court will give relief to neither party because of the illegality of the transaction and
the maxim “in pari delicto potior est conditio possidentis” that is “the party who has the
money must keep it” will apply.

This rule will be applied even though the illegality arose because the assured was induced

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to effect the policy by reason of the innocent misrepresentation of the insurers agent that
an insurable interest existed in the life which was insured.
See: Harse v. Pearl Life Assurance Company 1904 1 KB 558.

However, there are certain circumstances where notwithstanding the fact that the policy
was effect without insurable interest and is therefore illegal and void, the assured may
nevertheless recover the premiums:

1. Where the assured was induced to effect the policy because of the fraudulent
misrepresentation of the insurer’s agent that he had insurable interest in the life proposed
to be insured.
See: Hughes v. Liverpool Victoria Legal Friendly Society 1916 2 KB 482.

2. Where the policy is illegal and void by reason of the form in which it has been issued
by the insurance company.
For example: A policy is rendered illegal if the name of the person for whose benefit it is
effected is not inserted therein. Now where through the fault of the insurance company
such an illegal policy is issued, the premiums paid by the assured will be recoverable.

See: Dowker v. Canada Life Assurance Company 1865 24 UCQB 591.

3. Where the assured rescinds the contract before any risk under the policy has been
attached. This exception illustrates the general rule in insurance law that the premium is
refundable if no risk is run.
 Other Instances of Insurance Interest
• Possession of property:
The mere possession of property is probably sufficient to give the person in possession
an insurable interest.
See: Nucena v. Craufurd 1806 2 BOS & PUL 269 at p. 302.

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Possession is, in English Law, a root of legal title and even if a possessory title must be
defeated by a claim brought by the true owner nonetheless it is a legal title good against
all others in the absence of special circumstances.

For example: A person who has found valuable chattel (known as a ‘finder’) may insure it
for its full value. His right is considered to be similar to that of a person with a voidable
title to goods. However, possession of property to which there is not right of enjoyment
and in respect of which no liability is owed at all will not suffice. Note: The American
and Canadian Courts have not accepted that wrongful possession can ground insurable
interest.

• Mere License to Use and Enjoy Property:

Where a person has a mere license to use and enjoy any property jointly with the owner
there can be no doubt that he has an insurable interest if the license is contractual.
(Usually a license coupled with a grant). However, where he has a license which is
revocable at the instance of the grantor, the situation is less clear.

See: Goulstone v. Royal Insurance Company (1858):

Pullock CB held that a husband had an insurable interest and could recover the full value
of a house as well as the household furniture therein which had been previously given for
the wife’s separate use but which both spouses enjoyed the actual use and occupation;

See: KLUDT v. Germany Mutual Fire 1951 (US)

This case approved the reasoning in Goulstone and there held that a husband living with
his wife had an insurable interest by virtue of occupation in the matrimonial home, the
title to which was in his wife’s name.
• Vendors/Purchasers:
A person who has entered in a valid contract for the purchase of any property has an
insurable interest in it. The contract must be valid and subsisting in order to give the

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purchaser an interest but the fact that it is voidable does not affect his insurable interest.

The purchaser’s insurable interest is commensurate with the loss which he may suffer as
a consequence of the damage to the property which may either extinguish or diminish
the value of his contractual right. The vendor of any property retains an interest in it for
so long as he is in such a legal position with regard to it that any loss or damage to the
property might result in loss to him.

A valid contract for the sale of land passes the risk immediately to the purchaser unless
the contract is expressed otherwise. The passing of the risk gives the purchaser an
insurable interest and he may at once insure for the full value. If the sale is subject to a
contingency or the performance of certain conditions by the purchaser, that does not
diminish the value of the purchasers insurable interest.

• Contract for the Sale of Goods:

The acquisition an insurable interest by a buyer depends principally upon when the risk
passes. The risk passes when the property in the goods passes however, it is important to
note that the two are not inseparable and it depends on the interpretation of the
particular contract whether:

(a) the property passes without the risk or

(b) the risk passes before the property.
In the case of (a) that is if the property passes without the risk, the buyer can insure
because he is the owner of the goods. In the case of (b) the buyer can also insure because
the passing of the risk without the property gives him an insurable interest because in the
event of subsequent loss of damage he must nevertheless pay the contract price and so
the whole loss falls on him.

If neither property nor risk has passed payment or part-payment of the purchase price
will give the buyer an insurable interest because if the goods are lost or damaged and the

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seller is insolvent, the buyer might not be able to recover the money which he paid for
them; the seller retains an insurable interest even when the risk and the property have
passed while he is still in possession of the goods because if he is unpaid in whole or part
on account of the buyer’s insolvency, he has an interest in respect of his lien against the
goods to the extent of the purchase money or the rest of his money.

Insurable interest in relation of the employer and employee June 18, 2013
Section 96 of the Insurance Act of Jamaica does stipulate that an employer should have
insurable interest to the employee. In fact those regulations are considered to be implied
as the act states “shall be deemed…..”

Apart from statute it is considered trite law that a contract to employ a person at an
ascertained/set salary for a specific term gives the employee an insurable interest in the
life of his prospective employer, to the extent of the actuarial value of the furfure salary
calculated at the date when the insurance is effected. And so conversely the employer has
an interest in the employee. This is to the value of the employee’s services during such
time as he is under a legal obligation to serve his employer. Case of Hebdon v West 1863
3BS, page 579. Turnbull v Scottish Provident institution, 1896 34SLR, 146.

In relation to an employer visavee an employee, the employer must not claim an amount
greater than the value of his interest in the employee at the start of the policy. What is for
sure is that an employer has no title or right to the services of an employee beyond the
length of a service contract or any period of notice given by the employee. In order to
recognize the employer’s actual interest, the law looks at the genuine expectation of the
employer of furfure gain to be add from the employee’s services.

The factual expectancy theory

The insured does not need to have a traditional proprietary right, that is actually owing
the property in order for that person to satisfy the requirement of insurable interest. This
theory therefore looks beyond the formal property rights towards the insured’s

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expectation to a piece of property.

Legal Right Theory

Where as the factual expectancy theory rests on subjective expectation, the legal right
theory considers only objective legal rules in determining the existence of a property right
and therefor an insurable interest

Contract
It is argued that insurance law does not follow the traditional stages of offer and
acceptance when it comes on to a contract. For example, the insurance agent who acts
on behalf of a company does not offer a policy for sale but merely solicit a proposal from
the prospective insured. The making of the proposal is not the acceptance of the offer
but merely the application for a policy of the making of an offer to take a policy from the
insurance company. Now even where a proposal form is completed and the first
premium is paid does not result in the insurance company being put at risk if the
premium receipts specifically states that the insurance will not come into effect until the
application is approved by the company.

