INSURANCE AND PENSIONS

LAW
CASE SUMMARIES WITH
KEY PRINCIPLES
Table of Contents
PART I: GENERAL POLICY OF INSURANCE CONTRACTS.................................................2
UNIT 1: DEFINITION OF INSURANCE.........................................................................................2
What is insurance? Definition and Classification of Insurance Business;.................................2
Premium; Benefit; Uncertainty.........................................................................................................2
Insurance interest; Contracts of Guarantee; Contracts of Indemnity.........................................2
UNIT 2: FORMATION OF INSURANCE CONTRACT................................................................2
2.1 Offer and Acceptance; Mistake.................................................................................................2
2.2 Formalities; Renewals; Cover notes........................................................................................2
UNIT 3: INSURANCE INTEREST AND DOCTRINE OF PRIVITY OF CONTRACT..............2
3.1 History and Rationale; Insurable Interest in lives; Insurable Interest and principle of.......2
Indemnity............................................................................................................................................2
3.2 Insurable Interest in property insurance; Insuring on behalf of third parties;......................2
UNIT 4: DUTY OF DISCLOSURE: MATERIALITY OF FACTS AND.......................................2
MISREPRESENTATION..................................................................................................................2
4.1 The Doctrine of ‘uberrimae fidei’; Determining the Materiality of non-disclosed facts;......2
Qualifying the duty of disclosure; Consequences of non-disclosure..........................................2
4.2 Ambit of the insured’s duty of disclosure; Scope of the insurer’s duty of disclosure.........2
4.3 Misrepresentation; Consequences of Misrepresentation by the insurer.............................2
UNIT 5: CONSTRUING THE TERMS OF INSURANCE CONTRACT......................................2
5.1 Terms of the Contract; Construing the terms of the Insurance Contract; Parol.................2
Evidence Rule....................................................................................................................................2
UNIT 6: WARRANTIES, CONDITIONS AND TERMS DESCRIPTIVE RISK..........................2
6.1 Nature and Effect of Insurance Warranties; Creating an Insurance Warranty...................2
6.2 Classification of Warranties in Insurance Contracts; Terms Descriptive of the Risk;........2
Consequences of a Breach of Warranty; Breach of warranty: the waiver.................................2
6.3 Conditions....................................................................................................................................3
UNIT 7: CAUSATION.......................................................................................................................3
7.1 Proximate Cause Rule; Agreements to alter the Rule of Causation....................................3
7.2 Multiple Causes; Burden of Proof; Impact of deliberate actions of the insured..................3
UNIT 8: CLAIMS PROCEDURE, MEASUREMENT OF LOSS AND REINSTATEMENT......3
8.1 Claims Procedure: - Claims; Insured’s Duty of utmost faith and fraudulent claims;..........3
Waiver of conditions precedent to recovery...................................................................................3
8.2 Measurement of Loss: - Principle of Indemnity; Under-Insurance and the principle of.....3
average; Excess Clause; Franchise Clause; Double Insurance and Contribution;..................3
Damages............................................................................................................................................3
8.3 Reinstatement: - Contractual Reinstatement; Statutory Reinstatement..............................3
UNIT 9: SUBROGATION AND ABANDONMENT.......................................................................3
9.1 Subrogation and Indemnity; When the Right of Subrogation arises; Rights of..................3
Subrogation; Justification for Subrogation.....................................................................................3
9.2 Abandonment..............................................................................................................................3
PART II: SPECIFIC CONTRACTS OF INSURANCE..................................................................3
UNIT 10: AUTO, CAR OR MOTOR INSURANCE.......................................................................3
10.1 Introduction (Part IX of Roads & Road Traffic Act, Cap 464); Types of Cover; Basis.....3
of Premium Charges; Requirements of Compulsory Insurance; Certificate of.........................3
Insurance; Anti-Avoidance Provision..............................................................................................3
10.2 Third Party Rights and Claims against the insurer; Hospital expenses; Offences..........3
UNIT 11: FIRE INSURANCE...........................................................................................................3
11.1 Fire Policies...............................................................................................................................3
11.2 Insured Perils in Fire Policies..................................................................................................3
11.3 Excepted Perils in Fire Policies..............................................................................................3
UNIT 12: PROPERTY INSURANCE..............................................................................................4
12.1 Definition of Property Insurance.............................................................................................4
12.2 Policy Coverage........................................................................................................................4
UNIT 13: MARINE INSURANCE....................................................................................................4
13.1 Definition of Marine Insurance................................................................................................4
13.2 Form and Types of Marine Insurance Policy........................................................................4
13.3 Warranties; Voyage Policies; Losses....................................................................................4
UNIT 14: HEALTH INSURANCE....................................................................................................4
14.1 Definition of Health Insurance.................................................................................................4
14.2 Policy Coverage........................................................................................................................4
UNIT 15: LIABILITY INSURANCE.................................................................................................4
15.1 Standard Terms in Liability Insurance Policies.....................................................................4
15.2 Employers’ Liability Insurance................................................................................................4
15.3 Third Parties (Rights Against Insurers)..................................................................................4
UNIT 16: LIFE INSURANCE...........................................................................................................4
16.1 Definition of Life Policy............................................................................................................4
16.2 Types of Life Policy; Maturity of Policy..................................................................................4
UNIT 17: REINSURANCE...............................................................................................................4
17.1 Types of Reinsurance Contracts............................................................................................4
17.2 Formation of the Contract........................................................................................................4
17.3 Implied and Express Terms....................................................................................................4
17.4 Claims........................................................................................................................................4
PART III: INSURANCE INTERMEDIARIES.................................................................................4
UNIT 18: INSURANCE INTERMEDIARIES..................................................................................5
18.1 Insurance Agents; Insurance Brokers; Claims Agents; Assessors; Loss Adjuster’s.......5
PART IV: REGULATION AND SUPERVISION OF INSURANCE AND INDUSTRY..............5
UNIT 19: REGULATION OF INSURANCE INDUSTRY..............................................................5
19.1 Regulation of insurer and other intermediaries; Management and Shareholding of.......5
insurance business; Financial Regulation of Insurers; Insurance Policies;...............................5
Policyholders’ Protection; Supervision...........................................................................................5
19.2 Transfer of Insurance Business; Winding of Insurers; Returns to be made by................5
Insurers; Insurance Fidelity Fund....................................................................................................5
UNIT 20: PENSION INSURANCE AUTHORITY (PIA)................................................................5
20.1 Establishment of Authority; Functions of Authority; Constitution of the Board of.............5
Authority; Registrar...........................................................................................................................5
GENERAL POLICY OF INSURANCE
CONTRACTS
DEFINITION OF INSURANCE

