SSERWANGA DAUDA

121-053011-25278

NO: 1

The contention that "insurable interest" is a misnomer and should be replaced with "insurable
relationship" in insurance law is a valid one. While both terms have been used interchangeably for
centuries, "insurable relationship" may more accurately capture the underlying concept as highlighted
below;

S.2 of the insurance Act 2017 defines insurance as a contract under which one party known as the
insurer in exchange for a premium agrees with another party known as the policy holder to make
payment or provide a benefit to the policy holder or another person on the occurrence of a specified
uncertain event which, if it occurs will be adverse to the interests of the policy holder or to the interests
of the person who will receive the payment of benefit .these was reiterated in the case of Prudential
insurance co. V commissioner of land revenue (1904)2 KB.

Insurable interest is being defined under S.5 of MIA to mean that "every person has an insurable
interest who is beneficially interested in the subject-matter of the insurance.”Every of insurance
contract requires an insurable interest to support it, otherwise it is invalid. This was held in the case of
Anctil V manufacture life insurance co (1899).

Section 7- 15 of the marine insurance Act and S.94 of the insurance Act identifies circumstances in
which persons are deemed to have an insurable interest in the subject matter.

Section 26(2) marine insurance Act provides that the nature and extent of the interest of the assured in
the subject matter need not be specified in the policy, this position is justified on the premise that the
property insurance, the insurer’s principal concern is the amount payable under the policy.

S.6(1) of the marine insurance Act provides that the assured must have interest in the subject matter at
the time of the loss, Though he need not be interested when the insurance is effected as being echoed
out in the case of Stockdale V Dunlop.

Among the roles of insurable interests can include it confers upon the insured the right to sue on the
policy as being encapsulated under the case of cosforol union and others V poor law and local
government officers mutual guarantee association Ltd (1901).

The reasons why the insurable interest is a misnomer and can be replaced with insurable relationship
includes;

Implication of Ownership: It suggests a direct financial stake or ownership in the property or life being
insured. However, this is not always the case. For instance, a business partner might have an insurable
interest in the life of a co-founder, even though they do not "own" their partner's life as seen in the case
of Dalby v. India and London Life Assurance Company (1854) which demonstrates that a contractual
relationship can give rise to an insurable interest, even without ownership.

Focus on Financial Loss: While financial loss is a significant factor, it's not the only consideration.
Emotional distress, potential legal liabilities, or business continuity risks can also justify an insurable
[Link] the case of Wick v. Babcock & Wilcox (1910) illustrates this point, finding that an employer
had an insurable interest in the life of an employee due to the potential financial loss that would result
from the employee's death.

THE INSURANCE RELATIONSHIP

Insurable relationship is a term used in insurance law to describe the connection between the insured
and the policyholder.

There are various elements that could establish the existence of an insurance relationship. However, the
most important are policy, the legal entitlement, and provisions of money's worth, insurable interest,
control, and premium.

First of all there must be a binding contract which as earlier noted is called the insurance [Link] the
contract, the insurer must be legally bound to compensate the other party hence the legal [Link]
should be noted that such right to legal entitlement should be clearly stated entitling the insured to
money or money's worth in the event that a loss occurs.

In the case of Medical defense union v Department of trade, (1979) court noted that it is not sufficient
to say that the provision of services is enough to constitute insurance.

It should be noted that the insurance contract shall be established where the money's worth is provided
as a right to the insured in form of valuable services such as a right to advice or a right to have an item
to be replaced or repaired in Department of trade and industry Vs St Christopher Motorists
Association Ltd, (1974), where the defendant undertook to provide its members with chauffeur services
should they be disqualified for driving due to being convicted of driving while intoxicated, the court
observed that this constituted insurance

The concept of "insurable relationship" is increasingly gaining prominence over "insurable interest" in
insurance law due to the following;

Flexibility: Insurable relationship offers more flexibility in determining coverage eligibility, allowing
insurers to consider a wider range of factors and adapt to changing circumstances. This can be beneficial
in situations where traditional notions of ownership or financial interest may not adequately capture the
nature of the risk.

Consumer protection: By focusing on the relationship between the insured and policy holder, insurable
relationship can provide greater protection for consumers .it ensures that the insurance coverage is not
limited to narrow definitions of financial interest, but rather extends to situations where there is
legitimate connection between the insured and policy holder .

Broader scope: insurable relationship can encompass a wider range of scenarios including those where
financial loss might not be immediate or quantifiable.

Clarity: it avoids the potential ambiguity of interest, which could be interpreted in different ways.

In conclusion, while the term "insurable interest" has been deeply ingrained in insurance law, "insurable
relationship" may provide a more accurate and comprehensive understanding of the underlying
principle. By emphasizing the connection between the insured and the policyholder, rather than solely
focusing on financial interest, this term can help to clarify and modernize insurance law.