Arguably, the guiding principle which governs the question as to the point in time at
which a contract of insurance is concluded revolves around the interpretation of the
dealings and the documents which pass between the parties in each case.

Note the parties must be ad idem, that is they must have consensus in order for a
contract of insurance to come into effect. This must involve the:
1. definition to be covered
2. duration of the insurance cover
3. the amount and mode of payment of the premium as well as the insurance payable
in the event of a loss.

Definition

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The parties must be sure what is the subject matter of insurance because if there is
ambiguity there is no insurance. Case beech v Pearl Assurance co limited where in this
case a contract of insurance was proposed to be taken out on the life Mary Ellen Ince,
who was the mother of the proposer, but the company’s agent thought that she had
intended to insure her grandmother and that the grandmother’s name was Mary Ellen
Ince. The grandmother’s name was actually Mary Ann Ince and more importantly though
the policy had Mary Ellen Ince, what was important is that it was the grandmother’s
address that was listed on the policy, the age was that of the grandmother, the particulars
of relationship referred to that of the proposer of and the premiums was calculated based
on the grandmother’s age and not mother.

In this case the court held that there was no contract at all as the parties did not agree on
the subject matter of insurance because the parties were never ad idem as to who was to
be insured

The rate or premium to be paid.

The rate can be expressed or implied. The parties can expressly determine what the rate
is going to be or it can be implied from the company’s ordinary or usual rate, if it is that
the company has a fixed tariff sheet or if it is that you had previous insurance it can be
inferred from the rate that you were charged before.

As it relates to the duration of the cover, the universal practice in terms of fire, burglary
and accident risks is to insure or one year or twelve months and in the absence of
anything to indicate to the contrary, that will be the implied term of the contract. But the
duration can also be inferred based on previous dealings with the parties therefore if they
had previous insurance outside of the standard 12 months then when the policy is to be
renewed, it could be done based on the previous dealing.

Premium
There is no rule of insurance law that there can be no binding contract of insurance until

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the premiums are paid or the policy has been issued, because once the terms of the
insurance are agreed upon, the is a prema facie binding contract of insurance and the
insured is obliged to pay the premium that has been agreed.

Similarly the insurer is bound to deliver a policy which contains the agreed terms.

That mere acceptance of an offer or a counter offer will not bring not bring an insurance
contract into effect unless the parties as mentioned above agree upon every material
term.

Offer
An insurance contract happens when there is a valid offer and acceptance. The offer
must be made by someone who intends to make an offer. It means then that the assured
does not have to be the one who actually make the offer but it can be done by an agent
on his behalf. The offer that is made must be complete and communicated to the other
party.

The insured is generally the person who makes the offer and at this stage the insured is
referred to as a proposed insured. The proposal is done up by the insured (proposal
form) and this is a standard document which is prepared by the insurers which solicits
information on matters relating to the proposed risk and the parties seeking the
insurance. If the insurer accepts the proposal then a binding contract is effected. But if
the insurer responds by introducing new terms or introducing condition precedents
which were not before then this amounts to a counter offer which is now for the
proposed assured to accept or reject.

In general contract law terms, the offer made by the proposed insured remains open for
acceptance until it is withdrawn by the offerer but as with contract law, a withdrawn is
not effective until it is communicated to the offeree.

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If the notice of withdrawal comes after the insurer has accepted the offer, then there is a
binding contract

Acceptance
The acceptance must be unconditional and communicated to the offerer however silence
does not denotes acceptance and as such, no binding contract will come into existence if
the insurer has not communicated its acceptance of the proposal. Rust v Abely
Assurance co ltd 1978 2LR, 386
Where in this case it was held that the applicant for a policy was under a duty to examine
the terms of the policy when it was sent to her and for that reason, her failure to accept
its terms within a reasonable time was deemed to be an acceptance of the company’s
offer to her. The court of appeal in affirming the decision of the lower court noted that
the retention by the appellant of the policy of insurance after seven months after receipt
was an acknowledgement on her part that she accepted it…..it being the policy as a valid
contract between herself and the policy. Now in this case, turn on the fact that the action
here was not construed to be silence, but rather acceptance by conduct.

Acceptance can also be denoted by an issue of a policy as usually the issue by the insurer
of a policy is a considered acceptance of the proposal; the insurers are therefore bound
by this and it is immaterial whether or not the policy contract was retained by the insures
and never handed to the proposer.

Note as it relates to acceptance, the mere communication of acceptance will not conclude
a contract of insurance unless it corresponds with the offer to which it relates.

When the insurance company makes the offer it is normally done in the form of a
coupon and if accepted by the assured a being contract comes into existence. The terms’
of which are either the terms written in the coupon itself or the terms incorporated by
reference

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How is acceptance done in these case?
By signing the coupon itself or by notification to the insurers. It is important to note that
after acceptance the insurer can’t introduce any new terms, but importantly at the point
of acceptance, it is argued that the assured duty of disclosure ends.

Special conditions which may delay the commencement of a contract

1. The insurance is not deemed effective until the premium has been paid. With this,
the insured may find without careful inspection, he has agreed to the delay of his contract
or put another way that his insurance is not deemed effective until he has paid the first
premium. Similarly a policy itself may not contain a condition precedent which stipulate
that the risk will not commence until the premium is paid. Where such a condition
precedent exists, the proper reference is that a preliminary contract exists because in
strict legal terms there is no acceptance. Harrington v Perl Life Assurance Co 1914 30 TR
613,Canning v Farquahar 1886 16 QBD 727, Looker v Law Union and Rock Insurance
Company 1928 1KB, 554
2. The contract does not comes into existence until the delivery of the ….in the case a
proposal may be made but subject to the term that no contract exists until the policy is
delivered to the proposer. So until the policy is delivered there is no liability on either
side and the position is as if no binding contract existed at all, notwithstanding that there
exists a valid proposal and unconditional acceptance and the parties are ad idem.
3. Where the contract is subject to the approval of directors, then it will not come into
effect until same is granted. So an agent may be given authority with a proposer, it may
be on terms as stated herein. If it is that negotiation proceeds on this basis, there is one
school of thought which states that notification of acceptance by the directors is not
necessary and that once the directors have in fact approved the risk, the contract
becomes effective. However, one thing to note in contracts is that one has to look on the
terms of the agreement and the conduct of the parties as it may just be that in the course
of negotiations, the normal means of communication of acceptance was required and it is
therefore possible that even though the directors have approved the risk, that there is still
no contract even moreso is the directors stipulate that some further step eg the payment

