Insurance interest is of great importance in the three main types of insurance: marine insurance, fire insurance and life insurance, and raises very difficult issues.
Such questions could no doubt arise in the various types of accident insurance. But in practice the cases are rarer due to the nature of the insurance or the way in which the conditions are formulated in it.
A. WHAT IS THE INSURANCE INTEREST
The traditional definition of this type of interest was given by Judge Lawrence in Lucena v. Crawford:
"A person is interested in a certain thing from which he can benefit and whose security or qualities are essential for that person. Interest should not be understood as a mandatory right of ownership over the property or parts of it, but the existence of some connection and significance of the insured property for that person, so that in case of loss or damage of the property negative consequences occur in his patrimony. And when a person is so bound to objects exposed to certain risks and dangers, it can be argued that he is interested in the safety of the object. To have an interest in the protection of a certain thing means for the person to be so dependent on it that it benefits from its existence and to lose from its eventual destruction. The possession of a thing and the interest that arises from it are two different things. In the first case, the measure is the price, while in the second case it is implied that the interest of a thing consists in its full insurance against the circumstances threatening its integrity. "
The mentioned definition is the basis of Art. 5 para. 2 of the Marine Insurance Act of 1906:
"A person's interest will be affected by the occurrence of the insured event in the transport of goods by sea, when he is the owner of the transported goods for which there is a risk, or would benefit from its timely arrival in connection with the obligation under periodic contracts. Where a party to the contract fulfills an obligation to deliver materials to a shipbuilder for the repair of a vessel and if during the installation of the delivered materials the vessel is damaged by an event against which it is insured in the policy, it is considered to some extent that the supplier has an insurance interest in preserving the materials he has supplied.
In life insurance or in most property insurances, where the subject of the insurance is a physical object exposed to risk, the insurance interest consists in the fact that the insured, due to its dependence on the insured objects, will suffer damages if they are destroyed or damaged by the existing risks. . In this case, the insured will be affected by death or mutilation, or theft of goods, and therefore has an interest in personal insurance or robbery insurance. The fact that the interest of the insured is unfounded and other persons at any time have the right to require him to hand over the insured object entrusted to him is not sufficient to not recognize the interest of the insured and could not prevent the conclusion of insurance contract.
The interest must actually exist, because the mere expectation of a possible acquisition of interest, however probable this may be, is not a sufficient ground for the person to insure the property from which the expectation arises.
Even if there is an interest, the insured may not be able to exercise his rights immediately. The right to future possession or future interest, although distant, are also insurable, as the future benefit of the insured is clear. The negative consequences that the insured suffers due to the loss of the property as a result of the occurrence of an insured event cannot but be acknowledged.
When the insured has a real interest, the way he received it is irrelevant.
The judiciary protects the interest recognized by law.
B. THE NEED FOR INSURANCE INTEREST
A requirement for any insurance contract is to be justified by an insurance interest, otherwise void.
In certain types of insurance, such as liability insurance, loyalty insurance or insolvency insurance, the very nature of the insurance implies the existence of an insurance interest, while other types of insurance, such as personal accident insurance or burglary insurance and livestock insurance, are concluded by the insured in respect of himself or his own property. Sometimes he can, for personal gain, insure another person or another's property, and then the question of the insurance interest would be of great importance.
The policy against a personal accident can be concluded by the insured against a loss that he could suffer due to an accident with another person. Such insurance is valid only if the insured person has an interest in the security of the other person and this interest has monetary value. A son whose father receives benefits and is dependent on him does not have a well-founded interest in claiming his father's personal accident insurance.
The insured cannot be compensated under fire insurance unless he proves that he has an insurance interest in the subject of insurance. Because it is clear that if there is no insurance interest in a given object, then it cannot be damaged by its destruction and there is nothing to receive compensation under the insurance contract. In this case, the contract will be only for the payment of a certain amount in the event of an insurance event in which neither party is interested and which outside the contract could not be in the interest of the insured, ie. this contract will be only one bet.
In liability insurance, where the insured object is not a physical object, the definition of insurance interest should be more general. It is sufficient that the interests of the insured are damaged by the accident against which he is insured, ie. it is enough for the accident to harm him in some way. Therefore, the insured will be damaged in the event of an accident that binds him to liability to a third party or in the event of the insolvency of his debtor and he therefore has an interest in signing an insurance policy for liability or against insolvency.
In the case of goods of another type of property, the insurance interest is related to the property, which could be unlimited or co-ownership, falling to him legally or due to participation in shares.
