2. CHAPTER 4 INSURABLE INTEREST
5% OF THE EXAM

3. Purpose of insurable interest
Reduce moral hazard
Discourage wagering

4. What is insurable interest?
Legally recognised financial relationship with the subject matter of insurance
Essential elements:
Subject matter
Economic/financial
Legal
Current (usually)
What is insurable interest?

5. Subject matter Of the insurance Of the contract
The property, life or liability insured
Of the contract
The financial interest in the subject matter of insurance
See Castellain v Preston 1883
‘What is it that is insured in a fire policy? Not the bricks and materials used in building the house, but the interest of the insured in the subject matter of the insurance.’
Links insurable interest with indemnity

6. Is there a legal interest?
The owner of a car
A married person
A father
A car repairer
Your motor insurer
A person who borrows a camera
A bank or building society

7. Financial interest

8. Old Marine Insurance case where judge used this example:
‘Suppose the case of the heir at law of a man who has an estate worth £20,000 who is ninety years of age, upon his death bed intestate, and incapable from incurable lunacy of making a will, there is no man who will deny that such an heir at law has a moral certainty of succeeding to the estate, yet the law will not allow that he has any interest, or anything more than a mere expectation.’
Emphasises that insurable interest must be current
Lucena v Craufurd 1806

9. Development of insurable interest law
Marine Insurance Act 1745
Marine Insurance Act 1906
Marine Insurance (Gambling Policies) Act 1909
Life Assurance Act 1774
Gaming Act 1845
Gambling Act 2005

10. Marine Insurance Marine Insurance (Gambling Policies) Act 1909
Marine policies void without insurable interest
Marine Insurance Act 1745
Marine Insurance Act 1906
Marine Insurance (Gambling Policies) Act 1909
Prohibited issue of marine policies without insurable interest
Criminal offence to effect marine insurance with no insurable interest

11. Life Assurance Act 1774
Person benefiting must have an insurable interest in the life assured
He/She must be named in the policy
He/She can recover no more than the value of their interest
The Act does not apply to insurance on goods, ships or merchandises

12. How does this affect insurable interest?
Gaming Act 1845
All gambling contracts void
Gambling
How does this affect insurable interest?
Gambling Act 2005
Gambling contracts can be enforced

13. Time for insurable interest
Life Assurance
Inception
Marine Insurance
When loss occurs
Other
Inception and time of loss

14. Can insurer waive insurable interest?
Marine insurance
No – Marine Insurance Act 1906
Life Assurance
No – Life Assurance Act 1774
Other insurances
Yes – see Williams v Baltic Insurance Association of London 1924

15. Creation of insurable interest
Common Law
Ownership
Spouse
Contract
Tenancy agreements
Statute
Industrial Insurance and Friendly Societies Act 1948 (updated by Amendment Act 1958)
Hotel Proprietors Act 1956 limits liability for guests luggage

16. APPLICATION OF INSURABLE INTEREST
Property Insurance
Part/Joint Owners
Agents
Bailees
Tenants
Liability Insurance
Damages awarded by the court
APPLICATION OF INSURABLE INTEREST