1. RISK ANDRISK AND INSURANCEINSURANCE PRINCIPLES OF
INSURANCE
2. INSURABLE INTEREST (i.i) One major difference between
insurance and gambling is the the former has to be supported by
insurable interest.
3. Subject Matter of Insurance - Contract Subject matter of
insurance is the life, limbs, property, rights or any potential
legal liability insured under a policy. Subject matter of contract
is the insureds financial interest in the subject matter of
insurance.
4. What is i.i The right to insure arising out of legally
recognized financial interest which a person has in the subject
matter of insurance. Which is the financial interest that is
recognized under the common law or statute.
5. When i.i must exist? At the time of inception and at the
time of loss. EXCEPT: Life insurance at the time of inception
Marine at the time of loss
6. ASSIGNMENT The transfer of rights and liabilities by one
person to another. An assignee, the person who takes over the
assignment rights will have no better rights that those enjoyed by
the assignor.
7. Exception of the Rule Marine Policies Freely assignable by
statutory provision. Only cargo policies are freely assignable.
Life Policies Freely assignable by statutory provision
8. Assignment of Policy Proceeds Arises when an insured
instructs his insurer to pay the policy proceeds to a third party.
The insurer remains a party to the insurance contract and continue
to assume liabilities under it. All policy proceeds are freely
assignable under the policy unless the contract provides
otherwise.
9. UTMOST GOOD FAITH (UGF) Subject to duty of good faith in
relation to disclosure during negotiation. The buyer should ask
questions if the need more information (caveat emptor let the buyer
beware)
10. Duty of UGF and Contractual duty of UGF Positive duty (of
the insured) to disclosed fully and accurately all material facts
that he (the insured) knows or ought to know, whether asked for or
not by the insurer. The proposal form commonly contain a
declaration to the effect that the particulars given in the
proposal is true and correct. By signing the form, the proposer
warrants the truth of this statement.
11. Material Fact A fact which would influence the PRUDENT
underwriter in accepting the risk or fixing the premium.
12. Duration Lasts until the completion of the insurance
contract. If any changes in teh material facts occur after they
have been intimated to the insurer but before the completion of the
contract, the proposer is required to notify the changes to the
insurer otherwise the contract would be voidable.
13. Breaches of UGF Breaches of UGF is committed the contract
is voidable. Breaches of UGF if: - Fails to provide the insurer
with information relating to the material fact, consider as non-
disclosure or - Misrepresent a material fact, i.e incorrect
information relating to a material fact, termed as
misrepresentation.
14. PROXIMATE CAUSE When a loss has occurred the onus is on the
insured to prove that the loss in respect of which a claim is made
was caused by the operation of an insured peril.
15. Definition The active, efficient cause that sets in motion
a train of events which brings about a result, without the
intervention of any force started and working from a new and
independent source.
16. INDEMNITY To make good a loss or damage. When the insured
has measurable insurable interest the contract of insurance will be
a contract of indemnity.
17. Methods and Measures 1C 3R Cash Repair Replace Reinstate
Measure Total Loss Method 1 Reinstatement / Replacement deduct wear
and tear Method 2 Market Value of a property similar to the one
destroyed Partial Loss Cost of repair
18. Factors Limiting Indemnity Sum Insured Average Condition
Policy Excess Franchise
19. Policies Which Pay More Than Indemnity Reinstatement
Policies Agreed Additional Costs Valued Policies
20. SUBROGATION Taking the rights belonging to an insured by
the insurer after the latter has indemnified the insured. Rights
including those rights against third parties who are also liable
for the loss which is the subject of the claim and the right of the
insured in the salvage.
21. Subrogation rights may arise Subrogation arising from tort
Subrogation arising out of contract Subrogation arising out of a
statute Subrogation arising out of salvage
22. CONTRIBUTION The amount which each insurer has to
contribute to the cost of a loss when the loss is covered by two or
more insurers
23. Principle of contribution and reason for necessary
Principle of indemnity an insurer who has indemnified the insures
may call upon the other insurers who are similarly liable for the
loss to contribute to the payment of indemnity. If the insured is
allowed to recover from more than one insurer for the same loss, he
may recover more than the loss, because there is no enrichment out
of insurance claim.
24. Conditions 2 or more policies of indemnity exists. The
policies must cover a common interest. The policies must cover a
common peril which gives rise to the loss. The policies must cover
a common subject matter. Each policy must be liable for the
loss.