CALLAGHAN v DOMINION INSURANCE CO [1997] 2 LLOYD’S REP 541

FACTS

This case revolved around an insurance policy that protected a discotheque (Disco) from fire
damage. After a fire caused damage to the discotheque, the plaintiffs filed a claim against the
defendants.

ISSUE

The primary issue in contention involved the defendant’s avoidance of the policy on the
grounds of non-disclosure. The pivotal legal inquiries included determining whether the cause
of action arose at the time of loss (fire damage) or upon the avoidance of the policy.
Additionally, a critical consideration was whether the plaintiff’s legal action was statute barred,
given its initiation more than six years after the property had sustained fire damage.

HELD

In coming to the decision Sir Peter Webster defined insurance as;

“An agreement to confer upon the insured a contractual right which, prima facie, comes into
existence immediately when loss is suffered by the happening of an event insured against, to be
put by the insurer into the same position in which the insured would have been had the event not
occurred, but in no better position

KEY PRINCIPLE

The case emphasizes the principle of determining when a cause of action arises in insurance
disputes-whether it is triggered by the event causing loss or by the insurer’s avoidance of the
policy. It also underscores the importance of adhering to statutory limitations regarding the
timing of legal actions in insurance claims.
LEGAL ENTITLEMENT
PRUDENTIAL INSURANCE CO V IRC (1904) 2 KB 658
FACTS

The Insurance Company provided endowment insurance policies. They disagreed with the
Commissioners as to whether these were policies of insurance and thus as to how they fell to
be stamped. Life insurance was defined in the 1891 Act as ‘insurance upon any life or lives or
upon any event or contingency relating to or depending upon any life or lives.’ The instrument
that was to be presented for stamping in that case was the policy of insurance and ‘Policy of
insurance’ was defined to mean ‘every writing whereby any contract of insurance is made’

ISSUE

It had to be determined whether endowment insurance policies met the criteria of a “contract of
insurance” for stamp duty purposes, focusing on the nature of payment and uncertainty
surrounding an adverse event.

HELD

A contract of insurance, then, must be a contract for the payment of a sum of money, or for
some corresponding benefit such as the rebuilding of a house or the repairing of a ship, to
become due on the happening of an event, which event must have some amount of uncertainty
about it, and must be of a character more or less adverse to the interest of the person effecting
the insurance

KEY PRINCIPLE

For a contract to qualify as insurance, it must involve an agreement to pay a sum of money or
provide a corresponding benefit upon the occurrence of an event with a degree of uncertainty,
and this event should be of a nature adverse to the insured party’s interest.

QUOTE

Channel J in defining insurance had this to say;

“A contract of insurance is one whereby one party the insurer promises in return for a
consideration the (premium) to pay to the other party the (insured) a sum of money or provide him
with some corresponding benefit upon the occurrence of one or more specified events. There must
be either uncertainty whether the event will happen or not if the event is one which must happen
at some time there be uncertainty as to the time at which it will happen. Generally, it is a
necessary part of making a recovery under a contract of insurance to prove that what caused the
loss was a fortuity.”
UNCERTAINTY
MEDICAL DEFENCE UNION V DEPARTMENT OF TRADE [1979] 2 All ER 421
FACTS

The Medical Defence Union (the 'union') was a company limited by guarantee with members
consisting of medical and dental practitioners.

