CONTRACT OF INSURANCE 2.pdf

PENTECOST UNIVERSITY FACULTY OF LAW LEVEL 200 REGULAR BANKING & INSURANCE LAW II BY EMMANUEL DZAGELI  INTRODUCTION Contract of Insurance FORMATION Contract of Insurance is where one party undertakes, in return for a consideration OF...

PENTECOST UNIVERSITY FACULTY OF LAW LEVEL 200 REGULAR BANKING & INSURANCE LAW II BY EMMANUEL DZAGELI  INTRODUCTION Contract of Insurance FORMATION Contract of Insurance is where one party undertakes, in return for a consideration OF paid by the other, to pay a sum of money or INSURANCE provide some equivalent benefits to the other if a specified event should happen, or CONTRACT when such as event should happen, or to make payments to the other until such an event should happen, the essence of the arrangement being that it is either uncertain whether, or uncertain when, the event will occur. LS Sealy & RJA Hooley.  Under the contract of insurance, the contract is known as a “Policy” FORMATION where it is in writing. OF The parties are called respectively INSURANCE “the insurer” or underwriter” and CONTRACT “insured or assured or policyholder” The consideration is referred to as a “the premium”.  PROPOSAL FORM Depending upon a particular insurance contract to be entered into, you may have different proposal forms FORMATION being provided by various insurance companies. There is however some basic questions which are common to all OF proposal forms. INSURANCE Contents of a Proposal Form CONTRACT (1) A description of the proposed insured. This includes the name, address and occupation of the prospective insured. (2) The description of the risk.  (3) The description of the circumstances affecting the risk, for example, if it is for personal accident insurance, the relevant questions will be on the person’s weight, height, habits, among others. Again if it is for property insurance, the relevant questions may be the location of the property, the FORMATION general environment and the business the property is hooked to and several other questions. OF The duty imposed on the insured at this stage is to disclose all material facts relating to the risk to be insured. INSURANCE (4) It is also necessary that the insurance company should CONTRACT know the previous history of the proposed insured. The proposed insured is required to state whether he has made a similar proposal to another insurance company, whether such proposal was declined or accepted at a higher premium or whether any previous policy of the proposed insured has been cancelled.  How is the proposal form assessed? In assessing the proposal form, general principles of law are applied. This includes the following: FORMATION (a) The first way is that a fair and reasonable construction must be put on the language by the proposed insured. OF In Merchant Manufacturers Insurance Co. v. Hunt, the question that was put was “Whether to the knowledge of the proposer any person INSURANCE who had been convicted of a motor offence will drive the car.” The answer provided was NO. By this the proposed insured meant that he CONTRACT has knowledge of the intended drivers’ record. (b) No excuse will be accepted for being careless. Therefore if the proposer inadvertently puts NO instead of YES it will not avail him to say that it was a slip of his pen. The answer so stated will be taken for what it is worth. (c) An answer given must be accurate in all aspects.  (d) Where a space for an answer is left blank so that a question is not answered at all, the reasonable inference is that there is nothing to enter as an answer. If the blank space is accepted without any further inquiry by the insurer, it is deemed that the insurer has waived the duty to disclose on the part of the insured. However, if the blank space really means a negative answer (NO) and if the negative answer is incorrect, the insurers are not liable. FORMATION In Roberts v. Avon, an insured made a declaration in a proposal form for a burglary policy that; “I have never sustained a loss in respect of any of OF the contingencies specified except …” A note was provided to give the date amount and the name of insurers in respect of the loss by virtue of being burgled. The insured did not put any words after except and for INSURANCE that matter did no fill the note that was attached. But in actual fact he had recovered from another insurance company a loss in burglary CONTRACT policy. He was burgled and he made a claim and the insurers objected to the claim on the grounds that the uncompleted portion gave them an answer which was ‘no’. The court held that the space which was left blank was a negative one. (e) Where the answer given is unsatisfactory as being inconsistent or incomplete, the insurers should ask further questions to clarify the answers so given.  Elements of Insurance Contract can be classified into two sections; ELEMENTS 1. The elements of general contract and OF A 2.The elements of special contract relating VALID to insurance. The special contract of INSURANCE insurance involves principles: CONTRACT insurable interest, utmost good faith,  indemnity, ELEMENTS subrogation, OF A Warranties, VALID INSURANCE Proximate cause, CONTRACT  assignment, and nomination, and return of premium.  OFFER & ACCEPTANCE OFFER An offer is an indication in words or by conduct by an offeror that he or she is prepared to be bound by a ELEMENTS contract in the terms expressed in the offer, if the OF offeree communicates to the offeror his or her acceptance of those terms. GENERAL The offer in an insurance contract typically comes from the person seeking insurance coverage, known as the CONTRACT "proposer" or "applicant." The offer is made when the proposer submits an application for insurance to the insurance company. This application contains important information about the individual or entity seeking insurance, the type of coverage requested, and other relevant details.  