ISLAMIC UNIVERSITY IN UGANDA

KAMPALA CAMPUS
GROUP: A
YEAR: FOUR
COURSE: LLB
SEMESTER: I
COURSE UNIT: INSURANCE
LECTURER: COUNSEL KANYIKE YUSUF

S/NO NAME REG NO

01 ORENGEJE SIMON PETER 221-053012-21477
02 NTALE BAKER 221-053012-21896
03 SEGUJJA PETER 221- 053012-22610
04 MANGINA DOMASCO 221-053012-21263
05 KAYONGO BENARD 221-053012-21531
06 ELLY KASIRYE 221-053012-21325
07 CHEMUTAI REBECCA 221-053011-22764
08 WADDA RAMADHAN 221-053012-21614
09 NASASIIRA DAPHINE 221-053012-21892
10 ONDUR SIDORO KACHUR 219-053011-20405
11 NAMIREMBE GRACE 221-053012-22663
NAMANDI

QUESTION.
Definitions, historical background and key theoretical strands of the law of
insurance.
INTRODUCTION.

Under section 2 of the Insurance Act cap 191, insurance is a contract under which
one party known as the insurer in exchange for premium agrees with another party
known as the policy holder, to make a 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 interest of the
person who will receive payment of benefit1
According to Howard Williams2, insurance is "a contract whereby one party
undertakes to indemnify the other against loss, damage, or liability arising from an
event which is uncertain".
According to Robert E. Keeton3, insurance is a plan under which individuals and
entities make payments to an insurer, who promises to pay them specified sums of
money if they suffer specified losses.
R.B Vermeesch & KE Lindgren4 asserted that the basis of insurance is that one
person (the insurer) contracts with another (the insured) that on the occurrence of
some events the happening or timing of which is uncertain, the insurer will pay money
or its equivalent to the insured. In consideration of this promise, the insured promises
to pay to the insurer a sum of money called the premium. The document issued by the
insurer to the insured to evidence the insurance contract is called a policy.
The parties to an insurance contract are;
Insured/assured, insurer, agents and broker.
Historical background of the law of insurance.
Insurance is traced to Marine Insurance5 that Italians merchants were involved in
trading along the high seas. Holds worth argues that the practice of insurance can be
traced from their practice ie that if good did not reach, the owner would claim from
the carrier called the owner of the ship. This practice has existed over a long period of
time which has guided the formulations of the principles of modern insurance. Here,
two principles developed ie insurable interest and the salvage (subrogation). Initially,
the process of insurance needed to take a standard form as there was no regulation to
1
Section 2 of the insurance act cap 191 and section 3 of the marine insurance act on the definition of marine
insurance
2
15th edn, 2013
3
Insurance law 1971

