1.1.1 Contract between insurer & insured whereby insurer
undertakes in return for payment of premium to pay a sum of
money to the insured, on the happening of a
specified uncertain event in which the insured has an interest
1.2 Key terms
184.108.40.206 The person who purchases insurance cover by paying premiums.
220.127.116.11 Company/person that provides the insurance cover
1.2.3 The event /risk/peril
18.104.22.168 The event that is covered by the insurance policy and
is generally loss or damage which is cause by the
destruction to property or death or injury to a person.
1.3 Suretyship Vs Insurance
22.214.171.124 Both offer protection offer some kind of
protection to people against loss which is
caused by an uncertain future event
126.96.36.199 Suretyship is accessory to the principal
obligation/contract. Insurance is the principal obligation.
188.8.131.52 suretyship agreement is a unilateral agreement, in which
the obligations go one way, and they are only on the surety.
Insurance contracts are BI-LATERAL Agreements
184.108.40.206 Surety pays out of goodwill, but in insurance, both parties
have an interest in the contract and both are getting
something out of the contract.
1.4 Wagers vs Insurance
220.127.116.11 Intention of wagers is too obtain a financial
benefit, whilst with insurance contract, it is not to
obtain a benefit, it is to protect against losses
18.104.22.168 Gambler creates his own risk,
insurer has no control over his risk
22.214.171.124 Wagers are NOT ENFORCEABLE. You can’t
go to court and enforce a bet/wager
126.96.36.199 No requirement with a wager
to have an insurable interest
188.8.131.52 In both cases, the person who is taking
out the insurance policy and the person
who is taking the bet stands to be paid if
a PARTICULAR EVENT happens.
1.5 Sources of Insurance Law
1.5.1 REQUIREMENTS for a trade practice or
custom to qualify as a source of insurance law
184.108.40.206 1. It must be uniformly observed.
220.127.116.11.1 2. It must be long established.
18.104.22.168.1.1 3. It must be well known.
22.214.171.124.1.1.1 4. It must be reasonable.
126.96.36.199.188.8.131.52 5. It must be certain.
1.5.2 Is foreign law a binding
source of insurance law? NO.
1.6 Types of Insurance
184.108.40.206 SHORT-TERM INSURANCE
220.127.116.11.1 Liability to insurer is ltd to actual financial loss
18.104.22.168.2 Common Types
22.214.171.124.2.1 Property Insurance
126.96.36.199.2.1.1 ALL RISKS POLICY: Indemnifies the insured against all manner and
form of risks regarding PROPERTY
188.8.131.52.2.1.2 COMPREHENSIVE MOTOR VEHICLE POLICY:
any damage/theft o your vehicle is covered
and may include third party cover
184.108.40.206.2.2 Pecuniary (Financial) Insurance
220.127.116.11.2.2.1 Consequential Loss Insurance
18.104.22.168.22.214.171.124 Taken out to protect against any loss that is
caused by interruption of the business (eg. strike)
126.96.36.199.2.2.2 Credit insurance
188.8.131.52.184.108.40.206 Where someone insures themselves
if they are a CP against the possibility
that the consumer does not pay, OR
the CP may require the consumer to
take out this insurance.
220.127.116.11.2.2.3 Fidelity policy
18.104.22.168.22.214.171.124 A policy that protects an
employer against fraud by one of
its employees which causes loss.
126.96.36.199.2.2.4 Public liability policy
188.8.131.52.184.108.40.206 This insures someone against acts or omissions
that cause harm to the public. Eg. City of Cape
Town insuring against claims of damages caused
by potholes, which are the cities responsilbility
220.127.116.11 How may the insurer ‘indemnify’ the insured?
18.104.22.168.1 By paying out a certain amount of money, or by
reinstating the damaged object/property.
1.6.2 Non- Indemnity
22.214.171.124 CAPITAL / LONG-TERM INSURANCE
126.96.36.199 FIXED SUM of money payable IF event occurs
188.8.131.52.1 The amount is NOT LINKED to the loss, and the amount
recoverable is whatever is stated in the contract. This is
the key distinction from indemnity insurance.
