Insurance
Do you need an insurable interest?
(A) Insurable Interest The insured must have an insurable interest in the subject matter of the insurance. For a comprehensive overview of the law of insurable interest, including the law reforms proposed by the Scottish Law Commission and the Law Commission, see Chapter 3 of the Joint Consultation Paper of the Law Commission and Scottish Law Commission, "Insurance Contract Law: Post Contract Duties and Other Issues" (Law Commission Consultation Paper No 201 and Scottish Law Commission Discussion Paper 152) and the recent Issues Paper on Insurable Interest (Issues Paper 10) available at http://www.scotlawcom.gov.uk/files/8114/2926/6038/insurable_interest_issues.pdf. Note that a draft Bill regarding insurable interest has not been published, available at https://www.scotlawcom.gov.uk/files/1414/6107/8682/Draft_Insurable_Interest_Bill_for_consultation_-_April_2016.pdf. The Life Assurance Act 1774 Section 1: - From and after the passing of this Act no insurance shall be made by any person or persons, bodies politick or corporate, on the life or lives of any person or persons, or on any other event or events whatsoever, wherein the person or persons for whose use, benefit, or on whose account such policy or policies shall be made, shall have no interest, or by way of gaming or wagering; and that every assurance made contrary to the true intent and meaning hereof shall be null and void to all intents and purposes whatsoever. The Life Assurance Act 1774 Act is important in that it imposes strict limits on who can insure the life of a third party, and also restricts the value of policies taken out by insureds on the lives of others - necessary to prove that the insured would suffer direct financial loss in the event of death of the life insured, and that the recovery under the policy will not exceed the insured's pecuniary interest in the continuation of the life insured. Married Women's Policies of Assurance (Scotland) Act 1880: Section 1 - A married woman can effect a policy of assurance on the life of her husband. Section 2 - The proceeds of a policy effected by a married man or woman on their own lives for the benefit of their children are deemed to be held in trust for the benefit of the children. Marine Insurance Act Section 5: (1) Subject to the provisions of this Act, every person has an insurable interest who is interested in a marine adventure. (2) In particular a person is interested in a marine adventure where he stands in any legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by the loss, or damage thereto, or by the detention thereof, or may incur liability in respect thereof. *Macaura v Northern Assurance Co Limited [1925] AC 619 *Cowan v Jeffrey Associates 1998 SC 496 (OH) Mitchell v Scottish Eagle Insurance Co. Ltd. 1997 SLT 793---- Mark Rowlands Limited v Berni Inns Limited [1986] QB 211 (CA) Fehilly v General Accident Fire & Life Assurance Corporation Ltd 1982 SC 163 (OH) Turnbull & Co v Scottish Provident Institution 1896 34 SLR 146
Can the parties contract out of statutory provisions?
1. The parties can contract out of the statutory provisions - s 16(2) IA 2015. If the term would put the insured in a worse position the insurer must ensure that the disadvantageous term is brought to the insured's attention before the contract is formed or varied, and the term must be clear and unambiguous - s 17 IA 2015. 2. Consumer Insurance Contracts A consumer insurance contract is an insurance contract entered into between an individual who enters into the contract wholly or mainly for purposes unrelated to the individual's trade, business or profession (i.e. the consumer insured) and a person who carries on the business of insurance and who becomes a party to the contract by way of that business (i.e. the insurer): section 1 2012 Act. Where the consumer insured and insurer enter into a consumer insurance contract the consumer insured must take reasonable care not to make a misrepresentation before the contract is formed or varied.
Non consumer insurance?
