General Principles of Insurance Law

I. INTRODUCTION

1. Definition of insurance2. The parties to the contract

The InsuredThe InsurersInsurance CompaniesUnderwriters

3. Classification of contracts of insurance According to the nature of the eventAccording to the nature of the interest affectedAccording to the nature of the insurance

4. The nature of the contract of insuranceThe subject-matter of the contract of insuranceThe subject-matter of insuranceA physical objectA chose-in-actionA liability imposed upon the assuredThe description of subject-matterTo identify the subject-matterThe kinds of descriptionSpecific descriptionsDescription of the locality of the subject-matterDescription of other circumstancesTo show the nature of the riskTo define the risk

5. Insurable interestWhat constitutes an insurable interest The necessity for an insurable interestDescription of interestThe general ruleExpress conditionProspective profits and consequential lossPrecarious nature of the interestThe time for insurable interestInterest at the time of the loss sometimes essentialRetrospective insurance

6. The Insurance Companies Act 1982

II. THE MAKING OF THE CONTRACT

7. Introduction8. The offer

What constitutes an offerBy whom the offer is madeThe proposal formThe usual contents of proposal formsDescription of proposed assuredDescription of the riskDescription of circumstances affecting the riskPrevious history of the proposed assuredThe questions asked in various types of insuranceLife insurancePersonal accident insuranceFire insurance Burglary insuranceMotor insuranceThe effect of the proposal formStatement by B.I.A. and Lloyd’sStatement of Life Offices’ Association

9. The cover noteThe purpose of the cover noteThe form of the cover note and its issueThe duration of the cover noteThe effect of the cover noteThe incorporation of the terms of the policyReplacement of the cover note by a policyBroker’s cover note

10. The acceptanceWhat constitutes an acceptance The methods of acceptanceWhere the offer is made by the proposerWhere the offer is made by the insurersThe effect of acceptanceDiscrimination

11. The principle of good faith 12. Non-disclosure

The extent of the assured’s dutyActual knowledgePresumed knowledgeIs the duty of disclosure an implied term?Te tests of materiality

The test of the ‘prudent insurer’The ‘reasonable assured’ testWhether the non-disclosure would influence the particular insurer is irrelevantAssured’s opinion as to whether the fact is material is irrelevantFifth Report of Law Reform CommitteeLaw commission’s proposalMateriality is a question of factThe time when materiality is to be judgedThe classification of material factsFacts normally materialFacts not normally material Facts which need not be disclosed Facts within actual or presumed knowledge of insurerFacts within constructive knowledge of insurerFacts as to which information is waivedFacts tending to lessen the riskFacts the disclosure of which is unnecessary by reason of a conditionFacts relating to ‘spent’ convictionsSome examples of material and immaterial factsFire insurance Burglary insurancePersonal accident insuranceGuarantee insuranceLife insurance Motor insuranceProof of the materiality of facts not disclosedThe duration of the duty of disclosureThe effect of non-disclosure

13. MisrepresentationModification of the duty by contractQuestion and answersThe effect of the questionsThe effect of the answersWhere there is a ‘basis’ clauseWhere there is no ‘basis’ clauseThe types of inaccuracyThe interpretation of the questions and answersThe statement must be considered as a wholeA fair and reasonable construction must be adoptedThe whole truth must be toldOther information in the possession of the insurersInconsistent or unsatisfactory answersWhere the space for the answer is left blankThe onus of proof

What must be provedSome examples of the evidence required

14. The premiumThe amount of the premiumThe payment of the premiumMode of paymentTime for paymentEffect of paymentPayment to the agent of the insurersThe authority to receive paymentThe form of paymentRight to claim a return of premiumRight to a return of part of the premiumWhere there is no right to a return of premium

III. THE POLICY

15. Introduction16. Classification of policies

According to the description of the subject-matterAccording to the amount recoverable‘Unvalued’ policies‘Valued’ policies

17. The form and contents of the policyInsurance companies’ policiesThe contents of the policyThe headingThe body of the policyThe back of the policyThe docketLloyd’s policiesThe form of the policyThe contents of the policyThe premiumThe liability of the underwritersConditionsThe incorporation of other policies

18. The effect of other documents on the policy Effect where the other document is not incorporated Effect where the other document is incorporated Looking at other documents to resolve ambiguities

19. Parol evidence in relation to the policyThe general rule Exceptions to the general rule

To prove that the policy is voidTo prove that the policy does not contain the correct termsTo prove a parol conditionTo add collateral termsTo identify the subject-matter of insuranceTo show that a word is used in a peculiar senseThe effect of the admission of parol evidence

20. The commencement and duration of the policyThe commencement of the policyThe duration of the policyDetermination by payment Determination by consentDetermination by assuredDetermination by statueDetermination by breach of condition

21. The cancellation of the policy22. The alteration of the policy

Methods of alterationThe right of the insurer to avoid the contract

23. The rectification of the policyEffect of delivery of policy containing wrong termsThe advisability of rectificationThe methods of rectificationBy the act of the partiesBy an order of the court