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of a premium is required before the contract is effective.
4. In relation to a contract of insurance is that there is no expectation that the parties
must have reached an agreement on all the terms of the insurance saved the terms
mentioned above, eg cover, duration, nature, premium because it is assumed that when
an insured seeks insurance from a particular insurer that he impliedly offers to take it on
the insurer usual or standard terms of cover. Consequently when insurer are going to
issue their policies is to issue them with the terms and conditions which are usually
attached to their policies in so far as these are not inconsistent with the expressed terms
of the parties preliminary contract. Note this only works when talking about usual terms.
If for example the policy of insurance when insu………….a member of the company for
example then the insured is not bound to accept a policy since arguably a policy for
insurance cover is not usually an application for membership in the insurer’s company

Cover note
It is not unusual for an insurance company to take some time to consider the proposers
application to take time to determine whether they would take on the risk. However since
a prospective assured usually wishes for cover from the time he applies for insurance,
and because the company has a sales device wants to physiologically ensure that the
applicant is precluded from either withdrawing his application or getting insurance from
a rival company, it is the practice of insures to issue temporary cover and it is usual in the
case fire, motor, burglary and accident type insurance. This is done by issuing a cover
note which essentially a preliminary contract is granted in anticipation of the acceptance
of the proposal and the issue of a formal policy.

Whilst it is not a must, the temporary cover is usually cover is usually superseded by the
terms of the actual policy if the proposal is accepted. Note also is that if a loss occurring
during this period is governed by the interim. Like any insurance contracts, it requires
agreement on all essential terms and takes effect subject to its own particular terms. It is
important to note that whether or not a cover note amounts to an agreement to insure

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depends upon the construction of the wording of the document of itself and not just on
the terminology that is used. Macki v the European Assuance Society 1889 21 LT, 102

Tutorial assignment
Insurable Interest
Tutorial Question: The West Indian modification of the law of insurable interest is itself
in need of reform. Discuss.

The law of insurable interest developed in English law some 250 years ago with the
formal recognition of the Marine Insurance Act of 1746. Prior to this there was never a
general rule requiring an insured to have an insurable interest in the subject matter
insured under an insurance policy/contract. In fact, 18th century English common law
permitted and enforced the making of bets and wagers on the duration of human life.
However, change was brought about by three statutory instruments: (1) The Gaming Act
(1845); (2) The Life Assurance Act (1774); (3) The Marine Insurance Act (1906) because
as the preamble of the 1774 Act stated that the making of insurances on lives or other
events where the insured has no interest has introduced a mischievous kind of Gambling.
The Life Insurance applies in the Commonwealth Caribbean in the absence of express
statutory exclusion. However, may writers have criticized the 1774 Act for its inadequacy
and ineffectiveness in combating the ills it intended to remedy.
The Caribbean in its reception of the Act was plagued by its deficiencies and as such, the
Caribbean Law Institute suggested certain reforms which were enacted in various
insurance legislations across the region. Section 127 of the Barbados Insurance Act and
Section 96 of the Jamaican Insurance Act represents a good example of these reforms.
However, on a closer analysis, it is seen that the West Indian modification of the law of
insurable interest is in dire need of further reform. In order to highlight the problem, an
assessment has to be made of the deficiencies of the 1774 Act. According to Merkin in
his article “Gambling by Insurance- A Study of the Life Assurance Act 1774”, 200 years
of hindsight has revealed four critical deficiencies either in drafting or omission: (1) the
nature of the interest required is not specified; (2) there is no indication of the time at

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which such interest is required; (3) no specific sanction for the breach section 1 is laid
down; and (4) the operation of section 2 is anomalous. The judiciary does not help as
there is a history of highlighting rather than eliminating these deficiencies.
As to the nature of insurable interest, the Act provides no definition and it is left up to
the courts to fill the gap. The notion of “pecuniary interest” is the guiding principle, in
that, the insured is required to show financial loss on the death of the person on whose
life the policy has been taken out. Exceptions to the rule exist where a man insures his
own life (per Wainwright v. Bland); a wife insures her husband (per Reed v. Royal
Exchange Assurance Co.) and a husband his wife (per Griffiths v. Flemming). In other
cases, there must be a positive proof of loss. Thus, a creditor can insure the life of his
debtor for the amount of the debt with interest (Per Hebdon v. West). An employer can
insure the life of his employee and the employee his employer but only for the notice
period. (Per Hebdon v. West; Griffiths v. Flemming). The same principle is applicable to
family relationships: a father cannot without more insure his son (Per Halford v. Kymer;
a child not dependent on his/her father cannot insure the lives of his father or mother
(Per Shilling v. Accidental Death, Harse v. Pearl Life Assurance).
The failure of the Life Assurance Act to provide an exhaustive guideline as to the
situations in which an interest exists was met in the Caribbean by the development of a
statutory code. For example section 96 of the Jamaican Insurance Act which is a
reflection of the CLI- driven reforms provides a list of persons who have an insurable
interest in the life of others: a parent or guardian in the life of a child under 18 years of
age; a husband in the life of his wife; a wife in the life of her husband; a grandparent in
the life of his grandchild under 18 years; a dependant in the life of the person who he is
wholly or partly dependent upon for support or education; a company in the life of an
officer or employee. Here we see a codification of the common law and an addition on
the common law since, the Jamaican Act adds a grandparent to the list of persons who
may have an interest in the life of his grandchild under 18 years. Thus the Act must be
commended since to some extent, it deprives the insurer of any possible excuse for
issuing a policy to a person without interest, especially since the common law punished a
policyholder who had no interest to the benefit of the insurer.

