TO INSURE IT ARISES OUT OF THE INSURED’S FINANCIAL INTEREST IN THE SUBJECT MATTER OF INSURANCE SUCH THAT HE BENEFITS BY ITS CONTINUANCE AND IS PREJUDICED BY LOSS OR DAMAGE THERETO INSURABLE INTEREST ARISES OUT OF OWNERSHIP/BAILEESHIP/MORTGAGE/BONDS INSURABLE INTEREST…contd WHEREAS THE SUBJECT MATTER OF INSURANCE IS LIFE/LIMB/PROPERTY/ INTEREST/LIABILITY,THE SUBJECT MATTER OF INSURANCE CONTRACT IS THE FINANCIAL INTEREST OF THE INSURED IN THE SUBJECT MATTER OF INSURANCE
CREATION OF INSURABLE INTEREST—3 WAYS
AT COMMON LAW - OWNER/BAILEE/TORTS BY CONTRACT/BOND BY STATUTE—eg.M.V.ACT/W.C.ACT/PLI ACT APPLICATION OF I/I: LIFE POLICIES ARE BENEFIT POLICIES MARINE CARGO POLICIES ARE FREELY ASSIGNABLE AGREED VALUE POLICIES ARE ISSUED FOR MARINE HULL/CARGO/FREIGHT ASSIGNMENT OF POLICY PROCEEDS—NOMINATION/ASSIGNMENT ASSIGNMENT IS THE TRANSFER OF RIGHTS AND LIAILITIES OF THE INSURED TO A THIRD PARTY WHO HAS ACQUIRED INSURABLE INTEREST IN THE SUBJECT MATTER OF INSURANCE UTMOST GOOD FAITH INSURED MUST DISCLOSE ALL MATERIAL FACTS HE MUST DISCLOSE NOT ONLY THE MATERIAL FACTS WHICH HE KNOWS BUT ALSO THE MATERIAL FACTS WHICH HE OUGHT TO KNOW A MATERIAL FACT IS A FACT WHICH WILL INF -LUENCE THE JUDGEMENT OF A PRUDENT UNDERWRITER WHETHER TO ACCEPT THE RISK OR NOT AND IF SO AT WHAT RATE OF PREMIUM UTMOST GOOD FAITH…..contd EXAMPLES OF UTMOST GOOD FAITH : FIRE—construction/situation/occupation MARINE---nature of cargo/method of packing/mode of carriage/transhipments BURGLARY—nature and value of stock/security arrangements/situation of premises MONEY—single carrying limit/annual estimated carryings/mode of carriage/distance involved UTMOST GOOD FAITH…..contd FACTS WHICH MUST BE FACTS WHICH NEED NOT DISCLOSED BE DISCLOSED FACTORS WHICH INCREASE FACTS OF LAW THE HAZARD FACTS OF COMMON FACTS RELATING TO THE KNOWLEDGE DESCRIPTION OF THE FACTS WHICH DIMINISH SUBJECT MATTER THE RISK PREVIOUS CLAIMS HISTORY FACTS REVEALED BY PRE- ANY OTHER POLICY ACCEPTANCE INSURANCE COVERING THE SAME SURVEY PROPERTY/SUBJECT FACTS WHICH COULD BE MATTER AGAINST SIMILAR ASCERTAINED FROM THE PERILS INFORMATION SUPPLIED BY PREVIOUS THE PROPOSER DECLINATURE/SPECIAL TERMS IMPOSED BY INSURERS UTMOST GOOD FAITH…..contd BREACH OF UTMOST GOOD FAITH MAY OCCUR IN FOUR DIFFERENT WAYS: INADVERTANT NON-DISCLOSURE INTENTIONAL NON-DISCLOSURE (CONCEALMENT) INNOCENT MISREPRESENTATION FRAUDULENT MISREPRESENTATION CONTRACT BECOMES NULL AND VOID IN CASE OF CONCEALMENT AND FRAUDULENT MISREPRESENTATION. IT IS VOIDABLE IN CASE THERE IS INADVERTANT NON-DISCLOSURE OR INNOCENT MISREPRESENTATION INDEMNITY INDEMNITY IS A MECHANISM BY WHICH INSURERS PROVIDE FINANCIAL COMPENSATION IN AN ATTEMPT TO PLACE THE INSURED IN THE SAME FINANCIAL POSITION AFTER A LOSS WHICH HE OCCUPIED IMMEDIATELY BEFORE THE LOSS INDEMNITY RESTRICTS THE COMPENSATION UNDER THE POLICY WITHIN THE FOUR CORNERS OF INSURABLE INTEREST.INSURED CANNOT GAIN MORE THAN HIS I/I BECAUSE HE CANNOT LOSE MORE THAN HIS I/I THUS, AS PER THE PRINCIPAL OF INDEMNITY,THE INSURED WILL NOT BE ALLOWED TO MAKE A PROFIT OUT OF THE LOSS METHODS OF INDEMNITY— CASH PAYMENT REPAIR REPLACEMENT REINSTATEMENT INDEMNITY…contd MEASURE