oo MAD * pe CHAPTER 10.” INSURABLE INTEREST synopsis 228 -, 7. What is meant by, the property en used By the insured?...... 234 ETRetnet ic ee EUR fre Wha is Yet tie 231 ‘meant by. ‘interested’ in goods 234 Genet ererest of we pes 9. Race coveing oe itr Ipsrabe intrest of two In net : i ore ein sara In = 10, Tilustrative Cases. ure 236° feet a ee 232 11, Time wher insurable interest Ihe antes m 233 Must CXISt 0-0 ae 6 Bwamples ofnciabie incest. 233 1, Insurable interest ; epee mntract of insurance to be valid, it is not enough, that the parties to it ar earn tame ke jhe ha he gars i ae ration is lawful. It is necessary in addition that the insured has insurable interest. in the subject-matter of the Insurarice.: (even if itis called incontestable). Other- se will amount toa wager and will be void according tos: 30, Contract Act. Especially in fire, maring and life, insurances, the question of insurable interest is of particular importance.’ Insurable interest is a basic requirement of any contract of insurance unless i Gane, ands lawfully waived Ata general level, this means that the party to the : Ject-matter of the insurance, whether that be a life or prop- fonshig salty {o which he might be exposed. The absence of the required rete, on tis nas fender the contract illegal, void or simply unenforceable, depending We have already stressed the essential differences bee tween lif insurances in many respects, and the law regard interest is one situation where the differences gan be omeiayY Seeing insurable 2 The insurable interest requirement fanufocturer's Life fas EA Ment ence oye E 279 (1899) AC 604 Pc), Howard nepori dann Life Asuance C805 1 ne on lif ITIP Snr a tp J ¥ Fe" 89 604 Spa (18953) ATER : © scanned with OKEN ScannerCap, 10—INSURABLE INTEREST 229 series of ine 1 independent principles, which apply differently to the various classes of ingurance contract, (i) Interest required: py sta i ; tute—= The Life Assurance Act 1774mposes oie ere requirement in‘respect of life policies, and the Marne ee Act 1906 operates similarly in respect of marine seth statutes override any provision to the contrary in the policy. a i) teeta rebtairéd by the poliey-~The policy will genefally require the reid to have insurable interest, either directly, or indirectly by pro- viding that the assured mist prove that he has ‘suffered a loss. Policies : of this nature are indemnity policies. (iii) Anti-wagering legislation —By the __ tracts by yay of gaming or wagering = insurance? ~ are mull and:void. Insurable interest is not only used in insurance [aw 358 of art to describe a statutory requirement; the term is a ibe the assured’s interest in the subject mater ofthe loss under apolicy of indemaity. contract of insurance on goods or land, for example, is y aikerued as a contract of indemnity if there is a oerEing in the policy to indicate a conttary intention he insuret js ot obliged to pay under such a policy ifthe assured has re Vaterest at the time of the loss. And Pay af the terms of the contract are not cleaf of the point, there isa tendency of the courts fo construe those terms in such @ way 24 0 ‘necessitate interest in the assured as a condition precedent to hig claim: For otherwise the contract fight be aoe Pvager, and it must be construed wf es Maes ‘valeat quam pereat'- ‘But there are many cases where the policy docs indicate art intention by the in- suret to pay even though the assured “terest at the time of the Toss, and Such a policy is not necessarily a wagers 25, or example, where the assured acting SuG gent or trustee insures the interests. 