4
The business law of Australia 7th edn p 966
5
holdworth
that effect. This practice later formed part of the law in Italy and it is is the same
position in England. It was not until the 17 th century that insurance began to be
codified in England 1774 life insurance Act. This life insurance is linked to the era of
industrial development where people were subjected to industrial injuries.
During marine activities in many ancient society, merchants and traders pledged their
ships or cargo as security for loan whereas in Babylon creditors charged higher
interest rates to merchants and traders in exchange for a promise to forgive the loan if
the ship was robbed by pirates or was captured and held for ransom.
In post-medieval England, the local groups of working people banded together to
create “friendly society” forerunners of the modern insurance companies. Members of
the friendly society made regular contributions to a common fund, which was used to
pay for losses suffered by members. The contributions were determined without
reference to a member’s age, and without precise identification of what claims would
be covered.
Without a system to anticipate risks and potential liability, many of the first friendly
society were unable to pay claims and many eventually disbanded. Insurance
gradually came to be seen as a matter best handled by a company in the business of
providing insurance.
Insurance companies began to operate for profit in England during the 17 th C. they
started calculating the probability of losses related to particular risks. These
calculations made it possible for insurance companies to anticipate the likelihood of
claims and this made the business of insurance reliable and profitable.
The development of law of insurance in Uganda.
Uganda became a British protectorate in 1894 and British laws including those
governing commerce and insurance were introduced. The English common law
system heavily influenced Uganda’s legal framework including the regulation of
insurance.
The 1902 order-in-council made laws that were applicable in England before 1902
automatically applicable in Uganda, including the statue of general application. The
subsequent Judicature Act confirms the application of the order-in-council and the
laws thereof. The 1967 Judicature Act excluded the application of statutes of general
application (Uganda Motors Ltd vs Wava Holdings Ltd6
Nominal defendants Council established by statutes to help victims of motor vehicle
accidents get compensation., motor vehicle 3 rd party insurance to provide for the
safety or compensation of 3rd party victims. This illustrate the idea of insurance being
a social insurance and the role of the government has turned from being provider to a
regulator whereby providers of insurance must be corporate bodies and must be
licensed by the insurance regulatory policy in Uganda.
6
SCCA No 19 91
In Uganda, the first insurance company was in 1949 called the East Africa General
Insurance Company and in 1962 AIG begun and in 1964, the national insurance
corporation was established. Insurance is generally described as a contract to pay
money for providing service on the occurrence of a future uncertain event or certain
event provided that the insurer has interest in that event. The management of
insurance in Uganda is now under the management Act cap 191 which establishes the
insurance regulatory authority formally known as the insurance commission.as a body
corporate, it has the object of insuring the effective administration, supervision,
regulation and control of insurance business in Uganda. The IRA controls and licenses
insurance company and an insurance company has to comply with several conditions
in order to obtain a license.
Key Theoretical Strands in the Analysis of Insurance Law & Its Practice in the
World and Uganda at large:
A theory is a supposition or a system of ideas intended to explain a certain
phenomenon hence a theoretical strand connotes to the basis under which insurance
was developed
The study of insurance law involves several theoretical strands that have evolved over
time. These include:
The principle of indemnity: in the insurance contract the theory of indemnity
requires that the insured be restored to the same financial position that they had before
the loss occurred. This principle has been established in numerous cases, in the case of
Salini construttori SPA V Jubilee insurance company of Uganda Ltd 7, (marine
cargo insurance) the vessel sailed and was subjected to mechanical problem and
forced to dock. The plaintiff was indemnified for the loss of his properties like the
iron bars. However, in Castellain v Preston8 the in insurance company in ignorance
of the transaction between the vendor and the purchaser, indemnified the vender, it
was held that in action by the company against the vendor, the company were entitled
to recover a sum of equal to the insurance money from the vendor for their own
benefit.
The principle of Utmost good faith: This principle requires both parties (the insurer
and insured) to disclose all material facts that could affect the insurance contract. This
principle was established in the case of Carter v Boehm9 where lord minefield held
that insurance is a contract based upon speculations, that the contract is entirely based
on utmost good faith. This forbid either party by concealing what he privately knows
to draw the other into the bargain from his ignorance of that fact and he is believing
the contrary. This principle was married in the case of Hajji Kavuma Haroon v first
insurance company10 where justice kainamura held that the all the material facts of
7
Cs 109 2016
8
1882
9
(1766) 3 Burr 1905
10
Cs 442 2013
the property should be disclosed to the hence dismissing the case with costs to the
defendant insurance company.
Insurable interest: This principle requires that the insured has a legal or financial
interest in the subject matter of the contract. This principle was established in the case
of Lucena v Crawford11.
Contribution: This principle applies when there are multiple insurers covering the
same risk. In such cases, each insurer contributes a proportionate amount to the loss.
This principle was established in the case of Royal Exchange Assurance v Cooper12.
One theoretical strand in the analysis of insurance law is the concept of risk
management. Insurance is designed to help individuals and businesses manage risk by
spreading it across a large group of people, which reduces the potential financial
impact of a loss. Another theoretical approach is based on the principles of contract
law, where the insurer and insured parties each have rights and obligations set out in
the insurance policy.
Contract theory especially will theory: Contract theory is a significant theoretical
strand in relation to insurance. One of the key principles associated with contract
theory is the idea of autonomous decision-making. When parties subscribe to an
insurance policy, they are making a voluntary decision to enter into a contractual
agreement. This agreement often involves a promise by one party to pay out a sum of
money to the other party in the event of a specific contingency, such as an accident or
illness. The will theory of contract, which emphasizes the importance of the parties'
intentions in creating a legally-binding agreement, is particularly relevant here.

One decided case that illustrates the application of contract theory in insurance is
Walmsley v. Walmsley13. In this case, the court considered the validity of an
insurance contract and whether it was a contract of indemnity or a contract of life
insurance. The court ultimately concluded that the policy was a contract of indemnity,
as it required the insurer to pay out the exact amount of the loss suffered by the
insured party.

Contract theory is a branch of law and economics that examines the nature, structure,
and enforcement of contracts. It provides a framework for understanding the rights
and obligations of parties involved in agreements. Key concepts include:

1. Agency Theory: Examines the relationship between principals and agents.

2. Game Theory: Analyzes strategic interactions between contracting parties.

11
(1806) 2 Bos & P 269
12
(1721) 3 P. Wms 315
13
(1996)
3. Transaction Cost Economics: Studies the costs of negotiating, monitoring, and
enforcing contracts.

4. Relational Contract Theory_: Focuses on long-term, cooperative relationships.

5. Contractualism: Emphasizes the moral and ethical dimensions of contracts.

6. _Efficient Breach Theory_: Suggests that parties should be allowed to breach

contracts if it's economically efficient.

7. Promissory Estoppel_: Protects reliance interests when promises are made.

Contract theory has applications in various fields, including:

Insurance Law

It helps us understand how contracts work, how they can be optimized, and how
disputes can be resolved.
Overall, contract theory provides a theoretical framework for understanding how
insurance policies are created, the voluntary nature of the contractual relationship
between the parties, and the importance of the parties' intentions in defining the scope
of the obligations imposed under the contract.

b) The economic theory of law: The economic theory of law also has relevance to
insurance law, particularly in relation to issues such as the distribution of risk and the
pricing of insurance policies. This theory proposes that parties enter into legal
contracts as a means of maximizing their own self-interest and that legal rules should
be structured in a way that promotes efficiency and economic growth.