OF INDEMNITY: BUILDINGS-- COST OF REPAIRS – DEPN. ON M/C PLANT/MACHINERY---COST OF REPAIRS-DEPN.ON THE VALUE OF PARTS REPLACED WHOLESALER’S STOCK—MANUFACTURER’S SELLING PRICE +HANDLING/TRANSPORTATION TO THE INSURED’S PREMISES RETAILER’S STOCK—WHOLESALE PRICE+H/T STOCK-IN-PROCESS:RAW MATERIAL COST +PROPORTIONATE O/H AND LABOUR RAW MATERIAL—COST OF REPLACEMENT FROM SUPPLIER FINISHED PRODUCT----RAW MATERIAL COST +O/H AND LABOUR LOSS OF PROFITS---N/P+INSURED STANDING CHARGES LIABILITY INSURANCE—AS PER COURT AWARD, SUBJECT TO LIMITS OF LIABILITY F/G POLICY-FINANCIAL LOSS SUFFERED,SUBJECT TO LIMITS OF GUARANTEE INDEMNITY…contd EXCEPTIONS TO THE PRINCIPLE OF INDEMNITY: MARINE POLICIES ARE AGREED VALUE POLICIES LIFE AND P. A . POLICIES ARE BENEFIT POLICIES REINSTATEMENT VALUE POLICIES PAY NEW FOR OLD FACTORS LIMITING APPLICATION OF INDEMNITY: SUM INSURED CONDITION OF AVERAGE EXCESS/FRANCHISE LIMITATIONS IMPOSED BY POLICY CONDITIONS—eg Limit per bottom/limit per location in marine special decl. policies Single carrying limit in money policy AOA/AOY LIMIT IN LIABILITY POLICIES SALVAGE SUBROGATION SUBROGATION IS A COROLLARY TO THE PRINCIPLE OF INDEMNITY IT IS DEFINED AS THE TRANSFER OF RIGHTS AND REMEDIES OF THE INSURED TO THE INSURER WHO HAS INDEMNIFIED HIM IN THE EVENT OF LOSS/DAMAGE SUBROGATION PREVENTS THE INSURED FROM RECOVERING FROM MORE THAN ONE SOURCE AND MAKING A PROFIT OUT OF THE LOSS SUBROGATION ARISES UNDER TORTS/STATUTE /CONTRACT/SALVAGE AND IS IMPLIED IN ALL CONTRACTS OF INDEMNITY SUBROGATION CAN ONLY BE TO THE EXTENT OF INDEMNIFICATION FIRE POLICY PROVIDES FOR ENFORCEMENT OF SUBROGATION RIGHTS EVEN BEFORE INDMNIFICATION CONTRIBUTION CONTRIBUTION IS ALSO A COROLLARY TO THE PRINCIPLE OF INDEMNITY CONTRIBUTION IS THE RIGHT OF AN INSURER, WHO HAS PAID A LOSS UNDER A POLICY,TO RECOVER A PROPORTIONATE AMOUNT FROM OTHER INSURERS WHO ARE LIABLE FOR THE SAME LOSS i.e. THE LOSS GETS SHARED IN PROPORTION TO THE RESPECTIVE SUMS INSURED UNDER THE VARIOUS POLICIES
REQUIREMENTS FOR SUBROGATION—
COMMON PERIL/SUBJECT MATTER/INTEREST MORE THAN ONE POLICY IN FORCE ON THE DAY OF LOSS LIABILITY ADMITTED UNDER ALL THE POLICIES PROXIMATE CAUSE PROXIMATE CAUSE MEANS THE ACTIVE, EFFICIENT CAUSE THAT SETS IN MOTION A CHAIN OF EVENTS WHICH BRINGS ABOUT THE RESULT, WITHOUT THE INTERVENTION OF ANY FORCE STARTED AND WORKING ACTIVELY FROM A NEW AND INDEPENDENT SOURCE IT MEANS THE MOST DOMINANT / EFFECTIVE / DIRECT CAUSE WHICH IS MOST CLOSELY CONNECTED WITH THE LOSS SINGLE CAUSE – LOSS IS PAYABLE IF THE CAUSE IS AN INSURED PERIL SUCCESSIVE CAUSES - LOSSESS PAYABLE IF THE ORIGINAL CAUSE IS AN INSURED PERIL CONCURRENT CAUSES – LOSS IS PAYABLE IF AN INSURED AND UNINSURED PERIL ACT CONCURRENTLY. LOSS IS NOT PAYABLE IF AN INSURED AND AN EXCEPTED PERIL ACT CONCURRENTLY. IF THE RESULTS OF THE OPERATION OF THE INSURED PERIL CAN BE SEPARATED FROM THE EFFECTS OF THE EXCLUDED PERIL, THE LIABILITY UNDER THE POLICY WILL BE RESTRICTED TO THE LOSS DUE TO THE INSURED PERIL
Brian Atwood Wansor v. George Hantscho Co., Inc., Third Party Plaintiff-Defendant-Appellee v. W. R. Bean & Son, Inc., Third Party, 595 F.2d 218, 3rd Cir. (1979)