Insurable Interest
What is the rationale for the insurable interest requirement
1. Furthers indemnity principle - recovery limited to actual loss 2. it discourages wagering 3. It avoid moral hazard. Reduces incentives to facilitate loss because you care about x so you are likely not to prompt x's destruction 4. prompts public safety (you'r unlikely to burn down your own house if you have an insurable interest in it)
What is an insurable interest (4)
1. it is the relationship between the insured and the object of insurance 2. loss or destruction of that interest triggers insurance payment 3. this is required for valid insurance contract 4. This distinguishes the insurance contract from wagering
What kind of interest in a thing gives you an insurable interest
1. legal 2. equitable 3. contractual 4. pecuniary
What princible was rejected in favour of Factual Expectancy Test
The Macaura principle
Describe the Factual expectancy test
Kosmopolous: Does the insured benefit from the continued existence of some thing, would they suffer at the destruction of that thing I. having some relation or concern in the subject of insurance II. This relationship must be one where if the risk that is insured against actually happens it will produce damage, detriment or prejudice to the insurer. He has a real interest in this thing "To have moral certainty of advantage or benefit but for those risks or dangers he may said to be interest in the safety of the thing" "To be interested in the preservation of a thing such as to benefit fom its existence and receive prejudice from its destruction" 1. insured needs to have pecuniary ($) interest in the subject matter, cant just be emotional 2. The subject matter of insurance must be real or presently vested. hope to acquire some item does not give you ability to insure. At the least you need a legally enforceable right to obtain property in the future. 3. It (insurable interest) is not established by legal title alone, but this helps 4. can be defeated on public policy grounds (we do not want to give a person who knows they are buying a stolen good an interest in that good)
discuss insurable interest with regard to the leading case on the subject
Kosmopolus. The facts of this case was that a business person was the sole proprietor of a business. he was also the soul shareholder. But the business was incorporated. The insurance for the business was in his name, and not in the name of the company. There was a fire, his business was destroyed. Old law stated that in order to have an insurable interest you had to be the owner of the item. This is switched out for the legal expectancy test
Describe the aforementioned principle and give its name again
Macaura princble 1. it focused on property or contractual rights 2. legal or equitabl interest was required for insurable interest in property
What are some implications of the factual expectancy test
The relationship between insured and property is fact specific This allows for flexible determination Tangible connection with property is required, you have to have a pecuniary interest in that thing
How would you describe the factual expectation test
an inquiry into how the person seeking insurance is related to that thing. Is there a close relationship between insured and object of insurance insureds interest in insured object bay me legal, equitable or contractual