Their activities included conducting legal proceedings on behalf of members, indemnifying

members against claims for damages and costs, and providing advice and educational
guidance.

Members' rights regarding legal proceedings and indemnities were limited to the fair
consideration of their requests for help; they did not have the right to compel the union to
conduct legal proceedings or indemnify them. Upon acceptance of an application for
membership, a contractual relationship is established between a member and the union.

A member's financial obligation, regardless of the number of claims against them, was limited
to paying the appropriate annual subscription for their class of membership.

ISSUE

The matter in question was to determine whether the contract between the union and its
members constituted a contract of insurance within the meaning of the Insurance Companies
Act 1974.

The Department of Trade contended that the contract was one of 'insurance' under the general
law, falling within the 1974 Act, based on the argument that, on the occurrence of an event
(such as a claim), a member becomes entitled to a 'benefit,' even if that benefit is not a right to
money or money's worth.

The specific contention was that a member's right to have their request for help with a claim
properly considered by the union is a benefit, rendering the contract one of insurance under
the 1974 Act.

HOLDING

It was held that to constitute a contract of insurance under the general law and within the
1974 Act, there must be, on the occurrence of some event, a right to receive money or money's
worth. If the entitlement is merely to some benefit other than money or money's worth, the
contract is not one of insurance.

The court held that a member's right to have their application for help (the right to request for
help) with a claim properly considered by the union did not meet the criteria for a contract of
insurance.

Therefore, the union is not considered an insurance company carrying on an insurance

business within the 1974 Act.

The union was entitled to a declaration to that effect.

KEY PRINCIPLE
In order for a contract to be considered a contract of insurance under the general law and
within the scope of relevant legislation, there must be a right to receive money or money's
worth upon the occurrence of a specific event. The court clarified that entitlement solely to a
benefit other than money or money's worth does not suffice to categorize the contract as one of
insurance.

In other words, for a contract to fall within the realm of insurance, the policyholder or
beneficiary must have a tangible right to receive a monetary payout or its equivalent when a
defined event takes place. The court distinguished between benefits that are monetary in
nature and those that are of a different kind. In this case, the court held that a member's right
to have their request for assistance with a claim properly considered by the union, while a
benefit, did not meet the criteria of a contract of insurance because it did not entail a right to
money or money's worth.

QUOTE

. “The central question emerged as being whether each contract was a contract ‘of insurance’,
and so the main issue comes down to the meaning of the one word ‘insurance’ in the expression
‘contract of insurance’.

The leading authority, I think, is the judgment of Channell J in Prudential Insurance Co v Inland
Revenue Comrs, as read in the light of Gould v Curtis (Surveyor of Taxes). From these cases it
appears that a contract is a contract of insurance if three elements are present. There
has been no dispute about the second and third of these, and the first is also common ground,
save as to one point. It is round that point that the argument has centered. Before I turn to the
terms of the three elements, I should say that from Gould v Curtis it appears that there are two
categories of insurance which may respectively be called indemnity insurance and
contingency insurance. Indemnity insurance provides an indemnity against loss, as in a fire
policy or a marine policy on a vessel. Within the limits of the policy the measure of the loss is the
measure of the payment. Contingency insurance provides no indemnity but instead a payment
on a contingent event, as in a life policy or a personal injury policy.”

“With these two categories of insurance in mind, the three elements in a contract of insurance
may be expressed as follows: and in this I draw largely on what Channell J said in the
Prudential case ([1904] 2 KB 658 at 663).”

1. First, the contract must provide that the assured will become entitled to something on the

occurrence of some event.

2. Second, the event must be one which involves some element of uncertainty

3. Third, the assured must have an insurable interest in the subject-matter of the contract.
GOULD V CURTIS [1913] 3 L.B 84

FACTS

Mr. Gould purchased a life insurance policy with both a benefit for his beneficiaries and an
endowment feature guaranteeing him a payout if he survived till a specific date. He argued that
he could deduct the entire premium for income tax, but the tax authorities disagreed, claiming
only the portion covering the death risk was “true insurance.” The court sided with the
authorities, ruling only the death benefit portion of the premium was deductible. This case
clarified tax deductions for complex life insurance policies with mixed death and investment
features.

ISSUE

The matter in question was to determine whether premiums paid on a life insurance policy
with both death benefit and endowment features were fully deductible for income tax purposes
under section 54 of the income Tax Act, 1853.