24. The renewal of the policyStipulations as to renewal Where the policy is renewable by mutual consentWhere the policy is renewable at the option of the assuredWhere both parties must renew the policy in the absence of noticeThe practice as to renewalStatement by B.I.A. and Lloyd’sThe effect of renewalThe situations to be consideredSome express terms as to whether renewal is as new contractDays of graceThe classes of stipulation

25. Lapse and revival of policy26. The perils insured against in the policy27. The exceptions in the policy

The variety of exceptions usedThe exceptions to be found in most types of policyThe construction of exceptions

28. The conduct of the assured

Negligent actsWillful actsExpress stipulations in the policy

29. The conditions of the policy The classification of conditions Implied and express conditionsExpress conditionsClassification of conditions with reference to time of operationConditions precedent to validity of the policyConditions subsequent of the policyConditions precedent to the liability of the insurersWhat constitutes a conditionWhether personal fulfillment of the condition by the assured is necessaryBreach of conditionWhat constitutes a breachBurden of proving a breachThe effect of a breachThe usual effectWhere a particular penalty is providedWaiver of breach of conditionWaiver by the insurers: what constitutes a waiverWaiver of breach already committedWaiver of future performance of conditionWaiver must be pleadedWaiver by agent of insurersStatement by B.I.A. and Lloyd’s

30. The alteration of the risk under the policyThe effect of an alterationWhere the policy ceases to applyWhere the alteration merely suspends the operation of the policyImplied conditions as to making alterationsWhere the policy contains an express condition against alterations Where there is no express condition against alterationsExpress conditions as to making alterationsThe types of prohibition or restriction Conditions prohibiting alterations absolutelyConditions prohibiting increase or riskConditions prohibiting alterations without noticeConditions prohibiting increase of risk without sanction

31. The assignment of the subject-matter insured under the policyExpress conditions against assignmentAssignment by operation of lawSale or gift of subject-matterCreation of a trust mortgage

Change in a partnership 32. Other insurance

Express conditions relating to ‘other insurance’What constitutes ‘other insurance’

33. The assignment of the policyWhat constitutes a valid assignmentConsent of the insurersContemporaneity of assignment of the policy and the subject-matterThe form of the assignmentAssignment by operation of lawThe effect of the assignment of the policy

34. The construction of the policyConstruction and the doctrine of precedentThe principal rules of constructionThe intention of the parties must prevailThe whole of the policy must be looked atThe written words will be given more effect than the printed wordsThe grammatical construction will be adoptedThe words are to be construed in their ordinary meaningThe meaning may be limited by the contextThe words mean what they sayThe words must be construed liberallyA reasonable construction will be preferredThe ‘contra proferentem’ ruleThe court will try to reconcile the inconsistencies Express terms override implied termsSubsequent ascertainment of matters originally uncertainThe size of print in insurance policies

THE CLAIM

35. Introduction36. The time of the loss

No express termsExpress terms

37. The doctrine of proximate causeThe meaning of ‘proximate cause’Was the loss caused by a peril insured against?Where the last cause is the peril insured againstWhere the peril insured against is not the last causeWhere there is no break in the sequence of causesWhere the sequence of causes is interruptedWhere the causes are concurrentWas the loss caused by an excepted cause?

Where the peril insured against is preceded by an excepted causeWhere the peril insured against precedes an excepted causeWhere the loss is caused by the action of two concurrent and independent causesModification or exclusion of the doctrine of proximate cause

38. The making of a claimNotice of lossThe notice need not be in writingThe notice need not be given by the assured himselfThe notice need not be given to the insurers personallyThe notice should be given within the prescribed timeParticulars of lossDelivery of the particulars of the lossSufficient details must be givenThe particulars of the lossSufficient details must be givenThe particulars should be delivered within the prescribed timeThe methods of proving the lossFraudulent claimsThe Insurance Ombudsman Bureau

39. Burden of proofProof of lossOn whom the burden liesDegree of proof requiredProof that the loss falls within an exceptionOn whom the burden liesThe general ruleModification by the terms of the policyDegree of proof requiredWhere the undertaking of the insurer is qualifiedThe principles to be appliedPromise with an exceptionQualified promise

THE SETTLEMENT OF THE CLAIM

40. Introduction41. Payment of the loss

The calculation of the amount recoverableValued policiesUnvalued policiesSuccessive lossesSimultaneous lossesLimitation on the amount recoverableContribution clause

Average clauseExcess clauseClause specifying smaller sum payableLimitation by statuteFranchise clausesTo whom payment is to be madeThe form of paymentThe payment of interestPayment by mistakeMistake of law Mistake of factSome examples of mistakes of factExceptions to the general ruleEx gratia payments

42. The application of the proceeds of the policyThe general ruleExceptions to the general ruleRight conferred by statuteContract for the sale or exchange of propertyMortgage by deedProperty subject to a trust or settlementRight conferred by contract