184.108.40.206 Common Types
220.127.116.11.1 Insurance over a person
18.104.22.168.1.1 Personal accident policies
22.214.171.124.1.2 Disability insurance policies
126.96.36.199.1.3 Life insurance policies
2 Elements of an insurance contract
2.1.1 Insured’s obligation
2.1.2 REQUIREMENTS to be VALID
188.8.131.52 There must be a premium payable
and it must be clearly specified for
the contract to be valid.
184.108.40.206.1 The the intervals at which the
premium must be paid are specified.
220.127.116.11.1.1 The amount payable must be specified
18.104.22.168.1.1.1 Place of payment must be speciified
2.1.3 Is it necessary for the first premium to be paid before
the contract becomes effective? Ie. So is the policy
effective before you have paid your first premium?
22.214.171.124 Yes it is, it is effective from when you enter into it, HOWEVER
if the premium has not been paid then the insurer does not
have to honour the claim until you have paid.
2.2 Payment of specified sum / equivalent
2.2.1 insurers obligation
2.2.2 How is the sum determined in
case of non-indemnity insurance?
126.96.36.199 Says in the contract (predetermined amount)
2.2.3 How is the sum determined in
case of indemnity insurance?
188.8.131.52 Dependent on the extent of the loss. This amount will then be
recoverable either in money or in replacement.
184.108.40.206.1 NOTE: This is assuming that the particular
policy does cover for this amount
220.127.116.11 Right of contribution
18.104.22.168.1 What is the right of contribution
and when does it apply?
22.214.171.124.1.1 This right belongs to the insurer where a
particular item of property or a particular event
has been insured against by the insured party with
more than one insurance company
126.96.36.199.1.1.1 Doctrine says that if one of the insurers pays, that
insurer may claim a contribution from the other insurer.
188.8.131.52.2 How is the right exercised?
184.108.40.206.2.1 Assuming you have a non-compliant insurer, in the court
proceedings when one insurance company sues another
insurance company in its own name.
220.127.116.11.2.1.1 NOTE: Insured party is not
involved and the suing insurer
MUST HAVE PAID.
18.104.22.168.3 Why does this exist?
22.214.171.124.3.1 To avoid the insured being
paid twice for the same loss
2.3 Specified uncertain event/Risk
2.3.1 Contractual requirements for description of risk?
126.96.36.199 1. Subject matter, which is exposed to the risk
188.8.131.52.1 2. Peril --> The actual event that causes the loss, eg. Car accident
184.108.40.206.1.1 3. Circumstances affecting subject matter OR
peril ie. likelihood of the peril happening
2.4 Insurable interest
2.4.1 Determines extent of insured’s claim
220.127.116.11 Economic interest
18.104.22.168 Relating to risk IF thing damaged / event occurs
2.4.3 Indemnity Insurance
22.214.171.124 Insured must have pecuniary/economic interest
126.96.36.199.1 How do you test this?
188.8.131.52.1.1 You ask will the insured incur
financial loss, or fail to derive a
financial benefit if the risk occurs?
184.108.40.206 When may the insured NOT recover loss?
220.127.116.11.1 1. When there is no actual loss suffered
18.104.22.168.1.1 2. If the insurable interest no longer exists at the time that the risk event happens
22.214.171.124.1.1.1 3. When the policy doesn’t cover that particular risk/loss
126.96.36.199 What is the purpose of requiring
insurable interest(s) in indemnity policies?