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However Section 69 Jamaican Revised Insurance Act of 1973, reveals shortcoming of the
newer section 96 (2001) which was influenced by the CLI. Section 69, unlike section 96
went on to provide situations in which no insurable interest was required. Section 69 (1)
did not apply to contracts of group insurance; contracts where the insurer’s liability is
limited to insuring moneys to be paid for the death or funeral expenses of any person.
This is a great development since the case of Harse v. Pearl Life Insurance illustrated
how unfair the common law operated. In that case, the insured tool out two policies on
his mother’s life owing to the fact that his father was paralyzed and incapable of work
and the fact that he could not afford to pay his mother’s funeral expenses. Collins MR
dissenting held that the defendant was unable to recover his premiums since there is no
obligation on a child to bury his parents or pay their funeral expenses.
Thus the 1973 Revised Act provided some relief in this regard. Further, Section 69,
reflecting the principle of indemnity insurance, stipulated that such contract would be
void unless it is clearly expressed to be a contract to indemnify the insured in respect of
the expenses he actually incurs in connection with the death or funeral of such person. It
is in lieu of this inclusion that lead Lesley Walcott to comment that the 1973 Revised
Insurance Act of Jamaica was an Act before its time, since the common law or other
Statutes in the region provided no relief for a person who insured the life of his parent or
other person in order to meet their funeral expenses in the event of a predecease. What
we see in West Indian modification using the CLI approach as a guide is a mere retention
of the traditional common law and the provisions of the 1774 Act. Thus, having
established the fact that Section 96 of the Jamaican Insurance Act (2001) reflects reforms
driven by the CLI, we are led to conclude that it has retroactive effect, and thus the
contention that the West Indian modification of the law of insurable interest is in need of
reform finds life in this fact.
As to the timing of insurable interest, the 1774 Act was silent and as such the matter was
resolved by litigation. Beginning with the case of Godsall v. Boldero, Lord Ellenborough
LC pronounced that insurable interest was required at the time of the death of the person
insured. If no interest existed at the time of the death, then the action would fail.
However, the ground-breaking decision of Dalby v. India & London Life Insurance,

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established that insurable interest need only exist at the time of the contract. This salient
principle was further confirmed by the dicta of Waller LJ in Feasey v. Sun Life Assurance
Corporation of Canada. There he said that the interests in policies falling within section 1
of the 1774 Act must exist at the time of entry into the policy, and be capable of
pecuniary evaluation at that time. He further propounded that the nature of the insured’s
insurable interest should be discovered from all the surrounding circumstances and that
there is no hard and fast rule. On an examination of the section 96 of the 2001 Insurance
Act, it is discovered that, like the 1774 Act, it is silent as to the time when insurable
interest is required. This reveals that the legislation needs to be modified to incorporate a
rule as to the time when insurable interest is required, since problems may continue to
arise where the common law is left to govern this area.
Section 96 also provides no rule as to what happens to the premiums paid by the insured
in the event that there is a lack of insurable interest. The common law again seems to
dominate this area. In Harse v. Pearl Life Insurance Collins MR referring to a salient
principle of general contract law said that on the assumption that the policy was void for
lack of insurable interest, it is clear law that where one of two parties to an illegal contract
pays money to the other in pursuance of the contract, it cannot be recovered back. In
comparison to section 96, section 69 (5) of the Revised Insurance Act provided that
where a contract of life insurance is void for lack of insurable interest, all premiums paid
thereunder shall be returned by the insurance company unless it can prove that it was
unaware of the lack of interest owing to the insured’s false representation. Here again we
see section 69 remedying the injustice of the common law and it is humbly suggested that
it is pitiful that the CLI did not use section 69 as a prototype/guide for any further
recommendations that were needed to improve the modification made to the law of
insurable interest in the West Indies. It is thus seen that the present section 96 represents
a retrogression rather than a progression in its modification of the law of insurable
interest.
Another pitfall seen in the West Indian modification of the law of insurable interest is the
fact that the sparse reforms were only made in relation to life insurance; the question of
insurable interest in indemnity insurance is not addressed. The governing statute on

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indemnity insurance is the Marine Insurance Act (1906). Section 9 (1) of the Barbados
Marine Insurance Act requires an insurable interest in the subject matter insured to be
present at the time of the loss and not at the time when the insurance is effected. Thus
the common law as reflected in cases such as Feasey; Deepak Fertilizers &
Petrochemical Corporation v. Davy McKee; Glengate KG Properties Ltd v. Norwich
Union Fire Insurance and Marc Rowlands Ltd v. Berni Inns Ltd continues to govern the
requirement of insurable interest. This is highly undesirable since the common law can
prove to be work in an unfair manner with regard to insureds.
Concluding therefore, a need for further reform of the West Indian modification of
insurable interest is needed particularly in the area of life insurance since on an
examination, it was seen that the CLI driven reforms merely codified the common law on
insurable interest to a great extent; there is no addition to the already faulty 1774 Act
except as was seen in Section 96 of the 2001 Jamaican Insurance Act which is seen as a
retrogression from previous reform that was made in Jamaica in 1973 by the Revised
Insurance Act which specifically made provision for the return of premiums where no
insurable interest is found to exist. A highly commendable development since the
common law on that area is very harsh. Further, it is highly unsatisfactory that the only
area where an incursion was made was in the area of life insurance, thus leaving
indemnity insurance to be governed by somewhat arbitrary and harsh common law rules.

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Insurane Law Class- Utmost Good Faith - coming on exam insurance Law
July 2, 2013
The principle of utmost good faith also referred in the Latin term" uberrimae fidei "
governs all contracts of insurance and reinsurance and applies both before a contract is
concluded and during the performance of thc contact.
In the pre formation period ie before the contract is formed the principle of utmost good
faith creates a duty owed by the assured or the insured or if he is acting by an agent ( the
insured have someone acting on his behalf) to disclose material facts. After the contract
has been signed the principle continues to effect the policy of insurance so tat if the
insured
Refrain from making untrue statements from negotiating a canon tract.
During the post formation stage after the contract is signed the principle of utmost good
faith continues to affect the policy of insurance so that if the insured seeks a variation to
or a renewal of the insurance contract he or she becomes subject to the same principles
as if this were an insurance contract for the very first time. The general principles upon
which the duty of disclosure is based can be found in the locus classics case of Carter v
Boehm (1766) in this case, an action was brought on a policy which was for the benefit
for the one George carter who was at the time the governor at the time of the East
Indies. The fort had been attacked by foreign enemies, the underwrites of the insurance
argued that the weakness of the fort and the like hood of its being attacked by the French
which were material facts known to the assured which ought to have been disclosed to
the underwriters. The court did not agree, the court did outline the principles underlining
the duty of disclosures.
The court said:
1. An insurance contract is one of speculation;
2, that the special facts upon which the contingent chance is to be computed lie most
commonly in the knowledge of the assured only;
3. The underwriter trust to his representation and proceeds upon confidence that he the
assured does not keep back any circumstance in his knowledge to mislead the
underwriter into a belief that the circumstance does not exist.

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Lord Mansfield dissented on the 3 points above
The court went on to note that the keeping back or suppression of the information
referred to above as circumstances is a fraud and consequently the policy is fraud.
If the suppression is done by mistake what then? Even though a fradulent intention is
absent the underwriter is still deceived and the policy is still void because the Risqué run
is really different from the Risqué understood and intended to be run at the time of the
agreement.
This principle of utmost good faith applies to all species of insurance, although it does
not necessarily mean that the scope and the application of the duty are identical in every
type of insurance.