1. isurance Contracts The insured must make to the insurer a "fair presentation of the risk" - s3(1) IA 2015. This is the duty of fair presentation - s3(2) IA 2015. A fair presentation of the risk is a presentation: • which discloses every material circumstance which the insured knows or ought to know; or failing that, which discloses enough to put a prudent insurer on notice that it needs to make further enquiries to reveal those material circumstances. • which makes the disclosure in a manner which would be reasonably clear and accessible to a prudent insurer. • in which every material representation as to a matter of fact is substantially correct; and every material representation as to a matter of expectation or belief is made in good faith - s3(3) and (4) IA 2015. Excluded from the duty to disclose (unless the insurer makes a specific enquiry) are circumstances which diminish the risk; circumstances the insurer knows, ought to know or is presumed to know; or it is something about which the insurer waives information - s3(5) IA 2015. A circumstance or representation is material if it would influence the judgement of a prudent insurer in determining whether to take the risk, and if so, on what terms - s 7(3) IA 2015. See the examples given in s.7(4) IA 2015. Two interpretations of "influence the judgement": - (1) whether the undisclosed fact would have had a 'decisive influence' on the prudent insurer; or (2) whether the fact is one which would have had an 'effect' on the prudent insurer's mind. The second formulation was approved by the House of Lords (by a majority) in the case of *Pan Atlantic v Pine Top Industries Co. Limited [1995] 1 AC 501.
What type of misrepresentations are there?
A misrepresentation by the consumer insured can be (i) deliberate or reckless or (ii) careless. It will be deliberate or reckless if the consumer knew that (a) it was untrue or misleading, or did not care whether or not it was untrue or misleading and (b) the matter to which the misrepresentation related was relevant to the insurer or the consumer did not care whether or not it was relevant to the insurer. A misrepresentation is careless if it is not deliberate or reckless: section 5(2) and (3) 2012 Act. The burden of proving that the misrepresentation was deliberate or reckless lies with the insurer: section 5(4) 2012 Act. There is a rebuttable presumption that the consumer had the knowledge of a reasonable consumer and that the consumer knew that a matter about which the insurer asked a clear and specific question was relevant to the insurer: s5(5) 2012 Act.
Warranties?
A warranty is a fundamental term of the insurance contract. It is effectively a promise made by the insured, and must be strictly observed. Can be warranty of fact or of opinion. A warranty of fact can take the form of:- (1) a statement of fact by the insured as to the past or present, or (2) a continuing undertaking that a state of affairs will prevail throughout the duration of the policy, which must be exactly complied with, whether it be material to the risk insured or not. This is sometimes referred to as a 'promissory' or 'continuing' warranty. Normal rules of contractual interpretation apply to warranties. *Hussain v Brown [1996] 1 Lloyd's Rep 627 (CA) *Ansari v New India Assurance Ltd. [2009] EWCA Civ 93; [2009] Lloyd's Rep IR 562. Kennedy v Smith 1976 SLT 110 (First Division) On breach of a warranty of opinion see *Mchpee If there is a breach of warranty the insurer has no liability for any loss occurring after the warranty has been breached and before the breach has been remedied - s 10(2) IA 2015.
The continuing duty of good faith?
An insurer is bound, before the contract is entered into, to disclose to the proposer anything he knows that goes to reduce the risk from the level at which the proposer wrongly believes it stands. Lord Mansfield, in Carter v Boehm 1766 3 Burr 1905, gave the example of someone wishing to insure a ship that was known to the insurer already to have safely arrived at its destination. The duty also exists during the contract, but only in relation to facts that are material to the risk insured. Bank of Nova Scotia v Hellenic Mutual War Risk Association (Bermuda) Ltd ("The Good Luck") [1992] 1 AC 233 Banque Financiere de la Cite SA v Westgate Insurance Co Ltd [1991] 2 AC 249 By contrast, there is no duty on the insured, during the course of the policy (as opposed to prior to the contract being entered into or varied), to disclose to the insurer any circumstance that has developed since the inception of the policy and which increases the risk. However the policy may have a specific term requiring such disclosure to be made. Manifest Shipping Co Ltd v Uni Polaris Shipping Co Ltd ("The Star Sea") [2001] 2 WLR 170 (HL) Lord Hobhouse (at paragraph 38): "It is not necessary to disclose facts occurring, or discovered, since the original risk was accepted material to the acceptance and rating of that risk. Logic would suggest that such new information might be valuable to the underwriter ... but it need not be disclosed".
Whats the consequences for breaching the duty of fair presentation?