HODING

The court of Appeal held that only the portion of the premium attributable to the life insurance
aspect of the policy, known as the “temporary assurance premium,” as deductible. The portion
attributable to the endowment feature, which represented a guaranteed investment return
regardless of death, was not considered “insurance” for tax purposes.
INSURABLE INTEREST

CASTELLAIN V PRESTON (1883) 2 QB 380

FACTS

Mr. Castellain (seller) had sold his insured house to Mr. Preston (buyer) for an agreed price.
Before the sale closed, the house was destroyed by fire. Mr. Castellain claimed and received the
full insurance payout for the house. Despite the fire damage, Mr. Preston still wished to
purchase the property for the original price. Mr. Castellain sought to keep both the insurance
money and the sale price.

ISSUE

Whether Mr. Castellain could retain both the insurance payout and the sale price, or if he was
obligated to repay the insurance company after the sale remained intact.

HOLDINNG

The court held that Mr. Castellain could not keep both the insurance money and the sale price.
Insurance serves as an indemnity for loss, and receiving both the payout and the sale price
constituted unjust enrichment and double recovery. Therefore, Mr. Castellain was required to
repay the insurance company the amount he had received.

KEY PRINCIPLE

This case establishes that;

(i) Insurance cannot be used as a way to profit from loss or speculate on an event.
(ii) The insured interest must be genuine and represent a financial stake that would be
negatively affected by the insured event (e.g., fire in Castellain’s case).
(iii) The insurance payout, along with any other recovery (e.g., sale proceeds), should
not exceed the actual loss and put the insured in a better financial position than
before the loss.
MORNACH STEEL LTD V JESSONS INSURANCE AGENCY LTD SCZ JUDGMENT NO 6 OF
2013(UNREPORTED)

FACTS

Monarch Steel Limited (Appellant) obtained six insurance covers from Jessons Insurance
Agency Limited (Respondent) between 1st July 2005 and 1st July 2006. The covers included Fire
Insurance Policy, Public Liability Policy. Employments’ Liability cover, GPA insurance Policy,
and Private Car Comprehensive Policy. The Appellant verbally undertook to pay the premium in
installments over three months but defaulted on several policies.

ISSUE

The key legal issue was whether a claim arising from an insurance policy not paid within 60
days could succeed, given the appellant’s argument that the policies had lapsed under section
76(1) of the insurance Act, 1997.

HOLDING

The learned trial judge held that the conduct of the parties, specifically the agreement to pay a
premium payment credit scheme beyond the statutory sixty days, amounted to a waiver of the
legal requirement to pay the premium within 60 days. The endorsement to the policies reflected
this agreement. The Judge concluded that the appellant could not insist on the original 60-day
premium payment clause, as it had obtained this right through the doctrine of waiver,
Judgment was entered in favor of the respondent and the appeal was dismissed.
PREMIUMS

A premium is the amount paid to an insurer for accepting a risk. The insured pays a premium
to the insurer as consideration for the insurer’s promise to provide a benefit in the event of the
insured suffering a loss i.e.

In the case of Hampton v Toxteth Co-operative Society, membership in a local co-operative

society was stated to grant the right to a monetary sum upon the death of a member's spouse,
with the amount to be determined by specified criteria

CONTRACTS OF GUARANTEE VS CONTRACT OF INDEMNITY

Seaton V Heath [1899] 1 QB 782 gives the following distinction between a contract of
guarantee and a contract of insurance:

“The insured generally puts the risk before the insurer as a business transaction, and the insurer
on the risk stated fixes a proper price to remunerate him for the risk to be undertaken and the
insurer engages to pay the loss incurred by the insured in the event of certain specified
contingencies occurring. On the other hand... [Where contracts of guarantee are concerned] the
creditor does not himself go to the surety, or represent, or explain the surety, the risk to be run.
The surety often takes the position from motives of friendship, and generally not as a result of
any direct bargaining between him and the creditor, or in consideration of any remuneration
passing to him from the creditor.”

-Romer L.J-
CONTRACTS OF INDEMNITY

LEPPARD V EXCESS INSURANCE [1979] 1 WLR 512

FACTS

The Plaintiff's property sustained damage due to fire and sought compensation from
defendants under an insurance policy. As a result a dispute arose over the amount of
compensation and the plaintiff claimed the full cost of reinstatement, while the defendants
argued for the market value of the property at the time of the fire.

ISSUE

It had to be determined whether the plaintiff was entitled to receive compensation equivalent to
the full cost of reinstatement or limited to the market value of the property at the time of the
fire.

HOLDING

The court ruled in favor of the defendants and found that the plaintiff's entitlement was limited
to the market value of the property at the time of the fire, not exceeding the cost of
replacement.

PRINCIPLE

The principle of indemnity governs insurance contracts, limiting compensation to the actual
loss suffered by the insured.

Insurance policies are construed as indemnity contracts, with the insurer obligated to
indemnify the insured for the actual loss incurred, not exceeding the cost of replacement.

The insured cannot recover more than the actual loss suffered, even if the policy provides for a
higher amount.
FFORMATION OF INSURANCE CONTRACTS

ESSENTIALS FOR A VAID CONTRACT

The precise moment at which a contract of insurance comes into existence is a matter of
construction.