ACCEPTANCE The acceptance of the offer is the insurance company's agreement to provide coverage ELEMENTS based on the terms and conditions outlined in OF the application and the insurance policy. GENERAL Acceptance is usually communicated through the issuance of an insurance policy, also known CONTRACT as the policy contract or insurance binder. This document outlines the terms, conditions, coverage limits, premiums, and other essential details of the insurance arrangement.  It's important to note that acceptance of the offer may be subject to certain conditions, such as underwriting approval. Insurance companies often evaluate the risk associated with providing coverage to the applicant before accepting the ELEMENTS offer. This evaluation may involve assessing factors like the OF applicant's health (in the case of health insurance), the condition of the property (in the case of property insurance), GENERAL or the nature of the business (in the case of commercial insurance). CONTRACT Once the insurance company accepts the offer and issues the policy, both parties are bound by the terms and conditions of CON’T the contract. The policyholder (the person or entity that purchased the insurance) is obligated to pay the premiums as specified in the policy, and the insurance company is obligated to provide coverage as outlined in the policy.  Counter - Offer ELEMENTS When the prospect (the potential policy-holder) proposes to enter the contract, it is an offer and OF if there is any alteration in the offer that would GENERAL be a counter-offer. CONTRACT In the absence of counter-offer, the acceptance of the offer will be an acceptance by the insurer. CON’T At that moment, the notice of acceptance given to the other party; will be a valid acceptance  CONSIDERATION “Consideration" refers to the exchange of something of value between the two parties involved: the insured ELEMENTS person (or policyholder) and the insurance company. OF Consideration is one of the essential elements of a legally binding contract, and it plays a crucial role in GENERAL insurance contracts as well. CONTRACT Premium Payment: The policyholder agrees to pay a specified amount of money to the insurance company at CON’T regular intervals, which is known as the premium. This premium is the consideration given by the policyholder.  Promise of Coverage ELEMENTS In return for the premium payment, the insurance company promises to provide OF certain benefits and coverage as outlined in the insurance policy. GENERAL These benefits can include financial protection, compensation, or assistance in CONTRACT case of specific events or losses covered by the policy. This promise of coverage is the consideration provided by the CON’T insurance company. ELEMENTS Binding Agreement When the policyholder pays the premium and the insurance company accepts it, a binding agreement is OF formed. This agreement establishes the rights and responsibilities of both parties. The policyholder agrees to adhere to the terms and GENERAL conditions of the policy, and the insurance company commits to providing coverage as specified in the policy. CONTRACT It's essential for both parties to fulfil their obligations under the contract for it to remain valid and for the insured person to receive the benefits they are entitled to in the event of a covered loss. CON’T ELEMENTS CAPACITY The "capacity to contract" in insurance law refers OF to the legal ability of an individual or entity to enter into a valid and enforceable insurance contract. GENERAL In most legal systems, there are certain requirements that must be met for a contract to be considered valid, and one of these CONTRACT requirements is that the parties entering into the contract must have the capacity to do so. Here's CON’T a more detailed explanation:  LEGAL AGE In many jurisdictions, individuals must have reached a certain age to have the capacity to contract. CAPACITY This age is typically 18 years or older, but it can vary depending on the specific jurisdiction. The contract age under Act 25 is 21 years and TO therefore same shall apply under the contract of insurance. CONTRACT Minors, generally those under the legal age, may not have the capacity to enter into insurance contracts without the involvement of a legal guardian or parent.  MENTAL CAPACITY Parties entering into an insurance contract must have the mental capacity to understand the CAPACITY terms and implications of the contract. This means they must be of sound mind at the TO time of entering into the agreement. Individuals suffering from mental illnesses or cognitive impairments that prevent them from CONTRACT understanding the contract may lack the capacity to contract.  LEGAL COMPETENCE Parties must also have the legal competence to CAPACITY contract, meaning they are not under any legal disabilities that would prevent them from entering into contracts. TO For example, individuals who have been declared legally incapacitated by a court, such as those with severe intellectual disabilities, CONTRACT bankruptcy, may not have the capacity to contract.  