188.8.131.52.1 To ensure people don't make money out of ensurance
184.108.40.206 (4) Broad Categories of insurable interests
under indemnity insurance, which relate to
real rights, personal rights & incorporeal
220.127.116.11.1 Property rights
18.104.22.168.2 Contract rights (personal rights)
22.214.171.124.3 Legal liability
126.96.36.199.3.1 Person insures against future obligations
arising from contract or delict
188.8.131.52.3.1.1 Liability ito contract
184.108.40.206.220.127.116.11 Eg. Insuring against the actions of one of your
subcontractors, who you have a contract with
18.104.22.168.3.1.2 Liability ito delict
22.214.171.124.126.96.36.199 Public Liability, caused by 3rd party or yourself, eg.
Eg. Negligence such as Car accidents
188.8.131.52.4 Factual expectation of damage
184.108.40.206.4.1 Insured has interest in preservation of the
thing in that s/he will benefit from its existence
or suffer prejudice from its destruction
220.127.116.11.4.1.1 Eg. Rented car
18.104.22.168.4.1.2 NOTE: MUST HAVE LEGAL POSSESSION
FOR IT TO BE AN INSURABLE INTEREST
22.214.171.124 When must the insurable interest exist?
126.96.36.199.1 Has to exist at the time of the loss and at
the time you enter into the contract.
2.4.4 Non-Indemnity Insurance
188.8.131.52 When must the insurable interest exist?
184.108.40.206.1 Has to exist at the time the contract is concluded. Once the contract has been concluded, it doesn’t
matter what has happened to your insurable interest, you are still covered by the insurance policy,
and they still have to pay out.
220.127.116.11.1 MARRIAGE: Spouses will have an
insurable interest in eachother’s lives.
18.104.22.168.2 DEBTOR/CREDITOR RELATIONSHIP:
The creditor will have an insurable
interest in the life of the debtor.
3 Conclusion and Contents of Insurance Contracts
3.1 3rd parties
3.1.1 INTERMEDIARIES Involved in
22.214.171.124.1 Agents of insured
126.96.36.199 Canvassing agents
188.8.131.52.1 ‘Propose’ contracts to potential
clients obo insurer BUT may or may
not have authority to bind
3.1.2 Have interest in contract
184.108.40.206 Beneficiaries of a contract, such as the
child of someone with life insurance
3.2 Principals of Contract Law
3.2.1 (4) REQUIREMENTS FOR BINDING INSURANCE CONTRACTS
220.127.116.11 1. That the parties have contractual capacity.
18.104.22.168.1 2. The agreement is lawful.
22.214.171.124.1.1 3. The agreement must be possible
126.96.36.199.1.1.1 4. Any statutory formalities must be complied with
3.3 Misrepresentation & Non-disclosure
3.3.1 With the insured party, there primary duties are two fold:
188.8.131.52 1. The duty against misrepresentation.
184.108.40.206.1 2. The duty to fully disclose/against non-disclosure
220.127.116.11.1.1 IF there is material misrepresentation or
non-disclosure, then contract is VOIDABLE (set
aside by insurance company or insurance
company may charge higher premiums) at the
instance of the insurance company.
18.104.22.168.1.2 THEREFORE INSURED MUST
DISCLOSE ALL INFO THAT IS:
22.214.171.124.1.2.1 1. Material to assessment of risk
126.96.36.199.188.8.131.52 2. Of which insured has actual/constructive knowledge
184.108.40.206.220.127.116.11.1 ACTUAL: factual info which the insured party knows
18.104.22.168.22.214.171.124.2 CONSTRUCTIVE: The knowledge that is
deemed to exist with the insured party.
126.96.36.199.1.2.2 AND FURTHERMORE, INSURED MUST:
188.8.131.52.184.108.40.206 Be Truthful & Accurate
220.127.116.11.18.104.22.168.1 Volunteer information that may affect the risk
22.214.171.124.126.96.36.199.1.1 NOTE: No excuses available to
insured, where if you make a
mistake or forget, then too bad.
188.8.131.52.184.108.40.206.1.1.1 HOWEVER duty on insurer to frame
questions clearly & unambiguously
220.127.116.11.1.3 This duty to disclose lasts Continues
throughout negotiations, leading up
to the conclusion of the contract,
terminates after conclusion
18.104.22.168.2.1 What qualifies as misrepresentation by COMMISSION?
22.214.171.124.2.1.1 This is a PRE-CONTRACTUAL statement which is untrue
126.96.36.199.2.1.2 The test to see if misrepresentation by
commission will render the contract void:
188.8.131.52.184.108.40.206 1. Was the info the insured party gave FALSE or INACCURATE?