0! @ third party LAWRENCE, J. is sgid to have given & classical definition of insurable interest a ry chuge "A man is interested in @ n8 Te whom Lucena v. Craufurd, (Mari judi ams the circumstances which may at hole or 2 part of'@ advantage may arise of Dr adver terest does not nevessarly imply. ight to the whol 1 toga. but the having some relation 1° in the subject of the insur- {hiPB pion elation or concer by the Rappening of the perils insured egting arr'be so affected as to produce a dormir, elrinpent or prejudice to the person i rote eiroumstanced with respect £0 mater exposed to Is Seave a moral certaintyrof advantage of ‘benefit, but i Werested in the safety of the to be so circumstanced prejudice—from its de- ming Act 1845, S. 18, all con. including purported contracts of for those risks or danger, thing, To be interested in the p of a thing, Mpeet fo it as 10 have benefit fom its existence, struction”. fae a hg very ease, the word ‘interest’ hs been defined 16 mean “ifthe ever takes ple, ihe B vnkergyantage”, and "if itis frosted, the party take Putfor a loss”, This decison YS er anes the beneficial and detrimental oe | ate Jn Howard ,Rfiae (860) 4 Lr sis. (1912) 3 ‘KB 315. 4, See Coker v Bolion, 1 (ig05) 2 BOS & PNR 269 (HL) © scanned with OKEN ScannerOE LAW PARTI—PRINCIPLES OF INSURANCE i tel i “ assured must necessarily possess to be a genuin i an fe : a hed en inert hit on asso i party to he au it in st is a It in crng insurable teres he event would result dhe even Insured spain ae seine ts erent ou in sil ernst a Se sted sting seul substantial Toss or i a . inert of sto the pours arenes, insurable interest has been devin cause financial loss to s p fbi the ‘ould as an approximate result invelve in he oss o diminution of ee pee would a by law or in any legal ability, ie exreneaed possible loss or Habit : isa Property in the nature of an actionable claim, cori in nda eee the insured stands in each ; F that on the happening of an event, he maj) sus. & {elation to the subject matter tha tne egRenE ofan mnie Es i ; ingent, defeasible, equitable expecte ate, contingent, lefeae and mere eaeeaseson ince wisout ae interest’ in the goods would not be Suter ectaton insurable interest, relation between the irisured of insurable Property, or may be Prejudiced by its loss co by damage thereto or by: the destruction thereof or ‘May incur’ liability: ‘Urrespect thereof.” t ected, and where Whe assured has no interest at the time of the! Ios, he'can Not acquire interest by any after re Insurable interest life, fire, Marine and other insurances is Tequired by vari. US statutes in England Such as the Life Ssurance Act 1774, The ming Act 1845 and Marine Jnsurance Act 1906, In India farine Insurance ‘Act 1963 lays down. the Zequirement of insurable interest in Marine insurances, In other i implication, SC or driviy Motor vehicle ina ublic place is sufficient j Interest for the pumpee OF effecting insurance jf favour of the third Party Sable of in "30 ofthe Contract Act Fequires it by j © scanned with OKEN Scannerity for an Insurance Interest cry contract of insurance requires an insurable interest to support it; other tis invalid, tain kinds of insurance, e.g. liability insurance and fidelity or solvene insurance, the very nature of the insurance implics the cxistence of an insurabl interest, whilst other kinds of insurance, e.g. personal accident insurance an burglary or livestock insurance, are, in practice, effected by the assured, for th part, in respect of his own person or property. Occasionally, however, th ured may, for his own benefit, effect an insurance upon the person or propert of another, and then the question of insurable interest becomes important. 5. Neces In ct mo: Sce Fender v, Mildmay, (1938) AC 1, 36 : 81 SJ 549: 53 TLR 885. . Beresford v, Royal, (1938) AC 586, 604; Janson v. Driefontein Mines, (1902) AC 434 . See Prudential Staff Union v. Hall, ( 947) KB 685 : 80 LIL 410 : 63 TLR 392 ; (J947) KB 685. Anctil v. Manufacturer’s Life, (1899) AC 604 : (1895-9) All ER Rep. 1238 (PC) . Gadge v. Royal Exchange, (1900) 2 QB 214 ; Mecdonald v. Green, (1950) 66 TLR 649. Coker v, Bolton, (1912) 3 KB 315; Digby ¥. General Accident, (1943) AC 121, 141; Stock Ingles, (1884) 12 QBD 564 GA (Mar Ins) affirmed in (1885) 10’AC 263; Re London C.C. Rei surance Office (1922) 2 Ch 6? 