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"The present concept of insurable interest has worked tolerably well in marine insurance. This makes it difficult to support a case for radical reform of s. 5 of the Marine Insurance Act (MIA) 1906."Do you agree?

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"Despite causing difficulties occasionally, the present concept of insurable interest has worked tolerably well in marine insurance. This makes it difficult to support a case for radical reform of s. 5 of the Marine Insurance Act (MIA) 1906." Do you agree? Introduction: The marine insurance contract is defined as a contract whereby "the insurer undertakes to indemnify the assured in manner and to the extent thereby agreed against marine losses"1. In order to be able to rely on such a marine insurance policy, the assured must be able to show that he has an insurable interest in the goods as seemingly it is a precondition to suffering a loss. Moreover, there will be an insurable interest if the assured "stands in any legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property or may be prejudiced by its loss or by damage thereto or by the detention thereof or may incur liability in respect thereof."2 It is submitted, that this above definition of insurable interest has been continuously expanding and though the dicta from cases may tend to narrow it down, it is by no means exhaustive though inclusive.3 However, as the law is reason unaffected by desire,4 one must reason whether there is a need for radical reform in this area of law by considering effects of the current law dominating this concept. Definition in s. 5: As will be seen below, while looking at the wordings of the s. ...read more.


However, as of today, except for the UK, other foreign countries such as Canada and USA have adopted 'economic interest' as the only requirement and not with the requirement of 'legal or equitable interest' as well, and it has been observed that this has not led to any kind of major difficulties.20 b) Wordings of the Statute: On reading the entire wordings of s.5 (1) and (2) it may seem, as submitted above, that the section is merely a definition and is not exhaustive. As is observed by Thomas, the words "in particular" in s.5 (2), make this subsection simply illustrative of the broader statement in s.5 (1) so as to create an impression that an insurable interest can be supported in unspecified circumstances not confined to s.5(2).21 Speaking of which he states that, when the MIA bill was introduced in the 1906 session of Parliament and was sent to the Commons Standing Committee on Law, there were two limbs to s5 (2). Namely, s. 5 (2)(a) which is almost the same as the current subsection, and s. 5(2)(b) that stated that interest cannot be founded upon expectation of benefit or detriment alone. He then explains that, the 'unknown reason' this s. 5 (2)(b) was dropped could be either because it made little difference or, to expand the scope of the current s 5(2) so as to accommodate within it certain relevant decisions of that period that were not easy to reconcile with the then established but expanding doctrine.22 Thomas reasons that one such example of such a case could be Wilson v Jones23. ...read more.


Conclusion: In conclusion therefore from the above the following can be concluded. Firstly that that the concept of insurable interest has developed to satisfy the requirement of the indemnity principle so that assured is indemnified in the true sense only if he suffers a lost. Hence the need has been felt for the existence for the legal or equitable relationship between the assured and the insured subject matter. There have been arguments made, like that by Lawrence J for the removal of this relationship and the acceptance instead only that of economic interest, as taken up in some foreign legal systems, but though not completely accepted as approved the courts have in recent decisions tried to broaden the scope of the act. Their problems and hence the restrains have however been in relations to the technical glitches created in the criteria's of factual expectation of benefit or loss. It has also been seen from the above discussion that the courts have been free to develop new types of insurable interest, and this has been possible mainly because of the illustrative approach taken to s 5(2) and the recognition of the marine adventure itself as capable of being subject matter of insurance30. The other such broad usage of this concept has been seen above in s 6. However, from the changes towards new approach and reforms taking place all over the world and discussed above as happening in Australia, though it may seem workable, tolerable and as broadening, the present concept of insurable interest still has its short comings and appears more as struggling for certainty, as if to be waiting for a new Sir Mackenzie Chalmers of the 21st century. ...read more.

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