It's application is different regardless of the specie London Assurance v Mansen (1879)
Jessell MR stated that whether it is life fire or marine insurance good faith is required in
all cases and even where in marine insurance there are particular requirements, for unique
disclosure that this operates as an application of the principle rather than a distinction
The general view is that the duty of disclosure is an implied condition of the contract,
although it has been argued that this duty arises and exist independently .

The Duty of disclosure of the Assured

It means that the assured must disclose to the insurer all facts material to, an insurers
appraisal of the risk which are known or deemed to be known by the assured. But neither
known nor deemed to be known by the insurer. If he breaches this duty then the insurer
is entitled to avoid the contact of insurance , provided that the insurer can show that the
non disclosure induced him into making the contract on the relevant terms.
1. Show that there's was non disclosure
2. You have to be induced to entering the contract.
These two must be proven by the insurance company.
Can you disclose what you don't know?
The duty of disclosure only extends to the facts that are known,

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and you are required to disclose what you deem to know in law.
" since you cannot disclose what you do not know, ... And ( the obligation to disclose
depends upon the knowledge that you possess" Morton Lj case Joel v law union and
crown insurance (1908) 2 KB

In Joel v. Law Union and Crown Insurance Co.23 a statement as to the health of the
proposer, made by him, was regarded as a statement of opinion. This accords with
common sense, as the proposer who is not a medical expert, or was not told specifically
by such an expert of facts as to his health, cannot be expected to give more than an
opinion. However, in a later case24 concerning a similar issue, a proposer who failed to
disclose a visit to a specialist was held to be guilty of non-disclosure of material fact, even
though he did not know that there was anything seriously wrong with him. Thus,
although a mere statement as to health without more information, is a statement of
opinion, at least where the proposer cannot be expected to give more than an opinion.
However, in a later case24 concerning a similar issue, a proposer who failed to disclose a
visit to a specialist was held to be guilty of non-disclosure of material fact, even though
he did not know that there was anything seriously wrong with him. Thus, although a
mere statement as to health without more information, is a statement of opinion, at least
where the proposer does not know any relevant facts. If a proposer for life insurance has
consulted a doctor in more than an ordinary way, the fact of consultation will almost
certainly be a material fact requiring disclosure.

Concept of knowledge
When it comes to a natural person, the question of knowledge is simple, a man either
knows or don't know . The proposer of life, health and accident insurance need not
disclose a medical condition which his doctor has not told him about so long as he is
ignorant of it and not shutting his eyes to the truth.

If you are a company what does a company know and who should disclose?
Actual knowledge is dependent on the persons in who this knowledge resides. Certainly

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if the knowledge the directing mind and will of the company and or in those who
control what the company does then there knowledge will be deemed the knowledge of
the company whether or not they are the persons responsible for arranging the insurance
cover in question, ie directors, officers of the company and even non directors of the
company whom the board would have delegated some of its responsibilities.
If an officer of the company knows the company is deemed to know

Innocent Omission
If a fact is material, and within the knowledge of the assured or its agent, then we know
that the assured has an absolute duty of disclosure. However, mistake or forgetfulness,
offers the assured/ insured no defense because it is immaterial whether the omission to
communicate a material fact arises from indifference or a mistake or from it not being
present to the mind of the assured that the fact was one which it was material to make
known.

What is the effect of these questions which are asked on a proposal form?
The general rule, is that the fact that the particular questions relating to the risk are put to
the proposer does not per say relieve him of his independent obligation to disclose all
material facts. Eg taking insurance form your house ie anti burglary for the house
Schoolman v Hall ( 1951) 1 Law report pg 139
You must disclose that you have a criminal record.

Schoolman v Hall ( 1951) 1 Law report pg 139

shows that failure to disclose facts about the insured may lead to claim repudiation,
where in this case, an act of dishonesty fifteen years earlier was held to be material when
taking out a jewellery insurance policy.
In a proposal form, the insured is asked to sign the declaration, which is the statement
that all material facts have been disclosed by the insured

It is possible that the Form of the questions asked, may make the applicants duty more

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strict, because applicant/ proposer may well be reminded of a particular question, that
he has a general duty of disclosure in relation to the subject matter of the question, even
if it outside of his direct ambit. However, it is also possible, for the questions asked to
limit the duty of disclosure if the questions are asked on particular subjects, and the
answers to them are warranted. It may be inferred, that the insurer has waived his right to
information, either on the same matters, but outside of the scope of the questions or on
matters similar to the subject matter of the questions asked . Eg If the insurer asked how
many accidents the assured had within the past 3 years it may be implied that the insurer
does not want to know, of accidents which occurred before that time even though those
information are still material.

Declarations in relation to the policy

Apart from the questions asked on the proposal form, and the subject Matt of those
question, the form itself may also limit the duty of disclosure. Where the form requires
the proper to sign a declaration that he or she was not aware of any circumstance that
would make the insurance more hazardous. Because by requiring the assured to give his
own honest opinion on the matter, the insurer would have impliedly waived disclosure of
the actual facts/ truth . Similarly, if the policy provides that in the event of an incorrect
definition of the subject matter insured the insurers agree to hold the assured covered at
a premium to be negotiated then that will protect the assured, from avoidance of the
policy by the insurers in the event of a failure of the assured to provide an adequate
description of the subject matter .

How long does one have this duty of disclosure?

The time up to which full disclosure of facts, material to the risk proposer must be made
is the moment when a binding contract is concluded. The practical effect of this rule is
that the proposer is bound to disclose any material facts concerning the insurance
proposed which come to his notice while negotiations are proceeding and before the
proposal is accepted. Looker v Law
Union and Rock Insurance Company Limited (1928) 1 KB 1554 he stated in the form

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that he was free from disease and ailments the insurers informed him that the insurance
will become effect based on receipt of the premium five days after this, information
came to the insurer that the proposer we seriously ill with pneumonia and four days later
he died. The cheque ie the premium, of the insurer was received one day prior to his
death. An action brought against the insurers to full fill there obligations under the
policy, the court held that the insurers were not liable. Because there was a failure to
discharge in duty incumbent upon all proposers of contract of insurance, such as these,
namely in duty to inform the insurers of any material change in the nature of the risk to
be undertaken by them.

