Insurance

• Insurance Act 1963 (revised 1972)
• Insurance contract is a contract where the insurer agrees to indemnify the insured against a loss which may arise upon the occurrence of some event or pay a certain sum of money on the occurrence of a particular event.
• indemnify the insure against a loss – Eg: motor vehicle insurance. The insurer is the owner of the car. If his car get into an accident, the loss suffered by him due to the accident claim will be indemnified by the insurance provider. Another example would be the professional indemnity insurance for professionals.
• Pay certain sum of money – Eg: life insurance, medical insurance.

• The elements of contract, as has been covered, will be applicable. Under insurance contract, the elements will be reflected as the following:
• ITT – The insurance agent explains the product to the client.
• Offer – The proposal form filled by the person seeking the coverage
• Acceptance – The insurance company process and accepts the proposal.
• Consideration – The premium
• Terms of contract – The policy
• The insured loss – The risk

• Canning v Farquhar (1886) 16 QBD 727
– The plaintiff applied for life insurance
– The defendant told him that no insurance contract will take place until the first premium was paid.
– The plaintiff fell over a cliff and died as a result
– The company refused to accept the premium from plaintiff’s agent because of the change of risk has occurred (at the time of the proposal was made and the time payment was made)
– HELD – the company was under no obligation because the risk has substantially changed.

• The risk that can be insured must an insurable interest
(II)
• A person will have II if he will suffer a loss in the event the property is destroyed
• The insurance policy will be void if a person has no insurable interest over the property, unless situation falls under the exception.
• Exceptions
• In life insurance policies the insured is deemed to have an II in the following persons:
– Spouse
– Child or ward below 18y/o
– Dependents – S.40(2)

• Nanyang Insurance v Salbiah
– It was held that the owner had II in a car registered and insured under the owner’s name.
– Although the accident occurred when the car was lent to someone else.

• General contract – there is no obligation to disclose
• Insurance contract – it is a duty to disclose
• Insurance contracts is based on mutual trust and confidence (uberimae fide – utmost good faith)
• Reason: because parties are not in an equal position with regards to knowledge of possible risk.
• The insured has to give the requested information – example: health status

• Goh Chooi Leng v Public Life Insurance
– The plaintiff answered NO to the question “have you ever had advice about your heart or lung or for cough”
– There was evidence that the plaintiff had been treated for tuberculosis
– The contract was held to be voidable.

• Answer: Material Facts
• Facts which would influence the mind of a prudent insurer in deciding whether to accept the risk or not; and at what premiums.

• New India Assurance v Pan Piang Chong
• The fact of prior conviction of offence relating to driving of motor vehicle was held not to be material
• Therefore his non-disclosure did not cause the contract to be voidable

• Contract of indemnity only restores the insured to his or her original financial position.
The insured cannot gain from indemnity
• The insured is entitled to be indemnified but he cannot recover more than the actual loss

• Putting the insurer in the shoes of the insured
• The insured’s rights is subrogated to the insurer who can make use of the remedies available to him
• The insurer can sue a third party in the name of the insured
• Example: the insurer can sue the employee driver of the insured after paying the injured party in an accident involving the car of the insured – Lister v
Romford Ice.

• Teo Kim Kien v Lai Sen
• Respondent sent his car to a service station, the car was involved in an accident when driven by the employee of the station. The insurer of the fisrt respondent paid to the injured party and the first respondent brought an action against the employee. In this case the court upheld the principle of subrogation