ZAMBIAN OPEN UNIVERSITY

SCHOOL OF LAW

NAME; UPENDO BWALYA

COMPUTER NUMBER; 21910691

YEAR OF STUDY 2023 (2nd Year)

SEMESTER NUMBER; TWO (I1)

COURSE; COMMERCIAL LAW II

COURSE CODE; LL222

LECTURER; MR. MAXWELL MWIINGA

ASSIGNMENT NUMBER; TWO (2)

DUE DATE; 30/10/2023

EMAIL; upendobwalya98@gmail.com

MOBILE NUMBER; 0961691362/0973866986

ADRESS; 0215 RIVERSIDE, KITWE

QUESTION:

Insurance is in categories. Under motor insurance, there is some form of agency law that is
played once the insured event has occurred. Explain the type of insurance cover suggested in
the statement above statement while stressing the principle underlined therein.

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 INTRODUCTION

In modern day society where life is unpredictable, it is important to protect oneself and/or
possession from unexpected events that may cause a detriment to us and this is where
insurance comes in. To present this assignment, the initial part of the paper shall endeavor to
explain the meaning of insurance and its types. Secondly, this paper shall explain the type of
insurance cover suggested in the question while stressing the principle involved. Finally, a
conclusion of the discussion shall be authored.

MEANING OF INSURANCE

Like many principles in law, the term ‘insurance’ doesn’t have a single accepted definition.
In attempt to explain insurance in a broad and vivid manner it is important to look at
definitions from the dictionaries of law as well as from the law governing insurance.
According to the Oxford’s Dictionary of Law1 insurance is ‘a contract in which one party (the
insurer) agrees for payment of a consideration (the premium) to make monetary provision for
the other (the insured) upon the occurrence of some event or against some risk’. 2 Similarly,
the Black’s Law Dictionary3 defines insurance as ‘a contract by which one party (the insurer)
undertakes to indemnify another party (the insured) against risk of loss, damage, or liability
arising from the occurrence of some specified contingency, and to defend the insured or to
pay for a defense regardless of whether the insured is ultimately found liable’.

From both of the definitions above, these dictionaries basically define insurance as a contract
between the insurer (who agrees to take a premium) and the insured (who relies on the insurer
to protect them from an undesirable event that may happen to them). In Zambia, insurance is
governed by the Insurance Act4 in which the act defines insurance as;

“a mechanism or service for the transfer of all or part of certain risks of financial loss
or defined benefit by one party, the insured or beneficiary, to another party, the
insurer or entity that assumes the financial liability in exchange of payment of a
premium or contribution, through which—

1
The Oxford Dictionary of Law. 2002. (5th Ed.). (Edited by Elizabeth A. Martin). Oxford University Press;
London.
2
Ibid p.256
3
Black’s Law Dictionary. (9th. Ed.). Bryan A. Garner. (2009). WEST Publishing CO. p.870
4
Act No.38 of 2021

2
 (a) the insurer or entity that assumes the liability undertakes to indemnify or
compensate the insured or beneficiary on the occurrence of loss as defined in the
policy or contract between parties;

(b) the insurer or entity that assumes the liability collects and pools the premium or
contribution paid for the purposes of providing indemnity, compensation or creating
reserves for future loss; and

(c) the insurer or entity that assumes the liability on the expiry of the policy or
contract between the parties retains the premium or funds earned from such a
service”.

The Insurance Act definition of insurance can be mirrored by that of the Oxford Dictionary of
as well as Black’s Law Dictionary. However. In paragraphs a, b and c it seems the Act further
explains how insurance works.

COMMON TYPES OF INSURANCE

Generally, insurance is classified by indemnity insurance, which provides an indemnity

against loss and in which the measure of the loss is the measure of payment like a fire policy
and contingency insurance, which involves payment on a contingent event and in which the
sum paid is not measured by the loss but stated in the policy like a life policy. 5 Regardless of
the classifications, here are some common types of insurance;

1. Life Insurance

This type of insurance is one of the most common insurance covers. Life insurance involves
an agreement between an insurance company and the policyholder to pay a specified amount
to a designated beneficiary on the insured's death. The Insurance Act 6 deals with Insurance
Policies in general and it provides for certain protection in case of life policies Part IV of the
Act.