TAYLOR V ALLON [1966] 1 QB 304

FACTS

The appellant's motor car insurance expired on April 5, 1964, and he intended to switch to a
new insurer.

The appellant obtained a temporary cover note from the new insurer for thirty days starting
April 16.

The old insurer sent a temporary cover note for fifteen days starting April 6.

On April 15, while driving his car, the appellant was stopped by the police and asked for his
insurance certificate.

The appellant presented the expired insurance certificate and the cover note from the new
insurer but did not mention or produce the temporary cover note from the old insurer.

ISSUE

Whether the appellant was insured under the Road Traffic Act, 1960, on April 15, 1964, based
on the temporary cover note from the old insurer.

HELD

The court held that the appellant was not insured under the Road Traffic Act on April 15,

1964.

The temporary cover note from the old insurer was deemed an offer to insure for the future.

The appellant did not show that he knew of the temporary cover note or relied on it, thus
failing to accept the offer.

Despite the insurance company's representative stating they would assume liability, there was
no enforceable contract of insurance.

The appeal was dismissed, and leave to appeal to the House of Lords was refused.

PRINCIPLE

A valid insurance contract must arise from an enforceable agreement between the parties.

An offer to insure for the future requires acceptance by the insured, typically through conduct
or communication.
Mere knowledge of the temporary cover note is not sufficient; the insured must also act in
reliance on it to accept the offer.

The court will not consider statements by insurance company representatives as evidence of an
enforceable contract if doubt exists regarding its validity.

LOOKER V LAW UNION AND ROCK INSURANCE [1928] 1 K.B. 554

FACTS

Dr. William Looker, a healthy man, applied for a £5000 life insurance policy with the Law
Union and Rock Insurance Company.

He stated in his proposal that he was free from disease or ailment.

The insurance company accepted the proposal, contingent upon Looker's health remaining
unaffected until the first premium was paid.

Shortly after acceptance, Looker fell ill with pneumonia and died.

ISSUE

Whether a contract was formed between Looker and the insurance company, considering his
illness and failure to disclose it.

HOLDING

The court ruled in favor of the insurance company, stating that no contract had been
concluded.

The absence of disclosure of Looker's illness constituted a material change in risk, and the
insurance company was not notified of it.

Therefore, the insurance company was not liable to pay out the policy.

PRINCIPLE

In contracts of insurance, the proposer (proposer) has a duty to disclose any material changes
in risk.

Acceptance of the proposal is contingent upon the continued truth of the representations
made, and any material change may invalidate the contract.

Failure to disclose material information may result in the insurer not being bound by the
contract.
TEMPORARY COVER

AKAMANA V DIAMOND INSURANCE LTD (2009/HN/316) [2011] ZMHC 117

FACTS

Mukwe Akamana sought a comprehensive motor insurance cover for his Mitsubishi Canter
light truck from Diamond Insurance Limited. The insurance was effective from June 19, 2008,
to June 18, 2009. Akamana issued a cheque dated August 29, 2008, to Diamond Insurance
Limited for the full premium. However, on November 9, 2008, Akamana's truck was involved in
a road traffic accident with a third-party truck. When the third party sought indemnity from
Diamond Insurance Limited, the insurer refused, citing Akamana's non-payment of the
premium.

ISSUE

The central issue was whether insurance cover is contingent upon the prepayment of the
premium.

HELD

The court held that insurance cover is governed by general principles of contract law,
necessitating offer, acceptance, and consideration. While the insurer commits to indemnify the
assured against proposed risks, the assured must pay or undertake to pay the premium. The
certificate of insurance signifies acceptance by the insured and encapsulates the full contract
terms, including conditions and cover extent. Crucially, the court determined that prepayment
of the premium is not a condition precedent to the effectiveness of insurance cover. Once the
insurer acknowledges the insured's indebtedness, the appropriate remedy is to pursue legal
action for the unpaid premium, not to repudiate the contract. The court interpreted the
relevant provisions of the Insurance Act, clarifying that they only apply when the premium due
date is specified in the contract. In the absence of such specification, the insured remains a
debtor without forfeiting the benefits of the contract. Moreover, if the insured event occurs
before premium payment, the insurer is obliged to indemnify the insured and then recover the
premium through standard debt recovery procedures. Consequently, the court found Diamond
Insurance Limited in breach of contract for refusing to indemnify Akamana despite receiving
the full premium.

