As far as the essence of the insurance contract is concerned, first of all this must be distinguished between the subject of the insurance contract and the thing that is insured. The subject of insurance contracts must be precisely defined.
A. SUBJECT OF THE INSURANCE CONTRACT
The insurance contract does not ensure the prevention of the insured event. It provides monetary compensation to the insured upon occurrence of an insured event. Therefore, the subject of the insurance contract is the sum insured and this subject should be distinguished from the insured property, which exists independently of the contract.
Judge Brett made the following statement:
"In my opinion, the subject of the insurance contract is money and only money. The insured item is a completely different thing from the subject of the insurance contract. If the event specified in the insurance occurs, what follows according to the policy is to pay a certain amount of money. It is true that under certain conditions, such as a fire policy, there is an option to invest the money in the reconstruction of the premises, but this does not change the fact that the obligation assumed by the insurance company is only to pay a certain amount of money.
A similar case was quoted by Judge Bowen:
"What is actually insured in a fire policy?" This is the interest of the insured in the subject of the insurance, not the bricks and materials used to build the building. "
B. INSURED ITEM
The insurance contract presupposes the existence of something that will be affected by the event and therefore everything that would be affected by the event can be insured. To be more precise, we must note that the subject of insurance in most cases is a physical object.
Of course, there are also types of insurance that aim to protect the insured when he insists on it, not against damage to physical objects, but against the consequences for himself from such accidents. In these cases, the person is insured not against the damage or loss of an item, but against the adverse consequences that occurred as a result of this loss or damage.
The object of insurance can be:
• Liability borne by the insured.
The object of insurance against personal accident is the bodily integrity of the insured, life. In case of burglary insurance, the property is exposed to risk. In case of fire insurance, the object of the insurance is the insured building.
The insurance contract is invalid if the ownership of the property that is insured has been acquired by the insured through a crime. This rule also applies to the acquirer to whom the property has been transferred for consideration, regardless of whether he was bona fide or not.
Insolvency insurance, where the insured is insured against the inability of the debtor to continue to mature, is a security that is in fact the subject of insurance. The chirographed creditor cannot insure the debtor's property if it is encumbered with encumbrances or in other words he must suffer the privileged claims of the secured creditors, due to the performance of which he will remain unsatisfied, and therefore it is assumed that this creditor has no insurance interest. of this property.
The same principle applies to insurance against loss of a document or patent, where the insured party is insured against possible loss of the document or invalidity of the patent. In these cases, the subject of the insurance is the exclusive right, and not the material carrier with which this right is certified.
3. Liability with which the insured is bound
In the case of liability insurance, where the person is insured against liability to third parties, the object of the insurance is the liability against which the insurance is made, and from this type of insurance the contractual liability is excluded. The insured is not directly interested in the safety of the third party or in the protection of its property from damage. The risk against which he insures is not related to injuries or damage caused by the event. More important is the fact that in certain circumstances he may be personally liable for the insured event.
C. DESCRIPTION OF THE SUBJECT
The description of the item in the policy is required:
1. In order to give a definition of the subject;
2. In order to reveal the nature of the risk;
3. In order to define the risk itself.
Defining the subject
Determining the subject of an insurance policy is an integral part of any insurance policy and it must be done in clear and comprehensive language so that the insured item can be accurately identified.
If the object does not correspond to the description made, any further actions, including procedural ones, under the policy are meaningless, as the insured will not be able to prove that the item in respect of which he suffered loss corresponds to the object described in the policy. In a marine insurance case, Judge Blackburn said:
"The description of the subject is required both by the nature of the contract and by the generally accepted way of work of the insurers ..... is invalid due to lack of object and this policy does not apply even to items that the insured owns, despite the fact that they are of a value equal to that specified in the policy, as they are not transported. The reason for this is that the insurers have not concluded a contract to pay compensation for the entire property or in case of any loss. "
On the other hand, if the object corresponds to its description, but it is unclear and could relate to another object, the policy is considered null and void due to the incorrect definition of the insured good.