One case that demonstrates how economic theory applies to insurance law is ACWA
v. Mutch14. In this case, the court considered whether a contractual exclusion that
referred to "earth movement" was sufficient to exclude coverage for damage caused
by a landslide. The court found that the exclusion was unambiguous and that the
insurer was not liable for the damage caused by the landslide.

Overall, the economic theory of law provides a framework for understanding how
insurance policies are structured and priced in a way that is efficient and promotes
economic growth.

c) Gender theory: Gender theory has relevance to insurance law, particularly in

relation to issues such as gender-based discrimination in pricing and underwriting.
Gender-based discrimination can arise from practices such as charging different
premiums for male and female policyholders based on actuarial assumptions about life
expectancies and claims rates.
14
(1997)
One decided case that illustrates the application of gender theory in insurance is Test-
Achats v. Council of Ministers15. In this case, the European Court of Justice
considered the legality of insurance premiums and benefits that differentiated between
men and women. The court found that such differentiation was discriminatory in cases
where it was not based on actuarial risk assessments.

Gender theory is a framework for understanding the social and cultural constructions
of gender and its impact on individuals and society. Key concepts include:
a. Gender vs. Sex. Gender is a social construct, while sex refers to biological
differences.
b. Gender Roles. Socially defined expectations and behaviors associated with
being male or female.
c. Gender Identity. An individual's internal sense of being male, female, or non-
binary.
d. Gender Expression. How individuals present their gender to the world.
e. Patriarchy. A system of social organization that privileges men and
masculinity.
f. Intersectionality. Gender intersects with other identities (race, class, sexuality,
etc.) to produce unique experiences.
g. Performativity. Gender is performed and reified through social interactions and
cultural norms.
Gender theory influences insurance law by:
Highlighting gender-based discrimination, informing gender-neutral policy language,
Addressing gender-based risk assessments, Promoting inclusive policy design,
supporting gender-affirming care
This theory helps us understand how gender shapes our experiences and interactions,
including those related to insurance.
Overall, gender theory provides insights into how gender-based discrimination can
arise in the context of insurance and the potential legal remedies available to address
these issues.
d) Disability Rights theory: Disability Rights theory has relevance to insurance law,
particularly in relation to issues such as accessibility and non-discrimination. This
theory emphasizes the importance of ensuring that people with disabilities have equal
access to the benefits of insurance, both in terms of the availability of insurance
products and the pricing and underwriting of policies.

15
(2011)
One decided case that illustrates the application of Disability Rights theory in
insurance is Molloy v. United States Life Insurance Company 16. In this case, the
court considered whether an insurer could deny coverage to someone with HIV/AIDS.
The court found that the insurer's policy was discriminatory and violated the
Americans with Disabilities Act.
Disability Rights Theory is a framework that advocates for the rights and inclusion of
people with disabilities. It emphasizes equal opportunities, accessibility, and non-
discrimination. Key principles include:
a. Equality and Non-Discrimination: People with disabilities should have equal
rights and opportunities.
b. Accessibility: Environments, information, and services should be accessible
and usable.
c. Autonomy and Self-Determination: Individuals with disabilities should make
their own decisions.
d. Inclusion and Participation: People with disabilities should be included in all
aspects of society.
e. Dignity and Respect: Recognize the inherent dignity and worth of individuals
with disabilities.
f. Social Model of Disability: Disability is a result of societal barriers, not
individual limitations.
g. Human Rights: Disability rights are fundamental human rights.
h. Disability Rights Theory influences insurance law by promoting;
i. Inclusive policy design, accessible claims processes, Fair underwriting
practices, Reasonable accommodations, Benefits that support independent
living.
j. This theory aims to create a more equitable society, addressing systemic
barriers and promoting equal opportunities for people with disabilities.
Overall, Disability Rights theory provides a framework for understanding how
insurance policies and practices can be structured to ensure that people with
disabilities have equal access to insurance products and services.

Conclusion.
The modern insurance industry is navigating through turbulent waters, facing
challenges that stem from technological disruption, regulatory changes, and evolving
customer demands. Successfully addressing these challenges will require insurers to
embrace innovation, collaborate with insurtech startups, invest in cyber security
measures, and foster a workforce equipped with the skills necessary to thrive in a
digital-first world. By adapting to these changing tides, the insurance industry can
continue to play a pivotal role in safeguarding individuals and businesses against the
uncertainties of tomorrow.

16
(1995)
BIBLIOGRAPHY

 Insurance Act cap 191

 Insurance (intermediaries) regulations 2021
 Case laws
 Fundamentals of insurance, second edition, Milton Asiimwe, Ambrose
Kibuuka and Edward Nambafu,2016
 According to Robert E. Keeton insurance law 1971