PRINCIPLE:

The case establishes that prepayment of the premium is not a condition precedent to the
formation of a complete insurance contract. Insurance coverage begins upon acceptance of the
contract terms, and the insurer must indemnify the insured for covered events, regardless of
premium payment status. Any disputes regarding premium payment should be resolved
through legal means, rather than withholding coverage from the insured.
HERCULES INSURANCE V TRIVEDI (Tanganyika) EALR (1962) P358

FACTS

Trivedi & Co Limited submitted a proposal form to Hercules Insurance Co Limited for burglary
insurance to cover part of its stock-in-trade. Hercules Insurance Co Limited responded by
offering a policy covering the entire stock but refused to insure only part of it. Trivedi & Co
Limited accepted this offer, and Hercules Insurance Co Limited issued a burglary policy dated
February 17 at 4 p.m. standard time. However, on February 16, before the policy's effective
date, Trivedi & Co Limited's premises were burgled, resulting in the theft of goods worth over
Shs. 5,000/-. Trivedi & Co Limited notified Hercules Insurance Co Limited on February 17, but
the latter declined to recognize the claim, asserting that they were not "on risk" at the time.
Trivedi & Co Limited then applied for arbitration in the district court pursuant to a clause in
the policy providing for arbitration.

ISSUE

The central issue was whether the arbitration clause in the policy could be applied when there
was a dispute regarding the existence of a contract of insurance at the material time.

HELD

The court held that the dispute was not a claim under the policy but under the preliminary
contract for insurance. The real issue was one of rectification depending on the existence of the
alleged preliminary contract. Therefore, the arbitration clause in the policy did not extend to a
dispute regarding the rectification of the policy's terms. The court followed the precedent set in
Toller v. Law Accident Insurance Society Ltd., [1936] 2 All E.R. 952, which established that the
arbitration clause does not cover disputes related to rectification. Consequently, the appeal was
allowed, and the judgment and decree of the High Court were set aside, restoring the decree of
the district court.

PRINCIPLE

The case establishes that disputes related to the rectification of a contract are not covered by
an arbitration clause in the contract itself. Instead, such disputes fall outside the scope of the
arbitration clause and must be resolved through other legal means.
INSURABLE INTEREST

FEASEY V SUNIFE ASSURANCE CORP OF CANADA [2003] EWCA Civ 885

FACTS

The case arose from an insurance arrangement provided by a Protection and Indemnity (P&I)
Club.

The P&I Club insured its members against liabilities for personal injury or death suffered by
employees and others on board their vessels.

Initially, the club reinsured its liabilities through a conventional reinsurance arrangement with
Lloyd's syndicate number 957.

ISSUE

The primary issue was the interpretation of insurable interest in the context of the insurance
arrangement between the P&I Club and the Lloyd's syndicate.

Specifically, the question was whether the traditional understanding of insurable interest,
typically applied in straightforward cases of property insurance, was applicable in this case
involving liability coverage.

HOLDING

The Court of Appeal, led by Waller L.J., identified a category of insurable interest broader than
that applied in straightforward cases of property insurance.

This broader interpretation suggests that the concept of insurable interest should be
approached differently, especially in contemporary contexts involving liability coverage.

The decision implied a recognition that the traditional understanding of insurable interest may
need to evolve to accommodate modern insurance practices and arrangements, particularly in
scenarios where the insured's interest may not be strictly tied to ownership or possession of
property.
NYIMBA V NICO INSURANCE ZAMBIA LTD (Appeal No. 130/2016) [2017] ZMSC 32

FACTS

The insured property was owned by shareholders of a company who intended to transfer it to
the appellant as their capital contribution. The appellant acted as the owner, collecting rent,
managing the property, and arranging insurance for it. Despite not having legal title, the
appellant considered itself the owner and had insurable interest in the property. The insurer
declined the appellant's claim, alleging fraudulent misrepresentation regarding the property
ownership.

ISSUE

Whether the appellant had an insurable interest in the property despite not having legal title to
it.

HOLDING

The court held that the appellant did have an insurable interest in the property. Despite
lacking legal title, the appellant's actions and intentions, along with the circumstances
surrounding the insurance policy, demonstrated a sufficient connection to the property to
establish insurable interest.

PRINCIPLE

The principle of insurable interest dictates that an individual or entity must have a financial or
pecuniary interest in the insured property or subject matter. This interest must exist at the
time of insurance and must be such that the insured would suffer a financial loss if the
insured property were damaged or destroyed. Insurable interest can be established through
ownership, possession, or other pecuniary relationship to the insured property. In this case,
the court recognized that the appellant's substantial involvement and intention to acquire
ownership of the property were sufficient to establish insurable interest, even without legal
title.
LUCENA V CRAUFURD (1806) 2 B&P (NR) 269, HL

FACTS

The Commissioners of Admiralty, under statute, were responsible for Dutch vessels and
cargoes detained or brought into ports of the United Kingdom. They insured certain Dutch
ships and their cargoes after the ships were seized by the British Government and before their
arrival in England. The ships were lost during their voyage, and the Commissioners sought to
recover under the policy.

ISSUE

Whether the Commissioners had an insurable interest in the ships at the time of loss,
considering they were responsible for the ships only upon their arrival in England.