2. Fire Insurance

This is an agreement whereby one party (the insurer), in return for a consideration,
undertakes to indemnify the other party (the insured) against financial loss which he may

5
Nagel, C.J et al. (2019). Commercial Law. (6th Ed.). LexisNexis (pty) Ltd: Durban
6
Supra note. 4

3
sustain by reason of certain defined subject matter being damaged or destroyed by fire or
other defined perils up to an agreed amount.7

3. Property Insurance

This is an agreement to indemnify against property damage or destruction. Also termed

property-damage insurance.

4. Liability Insurance

Liability insurance refers to an agreement to cover a loss resulting from the insured's liability
to a third party, such as a loss incurred by a driver who injures a pedestrian. The insured's
claim under the policy arises once the insured's liability to a third party has been asserted.
This type of insurance is known as third-party insurance or public-liability insurance. An
example is Motor insurance, which is compulsory and is the objective of this assignment
therefore it shall be looked in detail.

LIABILITY INSURANCE AS CLASS FOR MOTOR INSURANCE

Under contracts of liability insurance, the insurer undertakes to indemnify the assured against
legal liability to third persons. As aforementioned, an example of liability insurance is Motor
insurance, which is compulsory. Since there are different types of Motor-Vehicle policies,
there are restrictions and limitations in motor vehicle insurance policy. An obvious example
is the standard car policy, which typically covers both damage to the car and the driver’s
potential liability to someone injured by his negligent driving.

Motor Insurance

Motor insurance is the insurance coverage of risk arising out of the use of motor vehicles
such as car, truck or other vehicles causing damage and loss to oneself as well as other’s
property in an accident.8 Here are characteristics of motor insurance;

 Motor insurance is mandatory because whenever one is driving it is not only him or
her that may be subject to their car being damaged or having to incur injuries, but they
may also cause damage to the people around them.
 It provides coverage related to property damage, bodily injury, medical expenses any
other sort of compensation in legal proceedings.

7
Furmson, M & Chuah, J. (2013). Commercial Law. (2nd Ed.). Pearson Education Limited.
8
Supra note 5.

4
  It is also referred to as car insurance, auto insurance and vehicle insurance.

Motor Insurance Coverage

a) The most common coverage of motor insurance is against loss or damage by accident,
fire lightning, theft and/or natural disaster.
b) It covers third party liability in form of injury, death and property caused to others.
c) Motor insurance also cover a person who insured himself while driving some other
vehicle not owned by him or held by him under a hire-purchase agreement. However,
the policy will only remain effective where the insured has an interest in the specified
vehicle. In Tattersall v Drysdale9 policy with reference to a specified car, contained
an extension covering the insured while driving other cars. The insured sold the
specified car and drove another car. It was held that as soon as he sold the specified
car, the policy ceased to be effective.

Exclusions

a) The most common exclusion to coverage is the normal wear and tear to the vehicle.
b) Damage when the person was driving without a proper license and in an instance
where a person was driving while drunk.
c) Another one very common clause is one that excludes liability if the vehicle is used in
an unroadworthy condition. In the case of Clarke v National insurance and Guarantee
Corporation Ltd10 a motor policy excluded liability while the car was being driven in
an unsafe or unroadworthy condition. During a journey in an unroadworthy condition
in which there were eight passengers an accident occurred and the car was destroyed.
The insurer's repudiated liability.

CONCLUSION

In conclusion, it has been noted that under liability insurance, the insurer undertakes to
indemnify the assured against legal liability to third persons. This is the case in fire insurance,
it seems in modern practice much insurance is designed to cover liabilities which the insured
may incur to other people (what is often called third-party risk).

9
(1935) 2 K.B. 174
10
(1964) 1 Q.B. 199

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 BIBLIOGRAPHY

Books Referred to;

Furmson, M & Chuah, J. (2013). Commercial Law. (2nd Ed.). Pearson Education Limited.

Nagel, C.J et al. (2019). Commercial Law. (6th Ed.). LexisNexis (pty) Ltd: Durban

Cases Referred to;

Clarke v National insurance and Guarantee Corporation Ltd (1964) 1 Q.B. 199

Tattersall v Drysdale (1935) 2 K.B. 174

Statute Referred to;

Insurance Act, Act No.38 of 2021

Dictionaries Referred to;

Black’s Law Dictionary. 2014. (10th Ed.). Bryan A. Garner. Thomson West Publishers.

The Oxford Dictionary of Law. 2002. (5th Ed.). (Edited by Elizabeth A. Martin). Oxford
University Press; London.