DR. RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY
The Insurable Interest Doctrine
Name: Sukriti Guha Roll No.: 142 Semester: VIIIth Class: B.A., LL.B. (Hons.) Subject: Insurance Law Submitted to: Ms. Aparna Singh
TABLE OF CONTENTS
II. Can there be any valid insurance agreement without insurable interest? III. Creation of insurable interest
IV. Wager and insurance
V. Types of insurable interest
VI. Time or duration of insurable interest
VII. Insurable interest vis-à-vis life insurance contract VIII. Insurable interest vis-à-vis marine insurance contract IX. Insurable interest vis-à-vis fire insurance contract X. Conclusion
The aim of insurance is to shift risk from one person (the insured) to another (the insurers). In insurance contract as a matter of public policy, certain insurable requirements must be met, to make it valid. Insurable interest is one of the basic requirements of the insurance. Without it the insurance contract is a mere wagering agreement.
In India it is strange that the Insurance Act 1938 does not contain a definition of insurable interest. The only section, namely section 68, which makes a passing reference to the words 'insurable interest’ stands repeated by section 48 of The Insurance Amendment Act 1950. Briefly stated there is no legislative guidance in Indian law on the subject but still marine insurance defines under section 7 of the marine insurance act 1963 defines insurable interest.
Insurable interest is also defined as a legal right to insure an asset or person. In theory, therefore, nothing more is payable than the amount of actual loss. It follows that unless the assured has a pecuniary interest in the thing insured, no question of loss or indemnity shall arise. A person cannot therefore insure a thing, the loss of which cannot cause him any financial loss. A policy of insurance, therefore, is void if the insured has no such pecuniary interest in the subject matter of the insurance. Any person, who would suffer from destruction or loss of a thing, has insurable interest in that thing.
The insurable interest must:
* Be definite
* Be capable of valuation
* Be legally valid and subsisting
* Involve the loss of legal right
* Involve a legal liability
II. CAN THERE BE ANY VALID INSURANCE AGREEMENT WITHOUT INSURABLE INTEREST? The existence of insurable interest is an essential ingredient of any insurance contract. It is an important and fundamental principle of insurance. It can be defined as the legal right to insure arising out of a financial relationship recognized under law, between the insured and the subject matter of insurance We find that the meaning of the term insurable interest is liberally interpreted. It is not always the legal interest or a full interest that's required by the courts but it should be such that it would be sufficient if it is recognized by court of law or equity as such interest. The following points may be gathered: 1) The interest should not be a mere sentimental right or interest, for example love and affection alone cannot constitute insurable interest. 2) It should be a right in property or a right arising out of a contract in relation to the property. 3) The interest must be pecuniary that is, capable of estimation in terms of money. In other words, the peril must be such that...
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