HOLDING

The House of Lords upheld the insurer's defense, ruling that the Commissioners did not have
an insurable interest at the time of loss because their duty only commenced upon the ships'
arrival. The decision was based on a narrow interpretation of insurable interest, focusing on
the legal right or contractual entitlement to the insured property.

PRINCIPLE

The judgment highlighted differing interpretations of insurable interest. Lawrence J adopted a

broad approach, considering any moral certainty of benefit or advantage from the insured
property as constituting an insurable interest. In contrast, Lord Eldon took a narrower view,
emphasizing a legal or contractual right in the property. The judgment also acknowledged the
evolving nature of the concept of insurable interest, suggesting a trend towards a more flexible
and expansive interpretation, particularly in jurisdictions like Canada and the USA.
WILSON V JONES [1867] 2 LR Exch 139

FACTS

The case revolved around an insurance policy concerning the laying of an electric telegraph
cable across the Atlantic Ocean. During the cable-laying process, a section of the cable broke
while being hauled back into the ship. This breakage resulted in a failure in the transmission
of the electric current. Weather conditions at the time of the cable breakage were reported as
light westerly airs and fine clear weather.

ISSUE

The primary issue at hand was to determine the nature and scope of the insurance coverage
provided by the policy. Specifically, the court had to decide whether the loss incurred due to
the cable breakage during the laying process qualified as a covered peril under the insurance
policy.

HOLDING

The court determined that the insurance policy was not a wager but rather a contract of
indemnity designed to protect the insured party's interest in the venture. It was concluded that
the loss suffered due to the cable breakage fell within the perils insured against. Additionally,
the court found that the loss constituted a total loss under the policy, regardless of whether the
insured interest was seen as the cable itself or the success of the venture.

PRINCIPLE

The principle established was that insurance policies functioned as contracts of indemnity
intended to safeguard the insured party's financial interest in a venture. The interpretation of
the policy language included risks beyond ordinary perils, encompassing any dangers that
could interrupt the venture and impact the insured party's expected profits. In cases of total
loss, the insured party was entitled to indemnification under the policy terms.

It is necessary for the insured to have an interest only at the time the policy is effected
DALBY V INDIA AND LONDON ASSURANCE

FACTS

The case involved a life assurance policy taken out by the Anchor Assurance Company, with
the plaintiff serving as trustee, against the India and London Life-Assurance Company.
Initially, the Anchor Assurance Company insured the life of the Duke of Cambridge for
£10,000, with policies issued to Wright. Later, the Anchor Company limited their insurances to
£20,000 on one life and procured a £10,000 policy with the defendants as a counter insurance.
Subsequently, the Anchor Company canceled their policies with Wright, except one kept by a
director, who continued paying premiums until the Duke's death. At the time of the Duke's
death and up to the lawsuit, the plaintiff had no interest in the policy.

ISSUE

The central issue revolved around whether the life assurance policy was void due to the
plaintiff's lack of interest at the time of the Duke's death, in accordance with the provisions of
the statute 14 G. 3, e. 48.

HOLDING

The court ruled that the life assurance policy remained valid and was not void despite the
plaintiff's lack of interest at the time of the Duke's death. Consequently, the court reversed the
judgment, allowing the plaintiff to recover the true value of the interest at the time of effecting
the policy.

PRINCIPLE

In interpreting the statute 14 G. 3, e. 48, aimed at preventing gaming in insurances, the court
concluded that if there was an interest at the time of effecting the policy, it was not a wagering
policy. Furthermore, the court rejected the characterization of life assurance policies as
contracts of indemnity, akin to marine or fire insurance, emphasizing instead that they were
contracts to pay a fixed sum in the event of death. The court criticized the judgment in Godsall
v. Boldero, which treated life insurance as contracts of indemnity, stating that it did not align
with the clear terms and intent of life assurance contracts and had been disregarded in
practice.

DUTY OF DISCLOSURE: PRINCIPLE OF UBERRIMAE FIDEI

CARTER V BOEHM

FACTS

Mr. Carter, the Governor of Fort Marlborough, took out an insurance policy with Mr. Boehm
against the fort being taken by a foreign enemy. A witness testified that Mr. Carter knew of the
risk of attack by the French, but did not disclose this to the insurer. When the French
attacked, Mr. Boehm refused to fulfill the insurance claim, leading to Mr. Carter's lawsuit.

ISSUE

The main issue was whether Mr. Carter's failure to disclose the known risk of a French attack
constituted a breach of the duty of utmost good faith (uberrimae fidei) in insurance contracts.

HOLDING

Lord Mansfield held that Mr. Carter's failure to disclose the material fact of the risk of a French
attack amounted to a breach of the duty of utmost good faith. This breach rendered the
insurance policy voidable at the option of the insurer, Mr. Boehm.