But property rights are not a prerequisite. The insurance interest may arise from a concluded contract.
If a person has concluded a contract for responsible storage of goods or has undertaken to insure them, he has an insurance interest in them. The terms of such a contract could bring a benefit to the person and in this case the danger of losing these benefits is the basis for the interest of the insured object. The mere fact that there is property acquired in a lawful manner is sufficient for the existence of an insurance interest.
When a bank grants a loan for the financing of a film production and it is guaranteed by a letter of credit and an insurance policy, the performance of which is made conditional if the letter of credit is not repaid within the specified period, the bank is considered to have insurance interest. was found, would not be used as a guarantee.
Insurance interest is always valued in money.
The insurance interest does not have to be permanent or continuous; although it may be canceled, an insurance contract can still be concluded because the interest exists until the moment of cancellation.
With regard to marine insurance, Article 4 of the Marine Insurance Act 1906 provides:
Any marine insurance contract made by pledging is valid;
And he is considered as such:
a) when the insured has no insurance interest, as it should be according to the law and at the conclusion of the insurance contract does not expect to acquire such;
(b) where the lien was made "with or without interest", "without any proof of interest other than the policy itself" or "without benefit to the insured in the protection of property" or was concluded on the basis of other similar conditions which state that possibility to protect a property, a policy can be concluded without benefit from the protection of this property for the insurer.
According to Art. 1 of the Life Insurance Act of 1774 the insurances without the presence of interest are invalid. Regardless of its name, this provision is not limited to life insurance, as it explicitly applies to such against any other accidents.
It is therefore considered that it could relate to personal accident insurance policies or other documents in the form of policies, in the event of a rise or fall in the price of shares, in the determination of the sex of a person or on the day of the armistice. On the other hand, the Law does not apply to insurance of ships, various cargoes and goods or of bets that are not described in the form of a policy. The law also states that insurers are not allowed to cover losses greater than the amount or value of the insured's interest.
C. DESCRIPTION OF INTEREST
1. General rule
Although the insured must have some interest in the subject of the insurance which entitles him to take out insurance relating to that interest, he is not, as a general rule, required to specify or disclose to insurers the nature or extent of his interest.
With regard to marine insurance, Art. 26 para. 2 of the Marine Insurance Act states:
"It is not obligatory for the policy to specify the nature or degree of the insured's interest in the subject of the insurance."
What is required is an accurate description of the subject, which is a sufficient condition for indemnification of the insured in the presence of any interest in the subject of insurance and regardless of whether he is the owner or not. This is equally true when the insured has several interests, differing in nature and size, but related to the same subject.
2. Exceptions to the general rule
An accurate description of the insurer's interest is required in the following cases:
(a) Where there is an explicit condition for the existence of such an interest.
(b) When the insurance is for forthcoming benefits or for a causal loss.
(c) Where the interest is material to the risk because of its uncertain nature.
a) Under an explicit condition
Sometimes insurers explicitly stipulate that the policy must not include interests of certain types, unless the insured specifies them, as is the case with entrusted goods or those given on consignment.
Often the insured person is obliged, according to an explicitly stated condition, to disclose to the insurer or to specify in the contract the degree of his interest in the subject of the insurance. In any case, he may not receive compensation for loss in a lawsuit unless he proves the extent of his interest or when he intended to indemnify the interests other than his own, their degree and his intention to cover them.
b) Forthcoming benefits or causal losses
When the special nature of his interest is such that it would cause the occurrence of the risk, then it is correct to claim that it is the interest itself that is the subject of the insurance and in this situation must be specified.
In this case, the interest in the protection of the object is not direct, but only indirect, ie. a potential benefit can be derived from its longer protection.
The benefit or remuneration already specified at the time of the conclusion of the insurance or which should have been acquired in the natural course of the flowers before the loss need not be determined separately, as they are subject to property insurance compensation because they are of direct interest. of this property.
On the other hand, the expected benefit deriving from the use of the property is quite different. That the event will occur cannot be assumed or can be stated with certainty on the day of insurance. Nor can it be argued that the destruction of a property that could be the cause of compensation always causes a loss of benefit, as it may never be acquired, even if the property is not destroyed. Therefore, according to property insurance, the forthcoming benefit cannot be compensated. In order to be covered, it must be insured exactly as such.
Such insurance is unrealistic, because the forthcoming benefit has the character of something that is expected. But her uncertainty is obvious.
