What is Insurable Interest?
The legal right to insure arising out of a financial relationship recognised at law between the insured and the subject-matter of insurance.
What are the features of Insurable Interest?
Subject-matter of insurance: Property or event that may cause financial loss or liability.
Subject-matter of the contract: The financial interest in the subject-matter (Castellain v Preston, 1883).
Legal relationship: Must be recognised in law (e.g., ownership).
Financial value: Must have measurable financial value.
Do insurers have insurable interest?
Yes, in the risks they assume. They can reinsure part or all of a risk; the subject-matter is their financial interest in the original insurance.
When must insurable interest exist?
General insurance: At inception and at time of loss.
Life insurance: At inception only.
Marine insurance: At time of loss only (reasonable expectation at inception is allowed).
What happens if there is no insurable interest in general insurance?
The policy is void. For indemnity contracts, insurable interest must exist at the time of the claim.
What is anticipated insurable interest?
Expectation of acquiring insurable interest in the future is not enough for general insurance.
What does the Marine Insurance Act 1906 state?
Marine insurance contracts are void without insurable interest at the time of loss.
What does the Marine Insurance (Gambling Policies) Act 1909 state?
It is a criminal offence to effect a marine policy without insurable interest or reasonable expectation of it.
How is insurable interest created?
Common law: Ownership, negligence liability.
Contract: Accepting greater liabilities than common law.
Statute: Duties or benefits imposed by law (e.g., Settled Land Act 1925).
How is insurable interest applied in property insurance?
Owners: Full insurable interest.
Joint/part owners: Interest up to their share.
Agents: Can insure on behalf of principal.
Bailees: Temporary holders of property.
Tenants: Interest in rented property.
How is insurable interest applied in liability insurance?
A person has insurable interest to the extent of potential legal liability for damages and costs.