Consequences of Breaching the Duty of Fair Presentation The insurer has remedies but only if he can show that but for the breach of fair presentation the insurer would either not have entered into the insurance contract; or would only have done so on difference terms. The insurer must show inducement. There will then be a "qualifying breach" - s 8(3) IA 2015. A rebuttable presumption will arise that the insurer has been induced to enter into the insurance contract as a result of the insured's non-disclosure of material facts - St. Paul Fire & Marine Insurance Co (UK) Ltd. v McDonnell Dowell Constructors Ltd. [1995] 2 Lloyd's Rep. 116. Remedy available depends on whether the breach is deliberate/ reckless or not. A qualifying breach is deliberate or reckless if the insured knew that he was in breach of the duty of fair presentation or did not care whether or not he was in breach of that duty - s8(5) IA 2015. If you don't know/ don't care then it is deliberate or reckless. The insurer has the onus of proof - s8(6) IA 2015. Must be a qualifying breach- there must be inducement must then also be defined if deliberate/ reckless or not. Remedies are set out in Sched 1. Where the breach is deliberate or reckless the insurer can avoid the contract, refuse all claims and need not return any of the premiums paid by the insured - para 2 Sched 1. Where the breach is not deliberate or reckless the remedy depends on what the insurer would have done had he known the true facts. If the insurer would not have entered into the contract on any terms he may avoid the contract and refuse all claims but must return the premiums paid to the insured - para 4 Sched 1. If the insurer would have entered into the contract, but on different terms (except terms regarding the premium), then the contract is treated as if it includes those different terms: para 5 Sched 1. If the insurer would have levied a higher premium, the insurer may reduce proportionately the amount to be paid to the insured on a claim: para 6 Schedule
What is the nature of an insurance contract?
Essentially, there are two types of insurance: (1) indemnity insurance - the insured is indemnified against loss, damage or destruction suffered, e.g. motor insurance, fire insurance, theft insurance, marine insurance, building and contents insurance, etc. The event is uncertain to occur. Major fundamental in the law of insurance. (2) life assurance - the insured event, i.e. death, is certain to occur. However, the precise timing of the death is uncertain. Uncertainty is common to all insurance transactions. With fire, motor etc there is no certainty that what you've insured will require it. Life insurance is certain but it is uncertain as to when. With a couple of exceptions Scots and English Law on insurance are identical: • The Marine Insurance Act 1906 applies in both jurisdictions. This Act codified the common law and the great majority of the principles set out in the Act apply equally to non-marine insurance. Has been applied in other areas of insurance. However to be treated with caution as its 100 years old. • The Consumer Insurance (Disclosure and Representations) Act 2012 applies to consumer insurance contracts in the UK. • The Insurance Act 2015 applies to insurance contracts in the UK.
What is the purpose?
Guarding Against Uncertainty and Risk Insurance is designed to provide safeguards in the event of misfortune or the occurrence of a risk. The key element in the practice of insurance is the spreading of the losses of the few who actually incur them amongst the many who buy the coverage. A major issue underlying insurance law is that the insured knows much more about the risk he wishes to have insured, and the perils to which it is subject, than the insurer. The insurer provides insurance for profit and as such he will not want to offer unlimited cover against every eventuality. The law protects the insurer by requiring the insured to provide information to the insurer - in consumer insurance the insured must take reasonable care not to make a misrepresentation to the insurer (as to which see section D below) and for commercial insurance the insured must make a fair presentation of the risk (also discussed in section D below). In an insurance contract an insured might provide a warranty to the insurer regarding certain matter. Breach of the warranty means the insurer is not on cover from the time the warranty is breached until it is remedied (warranties are discussed in section G below).
Whats the difference in remedies between the two types?
If the consumer breaches the duty by making a deliberate or reckless misrepresentation, the insurer has the remedy of avoiding the contract and refusing all claims. The insurer can retain all of the premiums paid, except to the extent (if any) that it would be unfair to the consumer to retain them: s4 and Schedule 1, para. 2 2012 Act. If the consumer makes a careless misrepresentation the nature of the insurer's remedy is dependent on what the insurer would have done if the inured had complied with the duty to take reasonable care not to make a misrepresentation: s 4 and Schedule 1, para. 4 2012 Act. If the insurer would not have entered into the contract, then he may avoid the contract and refuse all claims but must return all of the premiums paid: Schedule 1, para. 5 2012 Act. However, if the insurer would have entered into the contract, but on different terms (except terms regarding the premium), then the contract is treated as if it includes those different terms: Schedule 1 para 6 2012 Act. If the insurer would have levied a higher premium, the insurer may reduce proportionately the amount to be paid to the consumer on a claim: Schedule 1, paras 7 and 8 2012 Act.