Similarly, determining the non-interest of the insured is necessary when the insurance is against a causal loss.
c) Uncertain nature of the interest
Even when the interest of the insured in the subject of the insurance is direct, it is necessary for him to disclose if it is of an unusual and uncertain nature and significantly affects the risk.
D. WHEN THE INSURANCE INTEREST MUST BE AVAILABLE
Having interest at the time of loss is sometimes important
a) Insurance other than life insurance
When the insured, in case of damage caused by fire, wants to receive from the insurers as compensation the amount due to him under the policy, then it is important for him to prove that at the time of causing them he had an insurance interest in the destroyed object. The date is of great importance, because if at that time there was no insurance interest, the insured may not have suffered a loss, as a result of which he is not entitled to compensation.
It does not matter whether this interest existed or was later acquired once it arose before the loss was incurred.
With regard to marine insurance, Article 6 para. 1 of the Marine Insurance Act of 1906 provides:
"The insured must have an interest in the subject of the insurance at the time of the damage, and not at the time of concluding the insurance."
The opinion was expressed that in case of fire insurance the insured must have an insurance interest on the day of insurance, otherwise he cannot receive compensation.
When the policy states that the property owned by the insured on the day of insurance can be replaced by another, as when a trader insures his goods, then the insured is entitled to receive compensation regardless of the fact that the destroyed property became his property only after the date of signing the policy. However, as in the above case, the insurance does not apply to different items, but only to a group of items, it can be argued that the group, and therefore the interest in it, existed on the day of insurance.
When the policies are concluded by carriers or depositors and undoubtedly the policy is valid not only for the goods that were in their possession on the day of signing the policy, but also for those that could be entrusted to them for some time. Then the insurance is equivalent to insurance of a group of items and not of a separate item and the interest of the insured is an interest in the permanent item, ie. from the group of objects and exists for the duration of the contract, unaffected by a change in the individual objects forming the group.
However, the same arguments do not apply to the insurance of certain items of which the insured has no interest in insurance. In the case of certain goods, there is no reason to distinguish between marine insurance and fire insurance, and therefore future interest insurance is valid as long as the interest exists before the loss occurs.
Things are different in the insurance of houses, buildings and similar property and according to the Life Insurance Act of 1774, if applied to these insurances, it may be necessary to have an interest in concluding the insurance contract. In addition to a possible legal authorization, there is no reason why future interests in such property should not be insured in the same way as future interests in certain goods.
In any case, if the insured explicitly indicates that he has an interest at the time of insurance, he must in fact have such an interest when concluding the insurance contract. Acquiring interest after insurance and before the loss occurs is not a sufficient condition.
b) Life insurance
The insured must have an insurance interest when signing the policy. It does not matter whether he ceases to have such an interest as when the debtor, whose life is insured before he dies, pays his debt to his creditor.
Despite the fact that the subject of the insurance may in fact have been destroyed by fire on the day of concluding the insurance contract, in certain cases the contract may be valid and be grounds for indemnification of the insured despite the destruction of the object. Because, in principle, there is no objection to retroactive insurance, which states that the insured on the day of the loss actually had an insurance interest.
This type of insurance of houses, buildings or similar type of property is not prohibited by Art. 1.3 of the Life Insurance Act of 1774, even if the Act applies to fire insurance, since the insured is in fact damaged by the danger against which he is insured and therefore he has an insurance interest that existed on the day of concluding the insurance contract.
For such a contract to be valid, the following conditions must be specified:
a) that both the insured and the insurer were not aware of the damages at the conclusion of the contract;
(b) that they both intended to enter into a contract relating to such loss.
Their intention does not have to be explicitly mentioned. However, it must be clear from the language used that this is the intention of the parties. If this cannot be disclosed, the policy is invalid and the original insurance premium must be refunded. Also, when the fact of loss is known to both parties, but the amount is not established, a contract indemnifying the insured against such loss would be invalid, as in this case the contract is still a contract of chance.
With regard to marine insurance, Article 6 para. 1 of the Marine Insurance Act of 1906 provides:
The insured must have an interest in the insured object during the losses, although he is not obliged to have such an interest when concluding the insurance: if the insured object is insured as "lost or not", the insured may receive compensation, although it is possible that he acquired this interest after the loss, unless at the time of signing the insurance contract he knew about the damages and the insurer did not. "
Source: Insurance. Volume 1: Principles, Law and Practice, E. R. Harda Aizami