43. The assignment of the proceeds of the policyWhere the loss has already taken placeWhere the loss has not yet taken placeThe form of the assignment

44. ReinstatementReinstatement by the insurersReinstatement clauseTime within which election is to be madeThe mode of electionThe effect of the electionThe duties of the assuredReinstatement under the Fires Prevention (Metropolis) Act 1774Reinstatement by assuredDuty imposed by contractDuty imposed by statute

45. SubrogationThe nature of subrogationThe types of policies to which subrogation appliesThe history of the doctrineThe principle of indemnityWhen subrogation arisesThe rights in respect of which subrogation arises

Rights arising out of tortRights arising out of contractRights under statueRights over the subject-matterThe exercise of the right of subrogationThe duties of the assuredDuty to give assistance to the insurersDuty not to prejudice the insurer’s positionThe defences available to the party suedThe effect of subrogation

46. Indemnification aliundeIndemnification before paymentIndemnification after paymentThe insurers’ right to benefitThe cases in which the right arisesWhere the payment is made by a tortfeasorWhere the payment is made under a contractWhere the payment is made as a gift

47. ContributionThe meaning of contributionWhen the right of contribution arises Same subject-matterSame perilSame assuredPolicies in forceValid and effective contractsContribution not excluded by terms of policiesThe enforcement of the right of contributionThe apportionment of the lossSpecific policiesWhere the policies are concurrentWhere the policies are non-concurrentWhere the loss affects the common property not covered by both policiesAverage policiesThe two conditions of averageThe application of the two average conditionsThe apportionment of the loss

AGENCY IN INSURANCE TRANSACTIONS

48. Introduction49. The relationship between the principal and the agent

The rights of the agentCommission

IndemnityLienThe duties of the agentDuty to carry out the transactionDuty to obey his instructionsDuty to use proper skillDuty to accountDuty to act honestlyThe consequences of a breach of dutyForfeiture of all his rightsLiability for all loss sustainedDismissalCriminal liability

50. The relation between the principal and third partiesThe authority of the agentThe types of authorityExpress and implied authorityUsual authorityApparent authorityThe termination of the agent’s authorityWhere the act of the agent

51. The relation between the principal and third parties The authority of the agent The types of authority

Express and implied authority Usual authority Apparent authority The termination of the agent’s authority Where the act of the agent does not bind the principal The effect of the agent’s fraud

Ratification Conditions necessary for a valid ratification The effect of ratification Ratification after loss Marine insurance Non-marine insurance Insurances by persons interested Insurances by persons having no interest Where the policy covers persons other than the assured Knowledge of the principal or of the agent Imputed knowledge in general Principal’s knowledge imputed to agent Agent’s knowledge imputed to principal Imputed knowledge in insurance transactions

In relation to the assured and his agent Duty of disclosure Knowledge at other stages of the insurance In relation to the insurers and their agent Duty of disclosure Where the proposal form in filled in by the agent and third parties

52. The relationship between the agent and third parties Rights and liabilities under the contract Where he acts for a named or unnamed principal Where he acts for an undisclosed principal Liability for breach of warranty of authority

Liability in tort

MISCELLANEOUS

53. Conflict of laws The jurisdiction of the English courts

The ‘proper law’ of the contract Where there is an express provision in the policy

Where there is no provision in the contract The ‘presumptions’ The place where the contract is made Contracts made through agents The place of payment The form in which the policy is framed Terms valid in one country only Immateriality of locality of subject-matter

When the law of England must always be appliedAssignment

54. The effect of war upon the contract 55. The protection of policy holders

The Policyholders’ Protection Board Constitution

Appointment and tenure of members Remuneration and compensation

Powers and procedure Performance of functions Instruments and contracts

Accounts, audit and annual report Guidance by the Secretary of State The general scope of the Board’s function The Board’s duties in case of companies in liquidation Compulsory insurance

Third-party risk against insurance companies in road traffic cases General policies other than insurance policies Limits on the Board’s duties Long term policies Future benefits under long term business Disproportionate benefits under long term policies General provisions with respect to Board’s duties Performance of duties Exclusion and modification of Board’s duties The Board’s powers to assist policyholders of companies in liquidation The Board’s powers to protect policyholders of companies in financial difficulties Transfer of business etc. Long term business Levies on intermediaries Accountable intermediary Income liable to levy Exempt income levy Restriction on the imposition of the levy Rate of the levy Statement for the purposes of s 20 Declaration and enforcement of the levy Distribution of excess proceeds of levy Levies on authorized insurance companies Net premium income Application of proceeds Restriction on the imposition of the levies Statements of premium income Declaration and enforcement of levies Miscellaneous

Provisions for persons insured under contracts of insurance and evidenced by policies Application of general receipts by the Board

Application of surplus funds by the Board Oversea companies Disclosure of documents and information to the Board Statement by the Secretary of State in respect of the exercise of his powers Report by Secretary of State with to the operation of the Act Regulations