Insurance

Insurance

1. Types

   • Indeminity
     • property insurance or short-term insurance.
     • Insured recovers only his actual financial loss.
       • Cash or replacement determined after event occurs, ltd to loss suffered
         • Insured must be have position before insured event restored
         • Extent of damage
     • Right of contribution
       • When Insured is covered for same risk by other insurer(s)
         • Insured can claim from ONE, and the insurer can require contribution from others
     • Right of Subrogation
       • Insured cannot claim from insurer and 3rd party
         • Insurer has right to sue 3rd party who caused insured loss
           • cannot exercise right unless it has settled insured’s claim
     • Insurable interest must be present at time of taking policy AND time of Loss
   • Non-Indemnity
     • Insurer pays insured or named beneficiary
       • a Pre-determined sum upon occurance of insured event (risk)
         • Amt not related to risk, not ltd to loss
           • Benefits not available for paying debts
             • for 5 years from payout
             • Benefits and assets Capped at R50000 or as prescribed by minister
     • Insurable interest need only exist at time of policy

2. Elements

   • Insurer: collects premiums from
     • Obligation to pay sum of money for valid claim
       • Refuse:
         • false claim
           • Exaggeration, Fabrication, Self inflicted loss
         • Insurer failed to honor oblig (warranties)
         • Made material misrep / non disclosure in negotiations
         • filed claim out of time
   • Insured: to protect from loss of
     • Insurable Interest
       • Risk (event covered): from a specified future event known as the risk or peril
         • gives rise to insurers obligation
           • Risk and asset should be properly described, circumstances affecting both (conditions)
       • Stands to suffer or lose if risk occurs
     • Obligation to pay agreed premium
       • Contract provides amt, manner and intervals at which it is to be paid
         • Not necessary for 1st premium to be paid before contract is effective
           • BUT insurer may not honor claim until its paid or deduct from payout

3. Insurance=intention of the insured is to protect from financial losses causes by specified uncertain event.

   • Wager =parties intend to obtain financial gain from happening of specified uncertain event.
     • Not enforceable

4. Sources of Law

   • LongTerm Insurance Act of 1998*.
     • Short Term Insurance Act 53 of 1998*
       • Common Law and Trade practice

5. Intermediaries

   • Agent
     • On behalf of the Insurance co.
       • liability to their customers is administrative
   • Broker
     • Obo Insured to secure adequate coverage

6. Duty of Goof Faith and Disclosure in negotiations

   • Parties obligated to display good faith and disclose MATERIAL facts
     • Breach = Contract voidable at instance of innocent party
       • Materiality test = ask reasonable man
         • whether the information not disclosed was reasonably relevant to the risk and to the assessment of the premiums. = YES = Material
           • Cannot rely on Nondisclosure
             • Already known
               • Matter of general public knowledge
                 • Should be aware of in the course of its business
                   • Expressly/ Implicitly waived the right to be informed
             • Insurer may be precluded by estoppel from relying on misrepresentation / nondisclosure, after discovering such and it acts in a manner inconsistent with avoiding the contract.
           • Insurer mus prove materiality of misrepresentation
             • Effect:insurer may only set aside contractual obligations if it would not have contracted
               • If company would have contracted at a higher premium = insured should increase premiums.
           • e.g Dangerous occupation, extreme sports
             • liability of insured would be greater than normally expected
               • facts that show insured is likely to cause the risk to materialise through her/his own culpable conduct
           • Effect of non disclosure
             • Valid until election. Contract voidable at instance of insurer.
   • Terminates when contract = concluded
     • Disclosure must be made on each renewal

7. Contract

   • Insured must be informed of right to choose insurer
     • Insured attention should be drawn to provisions that limit liability of insure
       • Mus be in plain language, clear and comprehensible
   • Insurer can cancel/cool of within 30days of receiving policy summary, and no benefits paid
     • Insured who entered a contract as a result of direct marketing has a 5 business day cooling of period
     • Summary must be sent w.i 60days of conclusion
   • Terminated when
     • Expiry of agreed period of insurance
       • Mutual Agreements
         • Cancellation due to breach
           • Prescription
             • Supervening impossibility of perf. and waiver