What if there are two independent causes?
If there are two independent causes, neither of which can be determined to be the dominant cause of the loss, and one is covered and the other is not mentioned in the policy - then the insurers must pay. *J J Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The "Miss Jay Jay") [1987] 1 Lloyd's Rep 32 (CA) *Syarikat Takaful Malaysia Berhad v Global Process Systems Inc and Anr "The Cendor Mopu" [2011] UKSC 5; [2011] 1 All ER 869 If there are two dominant causes and one of them is excluded by the policy the insurer will not have to pay. *Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corporation Ltd [1974] QB 57 (CA) Midland Mainline v Eagle Star [2004] 2 Lloyd's Rep 604 CA It is for the insured to prove that the cause of loss was included as an insured peril. Rhesa Shipping v Edmunds (the "Popi M") [1985] 1 WLR 948 (HL)
Difference between the law in england and scotland?
In English law, the right to indemnity is in legal terms the equivalent to a claim for unliquidated damages for breach of contract - it arises at the time of the loss event and not at the time when the insured makes a claim or the insurer wrongfully refuses to pay. In English law, the indemnity principle currently extends to denying the insured any ability to claim damages from the insurer for consequential losses flowing from the insurer's failure promptly to pay a valid loss: Sprung v Royal Insurance (UK) Ltd [1999] 1 Lloyd's Rep IR 111 (CA) This is not the position in Scots law. In Scots law, where the insurer is liable to indemnify the insured, the payment of the insured's claim made under the policy is classified as a contractual obligation to pay a sum of money equivalent to the insured's loss, rather than an obligation to pay damages for breach of contract or otherwise: Scott Lithgow Ltd. v Secretary of State for Defence 1989 S.C. (HL) 9 and Strachan v Scottish Boatowners' Mutual Insurance Association 2010 SC 367. Scots law will allow a damages claim for late payment. But soon damages will be possible in England also - s13A of the Insurance Act 2015, into force on 4 May 2017.
What situation is it to state the agent is working for the consumer?
In any other case, it is to be presumed that the agent is acting as the consumer's agent unless, in the light of all the relevant circumstances, it would appear that the agent is acting as the insurer's agent. Relevant factors which may tend to confirm that the agent is acting for the consumer are that: a) the agent undertakes to give impartial advice to the consumer b) the agent undertakes to conduct a fair analysis of the market c) the consumer insured pays the agent a fee. *ADD IN CASES
When must the insurable interest exist?
In indemnity insurance the insurable interest must exist at the time of the loss - Godsall v Boldero (1807) 9 East 72. There is some doubt as to whether an insurable interest must also exist at the time the contract is entered into but it seems this is probably required. However, in life assurance the requirement is that it must exist at the time when the contract of insurance was made and need not continue to exist at the time of the loss - Dalby v India & London Life Assurance Co (1854) 15 CB 365. The law on insurable interest has recently been reviewed in depth in the case of Feasey v Sun Life Assurance Co of Canada [2003] Lloyd's Rep IR 637.
Duties of disclosure?
Insurance is a contract "uberrimae fidei" although this has been modified by the changes made to the law of insurance by the Consumer Insurance (Disclosure and Representations) Act 2012 ("the 2012 Act"), which came into force on 6 April 2013, and the Insurance Act 2015 (IA 2015), which came into force on 12 August 2016. An insured is obliged to provide information to his insurer prior to the contract of insurance being entered into or any variation being made to the insurance contract. The duty differs depending on whether the contract is a consumer insurance contact or not. A consumer insurance contract is an insurance contract entered into between an individual who enters into the contract wholly or mainly for purposes unrelated to the individual's trade, business or profession (i.e. the consumer insured) and a person who carries on the business of insurance and who becomes a party to the contract by way of that business (i.e. the insurer): section 1 2012 Act. Otherwise it is a non-consumer insurance contract (a commercial insurance contract).
What distinction is drawn between intermediaries?
