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    Insurance

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    Megha Agrawal
    The document provides an overview of key principles of insurance law, including insurable interest, indemnity, proximate cause, and utmost good faith. It defines insurable interest and explains how it can be created through common law, contract, or statute. Indemnity is defined as a contract to make good any loss, and the document outlines factors that can limit indemnity. Proximate cause is explained as the active cause leading to a result without intervention of any new force. Utmost good faith requires fully and accurately disclosing all material facts.

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    Insurance

    Uploaded by

    Megha Agrawal
    719 views32 pages
    The document provides an overview of key principles of insurance law, including insurable interest, indemnity, proximate cause, and utmost good faith. It defines insurable interest and explains how it can be created through common law, contract, or statute. Indemnity is defined as a contract to make good any loss, and the document outlines factors that can limit indemnity. Proximate cause is explained as the active cause leading to a result without intervention of any new force. Utmost good faith requires fully and accurately disclosing all material facts.

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    Insurance Ppt

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    The document provides an overview of key principles of insurance law, including insurable interest, indemnity, proximate cause, and utmost good faith. It defines insurable interest and explains how it can be created through common law, contract, or statute. Indemnity is defined as a contract to make good any loss, and the document outlines factors that can limit indemnity. Proximate cause is explained as the active cause leading to a result without intervention of any new force. Utmost good faith requires fully and accurately disclosing all material facts.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
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    719 views32 pages

    Insurance

    Uploaded by

    Megha Agrawal
    The document provides an overview of key principles of insurance law, including insurable interest, indemnity, proximate cause, and utmost good faith. It defines insurable interest and explains how it can be created through common law, contract, or statute. Indemnity is defined as a contract to make good any loss, and the document outlines factors that can limit indemnity. Proximate cause is explained as the active cause leading to a result without intervention of any new force. Utmost good faith requires fully and accurately disclosing all material facts.

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    Lecture 2

    Insurance Law
    Overview
    „ Principles of Insurance
    ‰ Insurable interest
    ‰ Indemnity

    ‰ Proximate cause

    ‰ Utmost good faith


    Insurable Interest
    Insurable Interest
    Definition:
    Insurable Interest is a relation between the
    insured and the event insured against such that
    the occurrence of the event will cause
    substantial loss or injury of some kind to the
    assured.
    Subject matter of insurance
    ‰ Fire – building, stock or machinery

    ‰ Liability – legal liability for injury or damage

    ‰ Life – life being assured

    ‰ Marine – hull or cargo


    Insurable Interest
    The leading Roman-Dutch law case
    Littlejohn v Norwich Union Fire Insurance Society 1905 TH 374

    held that if the insured can show that he stands to


    lose something of an appreciable commercial value
    by the destruction of the thing insured then his
    interest will be an insurable one.
    Insurable Interest
    Essentials
    „ There must be some property, right, interest, life, limb or
    potential liability capable of being insured;
    „ This property, right, interest etc which must be the subject
    matter of insurance
    „ Insured must stand in a relationship with subject matter of
    insurance whereby from its safety, well being or freedom from
    liability and would be prejudiced by its loss, damage or
    existence of liability
    „ Relationship between insured and subject matter of insurance
    must be recognised at law
    Insurable Interest

    Creation of Insurable Interest


    „ By Common Law

    „ By Contract

    „ By Statute
    Insurable Interest - creation
    „ Ownership
    „ Legal possession
    „ Custody of property belonging to others e.g.
    bailees
    „ Marriage - spouses have an insurable interest in
    each other’s life
    „ A lien-holder has insurable interest in the property
    subject to lien
    „ A debt creates insurable interest between debtor
    and creditor
    „ An employer has an insurable interest in the life of
    an employee
    Insurable interest in life insurance

    „ On your own life


    „ Close ties of blood or marriage
    „ When pecuniary interest is involved
    „ must be met only at the inception of the
    policy, not at the time of death
    Insurable Interest in Property
    Insurance
    „ Part or Joint Ventures
    „ Mortgagees and Mortgagors
    „ Executors and Trustees
    „ Bailees
    „ Agents
    „ Husband and Wife
    Does a share-holder has insurance interest?
    Insurable Interest in Liability Insurance
    „ A person has insurable interest to the extent
    of any potential liability may be incurred by
    way of damages or other costs.
    „ It is not possible to pre-determine the extent
    of interest because there is no way of
    knowing
    ‰ How often one may incur it
    ‰ What would be its monetary value
    Insurable Interest of Insurer

    Insurer may insure with another


    insurer part or all of the risk they
    have assumed – reinsurance
    Insurable Interest

    When must it exist?


