Theme 6 Insurance Law Lecture Notes PDF

THEME 6 INSURANCE LAW LECTURE 12 PROF CARIKA KEULDER WHAT IS AN INSURANCE CONTRACT? Insurance is a contract in terms of which one party (insurer) undertakes, in return for payment of premium by the insured, to pay to the insured a sum of money or render him its equivalent on the happening of a spec...

THEME 6 INSURANCE LAW LECTURE 12 PROF CARIKA KEULDER WHAT IS AN INSURANCE CONTRACT? Insurance is a contract in terms of which one party (insurer) undertakes, in return for payment of premium by the insured, to pay to the insured a sum of money or render him its equivalent on the happening of a specified uncertain event in which the insured has an interest. TYPES OF INSURANCE According to peril According to nature Nature and extent of (risk) of interest (person, cover (indemnity, property) non-indemnity) Comprehensive motor vehicle, fidelity policy, life policy  Parties Insured, insurer, 3rd Formalities N FORMATIO none, reduced to writing N OF THE Submission of proposal form and issuing of policy CONTRAC Proposal form (offer) T Content – particulars of person, details on subject matter and hazards, insurance history, financial status – warrant the truth Issuing of insurance policy - acceptance  Invalid terms Insurer exempt from liability for actions of its agent; Agent of insurer was actually agent of insured FORMATIO Insured waives a right to which he/she is entitled to in terms of the Long-Term Insurance Act or N OF THE Short-Term Insurance Act Short term CONTRAC Compelling insured to undergo a polygraph T test Policyholder undergoes test, fails, claim rejected Inducing the insured to undergo such a test Dispute may only be resolved by arbitration, can reach agreement once there is a dispute  The role of the broker Broker is an intermediary between insured and insurer – independent FORMATIO Relationship insured and broker – N OF THE mandate – reasonable care and skills Relationship between insurer and broker – CONTRAC commission if contract concluded T Statutory control –Financial Advisory and Inermediary Services Act Licence General and specific codes of conduct ELEMENTS OF INSURANCE 1. Payment of premium 2. Promise by insurer to pay sum of money or render its Grace period equivalent Indemnity Reciprocal obligation Non-indemnity No premium, no cover Pay premium before can get cover Only pay out if premium paid prior to materialisation of risk ELEMENTS OF INSURANCE 3. Materialisation 4. Insurable of risk Possibility of harm transferred interest Interest in preventing risk Future and uncertain Indemnity Described interest present when risk Object, perils, limiting risk (Qualified materialises promise and promise with will incur pecuniary or fail to get exceptions), limiting extent of liability anticipated financial benefit Non-indemnity Interest must exist when contract concluded own life, health, body and of spouse, parents of DUTY OF INSURED TO DISCLOSE MATERIAL FACTS Facts and circumstances that affects risk exclusive knowledge of insured Failure to do so mala fides – avoid liability – Mutual and Federal Insurance v Oudtshoorn Municipality Whether in opinion of reasonable person, the information could affect the insurer’s decision whether to accept the risk or charge a higher premium than usual – MATERIAL More than ordinary exposed to danger Culpable conduct Financial problems or poor financial history Poor insurance record DUTY TO DISCLOSE MATERIAL FACTS Do not need to disclose Facts that will not affect or lessen risk General knowledge Facts insurer know or ought to know Insurer expressly or tacitly waived the right to be informed Disclose facts to actual or constructive knowledge Actual – personal knowledge Constructive – ought in ordinary course of business know the fact Would have ascertained the fact if made inquiries as reasonable business prudence require Time of disclosure When taking out insurance, every renewal DUTY TO DISCLOSE MATERIAL FACTS Disclosure to insurer’s agent Did the agent have authority to act as agent? Proposed insured entitled to expect that agent will transmit info correctly Insurer’s right of rescission Voidable at option of insurer Insurer has onus Material Within knowledge of proposed insured; Not communicated to insurer or agent Electing rescission – restore premiums WARRANTIES Affirmative and promissory warranties Contractual undertaking that a certain state of affairs exists. Affirmative – motorvehicle insurance – valid driver’s licence Promissory – fire policy – books in fire-proof safe Common Law – insurer can cancel the policy Statutory protection of insured Jordan v New Zealand Insurance Co Material affected the assessment of risk Age, premium payable as if correctly stated. DUTIES FOR INSURER – COMPENSATE THE INSURED - LIABLE TO PAY Claim Liability Risk requireme not Extent of materialise nts excused by liability d complied exception with SUBROGATION Rights of insured who indemnified insured against a loss to exercise all remedies of the insured Wrongdoer should not benefit from fact that person wronged was insured Insured should not be enriched at expense of insurer