When it comes unto renewals what's the situation

When renewal is dependent on the insurers consent the full duty of disclosure attaches
(eg of renewal contracts car insurance, motor marine, health and accident ) the assured
therefore must disclose not only circumstances which have occurred during the expiry
period but also any matters which he omit to disclose when the old insurance was
concluded and which are still relevant to the new one you still have a duty to disclose that
provided that this information is material on the one hand and unknown to the insurer
on the other hand. After the insurer have accepted the risk, the general principle is that
there is no duty of disclosure. Because the assured has no duty to keep the insurer
informed, of matters affecting the risks even in cases where thin surer has an option to
terminate cover after giving a stipulated period of notice. Note however, that if the
assured negotiates a variations of the term of the policy to his benefit that he
automatically has a duty of disclosure. This duty is however limited, to matters which are
material to the insurers decision to vary the cover or not.

Insurers Remedy for failure of non disclosure by the assured:

The insurer can avoid the terms of the contract relating to this variation, but the insurer
cannot avoid the entire contract.
Burden of Proof is on the insurance company
Joel v Law Union the company alleged that the assured had not disclosed the fact that

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she had suffered from nervous depression after contracting influenza and had to consult
a brain specialist; the company put forward evidence that the printer form contained
questions that had been put forward by its medical examiner and the assureds medical
examiner had been instructed to include" any necessary explanation" along with the
answers that were given, the form also required the applicant to sign to the declaration
were in fact true . The assured had up on the form in response to the question which and
how many medical examiners have you seen, the name of two was stated but not the
brain specialist. The Court held that based on the nature of the question asked, that there
was no evidence of non disclosure because the form did not indicate which questions in
particular were put to which examiner and which explanation was given by which
examiner and consequently, the insurer failed to discharge the burden of proof. Note -
the examiner who put the questions on the one hand nor the examiners who filled in the
form on the path hand was called as witness .
The burden of proof lies on the insurer ie that there is non disclosure
The insurer must also prove that the non disclosures induced him into making the
contract in the sense that he would not have entered into the same contract if he had
known the matters which were not disclosed and by entering into the contract with the
same terms or he would not have entered into a contract at all. Inducement is shown if
disclosure of the relevant facts would have lead the insurer to ask further questions of the
assured at the time of proposal and would have led him to impose different terms . Ing v
Simmonds (2004) Lloyd's report pg 247 compare to Drake Insurance Plc v Provident
Insurance Plc (2004) QB pg 601
The above means that there's no legal presumption of inducement once non disclosure
of a material fact is proved. However it may go to show as a matter of evidence that the
insurer was induced in making the contract that he did.

Effect of Non Disclosure

1. On discovering the full facts the insurer can elect to avoid the contract of insurance
and he may do so either before or after the loss has occurred;
2 the contract of insurance remains in effect until it is avoided by the insurer ( non

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disclosure does not automatically mean that the cote act is avoided)
3 the premiums paid are returnable unless there are willful or fradulent concealment on
the part of the assured
4 non disclosures does not confer a remedy in damages
5 the contract is avoided with effect from the moment that the election to avoid it was
communicated to the assured

Contd Insurance Utmost Faith class Saturday July 6, 2013

Contd Utmost Good Faith
Materiality Principle
Avoidance- is retroactive and this is illustrated by the principle that premiums are
returned when a contract of insurance is avoided . Now the premiums are recoverable
notwithstanding the above, only on the basis that the insurers have never been at risk
under the void contract of insurance.
Composite Policy- two or more persons are insured under one policy, but in respect of
there separate interest eg mortgagor( home owner) or mortgagee ( legal or equitable
interest) and one of the co insured is guilty of non disclosure but the other is innocent. In
such circumstances, is the insurer entitled to avoid the policy? In principle because the
policy is one policy then the insurer should be allowed to avoid the entire policy, or
should be allowed to avoid the policy against all the parties because they would have
been mislead to overall risk. If it were otherwise, it would mean then the insurance policy
contract was really to separate contracts and not a simple contract.

Case Wool cott v Sun Alliance and Insurance Company 19781 WLR pg
Federation Insurance v Wasson (1987) 163 CLR pg 303
Newhamsure Insurance v Mgn ltd (1997) LRLR 24
Misrepresentation presenting information that is not so. It's fraud and so the contract can
be avoided. Even if it is innocent it affects the principle of disclosure.
Test for Materiality - a fact is material, ( for the purpose of non disclosure and
misrepresentation) if it is one that will influence the judgement of a reasonable or

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prudent insurer in deciding whether or not to accept the risk or what premium to charge
Case Lambert v corporative Insurance Society (1975)
Judgment is extremely importance - judgement does not mean final decision but simply a
formation of an opinion therefore, it doesn't mean that the insurer must have acted
differently if he had known the fact but measly that he would have wanted to know of
the fact when making his decision. That is it is enough if the insurer would have taken it
into account as a fact
Important case to materiality Pan Atlantic Insurance v Pine top insurance Company -
the House of Lords settled the question not withstanding there's is a 3 /2 majority that
judgement did not mean that the non disclosed fact must have had a decisive influence
on the insurer but rather was merely a factor to be taken into consideration .
Look at the decanting opinion of Lord justice Lloyd ***

Who determines whether it is material? The opinion of the insured or assured a general
rule, is irrelevant in determining whether or not the fact which was not disclosed was
material since the test of materiality is taken from the stand point of the prudent insurer
on the other hand a fact does not become material merely because the particular insurer
determines that it is so . However the court does take into consideration ( in addition to
the evidence of the insurers ) his subjective opinion that he would not have either at all
or on the same terms if all the facts have been disclosed .
Materiality / Evidence of materiality - in relation to life insurance there are a number of
facts considered material to the risk of or on the part of the insurance company ,
consequently previous medical history or previous consultations will be important .
case Komar v life Insurance corporation of India (1974) 1 LR pg 147
Yorke v Yorkshire Insurance (1918) 1 KB pg 662
Godfrey v Britanic Insurance Company Ltd (1963) 2 LR pg 515

Medical History includes previous illnesses, operations or medical treatment

marks v first Federation Life Insurance Company ltd (1964) 6 WIR pg 185

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Living conditions and habits eg taking harmful drugs / possibly harmful which may also
be material
Involved in motor racing
Equitable Life assurance society v General Accidents Assurance
Corporation (1904) 12 SLT pg 348

Previous refusals
London Assurance v Mansel (1879) in this case when in answer to the question has a
proposal been made on your life at any other office or offices and if so where and was it
at the ordinary or increased premium or alternatively was it declined the assured
answered as follows:
Insurance now in two offices for£ 1600 at ordinary rates . The proposal was accepted
however later the insurer found out that the insured was declined at other offices and it
was held that the insurers failure to disclose the previous refusals by other insurance
companies was a material fact which ought to have been disclosed which entitled the
insurer to avoid the policy ( use this term ie avoid the policy in exam )

Burglary , Property or Motor Insurance what is considered Material facts ?