CONSENT Insurance contracts require the voluntary and informed consent of all parties involved. CAPACITY If a person is forced or deceived into entering into an insurance contract, their capacity to contract may be challenged. TO Parties entering into the contract should enter into it by their free consent. The consent will be free when it is not caused by; CONTRACT (1) coercion, (2) undue influence, (3) fraud, or  (4) misrepresentation, or (5) mistake. CAPACITY When there is no free consent except fraud, the contract becomes voidable at the option of the party whose consent was so caused. In case of TO fraud, the contract would be void. The proposal for free consent must sign a declaration to this effect, the person explaining CONTRACT the subject matter of the proposal to the proposer must also accordingly make a written declaration or the proposal.  NOTE It is instructive to state that, in the absence of CAPACITY capacity to contract, an insurance contract may be deemed void or voidable, meaning it may not be enforceable or may be rescinded if the party TO lacking capacity challenges its validity. It is essential for insurance companies to ensure that the individuals or entities they are CONTRACT contracting with meet these capacity requirements to avoid potential legal issues and disputes in the future.  LEGAL OBJECT CAPACITY To make a valid contract, the object of the agreement should be lawful. TO An object that is, (i) not forbidden by law or CONTRACT (ii) is not immoral, or (iii) opposed to public policy, or  (iv) which does not defeat the provisions of any law, is lawful. CAPACITY In the proposal from the object of insurance is asked which should be TO legal and the object should not be concealed. CONTRACT If the object of insurance, like the consideration, is found to be unlawful, the policy is void.  1. INSURABLE INTEREST THE It has been defined as “the insured’s pecuniary interest in the subject ELEMENTS matter of the insurance.” It means that the insured must have some form of relationship with the OF subject matter of the insurance. The relationship may be legal or equitable. SPECIAL In Lucena v. Craufurd, the Crown commissioners insured enemy ships seized by British vessels which were still on high seas. The statute which CONTRACT allowed seizure only permitted seizure when the vessels were in British ports or British waters. Some of these ships were lost on high seas. The RELATING issue was whether or not the commissioners had insurable interest in the ships. TO The House of Lords held that at the time of the loss the commissioners had no insurable interest in the ships. Lord Eldon said as follows: “An INSURANCE. insurable interest is a right in the property or a right derived out of some contract in the property which in either case may be lost upon some contingency affecting the possession or enjoyment of the property.”  OWNERSHIP In Anderson v. Morris, there was a policy of cargo insurance on rice which was being loaded onto a vessel. The assured had contracted to buy the cargo which FORMS OF would be shipped. The contract of sale stipulated that the rice which was EXPRESSING being loaded was not to be at the assureds risk until the INSURABLE full cargo was loaded. When the cargo was three quarters full the ship sunk and the assured claimed INTEREST against the insurers of the policy. It was held that the assured did not have any insurable interest in the cargo that sunk because he did not bear the risk in the cargo until there was a full load. See Piper v. Royal Exchange Assurance.  A PERSON IN POSSESSION Any person in possession of the subject matter has the right to insure it as well. FORMS OF The possession that entitles the person to have EXPRESSING insurable interest is the possession that carries INSURABLE with it a responsibility. INTEREST The said responsibility must put financial obligation on the person in possession. A thief in possession does not come under this, for that he cannot insure the property.  In Afriyie v. Guardian Assurance Co., Assad & Co. owed a vehicle which was sold to one Kweku Appiah under a Hire Purchase agreement. The agreement prohibited Kweku Appiah from disposing off the vehicle whilst the Hire Purchase agreement subsisted. Kweku Appiah sold the car to one Osei Kweku alias Emmanuel Osei. There was an accident and the plaintiff who was a victim of that accident sued Osei Kweku and obtained judgment against him. Afriyie brought the present action to enforce the judgment under third party proceedings. The insurance company resisted the claim arguing that the sale of the vehicle contravened the Hire Purchase agreement and therefore did not pass any title to the purchaser that is Osei Kweku did not have any insurable CASE interest to support his claim. It was held that to have an insurable interest in an item one need not be the owner. A mere possession of the property is sufficient to give the person in possession an insurable interest. That at the time Emmanuel Osei alias Osei Kweku insured the car he was not the owner but he had an insurable interest in the property. Hence the defendants were under an obligation to indemnify him. The court said, insurable interest in property is not confined to absolute legal ownership. Generally, any person who is so situated that he will suffer loss as the proximate result of the damage to or destruction of the property, has an insurable interest in the property. Read these cases; Royal Exchange Assurance v Kofi Tailor & Assad Fakry & Sons v. Ghana Union Assurance  In order to make insurance transactions fair to all parties the law has elevated insurance contracts to the status of 2. THE contract of utmost good faith. CONCEPT The law requires that all material facts about the subject matter should be disclosed before the completion of the OF contract. The rationale is that in insurance contract, the UTMOST insured is transferring risk to the insurer and secondly it is only the proposer who has the full knowledge of the GOOD surrounding circumstances of the risk to be insured. FAITH To this end the insurer depends entirely on the information provided by the insured. The insured is thus required to make full, accurate and precise description of the relevant matters about the subject matter.  