Uzbekistan Insurance Company - Case Study Example

Introduction to Insurance The Manager, Uzbekistan Insurance Company has received three claims for his opinion. The first relating to the claim by Vicky's husband on her death due to fire and another claim for damage due to fire caused to the house belonged to Vicky. While the claim on her life can be settled due to perpetuity of insurable interest in life assurance contracts in spite divorce, fire claim cannot be settled because of Dave's negligence in wiring which was found to be faulty. The second case of Brian need not be settled because of his contributory negligence though his lawyers can claim for relief due to comparative negligence. The third case of Heather's death due to hospital's ineffective cleaning though she had been admitted due to allergy which she had not disclosed in the proposal, her husband's can be settled at higher premium rate with proportionately reduced sum assured since it would be too harsh to reject the claim on two counts. one even if she had stated the allergic condition, only higher premium would have applied and two, the death was not due to allergy. Opinion of the Manager, Uzbekistan Insurance Company Three questions arise for considering the claims of Dave. 1) Whether he has insurable interest on Vicky's life even after their divorce. 2) Whether death of Vicky was caused by his evil design under the pretext of accidental fire and 3) Whether he has insurable interest on the house and whether his negligence in wiring disqualifies him from making the claim. As per the sections 1 and 3 of Life Assurance Contract 1774 of England, the person should have insurable interest on the person whose life is sought to be insured by him/her and the sum insured must not be greater than the value of insurable interest as per the principle of indemnity as to the nature and time of interest.1 But as per the land mark judgement of 1854 in Dalby v Indian and London Life Assurance Co2, it was held to be sufficient if insurable interest existed at the time of conclusion of life assurance contract and that it need not continue until occurrence of the insured event, here Vicky's death. Hence Dave is deemed eligible for the claim on Vicky's life on her death even though technically he ceased to have insurable interest on their divorce. "However a person may also be interested in his former wife/husband where ties of affection and care continue to exist" 3 The fact that Vicky called Dave to set right the faulty wiring even after their divorce would prove that there existed cordial relationship between them signifying existence of insurable interest. However as a matter of abundant precaution, it is advised that confidential enquires must be made rule out the remote chances of Dave's intention to kill her in a seemingly accidental fire due to faulty wiring, before settling his claim. Secondly Dave's claim for the damage to the house due to the fire can not be entertained for the following reasons. The fire policy is a contract of indemnity unlike a life policy. In contract of indemnity, insurable interest must be present both at the time of conclusion of contract as well as at the time of occurrence of the insured event. In this case, because of the confirmed ownership of the house in Vicky's name and because of their divorce, Dave did not have insurable interest on Vicky's life. Further because his wiring was faulty and his negligence contributed to the loss and even if he had had insurable interest, he is not eligible for claim on the damage to the house. The second case is regarding Brian who dies while surfing apparently due to drowning confirmed by the presence of water in the lungs in post mortem. The fact that he over-exerted himself while jogging can be attributed as a contributory negligence and hence the claim of his lawyers for 20, 000 need not be settled provided there are provisions in the personal accident policy to that effect."An injured person's failure to exercise due care, which along with another person's (the defendant's) negligence, contributed to the injury. A common law defence, originating in England, that one who negligently harms another cannot be found liable if the injured person himself was negligent in the slightest degree"4 However Brian's lawyers can ask for some relief under the following provisions of Contributory Negligence Act 1945 "1 .-- (1) Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimant's share in the responsibility for the damage . . . (2) . . . the court shall find and record the total damages which would have been recoverable if the claimant had not been at fault . . . 4:-- [Fault is . . .] negligence, breach of statutory duty or other act or omission which gives rise to a liability in tort or would, apart from this Act, give rise to a defence of contributory negligence"5 The third case of Heather unfortunately seems lacking in utmost good faith condition. "All contracts of insurance are subject to utmost good faith in that people are obliged to disclose any detail which may be of importance to the insurers whether or not it is requested."6 However there is a twist in the case. The death of Heather was not due to the allergy but due to infection caused by ineffective cleaning in the hospital. Even though Heather had not disclosed the material fact of her allergic condition perhaps by oversight, it should not result in rejection of the claim of her husband because had she mentioned it at the time of insurance, the company would have increased the premium but not rejected the proposal. However it would be advisable to revise the premium accordingly and settle the claim at the reduced sum assured. had she died due to allergy. Otherwise it would be perversion to hold that hospitalisation would not have arisen but for the allergic reaction. Attention is drawn to the following "The Association of British Insurers (ABI) provided important safeguards for policyholders. It published statements of practice which said that insurers should ask clear questions about facts they considered material. In deciding whether to avoid a policy, insurers should rely only on the answers given or withheld. They should also only avoid policies where the non-disclosure or misrepresentation was deliberate or reckless, not where it was innocent. The ABI made it clear that customers were required to answer questions only to the best of their knowledge and belief"7 ICOB (Insurance: Conduct of Business Rules) rule 7.3.6 states that "1. An insurer must not unreasonably reject a claim made by a customer, 2. except where there is evidence of fraud, refuse to meet a claim made by a retail customer on the grounds: a. of non-disclosure of a fact material to the risk that the retail customer could not reasonably be expected to have disclosed. of misrepresentation of a fact material to the risk, unless the misrepresentation is negligent"8 Bibliography Life Assurance Contract Act 1774 Contributory Negligence Act 1945 Read More