Burglary Insurance usually protects against thief if the goods are exposed to unusual risk
of lost by thief is considered material . Any characteristics of the building which makes it
impossible or difficult o secure it would also be considered to be material similarly of the
insured have suffered previous losses then this would also be considered relevant since
the insurer occurred on the account of the insurers carelessness.

Property - the vulnerability of the building is considered important . In particular of

there is any abnormal user of the building which will expose or make it more susceptible
to flood or fire then this ought to be disclosed. Eg Ryland v Fletcher

Motor insurance - your are to disclose the number of accidents that you are in, this not

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only includes accidents which occur on your own account but also when you are driving
on behalf of someone else eg someone driving as your servant or agent also if you
Internet to lend your car to someone else to drive then you are to disclose their accidents
as well
Dunn v Ocean Accident and Guarantee Corporation Ltd (1933) 47 Lloyd's Report pg
129
Note the examples given above, relate to what is considered to what is considered moral
hazards and also an intranet example is previous convictions or. previous acts of
dishonesty .
Case Schoolman v Paul a jewelry who effected a policy against lot by burglary had as a
young man, been convicted of larceny of 6 occasions over a period of 7 yrs the last one
ended 14 yrs before the date when he got the policy. At first instance, the juror found
that the information was to be disclosed . The court of appeal agreed with that ruling.
Lambert v Corporative - the failure to disclose the convictions of the proposers husband,
in elation to the renewal of the policy regarding jewelry belonging to the proposer and
her husband was consider to be material.
Woollcott v Sun Alliance London Insurance - it is important to note that an insured
would not be required to disclose irrelevant convictions ie convictions relating to what is
obtained unless it is serious and given its severity is one that ought to have disclosed.
Arguably convictions which have been esponged from the record need not be disclosed.
Proven Dishonesty, even in the absence of a criminal conviction, may also be considered
material since the dishonest conduct of the assured in particular where it demonstrates a
real risks that the insurers will be asked to pay for fictitious or inflated losses is
considered material fact.

Two Principles - assured may not disclose ..what?

1. Facts known to the insurer this applies where the knowledge received by an agent of
the insurer provided that it is in the context of his duties and course of his employment
2. Information that is deemed within the constructive knowledge of the insurers ie what
he ought to have known

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3. Information which is common knowledge
4 Business practices and customs
5. Ordinary attributes of the risk - insurers are taken to know the ordinary attributes, of
the risks insured. So that if a trades man seeks to insure goods in his shop the insurer is
deem to know whether or not dangers would ordinalry be included in goods are included
in such stocks then an ordinary insurer may not need to disclose it. Similarly in domestic
situations, if it is that the assured indicates that a house is to be insured he need not
disclose the number of persons that are going to occupy the premises unless the numbers
a unusually high nor does he have to disclose how the house is heated as the insurer is
expected to know or find out.

Misrepresentation - an insurer is allowed to avoid and insurance contract, if he was

induced into entering it by misrepresentation of fact which was false in a material
particular .whether or not the proposer at the time acted fraudulent, innocent or
negligent. Principle of Materiality- the information which you would disclose is material
to the facts. Essentially based on the facts of each case to determine material.

Note: historically, misrepresentations relate to statements made before a contract is

concluded so they are not terms of the contract and are usually found in the statements
on the proposal form and we incorporated into the contract of insurance by virtue of a
device known as the Basis of the ContractClause - is based on the representation that
you have made this on the basis on which you have entered the contract. The basis of the
contract claus is a Warranty ie promises made by the insurers which relate either to facts
or to things the insurer says he will do or will not do.

These warranties invariable affected the risk to which the insurer is subject and can be
warranties as to:
A ) pass or present facts
B) whether it is continuos or continuing in the future
C) language used

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D) Warranties of opinion
If the terms are incorporated they can be avoided
Term to avoid the policy after based on the clause

Duty of Disclosure- it is mutual and applies to the insurer as well case

Banque Financiere v West Gate Insurance company ltd (1991) 2 appeal case pg 249
concealment of material facts by the insurer prior to the conclusion of the contract of
insurance entitles the assured to avoid the policy
Banqu Keyser v Skandia Insurance Company Ltd (1990) 1 QB pg 665
Independent of the duty imposed on the insurer, the insurer has a duty to act in good
faith when they are exerting the contractual obligations under the contract eg if the
insurer is conducting defense proceedings, in relation to acclaim brought against its
assured, then the insurance company must act in good faith.

Role of Insurance Agents - it is an important feature in the insurance industry acting on

behalf of the assured or the insurer and in legislation is described as a sales man when
acting on behalf of the insurer . It is for the assured to prove that the person with whom
he dealt with in obtaining the insurance was the agent of the insurer.

Two issues :
1. whether the knowledge of material information obtained by the agent in his dealing
with the proposer prior to the formation of the contract is considered adequate
disclosure to the company
- the general principle is that the knowledge of the agent is deemed the knowledge of the
company but this is dependent on the time at which the agent discovers the truth or
comes within the knowledge of the information therefore the information is obtained
otherwise in the course of the agency employment then this knowledge is not imputed to
the insurers.

Case AYREY v British legal and Assurance Company Ltd

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Oral communication of material facts to an agent of an insurance company who is
authorized to receive them renders the knowledge of the agent is the knowledge of the
company.
The knowledge which the agent acquired must have been such that he had the authority
to receive and in the manner in which he receive them if therefore for example, although
an insurer may not have given a particular agent authority to act as a medium for
communicating to the facts disclosed by the assured but the impression reasonably
received by the assured is that the person sent to him to obtain the proposal for
insurance is the proper person to whom to disclose the information or the facts, then this
will be considered ostensible authority and the insurers will be estopped from denying his
want of actual authority and the assured old have discharged the duty of disclosure
regardless of forgetfulness or inadvertently mistake on the part of the agent if the agent
inadvertently fails to pass on a material fact disclosed to him by the assured or inserts an
erroneous answer in proposal or application form and this fraud on the insurers is
established then the knowledge of the gent of the true facts is not imputed on the
insurers. ie the insurer must know the time of the authority and the method you received
the information . Though the authority was not given it is based on ostensible authority.
Similarly if the assured defrauds the insurers or tells the agent or the agent knows and
doesn't tell the insurer but the agent does not communicate this information then the
knowledge of the agent is not going to be considered the knowledge of the insurer case
News Holme brothers v Road transport and General Insurance Company (1929)2 KBpg
356 .