Ways of description
There are two ways to describe the thing:
(a) determination on individual grounds;
b) determination by gender;
a) Individually determined
The description of the insured object in the policy can be made so precisely that it refers only to a certain object. Then only one insured item is possible, namely the one specified in the policy.
For this purpose, the insured must prove that the object affected by the event corresponds to the description in the policy. An item that does not meet the description in the policy is excluded from the agreement reached when concluding the insurance contract, although this may be an item that the insured intended to insure.
For these reasons, an insurance company is not liable if the exact breed of an insured horse is incorrectly described or, for example, if the insurance policy does not mention the machines in it, even though the insured intended to insure them. The same goes for a factory in New Southgate, described as being located in Newington Green. The policy does not apply to sites that previously met the description, but were subsequently replaced by other similar ones that are affected by the insured event.
The subject of the insurance can be determined on a generic basis and thus refer to each object belonging to the genus. In this case the insured object is any belonging to the group indicated in the description.
The question of identification concerns only the group, and as regards the object affected by the event, it is sufficient to prove that it belongs to the group corresponding to the description. Therefore, it is not necessary to specify the intention to insure an item, as the policy is valid for each item in the group. The insured may receive compensation even if the object in question was not his property or did not even exist at the time of signing the policy, if the conditions of this policy allow it.
Accordingly, if a 'merchandise' is insured against theft, the insured must prove that the stolen items are part of that merchandise. But it is not necessary to prove that they were part of the goods at the time of concluding the insurance contract. In this sense, insurance refers to items that are part of a changing inventory.
If the items specified in the "Merchandise" insurance are replaced or supplemented by other items, the identity of the inventory is not violated.
On the other hand, for items that do not belong to the described group, the policy has no force, as they do not belong to the description of the item. The merchandise does not include an item made of linen, if the insured is not of the same material. Furniture does not include furniture, nor does the term "goods" include their packaging or manner of use.
DESCRIPTION OF THE LOCATION OF THE SUBJECT OF INSURANCE
In addition to identifying the object by individual or generic features, the description may include specifying its location. When the insurance relates to a building, the inclusion of the location is necessary due to the more accurate identification of the insured object. If compensation is to be paid for the damage to a building, it must correspond to the location indicated in the policy.
In other cases, the location does not need to be indicated in the policy. But if specified in the description of the policy, the insured event must occur at the same place.
In this sense, if personal injury insurance is limited within the UK, it must take place there. Goods located outside the premises specified in the policy are not covered by the insurer. The insurance against possible liability to third parties in the event of an accident caused by negligence on the part of the employees employed by the insured during work at a given place is valid for accidents only at the specified place. Goods insured at the time of transport by land to the vessel concerned shall not be covered if those goods are on board. The insurance for safe transportation from one building and places to another presupposes their movement between different places and buildings and does not apply to their movement from one room to another in the same building.
DESCRIPTION OF OTHER CONDITIONS
The description of the subject of the insurance may include the specification of other conditions, such as the type of activity of the insured or how the insured property is used. This clarification may be intended to make it easier to identify the object, but is most often important in determining the risk.
2. The nature of the risk
When deciding whether to take a certain risk, insurers must be guided by the description of the subject of insurance made by the insured. An integral part of the re-negotiated obligations of the insured is the accuracy of the description. An inaccuracy in the description, which does not prevent the identification of the subject of the insurance, may be an obstacle to indemnification of the insured, as he was not bona fide in conducting the negotiations.
3. Defining the risk
The insured object, regardless of its nature, may undergo a change in the term of the policy and in case of such a change the question arises whether the insurers are obliged for the changed object. They do not bear such responsibility if the change violates the identity of the object, as it no longer corresponds to the description in the policy. Very often the question of identity does not arise, but a possible change of the subject can make it more susceptible to the risk against which it is insured. In this case, such a change is prohibited by law or by the terms of the policy. If it is not prohibited, the change can be made without affecting the validity of the policy or the claim filed by the insured. In order to determine whether a change can be allowed or not, reference should be made to the description of the policy, which defines the subject at the outset when signing it and sets out the criteria according to which each subsequent change must be determined.
Source: Insurance. Volume 2: Principles, Law and Practice, E. R. Harda Aizami