Good faith was defined by Lord Mansfield in Carter v. Boehm8 as follows: “Good faith forbids either party by concealing what he privately knows to draw the other into a bargain from his ignorance THE of that fact and from his believing the contrary. The policy will be equally void against the underwriter if he concealed some CONCEPT information which he privately knows about the subject matter...” In this case there was a Fort in West Indies which was insured OF against European enemy attack. The insured was Governor Carter. The Fort was attacked by the French army and the plaintiff claimed for the loss that has resulted. The insurance company raised an UTMOST objection to the claim and the basis of the objection was that the Governor had earlier on written to his brother-in-law to take the GOOD policy on his behalf and in the said letter he had expressed his fear that the Fort would be attacked by the French. FAITH This information the insurance company argued was not disclosed at the time of taking the policy. The court held that underwriters in London were more likely to know this fact than the insured and hence ruled against the insurance company. The court held that the state of the French army was better known in England than in West Indies.   Glicksman v. Lancashire & General Assurance Co. Ltd.  Woolcott v. Sun Alliance and London Insurance Ltd.  Economides v. Commercial Union Insurance Plc. READ  Dawsons Ltd v. Bonnin THE  Rivaz v Gerussi,  Wolcott v. Sun Alliance, CASES  Whitewell v. Auto Car Fire & Accident Insurance Co. Ltd,  Locker v. Law Union & Rock Insurance Company Ltd,  Lambert v. Co-operative Insurance Society Ltd,  In insurance contract, the liability of the insurer is usually to pay a sum of money to the assured for the loss that has occurred. The contract may give the insurer the option to reinstate the property. The concept of indemnity is a situation where the promisor undertakes the duty to reinstate the insured for any loss that has occurred. INDEMNITY The concept therefore means that in the event of a loss arising from the insured peril, the insured shall be placed in the same position he occupied immediately before the happening of the event. A claim under a contract of indemnity is limited to the amount of the insured’s actual loss and the burden is on the insured to prove the quantum of his or her loss except where the parties are in agreement to the value of the property insured.  In Castellain v. Preston, the owners of a property contracted to sell it. Two weeks thereafter fire damaged part of the property. The owners put in a claim and after negotiations they received £330 for the loss that was incurred. In spite of this compensation, the owners completed the sale of the building and obtained the full price. The insurance company argued that the owners after all did not suffer any loss. It was held by the court that the owners of CASE the property were to repay the £330 to the insurers as they have suffered no loss. Brett L.J. had this to say: “The assured shall be fully indemnified but shall never be more than indemnified. That is the fundamental principle of insurance and if ever a proposition is brought forward which is at variance with it, that is to say, which either will prevent the assured from obtaining a full indemnity or which will give the assured more than a full indemnity, that proposition must certainly be wrong.”  (1) In the event of a loss the amount the insured will recover from his insurers will neither be more or less than his actual financial loss; CONSEQUENCES OF THE (2) If the subject matter insured is only partially destroyed, the insured can only recover the loss APPLICATION of repairing the damage and no more. In some OF cases the insurers may decide to treat the case INDEMNITY as constructive total loss and pays the insured the full market value. The insured is then bound to surrender the salvage of the property to the insurer. The insured cannot take the full indemnity and take the salvage as well.  (3) The insured is bound on full settlement of the loss to transfer to the insurers any rights which he may have against the third party in respect of CONSEQUENCES the loss. The insured cannot receive an OF THE indemnity and proceed against the tortfeaser for another payment. APPLICATION (4) Where the insured has taken more than one OF policy on the same subject matter he is INDEMNITY precluded from obtaining more than one complete indemnity. The insured is at liberty to elect which of the insurers to claim against. The insurer who pays for the loss is entitled to take a pro-rata contribution for the insurer or insurers.  