Lots of commercial insurance is arranged through intermediaries. Sometimes there are two or more intermediaries involved in the formation of the insurance contract. Despite the growing importance of direct insurance done on the internet or by telephone a substantial amount of insurance to individuals is still put in place through intermediaries. The distinction to be drawn is that between an independent intermediary - a broker - who acts for the insured, and a tied agent who acts for the insurer. A tied agent is limited to selling the products of his principal. Both independent brokers and tied agents are usually rewarded by a commission.
Financial market and service act?
Part XV of the Financial Services and Markets Act 2000 (FSMA) provides protection for the insured where the insurer is unable to meet its liabilities, e.g. on insolvency. FSMA imposes levies on insurers in order to finance insurers' liabilities and in some cases the insured will be indemnified in full when a claim is made against the Financial Services Compensation Scheme Ltd. The relevant rules are contained within the Financial Conduct Authority Handbook and the Prudential Regulation Authority Handbook - a combined view of both handbooks is available at http://fshandbook.info/FS/html/handbook/COMP/2. FSMA also enables the insured to make a complaint to the Financial Services Ombudsman regarding the insurer's resolution of a dispute. This Ombudsman right only relates to private individuals or a business which is a mico-enterprise (an enterprise with fewer than 10 employees and an annual turnover or annual balance sheet that does not exceed €2 million).
What if there is a breach of warranty?
Prior to IA 2015 a breach of warranty allowed the insurer to escape liability even if the breach was unconnected with the loss that occurred. No longer the case due to s11 IA 2015 - if a loss occurs and the warranty has not been complied with the insurer cannot use non-compliance to exclude its liability if the insured shows that the non-compliance could not have increased the risk of loss which actually occurred in the circumstances in which it occurred. Possible to contract out of sections 10 and 11 in commercial insurance provided the insurer complies with the requirements of s 17 (discussed above) - see s 16(2) IA 2015. Not possible to contract out of the provisions in consumer insurance contracts - s 15 IA 2015. No particular form of wording is required to create a warranty but it must be clear that the parties intend the term to be a warranty. The Courts will try to mitigate the severity of the law in relation to breach of warranty by interpreting any ambiguity in the warranty contra proferentem. Prior to IA 2015 answers to questions and statements made in proposal forms could be rendered warranties by a 'basis of the contract' clause. This is no longer the position - s 6 2012 Act and s 9 IA 2015. Not possible to contract out of this provision in any type of insurance contract - s 15 and 16(1) IA 2015.
Third parties rights etc?
Privity of contract prevented third parties who had suffered loss as a result of the conduct of the insured from claiming under an insurance policy between the insured and the insurer. Where an insured became bankrupt, the proceeds of any insurance policy would be paid to the insured's trustee in bankruptcy. The 2010 Act prevents this (as did the Third Parties (Rights Against Insurers) Act 1930, now repealed). The 2010 Act, which came into force on 1 August 2016, enables a third party who has a claim against an insured who has become bankrupt to proceed directly against the insurer. The Act operates as a statutory assignation of the insured's rights under the insurance policy to the injured third party - ss1(2) 2010 Act. The 2010 Act also improves the third party's rights to information about the insurance policy - s11 and Sched 1 2010 Act
Do insurers have a right to salvage?
Salvage If an insurer has paid a total loss then the wreckage of the insured object, if the insurer so wishes, becomes his property, and he is entitled to retain whatever he can realise from its disposal: Simpson & Co v Thomson Burrall [1877] 3 App Cas 279 (HL)
Fraudulent claims?
Same rules apply for consumer and non-consumer insurance. Found in IA 2015. If the insured makes a fraudulent claim the insurer is not obliged to pay it and may recover any sums he has paid - s12(1) IA 2015. See the distinction between a fraudulent claim and use of a fraudulent device - Versloot Dredging BV v HDI Gerling Industrie Versicherung AG [2016] 3 WLR 543. The insurer can also, by notice, treat the contract as having been terminated with effect from the time of the fraudulent act - s 12(1) IA 2015. If the insurer treats the contract as having been terminated he may refuse all liability under the contract in relation to events occurring after the time of the fraudulent act and need not return any premiums paid - s12(2) IA 2015. Treating the contract as terminated does not affect the parties' rights and obligations in relation to events that took place before the fraudulent act - s 12(3) IA 2015. Clarifies the position - in English law prior to the IA the effect of a fraudulent claim on the insurance contract was unclear.
