REFORMING INSURANCE LAW: - Law Commission

was not considered. There remain differences as to the payment of the premium, 397 definition of
contribution, 398 as to suing and labouring 399 and also as to return of premium. 400
8.4 It is also to be remembered that the Marine Insurance legislation is not a comprehensive
code but deals only with particular issues. If different rules continued to apply to marine and
non-marine, then the common law would continue to apply to marine insurance. There would,
for example be variations between the effects of breaches of claims conditions in the two
regimes.
8.5 The ALRC’s conservatism should not necessarily be regarded as a constraint to the approach
to reform in England, where the Law Commissions have tentatively proposed a single regime.
The issues raised by the ALRC, as well as the consideration that the differences in the rules
governing marine and non-marine brokers could equally be taken to make a good case for the
conclusion opposite to that which it ultimately reached.
Insurable interest
8.6 English law on insurable interest is a confusing and illogical mess. The Life Assurance Act
1774 requires a person obtaining a life policy to possess an insurable interest in the life of the
named assured at inception, and also demands the naming in the policy of the persons interested
in the life assured. Once the policy has incepted, the need for insurable interest disappears,
leaving the assured free to assign or otherwise deal with the policy as he thinks fit: this is
justified by the twin considerations that a policy of life insurance is not one of indemnity, and
that the contract is an investment which should be capable of trade. As far as marine insurance is
concerned, a policy effected by way of wagering or gaming is void, and the principle of
indemnity requires the assured to possess insurable interest at the date of the loss. 401 The Marine
Insurance Act 1788 requires the assured to be identified in the policy. The Marine Insurance
(Gambling Policies) Act 1909 even creates criminal offences for those responsible for issuing
policies without interest, although there is no record of any prosecution under the legislation.
There is no specific insurable interest requirement for non-life insurance, although a policy taken
out without interest is a wagering policy and void under s 18 of the Gaming Act 1845 and the
principle of indemnity holds the assured to recovering his actual loss on the happening of the
insured peril. English law will change when s 335 of the Gambling Act 2005 comes into force:
by repealing s 18 of the Gaming Act 1845 and other anti-gambling legislation, general nonmarine
policies will be freed from the requirement of initial insurable interest and will be
governed only by the indemnity rule, and it is at least arguable that the provisions of the Marine
Insurance Act 1906 requiring insurable interest at inception will be impliedly repealed. It would
seem that the 2005 Act does not affect the Life Assurance Act 1774. The result is uncertainty as
to when insurable interest is required, and there is great uncertainty as to what insurable interest
actually means: the definition has changed dramatically over the years to keep up with the
397 See infra.
398 See O’Kane v Jones [2005] Lloyd’s Rep IR 174, infra.
399 Yorkshire Water v Sun Alliance and London Insurance plc [1997] 2 Lloyd’s Rep 21.
400 It is unclear whether s 84 of the 1906 Act (England) applies fully to non-marine insurance.
401 Marine Insurance Act 1906, ss 4-15.
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