2. Whether the insurance company can repudiate liability under the policy the ground of
non disclosure or misstatement by relying on erroneous answers in a proposal form
completed but its agent

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Insurance Law notes July 9, 2013
... The arbitrator also found that based on the duties of the insurers agent, he had no
authority to complete the proposal for himself. The insurance company was not pleased,
they appealed and appealed again. The court of appeal note that in writing done the
answer given to him orally by the proposer the agents could only have been acting as an
agent of the applicant himself and not as an agent of the company but rather as the
agent of the proposer. Reason, a man cannot contract with self and therefore the person
who fills out the proposal form cannot be the agent (at that time) of the person to whom
the proposal is made.
What is the effect of this?
1. Is that any mistake or error in writing down the answers was not perpetrated by the
agent in performance to any duty of the company
2 if it was deliberate, his knowledge could not be imputed to the insurance company
since by virtue of that action he would have defrauded his principals. Note agents must
get the authority from the insurer to proceed. He cannot operate without the authority of
the company.
Note review offer and acceptance.

Mis understanding on the part of the proposer or the applicant.

If the agent, for instance, is completing the proposal form on behalf of the applicant and
the agent ,misunderstands a response given by the applicant to a question asked, then
arguably the applicant must take the responsibility for the agents error.
What if the error is an obvious mistake?
If the applicant says no when in fact it's yes : the applicant cannot be excused, because
even though the agent made an obvious mistake in those circumstances because he the
agent would have been acting on behalf of the applicant when the mistake was
committed
What if the agent decides to complete the form either 1. based on intrinsic knowledge of
the applicant he fills it out or 2. after he completes the blank form he leaves it for you to
complete or sign the blank form

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1. If he fills in the form of his own knowledge then procures
the applicants signature, he is not acting in a permitted authority and the insurer is
entitled to avoid the policy and the assure cannot recover under it.
2. In these circumstances, the agent will be acting as an agent for the applicant and
consequently the applicant is responsible for the form. If the agent sends the form to the
applicant and says pleas read it over, having read it over the applicant sees the error and
tells the agent and the agent fails to relay it to the company. The roles then reverse the
agent whether it be an agent of the company, his knowledge of the truth is then imputed
to the company and the company cannot then avoid the policy

Note the above information may have errors!!

Cases Bawen v London Helenbourg and Glasgow life insurance company (1892)2 QB
534
Wells v Smith (1914)3 KB 722
Paxman v Union Assurance Company (1923)15 LLOyds reports pg 206
Lewis v Northern (2956)4 dlr pg 496

One of the things the insurance company can do is insert in the proposal form and
notification that the agent filling up the form is the agent of the applicant and not the
company but note the Canadian case Graham v Anterium Mutual (1884)14 Anterium
reports pg 358 where it is possible that if the agent misleads the applicant by erroneous
explanation to a question on the form then in those circumstances, the agent will be
acting as an agent of the company and the company will then be liable for the mistake .
To address the forgoing the company could state that neither the knowledge of nor
statements made to the agent shall bind the company unless embodied in the written
proposal form.
Note - where an assured, has signed a proposal, or warranted the accuracy of a
declaration the onus of proof is on him to establish that despite formal appearances he
did not give the answers written down or attributed to him as the proposal form is prima

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facie evidence against the assured as to what he said to the agent.
Case Joel v Law Union and Crown (1908) because here it is suggested that the rule above
is avoided where the agent is instructed by the insurers, to explain the printed questions
because then the printed form alone cannot constitute evidence that an untrue answer
was given to a question contained in it.

Assignment on Subrogation, Cover notes, complete the course outline by next week
Assignment-: the principle of assignment in insurance law contains three main parts :
1-: effect of an assignment by an insured of the subject matter of his insurance policy,
2:- the assignment of the benefit of the contract of insurance
3:- the assignment of the contract of insurance itself.
Assignment of the Subject matter of the Insurance
-: this here is usually concerns the insurance of the subject property when that property is
sold or disposed of by the assured. Not the assignment of the subject matter of an
insurance policy will not operate as an assignment of the insurance of itself so once
contract for the sale of land, are exchanged both parties have an interest in the property
the vendor having the legal interest and the purchaser the equitable interest. As noted
from insurable interest both parties have an insurable interest in the property with a
responsibility to insure. In between the exchange of contracts and the completion of the
sale, the title has been transferred completely the purchaser fails to insure , the purchaser
is then able to recover the money under the vendors insurance policy
. Ranyner v Preston (1881) 18 CH pg 1
Castellain v Preston (1883)

What of the vendor?

Roberson v Scottish Automobile and General Insurance Company(1931)48 times law
report case pg 17
In this situation, the vendor cannot recover under the policy, after the completion of the
sale and its policy of insurance will lapse automatically once the subject matter
disappears.

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Assignment of the benefit of an insurance policy:- Where the assignment of the
subject matter does not itself include an assignment of the benefit of the policy, or if it
does not include the benefit of the policy the question arises is whether the benefit can
be assigned. Ie the right to recover benefits under the contract. Second instance Benefit
means right to recover under the contract. The assigned can only recover what the
insured is entitled to and to bind the insurer notice of the assignment must be given
otherwise the assignees recourse is against the assignor to compel him to make a claim
from the insurer itself. Third instance, on the face of it any insurance policy is freely
assingable however in relation to none life and non marine insurance policies because the
consent of the insurers are required then it is not considered to be assignable since
usually insurers only consent to an assignment to a new insured only when that
assignment would amount to the creation of a new contract. Additionally in order for the
assignment of the policy to be valid, it must be contemporamus with the assignment of
the subject matter of the insurance only non life insurance policies cannot be assigned in
the absence of the subject matter.
Subrogation:- means that one person is substituted for another and in insurance law, it is
the right of the insurer who has paid a loss to be put in the place of the assured so that
he can take advantage of any means available to the assured to either extinguish or
diminish the loss for which the insurer has indemnified the assured. Under the principle
of indemnity of insurance law, the insured is not to receive more than his real loss and he
is not to make a profit the doctrine of subrogation consist of two distinct risks on the
insurer on the payment of a loss
1:-To receive the benefit of all rights and remedies that the assured had against third
parties which could extinguish or diminish the loss sustained
Insurer A would be entitled under the principle of subrogation to receive compensation
from insurer B in the name of his assured. This particular first right stems from two
important common law principles 1: a person suffers a loss for which he can recover
against a third party, and he's also insured against such loss the insurer cannot avoid
liability on the ground that the assured can claim from a third party.

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