What is subrogation?
Subrogation The general rule is that the insured must never be more than fully indemnified. From the indemnity principle flows the right of subrogation. Subrogation is the right of an insurer who has fully indemnified the insured to stand in the shoes of the insured and to exercise (in the insured's name) all rights that the insured could have exercised himself to recover from any source other than the insurers the whole or part of the financial loss he has sustained and for which he has been indemnified. Castellain v Preston [1883] 11 QBD 380 (CA) Lonsdale & Thompson Limited v Black Arrow Group Plc [1993] Ch 361 Lonsdale & Thompson Limited v Black Arrow Group Plc The right of subrogation applies "from the top down" - Lord Napier & Ettrick v Hunter [1993] AC 713 - insurers, having indemnified the insured up to the limit of their policy, are entitled to their remedy out of funds received by the insured from a third party even though the insured's loss might be greater than the sum insured. Subrogation is not available to contingency insurers - as such the life insurers of a person killed in a car crash cannot claim against the person responsible for the crash.
What does the 2012 act state for who an agent is acting for?
The 2012 Act sets out rules for determining whether an agent is acting as an agent of the consumer insured or insurer - see section 9 and Schedule 2 of the 2012 Act. An intermediary will be the agent of the insurer when the agent: (a) does something in the agent's capacity as the appointed representative of the insurer for the purposes of the Financial Services and Markets Act 2000 (b) collects information from the consumer insured if the insurer had given the agent express authority to do so as the insurer's agent (c) enters into the consumer insurance contract as the insurer's agent if the insurer had given the agent express authority to do so.
Indemnity principle?
The Insured must prove not only the occurrence of the insured peril, for example fire, but also that he has suffered in consequence a pecuniary loss, over and above any excess (or "retention") which he has agreed to bear himself. "The sum insured" represents the maximum figure which the Insured can recover. Chapman v Pole [1870] 22 LT 306 Cockburn CJ: "You must not run away with the notion that a policy of insurance entitles a man to recover according to the amount represented as insured ... He can only recover the real and actual value of the goods". But note the exceptions of life assurance or a "valued" policy where a fixed amount will be paid. The indemnity principle provides that an insured can only receive from the insurer the amount which he has lost. Over-insurance will do the policyholder no good. Where the insured item is damaged (a partial loss) the insurer is required to pay for the cost of its repair to its pre-damaged condition. Where repairs are not carried out the standard measure of indemnity is the second hand value of the object in its pre damaged condition. It is possible to insure for "replacement as new", but that will cost more. In England (but not in Scotland) under the Fires Prevention (Metropolis) Act 1774 the insurer is obliged to pay for the reinstatement of the property up to the value of the sum insured at the request of any person having an interest in a building that has been damaged or destroyed by fire. The insured cannot make double recovery if he insures the same risk with two insurers - he can pursue his claim against one of the insurers only in order to recover his loss except where the contract of insurance includes a "rateable contribution clause". The insurer who had paid out would be entitled to recover a contribution from the other. In life assurance you can insure your own life for whatever sum you wish and there are no issues with double insurance. Not permissible to insure the life of another person for a value beyond what you will lose if they die: Life Assurance Act 1774, section 3. Leppard v Excess Insurance Co Ltd [1979] 1 WLR 512 (CA)
How is it regulated?
The activities of insurers are regulated by the Financial Services and Markets Act 2000 (FSMA) - essentially to ensure that insurance companies remain solvent and are run by fit and proper persons. FSMA also provides a specific dispute resolution mechanism under the auspices of the Financial Services Ombudsman in for consumers and micro-businesses. Third Parties (Rights Against Insurers) Act 2010 - provides those with claims against an insolvent insured with a direct right of action against the insolvent insured's insurer. Part XV of the Financial Services and Markets Act 2000 provides funds, contributed to by all insurers practising in the United Kingdom and administered by the Financial Services Compensation Scheme Ltd., with which to discharge 90% of the liabilities of insolvent insurers.
Agent of the insurer?
