Chapter 3

Question 1

Marine Insurance Act 1906 (Insurable Interest)

Answer 1

a person has an interest in a marine adventure if they have a legal or equitable relationship to it or any insurable property at risk
means they can benefit from it’s safety or suffer from its loss or damage

Question 2

Life Assurance Act 1774 (Insurable Interest)

Answer 2

prohibits making insurance policies on lives or events where the PH has no interest, or for gambling purposes

Question 3

Consideration - Currie v Misa (1875)

Answer 3

some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, sufferer, or undertaken by the other

Question 4

Reasonable Misrepresentations

Answer 4

the insurer must pay the claim

Question 5

Careless Misrepresentations

Answer 5

a proportionate remedy, based on what the insurer would have done had it known the facts

Question 6

Deliberate or Reckless Misrepresentations

Answer 6

the insurer can avoid the contract and refuse all claims

Question 7

Duty of Disclosure Requirements

Answer 7

• material circumstances
• clear and accessible information
• correct and good faith representations

Question 8

Exceptions to Disclosure

Answer 8

if it diminishes the risk, the insurer already knows it, ought to know it, is presumed to know it or if the insurer waives the need for that information

Question 9

Warranties

Answer 9

the insurers liability is in effect suspended until the breach is remedied

Question 10

Fraudulent Claims

Answer 10

• the insurer is not liable to pay the claim
• the insurer may recover from the insured any sums paid by the insurer in respect of the claim

Question 11

Enterprise Act 2016

Answer 11

all insurance contracts requiring insurers to ‘pay any sums due in respect of the claim in a reasonable time’

Question 12

Factors to consider under Enterprise Act 2016

Answer 12

• the type of insurance
• the size and complexity of the claim
• compliance with any relevant statutory or regulatory rules or guidance
• factors outside the insurer’s control

Question 13

Good Faith Concepts

Answer 13

• the positive duty of disclosure
• misrepresentation

Question 14

Pan Atlantic Insurance Co v. Pine Top Insurance Co (1994)

Answer 14

“material information is that which a typical, reasonable underwrite would have wanted to know about when forming their opinion of the risk”

Question 15

Recent law on Good Faith

Answer 15

• CIDRA and insurance act 2015
• avoiding the contract if the misrepresentation was deliberate or reckless
• if that information was known, they would not have entered to the contract
• if it was neither deliberate nor reckless, then it must return the premium

Question 16

Notification of Breach

Answer 16

claims handlers must inform the insured promptly if they believe a policy term has been breached

Question 17

Reservation of Rights

Answer 17

insurers may reserve their rights while investigating, meaning they might decline cover if a breach is found

Question 18

Burden of Proof

Answer 18

if the insurer repudiates a claim, the insured must prove waiver

Question 19

Court Stance on Waivers

Answer 19

courts are unlikely to uphold coverage defence if the insurer has promised not to rely on their rights and the insured has relied on that promise to their detriment

Question 20

Kosmar Villa Holidays plc v. Trustees of Syndicate 2008

Answer 20

suffered serious injury in pool and didn’t notify for a year when policy required immediate notification

• insurers are allowed reasonable time to investigate without reserving rights
• brief handling of a claim does not imply a permanent waiver or acceptance of liability unless there is unequivocal acceptance

Question 21

Leyland Shipping v. Norwich Union Fire Insurance Society Ltd (1918)

Answer 21

• a torpedo struck the ship Ikara. due to storm damage and orders, it sank at an outer berth
• house or lords ruled that the torpedo was the proximate cause
• the “chain of events” wasn’t broken, making the torpedo (a war risk) the dominant cause
• claim denied due to war risk exclusion

Question 22

Midland Mainline Ltd & Others v. Eagle Star Insurance Co Ltd (2004)

Answer 22

• following the hatfield rail disaster due to fatigue cracking, emergency speed restrictions were imposed, disrupting rail services
• court of appeal found two proximate causes: wear and tear (fatigue cracking) and speed restrictions
• since speed restrictions were due to wear and tear, both were deemed proximate causes
• insurers could rely on the wear-and-tear exclusion to deny the claim

Question 23

Warranties

Answer 23

• relating to past facts
• relating to present facts
• relating to a continuing state of affairs (a continuing warranty)

Question 24

Bank of Nova Scotia v. Hellenic Mutual War Risks Association (Bermuda) Ltd (1992)

Answer 24

the house of lords held that a breach of warranty terminated cover automatically from the date of breach

Question 25

Insurance Act 2015 - Breach of Warranty

Answer 25

the insurer can only avoid liability in certain circumstances • the loss occurred while a warranty was breached and before it was remedied • the warranty was designed to reduce the risk of a loss of a particular kind, location and time and the circumstances of the loss directly related to the breach

Question 26

Conditions

Answer 26

A condition precedent in a policy means compliance with specific terms is essential for an obligation to be binding

Question 27

Eagle Star Insurance Co Ltd v. Cresswell (2004)

Answer 27

a claims control clause in a reinsurance contract stated the insurer “will not be liable to pay any claim” if the condition was breached • the policy did not explicitly label the clause a condition precedent • intent was clear that the reinsurer should control negotiations or settlements court of appeal conclusion: wording was sufficient to classify it as a condition precedent

Question 28

Aspen Insurance UK Ltd & Others v. Pectel Ltd (2008)

Answer 28

whether the notification clause was a condition precedent • wording implied the insurer’s obligation to indemnify was conditional on compliance with notification • citing Kidsons, the judge ruled timely notification allowed insurers to investigate claims early outcome: a notification delay invalidated coverage, as compliance was a condition precedent

Question 29

Independent Peril

Answer 29

each peril can cause a loss on it’s own; insurer only covers the part attributable to the insured peril

Question 30

Interdependent Perils

Answer 30

loss requires both perils acting together, if one is excluded, the claim may not be covered

Question 31

Case Law on Independent and Interdependent Perils

Answer 31

Wayne Tank and Pump Co Ltd v. Employer’s Liability Insurance (1974) • fire caused by defective equipment (uninsured) and employee negligence (insured) • proximate cause was defected equipment, so claim denied • if an excluded peril is involved, coverage is denied J.J Lloyd (instruments) Ltd v. Northern Star Insurance (1987) • yacht damaged due to bad weather (insured) and defective design (uninsured) • insurer fully liable as neither cause alone would have led to the loss I2C Tektrol Ltd v. International Insurance Co of Hangover (2004) • source code lost due to a virus (excluded) and burglary • both virus and burglary were causes of loss, making the claim excluded

Question 32

Case Law on Exclusions

Answer 32

Bankers Insurance Co Ltd v Patrick South and Mark Ian Gardner (2003) • jet ski collision injury claim; policy excluded waterborne craft • decision - claim excluded C A Blackwell (Contracts) Ltd v. Gerling Agllgemeine (2007) • rain damage due to construction site without adequate drainage • losses were deemed fortuitous and not excluded due to defects or wilful misconduct