81. 21. Worthington y, Curtis, (1875) 1 Ch D 419; Stock v. Inglis, 1884; Ati, Gen v, Murray, (1904) KB 165; Hatley v. Liverpoo! Victoria Friendly Society, (1918) 88 LJ KB 237. 93 © scanned with OKEN Scannerowen vk ‘ wre’ wh iat the tote Thus, were reader ach Wr tve anny enter b sumac ahve newer fT ser ahve anerestrmUHL PE Tare in per and depenseny © snapper ear ane nce oP apnin, dhe meeured eRMMEL recover wpon & wee ti ne nen ner e were the 89 se yan if he has ne aneTrah interest in a pratt crema by. ite destrction, Mer qhere 3) piven by the conta! CAN attach. Fee pay. a svt of MONEY TO Srthe contracting PATS Wi het eh ean, thereon’, PY on rede 1, Humid BE a METS ‘wager: eran anterests an which, apart from y, possibility Tee adverse 10 the The ease of Macaura Xe Northern Assurance Company.” js a good or the eo types oF insurable orgrest, In that c2Ses One any gura insured tienber Ve fre estate against fire. HE se the timber to 8 COMBE facatach he was the S16 of i substantial sharel Mlustration pearls suffer 1oss on Whe oy 0% 2 ye crest under the policy the stge he could not Yer Oe ‘rove interest cf the los Though the insured ha olicy was held te be pot a wagering contract. i act of indemnity i time of the loss. This 1 part of the [aw of insurance 4 time ng, Act, thouel the ‘consequence Gaely, that the Polley xe unenforceable by a” uninter SUMNER. 6. Examples of insurable interest Insurable interest 18 NOL Timited to absolute oumership of property But may arise inv other ways also. Tt ey be Mwnership wheter Posolute, partial OF fers, mortgage! ‘mortga- that of & Timited, legal oF Straitable, for exom™P in Jon ea eer beneficiary. Eye are jawiul possession fajone such 8S ies of £0 ive insurable fesse, bailee oF © vijs or warenouseman, tes) iso be sounded UP? Betract, as in the Case Me einsurance By th In life insurance, C1OSe relationship such huisbang eqrictly deseribed pecuniary’ » Parent ‘and’ child, empl K sandy, Ivamy’s Genero f Insurance LAW third edition, Bunrerworths, Lon 22. Also Sec MocGillivrey, & Parkington's jasurance Laws Eighth ‘Euition, Volume 1 weet & Mit well, " 2B. (1346 oly (1925), ER Rep oh 925) AC Oe IgaspAMER ND, 29 : 78 LIKB 367 (1908-0) AIL ER 76 . cient 10 UNE wa. (I 35, Griffiths ¥ Sing, (1909) SRB 805, 8205 Ben Sool Law Wie? ti iment between Paget (oe eiimate chil sus 4 4 {Footnote No: 26 Contd) ¥ , vo © scanned with OKEN ScannerINCIPLES OF INSU ist in the life parTI--PR 2 ivevan, insurable intere 234 itor and'debtor, partners im business, mi Seach other.” 7... What is meant by, the property : d that the p ‘The documents susgested thet Te a by the insured?” being used by the i 2 ne ee cary ng 2 Mee intifee ontractors. These ors sere of the Pre Sien by emp(eyignfice on a comer of the First fle of tho de velop: lest j were sre rpoaes of the business JUS 9S H Nacpendent contractors at the ef d, on the true construction 3 for the purposes of the busi- far as the professional con- vm their contractual duties fhe scope of the business eing for the purposes design 4 ses of th Fe party ‘being used by the Insured ness” whether owned by the plaintiffs or not. And inso sete were referring to the drawings in order fo perfor) suleiiton to the development, the drawings fell within interruption policy. | . fi Sections 9 to 16 of the Marine Insurance Act 1963 give some instances of in sunsble interest as illustrations which hold good in other branches of insurance also. Thus, a defeasible interest or a contingent interest is insurable as it is a valid interest until itis defeated.” insurable interest’: What is meant by ‘interested’ in goods? The Court of Appeal in Glengate-KG Properties Lid v. Norwich Union Fire In« surance Society Ltd.,”? was required to decide exactly when an assured might be ‘interested’ in goods (in the instant