PRINCIPLE

The principle established in Carter v Boehm is that in insurance contracts, both parties owe a
duty of utmost good faith. This duty requires the insured to disclose all material facts relevant
to the risk to the insurer. Failure to disclose such facts may render the policy voidable at the
option of the insurer. Lord Mansfield emphasized the asymmetry of information between the
parties and equated non-disclosure to fraud. However, he also qualified this duty by stating
that certain facts need not be disclosed if they are open to both parties for judgment, if the
insurer ought to know them, or if they are already covered by the terms of the policy.

PAN ATLANTIC INSURANCE CO LTD AND ANOTHER

FACTS
Pan Atlantic Insurance Co Ltd and another reinsured their American liability insurance from
1977 to 1982, most of which was long-tail business.

They reinsured this business with Pine Top Insurance Co Ltd for the years 1980 and 1981.

When the contract came up for renewal in 1982, the broker discussed the possibility of a
reduced premium with Pine Top's underwriter.

The loss record for the years 1980 and 1981, during Pine Top's coverage, was disclosed, but
the long record (covering 1977 to 1979, when Pine Top was not on risk) was not fully disclosed.

The true losses for 1981 were higher than disclosed.

Pine Top refused to accept liability under the contract due to material non-disclosure.

ISSUE

Whether Pine Top was entitled to avoid the reinsurance contract based on material non-
disclosure.

HOLDING

The House of Lords held that the test of materiality in disclosure focuses on whether
undisclosed information would affect a prudent insurer's judgment in assessing risk.
Additionally, for an insurer to avoid a policy due to misrepresentation or non-disclosure, the
misrepresented or undisclosed information must have influenced the policy's formation. In this
case, the non-disclosure of additional losses for 1981 was deemed material, allowing Pine Top
Insurance Co Ltd to avoid the reinsurance contract for 1982. Thus, the appeal was dismissed.

PRINCIPLE

For an insurer to avoid a policy due to misrepresentation or non-disclosure, the

misrepresentation or non-disclosure must be material and must have induced the making of
the policy on the relevant terms.

DRAKE INSURANCE PLC V PROVIDENT INSURANCE

FACTS
Drake Insurance plc ("Drake") brought a claim against Provident Insurance plc ("Provident")
seeking a contribution in equity, contending that both companies were insurers of the same
loss. Provident had avoided the policy citing non-disclosure of a speeding conviction by Dr.
Singh. However, Drake disputed this avoidance, arguing that the accident in January 1994,
which was settled entirely in favor of the Singhs, should be reclassified as a no-fault accident.

ISSUE

The primary issue in this case was whether Provident Insurance plc ("Provident") was justified
in avoiding the insurance policy based on Dr. Singh's non-disclosure of a speeding conviction,
and whether Drake Insurance plc's ("Drake") payment was voluntary or obligatory as a co-
insurer.

HOLDING

The Court held that Provident was not entitled to avoid the policy, as Dr. Singh's non-
disclosure would not have affected the policy's terms. Consequently, Drake's payment was
deemed obligatory as a co-insurer rather than voluntary. Additionally, the Court determined
that Provident did owe a duty to inquire about the settlement status of the accident in good
faith. Furthermore, Provident was not induced into the policy by Dr. Singh's non-disclosure.

PRINCIPLE

The principle established in this case is that an insurer cannot avoid a policy based on non-
disclosure if such non-disclosure would not have influenced the policy's terms. Additionally,
where there are multiple insurers involved, their obligations may not necessarily be voluntary
but can be obligatory based on their status as co-insurers. Furthermore, insurers owe a duty
to act in good faith, including inquiring about pertinent details such as the settlement status of
an accident. Finally, avoidance of a policy cannot be justified by non-disclosure if the non-
disclosure did not influence the insurer's decision to enter into the policy.

BANQUE FINANCIERE DE LA CITE SA V WESTGATE INSURANCE CO. LTD

FACTS

Banque Financiere de la Cite S.A. and several other banks agreed to provide loans, conditional
upon the issuance of credit insurance contracts. The broker responsible for arranging
insurance fraudulently issued cover notes to the banks, falsely indicating complete insurance
coverage for the initial loan, despite an actual shortfall. Subsequently, the senior underwriter
discovered the fraud but did not inform the banks, who continued to make further loans.

ISSUE

The central question was whether the insurers were liable for damages due to their failure to
disclose the broker's fraud to the banks, notwithstanding the presence of a clause in the
insurance contracts excluding liability for fraud or deception.

HOLDING

The Court restored the initial judgment, ruling in favor of the banks. It held that the insurers
ceased to insure the banks upon the breach of warranty resulting from the broker's fraudulent
actions. Consequently, the insurers were liable for damages.

PRINCIPLE

The case affirmed the principle that upon the breach of warranty in an insurance policy, the
insurer is automatically discharged from liability. This discharge doesn't necessarily terminate
the contract outright; however, the insurer's liability ceases from the date of the breach, as
stipulated by the Marine Insurance Act 1906.