The doctrine was defined in the Castellian case as follows: “The right of the insurer who has paid for the loss to receive the benefit of all the rights and remedies of the insured against the third party...” The doctrine has its foundation in the principle of unjust enrichment. This can be illustrated on two fronts. The first is that an insured cannot recover more than full indemnity of his loss and where he receives more, he should account to the SUBROGATION insurer, that is, the insured cannot make profit. The second is that an insurer who has indemnified the assured is to succeed to all the rights of the assured and proceed against the tortfeaser in contract or tort and sue in the insured’s name. Where the insurer has already paid for the loss, this doctrine permits the insurer to recover from the third party or if the insured having received payment also exercises this right the insurer would be entitled to repayment from the insured.  In Mason v. Sainsbury, the plaintiff’s house was demolished in riots. The house had been insured and he successfully claimed compensation from the insurer. The insurers proceeded against the tortfeasers in the name of the insured. The tortfeasers contended that there could be no recovery from them because the insurers CASES have received premium from the insured. They had not suffered by the act of the tortfeasers. The court held that the insurers had the right to exercise the right of Subrogation against the tortfeaser once there is a loss and the loss has been paid. See Lister v. Romford Ice & Storage Co. Ltd  Where the insurer makes any payment to the insured not knowing that the insured has received a gift which is to mitigate the loss, the insurer is entitled to any sum in the hands of the insured up to but not below the value of the insurer’s own payment. GIFTS That is the insured is to account to the insurer. In Sterns v. Village Main Reef Gold Mining Co,23 the defendant took a policy in respect RECEIVED of Gold belonging to the company. There was a loss in respect of the insured Gold. BY THE The company made a claim and they were paid by the insurer. The company later received from the South African government money INSURED in respect of the loss that has been suffered. The insurance company thus brought an action to recover the payments made to the company by the South African government. It was held that the insurers were entitled to recover the money since the South African government paid the money to diminish the loss incurred by the insured. See Burnand v. Rodocanachi.  The insurers’ right of subrogation is limited to the actual sum paid to the assured. Any benefit received by way of over payment shall be refunded to the insured else the insurer shall hold the said money in trust for the insured. The principle operates after insurers have recovered from the tortfeaser the money paid to the insured. In Yorkshire Insurance Company v. Nisbett Shipping Co,25 a ship was insured for £72,000. There was a loss which was caused by a ship belonging to the Canadian government. The insurance SURPLUS company paid the £72,000 to the insured. The insurance company however agreed that the insured should proceed personally against the Canadian government. The insured was paid and when the amount was converted the total amount paid was £126,000. The insurance company contended that it was entitled to the extra £55,000 but the insured argued that they were entitled to only £72,000 which they paid out. The court held that the subrogation rights of the insurance company extended only to the sums the company has paid out.  The principle comes into play where an assured has more than one insurance policy in respect of the same risk. This has come to be known as double insurance. The purpose of the principle is to ensure that an assured does not recover more than what is due him even where the assured holds more than one policy on the same risk. The principle is applied when one insurer calls or CONTRIBUTION demands that the other insurer contribute to the cost which both have insured against their respective policies. The rationale is to prevent unjust enrichment and is basically between two insurers. See  Gale v Motor Union Insurance Co,  Weddell v. Road Transport & General Insurance Co  (1) There must be at least two or more REQUIREMENTS policies in force at the material time; FOR (2) Each of these policies must insure the INVOKING same subject-matter and the same CONTRIBUTION interest of the same assured; (3) The policies must concern the same peril that caused the loss.  A "warranty" is a specific provision or condition that the policyholder (the insured) must adhere to in order to ensure that their insurance coverage remains valid. 5. It is a legally binding promise made by the WARRANTIES insured to the insurer, and failure to meet the terms of the warranty can result in the insurer denying a claim or even voiding the insurance policy altogether.  Express Warranty A warranty can be explicitly stated in the insurance policy document. For example, the policy may contain a warranty that the insured property will be equipped with a certain type of security system, or that the insured will not engage in specific high-risk 5. activities. WARRANTIES Implied Warranty In some cases, warranties may be implied by law based on the nature of the insurance contract. For instance, there is often an implied warranty that the information provided by the insured when applying for coverage is accurate and complete.   Basis of the Contract Warranties are typically considered a fundamental or "basis of the contract." This means that they are central to the contract's formation, and any breach of warranty can give the insurer the right to void the contract from its 5. inception. WARRANTIES Materiality The warranty must be "material," meaning it relates to a significant aspect of the insurance risk. If a warranty is breached in a way that is not material to the claim, the insurer may still be obligated to pay the claim.  