The following matters may tend to show that the agent is acting as the agent of the insurer: a) the agent places insurance of the type in question with only one of the insurers who provide insurance of that type b) the agent is under a contractual obligation which has the effect of restricting the number of insurers with whom the agent places insurance of the type in question c) the insurer provides insurance of the type in question through only a small proportion of agents who deal in that type of insurance d) the insurer permits the agent to use the insurer's name in providing the agent's services e) the insurance in question is marketed under the name of the agent f) the insurer asks the agent to solicit the consumer's custom.
What remedy will the insurer have?
The insurer will have a remedy where the consumer insured breaches the duty to take reasonable care not to make a misrepresentation and where without the misrepresentation the insurer would not have entered into the contract or would have done so only on different terms: section 4 2012.
What obligations does the broker have?
The obligation of the broker: • to satisfy himself as to the nature and value of the risk proposed for insurance; • to advise his client as to the most appropriate form of coverage; and • to negotiate with the insurer to secure the best terms available. A broker will also assist the insured in dealing with any claim that may need to be made on the policy. As a matter of general agency law, while the knowledge of a broker is imputed to his principal, it is certainly not imputed to the other party in the transaction. Important in relation to the duties of disclosure (discussed at D above). Again as a matter of general agency law a principal will be bound by his agent's acts carried out within the scope of his actual or apparent ("ostensible") authority. There is frequently an element of dual agency involved in the insurance process. *Stockton v Mason and The Vehicle and General Insurance Co Ltd [1978] 2 Lloyd's Rep 430 (CA) *Newsholme Bros v Road Transport and General Insurance Co Ltd [1929] 2 KB 356 (CA) Cherry Limited v Allied Insurance Brokers [1978] 1 Lloyds Rep 274 McNealy v The Penine Insurance Co Ltd [1978] 2 Lloyd's Rep 18
Proximate Cause?
The principle of indemnity for loss involves consideration of what losses are covered by a policy. The policy will specify the risks covered and will usually also specify against what perils. Problems can arise where there are two possible causes, one of which is covered under the policy and the other is not. Ionides v The Universal Marine Insurance Co 1863 14 SB (NS) 259, Wiles J: "You are not to trouble yourself with distant causes, or to go into a metaphysical distinction between causes efficient and material and causes final; but you are to look exclusively to the proximate and immediate cause of the loss. "Immediate" means most closely connected, the "real" or "dominant" cause - not necessarily the closest in time." Rausher v Borthwick [1894] 2 QB 548 (CA)
Contribution?
The right of contribution arises where the property is insured with more than one insurance company and an insured event causes loss which is valued at less than the combined amount of the policies. Prima facie, the insured may recover from any one insurer the whole amount insured by it, but there is usually a clause in the insurance contract to the effect that each insurer shall be liable to contribute rateably only ("a rateable contribution clause"). If an insurer pays out more than his share of the loss he has a right to recover the amount he paid out above his share from the other insurers - Sickness and Accident Insurance Association Ltd. v General Accident Assurance Corporation Ltd. (1892) 19 R 977.
What is the standard of care of the insured?
The standard of care to be discharged by the consumer insured is that of the reasonable consumer, unless the insurer was, or ought to have been, aware of any particular characteristics or circumstances of the actual consumer or the representation made by the consumer was dishonest: section 3(3), (4) and (5) 2012 Act. Whether the insured has taken reasonable care not to make a misrepresentation is to be determined in light of all the relevant circumstances and the Act sets out some examples of factors that may need to be considered: section 3(1) and (2) 2012 Act.
Event insured?
There is a rule that the insured cannot deliberately cause the loss insured against for example Bereseford v Royal Insurance Company Limited [1938] AC 586. What happens if the insured event was partly caused by the actions of the insured? The answer varies from case to case for example see Dhak v Insurance Co, of North America (UK) Ltd. [1996] 1 WLR 936; Connelly v New Hampshire Insurance Co 1997 SLT 1341; and Gray v Barr [1971] 2 QB 554.
Definition?