220.127.116.11.18.104.22.168.1 2. Did it actually mislead the insurance company?
22.214.171.124.126.96.36.199.1.1 3. Does it relate to a material fact or circumstance?
188.8.131.52.2.2 Misrepresentation by OMISSION (non-disclosure)
184.108.40.206.2.2.1 Where the insured fails to disclose info which affects
the assessment of risk, in respect of which the
insurance company was ACTUALLY MISLED
220.127.116.11.2.3.1 Only material misrepresentation renders contract VOIDABLE
18.104.22.168.22.214.171.124 Whether or not the information that was not disclosed
was reasonably relevant to the assessment of risk. Ie,
did it affect the price of the PREMIUM, or did it affect
the LIKELIHOOD of the insurance company entering
into the contract (affect conclusion of contract)
126.96.36.199.188.8.131.52.1 If so, then it's material
184.108.40.206.2.3.3 Examples of facts that could be material:
220.127.116.11.18.104.22.168 Facts indicating unusually high exposure to risk
22.214.171.124.126.96.36.199.1 Eg. NASCAR driver takes out medical insurance
188.8.131.52.184.108.40.206 Facts showing liability of
insured would be greater than
expected if event occurs
220.127.116.11.18.104.22.168.1 Eg. Not specifying what
type of paint your car has.
22.214.171.124.126.96.36.199 Facts suggesting insured = likely to cause risk to
materialise through own culpable conduct
188.8.131.52.184.108.40.206 Proposed insured’s insurance history
220.127.116.11.18.104.22.168.1 This is linked to the proposed insured’s insurance
history, where if someone has claimed repeatedly
say for theft from their car, the insurance company
may think that the person has been forgetful and
hasn’t been locking their car doors.
22.214.171.124.126.96.36.199 Subjective circumstances of proposed insured
188.8.131.52.184.108.40.206.1 Eg. Having a stalker who you received death
threats from. Insurer should have known this.
220.127.116.11.18.104.22.168 Facts showing insurer’s right of subrogation
would be worthless / of limited value
22.214.171.124.126.96.36.199.1 If that CP knows that that
consumer is already insolvent
188.8.131.52.2.4 When may the insurer not rely on
non-disclosure by Insured?
184.108.40.206.2.4.1 1. When the insurance company already knew that information
220.127.116.11.18.104.22.168 2. Where the info is public knowledge
22.214.171.124.126.96.36.199.1 3. Where the insurance company should have known about
the info because of its particular kind of business
188.8.131.52.184.108.40.206.1.1 4. Where they have waived the right to that information
220.127.116.11.2.5 Who bears the burden of proof when
it comes to establishing materiality?
18.104.22.168.2.5.1 The insurance company, who must prove that
the info that you didn’t disclose was material.
22.214.171.124.2.6 NOTE: MISREP OF AGE will allow
for adjustment of policy benefits,
but will NOT declare it void
3.4 Renewals of contracts
126.96.36.199 New facts arising since original contract concluded MUST BE DISCLOSED.
188.8.131.52.1 Facts discovered since original contract concluded MUST BE DISCLOSED.
184.108.40.206.1.1 Answers which are no longer correct MUST BE DISCLOSED.
3.5 Effect of misrepresentation/ non-disclosure
3.5.1 Contract voidable at instance of insurer
220.127.116.11 AND if NO fraud, insurer must return all of
the premiums that were paid to it
3.5.2 NOTE: IF INSURANCE COMPANY misrepresents
something to do with the proposal which
misleads the insured party in such a way that
they don’t disclose material info
18.104.22.168 THEN Insurance Company CAN BE
ESTOPPED FROM REFUSING TO PAY OUT