Consequences of Breach If the insured breaches a warranty, the insurer may take various actions, including:  Denying a claim related to the breach.  Voiding the policy altogether, which means it is treated as if 5. it never existed, and no claims will be paid.  Adjusting the terms of the policy, such as increasing WARRANTIES premiums or modifying coverage. Notification of Changes Insured individuals or businesses should promptly notify their insurer if there are any changes in circumstances that could affect the warranties. For example, if a security system in a property covered by an insurance policy is removed or no longer functioning, the insured should inform the insurer.  The fundamental rule in insurance law is that the insurance company is only liable for losses proximately caused by the peril which has been insured in the policy. It is said to be the dominant or effective or 6. operative cause and not necessarily, the last PROXIMATE cause of the risk. CAUSE This doctrine is common to all classes of insurance and is based upon the presumed intention of the parties as expressed in the contract but it must be applied with good sense so as to give effect to and not to defeat that intention.  In Leyland Shipping Co. v. Norwich Union Fire Insurance Society,14 a shipping company took out an insurance policy in respect of a vessel against maritime perils except loss caused by hostilities. The ship was torpedoed in the waters and it was brought to the harbour. The harbour authorities asked that it be moved to outer berth, that is, outside the harbour. A tidal wave fell and the ship sunk. The ship owners claimed under the policy for loss caused by the perils of the sea. The House of Lords held that the insurers were not liable, the real cause being the torpedoing and not the perils of the sea. CASES In Pink v. Fleming,15 there was a policy on a cargo of fruits “warranted from average” unless damage was the consequence of collision. The ship was involved in a collision and had to go to port for repairs. The cargo as a result had to be reloaded and part of the cargo was damaged by delay and the way it was handled. The insured put in a claim on the basis that the loss was caused by collision. It was held that the collision was not the proximate cause of the damage and the insurers were not liable. See Re Eltherington & Lancashire v.Yorkshire insurance Co.  Doctrine  The application of the doctrine varies according to what the question is. The question is  whether the loss was caused by the peril insured against. With this the insurer is liable. APPLICATION Circumstances OF THE If the last of the successive cause happens to be the DOCTRINE peril insured against, insurers should honour the claim. See - Green v. Elmslie, - Mardsen v. City & County Insurance.  "Assignment and nomination" in the 7. context of an insurance contract refer ASSIGNMENT to two different ways in which the AND policyholder can transfer or designate NOMINATION the benefits or rights associated with the insurance policy to another party.  Assignment  Assignment is the act of transferring some or all of the rights, benefits, or interest in an insurance policy from the policyholder (assignor) to another person or entity (assignee). ASSIGNMENT  The policyholder may choose to assign their insurance policy for various reasons, such as settling a debt, AND transferring assets, or as part of estate planning. NOMINATION  Once the assignment is made, the assignee becomes the new beneficiary of the policy and is entitled to the benefits and proceeds outlined in the policy terms.  The insurance company typically requires written consent from the policyholder to execute an assignment, and the assignment must meet certain legal requirements to be valid.  Nomination  Nomination is the process of designating a person or entity to receive the policy benefits or proceeds in the event of the policyholder's death. The person nominated is known as the nominee. ASSIGNMENT  Unlike assignment, which transfers rights during the policyholder's lifetime, nomination comes into effect AND after the policyholder's death. NOMINATION  The nominee is typically named in the insurance policy document, and the policyholder can specify one or more nominees.  The nominee(s) will have a claim on the insurance proceeds upon the policyholder's demise, and they are legally entitled to receive the benefits, subject to any applicable laws and regulations.  This right is based on the fact that risk contemplated has never been borne by the insurer and it is based on total failure of consideration by the insurer. Any action to 8. recover the premium is in restitution. RETURN Circumstances where the premium is returned (1) Where the parties are not ad idem. They were at cross PREMIUM purposes; (2) Where the policy is either void or voidable (either party cancels the policy, when the proposal is withdrawn, when the contract is not concluded, misrepresentations at the insurers option);  (3) Where the policy is illegal and is unknown to the assured. It should be noted that the illegality cannot be relied on 8. by any of the parties if they were “in pari delicto” that is RETURN both are guilty of sin. Wilmount CJ in Collins v Blatern held that whoever is a PREMIUM party to an unlawful insurance if he has once paid the money stipulated to be paid in pursuance shall not have the help of the court to fetch it back again. You shall not have the right of action when you come into a court of justice in this unclean manner to recover it back. THANK END YOU