case, architects” plans) for the purposes of property cover, The plaintiff assured had purchased-a building with a view to refurbishing it, and had employed architects who. were working from temporary accommodation in the building. During,the course of the work, the building was destroyed by fire, arid the architects’ plans—of which there were no copies — were destroyed, resulting.in substantial delays to the refurbishment and loss both of rent and of the cost of reproducing the plans: The plaintiff had obtained both material damage insurance and consequential loss insurance. The material dam. age policy expressly excluded documents and Plans, the consequential loss policy red loss consequent upon damage to any ‘property used b: insure premises for the purposes of business", but only where there wee in Pee he time of loss material damage i » nly where there was in force at the property” Two questions ge insurance ‘covering the interest of the insured in the Purposes of business? If sor thecenatg ene Pans used by the plaintiff for the any intrest in-the plans this was the eases the plone eee assured had » the plans were excluded from the consequential loss policy by virtue of the material damage exception. 8 insurable interest in each other, ainchael v. Carmichgel’s Executrix, 1919 SC 636 ‘Scot- inset Satin each other, See Cormic ‘s s .. Carmic! i tt hn Atnerican law one who is asta gependent on another has ins rable in lerest in de fe se ramechs det le interest in the lit i he st om see Se va ¥, i 188 ; 04 s 1773, 779, In Australia, s, 86(1) a of the En rent tothe child, See also S. 115 of thet Act re, Shia’ ‘advai ne mon pol- Ru} Persor mee ak ah . nce 27. Glengate-Kg Properties Lid, Norwich Union Fire insurance Society S . y Scottish Union and Ne fienal Insurance Co. and Lownder Lambert UK, Lid., (1994) V, aw Repons, 278 (1996) 2 All ER 497, 'p Vol . ol 1, Lloyd’s Law Reps 28, Geismar v, Su WLR 38 + ( ip idlance Gnd London I 29. [1996}2 All ER GER 570 (smupetei i207) 2 Loy’ 487: mupgled anoy's Rep 62 : (S86) CUC ee as Con ER Te (1978) QB 338 : (ag7py 2 £1996) 1 Lloyd's R, ep 614. 95. = Pa) © scanned with OKEN ScannerHAPS TO—INSURABLE INTEREST 235 The Court of Appeal held.that the blai ini n c plaintiff, as a property developer, used in its business any property which formed tn integral pat oF the returbehinent projects, Rsther or not such property was owned by the assured, The architects’ plans fell ‘sily into this definition, The Court of Appeal by a 2+1 majority held that the Word “interest? was intended to refer only to the plaintiff's actual insurable inter- Deepak Fertilisers & Petroch Court of Appeal held that orice t insurable interest drops away, emicals Ltd... Davy McKee (London) Ltd.,*° the the sub-contractor’s work has been completed, his as he can no longer suffer any'loss, Insurable interest is not confined to'legal’ ownership only. The legat lial common carriers to make good the loss or damage to'the goods in transit bailor of goods is also’an insurable interest." 9. Insurance covering other interests A person with a limited interest in a property.may. insure to cover his interest only or so as to cover the interest of others as well who ‘are interested in the prop- erty. For instance, a carrier or baile may insure to cover his own loss or personal liability to the owner of the goods or up to the full value of the goods entrusted to him which includes the owner's interest as well.? What interest the assured in- tended to cover under the policy must be determined by construction ofthe policy itself, Thus, where the subject-matter of the insurance is described as ‘Goods his own, in trust or on commission’ the intention is to ‘insure beyond his own per- sonal interest and he will be entitled to recover the full value of the goods in case f Iss. e ‘i : ° ‘Where it is described as ‘goods held in trust for which they are responsible’ by he assured