Marine and Transport Insurance

Marine and Transport Insurance

Assignment

19/12/2011

1) Insurable Interest and Assignment in Marine Insurance

Insurable interest applies to all types of general insurance policies, including Marine and Transport. There is no single definition of insurable interest but the following covers its essential elements:

“The legal right to insure arising out of a financial relationship recognized at law, between the insured and the subject matter of insurance”

Marine Insurance Act 1906 section 4 commences by stating that:

“Every contract of marine insurance by way of gaming or wagering is void”

This statement shows the importance of insurable interest. Its absence makes the insurance policy a bet or wager. In the early days of insurance, marine policies were enforceable at common law even if there was no insurable interest. The reason for this was that at that time wagers in general were legally enforceable. However, this general freedom to insure was often abused. An insurance contract which lacks insurable interest cannot be enforced in a court action. In fact, premiums paid under a void insurance policy should be recoverable and payments made by an insurer under such a policy should also be recoverable.

Marine Insurance Act 1906 section 6 provides that the insured must be interested in the subject matter insured at the time of the loss. There is no requirement of insurable interest when the contract is made, and it does not matter that since the time of the loss the interest has ceased. This section also allows the subject matter of a marine policy to be insured ‘lost or not lost’. This means that it is possible for the insured to recover under a marine policy even if he acquired his interest after the loss has occurred, unless he was aware of the loss and the insurer was not. These rules reflect the practices of marine trade where cargo frequently changes ownership in the course of transit. In this case there is a transfer of rights i.e assignment of...