Social and commercial importance of insurance



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social and commercial importance of insurance

  • social and commercial importance of insurance

  • huge range of subject-matter:

    • ships
    • goods
    • warehouses
    • building projects
    • oil rigs


huge range of risks:

  • huge range of risks:

    • natural disasters (storms, earthquakes…)
    • piracy
    • non-payment
    • exchange rate fluctuations
    • strikes
    • political changes
    • war


insurance market

  • insurance market

  • origin: coffee house (1680s)

  • meeting place for captains and insurers





market leaders in many fields

  • market leaders in many fields

  • often first to offer insurance for new risks:

    • cars: 1904
    • planes: 1911
    • satellites: 1960s
  • almost bankrupt in 1980/90s:

    • Exxon Valdez – hurricane Andrew
    • Piper Alpha – asbestosis


market profitable again

  • market profitable again

  • capacity 2008: £16.1 billion in premiums

  • profit 2006: £3.7 billion

  • money for insurance provided by ‘names’

  • are grouped together in syndicates

  • insurance arranged by brokers and underwriters





prospective insured = proposer

  • prospective insured = proposer

  • use of agents (brokers)

  • different procedure at Lloyd’s:



insurable interest: legal or equitable relationship with subject-matter

  • insurable interest: legal or equitable relationship with subject-matter

  • Laucena v Craufurd (1806) 2 Bos & Pul (NR) 269

  • Macaura v Northern Assurance Co Ltd [1925] AC 619

  • Petrofina (UK) Ltd v Magnaload Ltd [1983] 2 Lloyd’s Rep 91



Feasy v Sun Life Assurance Co of Canada [2003] EWCA Civ 885: “It is not a requirement of property insurance that the insured must have a ‘legal or equitable’ interest in the property as those terms might normally be understood. It is sufficient for a sub-contractor to have a contract that relates to the property and a potential liability for damage to the property to have an insurable interest in the property.” (Per Waller LJ)

  • Feasy v Sun Life Assurance Co of Canada [2003] EWCA Civ 885: “It is not a requirement of property insurance that the insured must have a ‘legal or equitable’ interest in the property as those terms might normally be understood. It is sufficient for a sub-contractor to have a contract that relates to the property and a potential liability for damage to the property to have an insurable interest in the property.” (Per Waller LJ)



utmost good faith = uberrima fides

  • utmost good faith = uberrima fides

  • Carter v Boehm (1766) 3 Burr 1905: “Insurance is a contract upon speculation. The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only...” (per Lord Mansfield)



s.17 Marine Insurance Act 1906: “A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party.”

  • s.17 Marine Insurance Act 1906: “A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party.”



s.18 Marine Insurance Act: “Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured… If the assured fails to make such disclosure, the insurer may avoid the contract.”

  • s.18 Marine Insurance Act: “Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured… If the assured fails to make such disclosure, the insurer may avoid the contract.”



Container Transport International Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476: rejection of “decisive influence test”

  • Container Transport International Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476: rejection of “decisive influence test”

  • Pan Atlantic Insurance Co v Pine Top Insurance Co [1995] 1 AC 501: requirement of “inducement”



moral hazard

  • moral hazard

  • Roselodge Ltd v Castle [1966] 2 Lloyd’s Rep 113

  • Rehabilitation of Offenders Act 1974

  • physical hazard



mutual duty of utmost good faith

  • mutual duty of utmost good faith

  • Banque Financière de la Cité SA v Westgate Insurance Co Ltd [1991] 2 AC 249



peril: event insured against

  • peril: event insured against

  • exception: event expressly excluded

  • loss: total or partial loss

  • constructive total loss

  • doctrine of abandonment

  • causation: “proximate cause”



Becker, Gray & Co v London Assurance Corp [1918] AC 101

  • Becker, Gray & Co v London Assurance Corp [1918] AC 101

  • Marsden v City & County Insurance (1865) LR 1 CP 232

  • Leyland Shipping Co v Norwich Union Fire Insurance Society Ltd [1918] AC 350



indemnity principle

  • indemnity principle

  • Castellain v Preston (1883) 11 QBD 380

  • two elements:

    • recovery of money received from third party
    • action against third party



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