There is no single definition of insurance that is regarded as thoroughly satisfactory by practitioners, lawyers and academics. The following are judicial efforts at a definition. Scottish Amicable v Northern Assurance Company 1883 11 R 287, LJ-C Moncreiff It is a contract ... by which the Insurer undertakes in consideration of the payment of an estimated equivalent beforehand, to make up to the assured any loss he may sustain by the occurrence of an uncertain contingency. Prudential Insurance Co v Inland Revenue Commissioners [1904] 2 KB 658, Channel J It must be a contract whereby for some consideration, usually but not necessarily for periodical payments called premiums, you secure to yourself some benefit, usually but not necessarily the payment of a sum of money, upon the happening of some event. The Medical Defence Union Limited -v- Department of Trade [1980] Ch 82, Sir Robert Megarry VC:- not a contract of insurance - must be cabable of being able to be transferred in monies worth. It appears that a contract is a contract of insurance if three elements are present...First, the contract must provide that the assured will become entitled to something on the occurrence of some event...Secondly, the event must be one that involves some uncertainty...Thirdly, the assured must have an insurable interest in the subject-matter of the contract. The "benefit" must be a sum of money or an equivalent service measurable in financial terms: Department of Trade and Industry v St Christopher's Motorists Association [1974] 1 WLR 99 The right to the benefit must be certain: Medical Defence Union v Department of Trade [1980] Ch. 82
Average?
This principle is important where the subject matter of the insurance is under-insured. There will usually be a clause in the insurance contract which provides that the insured can recover only the proportion that the sum insured bears to the actual value of the property.
Whats the insured ought to know/deemed to know?
What does the Insured Know or What Ought he to Know? An insured who is an individual knows only what is known to him and what is known to anyone who is responsible for his insurance - s4(2) IA 2015. For an insured who is not an individual (eg a company) it knows only what is known to one or more of the individuals who are either part of the insured's senior management or responsible for the insured's insurance - s4(3) IA 2015. Senior management are those individuals who play significant roles in the making of decisions about how the insured's activities are going to be managed or organised - s4(8) IA 2015. An insured does not know confidential information known to the insured's agent where it was acquired by the agent through a business relationship with a third party - s4(4) IA 2015. An insured (individual or not) ought to know what should reasonably have been revealed by a reasonable search of information available to the insured - s4(6) IA 2015. A representation is substantially correct if a prudent insurer would not consider the difference between what is represented and what is actually correct to be material - s7(5) IA 2015. With regard to the standard expected of the insured where he makes a representation as to a matter of expectation or belief, see *Economides v Commercial Union Assurance Co Plc [1988] QB 587 (CA) which was followed by the Privy Council in Zeller v British Caymanian Insurance Co. Ltd. [2008] UKPC 4; [2008] Lloyd's Rep IR 545
What should the insurer ought to know?
What does the Insurer Know or What Ought he to Know? An insurer knows something only if it is known to one or more of the individuals who participate on the insurer's behalf in the decision on whether to take on the risk, and if, on what terms - s5(1) IA 2015. An insurer ought to know something if an agent or employee of the insurer knows it, and ought reasonably to have passed it on to an individual who participates on the insurer's behalf in the decision on whether to take on the risk; or the information is held by the insurer and is readily available to an individual who participates on the insurer's behalf in the decision on whether to take on the risk - s5(2) IA 2015. An insurer is presumed to know things which are common knowledge; and things which an insurer offering insurance of the class in question to insureds in the field of activity in question would reasonably be expected to know in the ordinary course of business - s5(3) IA 2015. An individual's knowledge (insurer and insured) includes matters which the individual suspected and of which he would have had knowledge but for deliberately refraining from confirming them or enquiring about them - s6 IA 2015. The way in questions are asked by the insurer can be important in relation to waiver: Hair v Prudential Assurance Co Ltd [1983] 2 Lloyd's Rep 667, Lord Wolff: "Whether or not such waiver is present depends on a true construction of the proposal form, the test being: would a reasonable man reading a proposal form be justified in thinking that the insurer had restricted his right to receive all material information and consented to the omission of the particular information in issue?"
Is writing required?
Writing is not required for the constitution of an insurance contract - s1 of the Requirements of Writing (Scotland) Act 1995. However s22 of the Marine Insurance Act 1906, provides that a marine insurance policy is inadmissible in evidence unless it is embodied in written form.
