Transcript Commercial Law Insurance

Commercial Law
Insurance
Insurance
• Insurance Act 1963 (revised 1972)
• Insurance contract is a contract where the insurer agrees to
indemnify the insured against a loss which may arise upon
the occurrence of some event or pay a certain sum of
money on the occurrence of a particular event.
• indemnify the insure against a loss – Eg: motor vehicle
insurance. The insurer is the owner of the car. If his car get
into an accident, the loss suffered by him due to the
accident claim will be indemnified by the insurance
provider. Another example would be the professional
indemnity insurance for professionals.
• Pay certain sum of money – Eg: life insurance, medical
insurance.
Insurance contract
• The elements of contract, as has been covered, will be
applicable. Under insurance contract, the elements will be
reflected as the following:
• ITT – The insurance agent explains the product to the
client.
• Offer – The proposal form filled by the person seeking the
coverage
• Acceptance – The insurance company process and accepts
the proposal.
• Consideration – The premium
• Terms of contract – The policy
• The insured loss – The risk
Insurance Contract
• Canning v Farquhar (1886) 16 QBD 727
– The plaintiff applied for life insurance
– The defendant told him that no insurance contract will
take place until the first premium was paid.
– The plaintiff fell over a cliff and died as a result
– The company refused to accept the premium from
plaintiff’s agent because of the change of risk has
occurred (at the time of the proposal was made and
the time payment was made)
– HELD – the company was under no obligation because
the risk has substantially changed.
Insurable Interest
• The risk that can be insured must an insurable interest
(II)
• A person will have II if he will suffer a loss in the event
the property is destroyed
• The insurance policy will be void if a person has no
insurable interest over the property, unless situation
falls under the exception.
• Exceptions
• In life insurance policies the insured is deemed to have
an II in the following persons:
– Spouse
– Child or ward below 18y/o
– Dependents – S.40(2)
Insurable Interest
• Nanyang Insurance v Salbiah
– It was held that the owner had II in a car
registered and insured under the owner’s name.
– Although the accident occurred when the car was
lent to someone else.
Duty of utmost good faith
• General contract – there is no obligation to
disclose
• Insurance contract – it is a duty to disclose
• Insurance contracts is based on mutual trust and
confidence (uberimae fide – utmost good faith)
• Reason: because parties are not in an equal
position with regards to knowledge of possible
risk.
• The insured has to give the requested
information – example: health status
Duty of utmost good faith
• Goh Chooi Leng v Public Life Insurance
– The plaintiff answered NO to the question “have
you ever had advice about your heart or lung or
for cough”
– There was evidence that the plaintiff had been
treated for tuberculosis
– The contract was held to be voidable.
What should be disclosed?
• Answer: Material Facts
• Facts which would influence the mind of a
prudent insurer in deciding whether to accept
the risk or not; and at what premiums.
Material Facts
• New India Assurance v Pan Piang Chong
• The fact of prior conviction of offence relating
to driving of motor vehicle was held not to be
material
• Therefore his non-disclosure did not cause the
contract to be voidable
Indemnity
• Contract of indemnity only restores the
insured to his or her original financial position.
The insured cannot gain from indemnity
• The insured is entitled to be indemnified but
he cannot recover more than the actual loss
Subrogation
• Putting the insurer in the shoes of the insured
• The insured’s rights is subrogated to the insurer
who can make use of the remedies available to
him
• The insurer can sue a third party in the name of
the insured
• Example: the insurer can sue the employee driver
of the insured after paying the injured party in an
accident involving the car of the insured – Lister v
Romford Ice.
Subrogation
• Teo Kim Kien v Lai Sen
• Respondent sent his car to a service station,
the car was involved in an accident when
driven by the employee of the station. The
insurer of the fisrt respondent paid to the
injured party and the first respondent brought
an action against the employee. In this case
the court upheld the principle of subrogation