wholesalers who purchased and ‘resold parcels: of tea, etc., lying in bon d houses and had sold and received the’ value of some. chests of tea, before ‘Ene broke out and damaged them, it was held that the words goods for which they were responsible, showed that they did ngt intend to cover the pro- prietary interest of other persons in the goods insured. Bs : ‘s iti il 2 fee, i.2,, a bailee to whom goo . Where it is described by the commercial trustee, SAL Lad nimpeontd | are entrusted for safe keeping as an insurance ‘on g\ ity Rot cover the interests of others-in the property. It will cover fis Deeg insurable int i f others.in oes Teal se ee Re iad including hig Oe Stay Se mee withthe goods.” from his responsi p ; ; ‘A person without any interest at all ean insure as trustee for the persgn having intergst, provided interest in such insurance to regu by aan m 4 i i trustee for ‘son. Jim amounts received as 1¢ intere : Ths Hg ye ncigle that a party to a contract can constitite himself a trus- i : i é4 Cal 209 (214). 30, (1991) 1 All ER (Comm) 7-5 sa , Sohn Lak Bala, AIR 1964 Cxl209 214). 9 9 3b SM euler ees Hep, (1965) | All ER 204 5.1965) 1 Loyd’s Rep 1: (1965) 32. Tom ruliers) Life x = . WLR 694 arch Fire ond Life Assce. Co, (1856) 5,E&B 870 : 1856 (1843-60) AILER Rep 33, Waters v, Monaré : aan mntite Insurance Co. ¥, Alege, 1871 LR7 CP 25. 34, North British and Morante Insurance Co, HOST NA sy FA London and NorsarUon ial (1947) KB 685. © scanned with OKEN Scanner61 SAND Sok w PLES OF INSURANCE LA’ s confer rights on goods or mer Part I—PRINCI he third (hus is under a contract and arty of right : 3,0 third party of rg! io insurance of rs does not apy the assured ny | ' me of t st “The Life Assurance Act, 177 not apply rem in the na i out‘on chandises and so the pglicy may be taken ; who insures as trustee, . ae és vie, on for The English Act laid down three oo + insured oF the person for hose ne ffected must have an interes i f insu 1) in every contract 0} © nett tas insurance Was & over mates, benefit the policy was effected shall not rec 2) the person for whose-benefit the policy was of : © rs han he valuyofovch insurable interes interested or for . son i () every policy shall contain the name’ of the pers whose benefit the policy was taken. sage, blood or adoption, by Jn life policies persons, haying relationship by marrage, blood cx AuOPu TY contractual relationship and by’ statutory duty have beet f advantage or: benefit insurable interest. It-is, not necessary that expectation of a should always be capable of pecuniary estimation. 10." Mustrative Cases ith and fis wits’ each 1) (Husband and Wife—Father and Son) Griffith and his sie} f Proposal form tee int life policy on their lives for £500 and bath Contributed towards the premiuim, After the policy was taken, the wife committe suicide and the husband claimed the sum assured, The insurer alleged that at the time of taking the policy the husband had no insurable interest in his, wife’s life as required by the Life Assurance Act, 1774,.Decreeing the claim VAUGHAN WILLIAMS L.J. held that ‘the hiisband has an: interest 'in his’ wife’s life which ought to be presumed’ and that ‘it is unnecessary to go into the’ evidence to-show TL pecuniary interest of the husband...” FARWELL LJ. agreed with this and said have come to this conclusion on: the constriction of the Life Assurance Act, 1774 itsel is i in ‘mischi ! value and not limited to their lien on ered woe and the it ir lien on the 00d: t of seach ng cate, The insurers comerceeg ot le in the goods. It w, i int goods of customers which the assured bell nd pop ng Nd at al sense, that the j ast male ods destroyed which the planus ake 37. Vondepittev, Preferr, 38. Willian Bate nf erage, Warnock v. Davis, (\ A) ATER 31.0 (1 10. Grigth». Flemming 62) ous 7s, (1924)2 KB 299, ther and Son (1909}4 {' 805, 820) OF FARWELL LA. oy © scanned with OKEN Scanner