Two Components in insurance law
in insurance law
There must be an ‘insurable interest’ to be insured
In every contract of insurance, the insured has to have an ‘insurable interest’.
Insurable interest is an interest in the subject matter of a contract of insurance which provides the insured with the right to enforce the contract.
A person who suffer loss in the event of his property being destroyed can be said to have an insurable interest.
If a person has no insurable interest, the policy is void.
:silhouettes:Case: Macaura v Northern Assurance Co Ltd (1925)
Macaura had no insurable interest as he had assigned the plantation to the company.
:silhouettes:Case: Nanyang Insurance Co Ltd v Salbiah & Anor (1967)
Lau Teck Siaw had an insurable interest in the car on the date of the accident. The car was driven by Abdul Karim with the permission of the insured.
Section 152 (2) Insurance Act 1996
Person shall be deemed to have insurable interest in relation to another person if the other person is his spouse, child, employee etc.
There must be an insurable interest at the time the insurance was taken.
there must be insurable interest at the time the insurance was taken and at time of a claim.
Proponent is required to demonstrate utmost good faith (uberrimae fidei) in insurance proposal
Insurance contracts are contracts of the utmost good faith (Uberrimae fidei)
Uberrimae fidei is applicable to describe a class of contracts in which one party has a preliminary duty to disclose material facts.
In insurance contract, contracting parties are required to disclose to each other all information (material facts) which would influence either party’s decision to enter into the contract, regardless of whether such information was requested or not.
This is because insurance contracts are based on mutual trust and confidence between the insured and the insurer.
Failure to disclose material information gives the other party the right to regard the contract as void.
:silhouettes:Case: Goh Chooi Leng v Public Life Assurance Co Ltd (1964)
Assured’s answer in the declaration was a deliberate lie. The contract of insurance was therefore voidable.
The person with the greatest knowledge of the risk involved is the proponent.
It follows that they should disclose all those facts that could influence the insurance company as to whether or not it will accept the risk.