Insurance Law

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1. Explain what is “Total Failure of Consideration” and explain your understanding of cases Tyrie & Fletcher ? (6/5)

Answer :
Total Failure of Consideration is a condition where the insured has never had anything of value in return for the their own payment

The risk may fail to run, resulting in a Total Failure of Consideration because of : ❖ The proposal may be withdrawn after the premium has been paid ❖ The Policy may be void for mistake or because there was no consensus ad idem ❖ The Policy may be void because there is no insurable interest ❖ The Policy may be voided ab initio for misrepresentation or non disclosure

In Tyrie & Fletcher (1777)
A first that where the risk has not been run, whether its not having been run was owing to the fault, pleasure, or will of the insured, or to any other cause, the premium shall be returned because a policy of insurance is a contract of indemnity.

Second if the insurer does not run the risk, the consideration for which the premium or money was put into his hand, fails, and therefore he ought to return it.

Another rule is that if the risk of the contract of indemnity has once commenced, there shall be no apportionment or return of the premium afterwards.

2. Explain difference of insurance and wages ? (6/10)

Answer :

Insurance contract are :
❖ The insured is required to have a financial interest in the subject matter of contract ❖ The object is to protect the insured against loss and their identity is know before the event ❖ Full disclosure on the part of both parties is required under the doctrine of utmost good faith ❖ In most cases payment is made only by the way of indemnity (example : for a loss which has been incurred) ❖ The contract is enforceable at law

Wagering contract are :
❖ The interest are limited to the stake to be won or lost ❖ Either party may win or lose and the loser can not be identified until after the event ❖ Full disclosure is not required either party

❖ The stakes are not paid by way of indemnity. Payment is made without suffering loss beforehand ❖ Neither party can enforce the contract in court

3. What is Proportional Principle ? (7/16)

Answer :
Is mean the insurer may not entirely avoid the policy for breach of good faith unless there is fraud.

Example :
If a proposer failed to disclose two previous claims when applying for household insurance and the insurer would have increased the premium by 25% if they had been told these facts, their liability for any subsequent loss would reduce by 20%. The following details will illustrate this :

Premium charged$ 200
Correct premium (which would have been charged)
If the claim had been disclosed)$ 250
Subsequent loss$ 5,000
Liability for loss $ 200 x $ 5,000$ 4,000
$ 250

4. What is position regarding assignment policies in property, marine, life insurance ? (9/3 – 9/5)

Answer :

❖ Assignment of contract for property insurance
The assignment must take place at the same time as the sale, this is because the policy will normally lapse automatically if the subject matter is disposed of and, therefore, there will no contract to assign once the sale has taken place. On the other hand, if assignment is attempted before the sale the assignment may not yet have sufficient insurable interest n the property to make the insured valid

❖ Assignment for Marine Insurance
In practice marine policies are not freely assignable because the ownership of cargo may change several times in the course of a voyage, and it is obviously convenient if the insurance cover can be easily transferred at the same time. Normally, the risk will not alter as a result of a change in the ownership of the goods, because they will usually remain on the same ship.

❖ Assignment for life Policies
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