Business Law Event Memo
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This event was a public lecture that I attended on principles of general insurance. The goal of every goal of contract of insurance is always to give the insured financial protection as well as protection from occurrence of a certain set of uncertainties. The insured is expected not to take advantage of this insurance cover for personal gains. Seeking opportunities to profit from the financial cover by reporting occurrences that are false is a violation of both the conditions and terms of the insurance contract. This false reporting results into break of trust as it amounts to breaching of the contract and heavy legal penalties can be passed on the party that breach the contract. To prevent breach of contract there are a number of insurance principles that guides the insurance business and must be adhered to by both the insured and the insurer. The lecture by David Williams was meant to give business students as well as insurance industry players the general insurance principles that are applicable when entering into an insurance contract. The insurance principles are very important in providing a fair play ground for both the insured and insurer as they enter into an insurance contract. These principles of general insurance that are applicable in insurance contract includes; insurable interest, outmost good faith, principle of indemnity, principle of subrogation, principle of contribution and principle of loss minimization.
According to the lecturer the principle of outmost good faith is a very important as well as basic principle in the law of insurance. The principle argues that the contract of insurance should be signed by all the parties to the contract in total trust or good faith. The insured person is expected to reveal to the insurer correct as well as clear information in regards to the subject matter of insurance. On the other hand the insurer is expected to do the same by revealing correct as well as clear information in relation to the conditions and terms of the contract. The principle of outmost good faith is applicable to all forms of insurance contracts such as marine, fire and life insurance contracts (Dickson, 1960). The second principle of insurance is insurable interest. For the insurance contract to be legally bidding to all the parties the principle of insurance interest must be upheld at all times. The principle states that insured should have some degree of insurable interest on the subject of the insurance contract. For instance when it comes to is life insurance the insurable interest is the life of the insured person. The insurable interest does exist when the existence of the subject of insurance gives the insured gains and on the other hand it non existence give the insured a loss.
The principle implies that the insured must suffer financial losses as result of damages to the object insured against. The principle is usually applicable to all insurance contacts. According to David, another important principle of general insurance is principle of indemnity. The principle do provides the assurance from the insurer to put back the insured to the same financial position that he/she was in before the occurrence of the risk. The insurer usually agrees to make compensation to the insured of the total sum of loss suffered after occurrence of risk insured against. The principle of indemnity is usually applicable in fire and marine insurance contracts. It is also important to note that the principle of indemnity is not applicable in life assurance policies because it’s hard to come up with the actual value of one’s life in monetary terms (Funmi, 1992).
Principle of contribution was another principle that David did discuss on during his lecture. The principle is usually applicable in all indemnity contracts; the principle provides guidelines on what should be done in the case of the insured taking more than one insurance policy to cover the same object. The insured is expected in such a scenario to make claim for compensation from one insurer or from all insurers. The principle argues that the insured should only when the insured claims the total sum of compensation expected after suffering a loss from one insurer, then he/she should not claim compensation from other insurers with a hidden agenda of profiting from the policy. The principle of contribution tends to be applicable in all indemnity contracts. Another crucial principle of general insurance is the principle of subrogation. This principle states that the insurer is entitled to right of ownership of the subject matter of insurance after compensating the insured for the losses that occur as a result of damages to the subject of matter of insurance. The principle is usually applicable in cases where the dented property has some value after occurrence of the risk that leads to the damage of the property. The insurer is expected to benefits from subrogation rights to the point of the full amount that he/she has given as compensation to the insured (Birds, 1993). The final principle of general insurance is usually the principle of loss minimization. This principle argue that the insured has a duty to ensure that he/she takes all the possible measures aimed at minimizing loss to the subject matter of insurance incase the unexpected occurrence takes place.
I decided to attend the event because I have some interests on how the law of insurance is applicable in real life insurance activities. I also was planning to take an insurance cover at the moment so the event provided me with a forum where I could learn more abut principles of insurance that are applicable when drawing an insurance contract. The issues that were been discussed during the lecture touches on principles of insurance and how one can applies them in real insurance contracts. The events helped me to gain more understanding on where the principles are best applicable when it comes to general contracts of insurance and the various benefits that one gets from observing the principle before and after entering into the contract with the insurer.