    ‰ Marine insurance - at the time of loss
    ‰ Life insurance - at the inception of the
    policy; continuing insurable interest is not necessary
    ‰ Other Insurances – at the time of loss
    and also at inception
    Indemnity
    Indemnity
    Definition:
    A contract of indemnity is one in which
    the promiser promises to make good
    the loss that occurs to the promisee on
    the happening of an event.
    ‰ Indemnity Contract – Fire or Marine Insurance
    ‰ Non-indemnity Contract – Life Insurance
    How is indemnity provided

    „ Cash Payment
    „ Repair

    „ Replacement

    „ Reinstatement
    Factors limiting Indemnity
    „ Average
    ‰ loss sustained X Sum insured/Market value
    „ Deductibles
    ‰ Excess
    ‰ Franchise
    „ Limits
    ‰ Sum Insured
    ‰ AOA
    ‰ AOY
    „ First Loss policies
    Extensions in Operation of
    Indemnity

    „ Reinstatement
    „ Contract Price Insurance

    „ Agreed Additional Costs

    „ Valued Policies
    ‰ Marine
    ‰ Fire
    Indemnity - corollaries
    „ Subrogation
    ‰ Literally means “to stand in place of”. It is the right of one person to
    stand at law in the place of another and to avail him of all rights and
    remedies of that other person.

    „ Contribution
    ‰ It was held in American Surety Co of New York v Wrightson 1910 that
    for contribution to apply the 2 policies involved must cover:
    „ same interests;
    „ same assureds;
    „ same adventure;
    „ same risk;
    „ different or same amounts.
    Proximate Cause
    Proximate Cause

    Definition:
    The active efficient cause that sets in motion a
    train of events which bring about a result,
    without intervention of any force started and
    working actively from a new and independent
    source.
    (Pawsey Vs Scottish Union & National Insurance Co. 1907)

    Proximate in efficiency and not in time


    ‰ Eg: A ship torpedoed while her final loss was due to a storm.

    ‰ It is not the latest, but direct, dominant, operative and efficient

    cause that must be regarded as proximate.


    Proximate Cause

    In Etherington v Lancashire and Yorkshire


    Accidental Insurance Co (1909) a man
    fell from a horse and sustained injuries
    that prevented him from moving. As a
    result he contracted pneumonia due to
    lying in the wet and died. The proximate
    cause of his death was held to be the
    fall not pneumonia.
    Utmost Good Faith
    Utmost Good faith

    Working Definition:
    A positive duty voluntarily to disclose,
    accurately and fully, all facts material to the
    risk being proposed, whether requested or
    not.

    „ Caveat Emptor Vs Uberrima Fides


    Utmost Good Faith

    Material Fact:
    Every circumstance is material which
    would influence the judgment of a
    prudent insurer in fixing the premium
    or determining whether he will take
    the risk
    Duty of disclosure

    The requirement of utmost good faith is


    complimented by the duty of disclosure
    which places an obligation on both
    parties to the insurance contract to
    disclose material facts relevant to the
    contract to each other.
    Resolving Coverage Disputes
    ‰ Contracts of Adhesion
    „ Ambiguities are interpreted in favor of
    policyholder
    „ Applied less often to commercial
    insurance

    ‰ Doctrine of Reasonable Expectations


    „ Courts interpret contracts as would a
    reasonable person not trained in the law
    Resolving Coverage Disputes (Cont’d)

    „ Bad Faith Suits


    ‰ If insurers refuse to pay claim cost or
    pay too little for claims, policyholders
    (or third-party claimants) to sue an
    insurer
    Important Terms
    Important Terms
    „ Life Vs Non life
    „ Insurance Agent Vs Broker
    „ Coinsurance Vs Reinsurance
    „ Subrogation Vs Abandonment
    „ General Average Vs Particular Average
    „ Occurrence Vs Claims Made
    In lighter vein!!

    „ NEW YORK, NY. (AP 1977) A man,


    knocked down by a car, got up uninjured,
    but lay back down when a helpful bystander
    told him to feign injury in order to collect
    insurance money.
    The car rolled forward and crushed him to
    death.
    Thank You

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