MUGISHA NAYEBARE KEVIN
119-053011-15840
STREAM A
QUESTION 1
SOLUTION.
The term insurable interest is not a misnomer as both concepts have
different elements and meaning that show their existence as shown below;
INSURABLE RELATIONSHIP
There are various elements that establish the existence of an insurable
relationship, the most pertinent ones include the following;
[Link] and legal entitlement.
In the insurance contract, the insurer must be legally bound to compensate
the other party hence the legal entitlement .It should be noted that such
right to legal entitlement should be clearly stated entitling the insured to
money or moneys worth in the event that a loss occurs as was discussed in
the case of Medical Defense Union V Department of Trade1 Court found
that the union was not carrying on the business of insurance and that the
contract with its members was not an insurance contract because to be
such, the contract must provide for the right of the insured to money or
moneys worth at the happening of an event. the court further observed that
it is not sufficient to say that the provision of service is enough to constitute
insurance.
[Link] interest.
The law clearly states that however with few exceptions that you have no
rights in another person’s property. In that respect, one cannot insure what
belongs to another as was discussed in the case of Macura V Lee Air
Farming Company, where court observed that the timber insured belonged
to the company but not Macaura thus he did not have an insurable interest in
the timber.
3. Provision pf money or moneys worth It should be noted that an
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 as was discussed in
1
[1979]2ALL ER 421
Department of Trade and Industry V St Christopher Motorists
Association Ltd 2,the court found that this constituted insurance
4 Premium. the insurance contract should also have a premium which is
consideration for the assumption of the risk and such should be paid for that
purpose. Basically, the insured should pay the premium in anticipation that
the insurer shall indemnify him / her in the event a loss occurs as was
discussed in Hampton V Toxteth Cooperative Society 3, where court
observed that no insurance business can be carried on the absence of a
clearly stipulated premium and policy.\
[Link]; In the insurance contract the insurer should have no control over
the occurrence of the loss. Essentially, the event insured against should be
outside the control of the party assuming the risk. If the party assuming the
risk has control over the event then it shall not be considered to be an
insurance contract but rather be deemed a guaranty / warranty.
6 Fortuity /uncertainty; In the insurance relationship, the occurrence of
the event that arises into the loss insured should be uncertain or fortuitous.
The reason for this is that the insurer promises to indemnify the insured in
the event of an unforeseeable loss. Where a loss is certain then there is no
incentive for insuring against this loss. in fact, where the occurrence of a loss
is certain then it defeats the essential element of the relationship between
the parties as the promise of indemnity is more of a guarantee than an
insurance contract.
PRINCIPLES OF INSURABLE INTEREST.
In Lucena V Craufurd, Lawrence J defined insurable interest, in his own
words insurable interest means if the event happens, the party will gain
advantage, if it is frustrated, he will suffer a loss 4
There are basically two types of insurable interests such contractual and
statutory;
Contractual; if the insurable interest is absent, the insurance contract is
illegal or void and no agreement between the parties dispensing with this
requirement can be effective. contractual action upon such a contract if the
insurer does not raise the plea of want of interest nevertheless the court of
its own motion may refuse to enforce the contract.
2
[1974]1 ALL ER 395
3
[1915]1 Ch. 721
4
(1806)2 B&P (NR)269
Statutory; is where the interest in the subject matter of insurance is
required by law itself for the validity of the policy, whether by express
statutory law as in the marine insurance act 1906 or by section 30 of the
Indian contract act merely declares that all contracts by way of wager is
void. this is the interest required by statute.
The time when the insurable interest must be present varies with the nature
of the insurance contract;
Insurable interest in life insurance; the general rule is that every person
has an insurable interest in his own life. Accordingly, a person may purchase
a life insurance policy on his own life, making the proceeds payable to
anyone he wishes. Life insurance contract is not a contract of indemnity and
a person affecting a policy must have an insurable interest in the life to be
assured
In the life insurance policy persons having relationship by marriage, blood
or adoption have been recognized as having insurable interest. Few
examples of relationship which have insurable interest in the life of other;
Husband and wife; husband and wife have insurable interest of life of each
other, for example in Griffith V Flemming where the wife acquired
insurable interest after the suicide of the husband, Vaughan Williams L.J
HELD that the husband has an insurable interest in his wife life which ought
to be presumed.
Child and parent; the insurable interest here was settled in the case of
Halford V Kymer [14] where it was held that the father has no insurable
interest in the life of his own son unless he is getting some pecuniary benefit
from him.
Debtor and creditor; here it as settled in the case of Godsall V Boldero [15]
and this was extended to the surety in the case of Beauford V Saunders
[16] where it as held that if the debt has been guaranteed by a surety, the
creditor will have interest in the life of surety as well
Bailor and bailee; insurable interest too exists here.
Mortgagee and mortgagor; the mortgagee has an insurable interest in the
life of mortgagor to the extent of the property mortgaged.
Insurable interest in non -life insurance for all the insurance policy
other than life insurance, the person taking the insurance policy must have
an insurable interest in the property insured.
Marine insurance; insurable interest is a special requirement of the marine
insurance contract and any valid contract of marine insurance can be
entered into by person only if he has insurable interest in the marine
adventure as settled in the case of Wilson v jones [18]
Fire insurance; a contact of fire insurance, like all other contracts of
insurance requires an insurable interest in the subject matter of the
insurance to support it as was discussed in the case of Macaura V
Northern Assurance Co.
In conclusion, since the two concepts have different elements and also
meaning responsible for their existence then insurable interest is not a
misnomer.
