What is a Cover Note and Insurable Interest In Property Insurance ?
When an insurer makes a proposal for insurance to an insured, the agent often issues a cover note to the insured pending approval and acceptance of the proposal by the insured or even the issue of a policy by the insurer. Such is the cover note.
An example of a cover note is where one is purchasing the third party auto mobile insurance from the insurer’s agents. However, it should be noted that the courts shall be strict in regards to the authority of the agent; hence, actions of an agent issuing a cover note without authority shall not bind the insurer.
It should be noted that the cover note is deemed to be a temporary contract of insurance for the duration that is agreed upon pending the consideration, approval and acceptance or denial of the proposal by the insurer. It often contains no terms but simply incorporates the conditions of the insurance policy issued by the insurer stating that the insurer has proposed to effect an insurance subject to all the usual terms and conditions.
Therefore, once issued, the cover note covers the assured and outs the undertakers on risk for the period while the proposal is being considered and until the policy is either granted or refused. It should therefore be noted that the cover not terminates once the policy is issued.
Refference:
Pyarali Kuverji V. The British India General Insurance Co. Ltd [1956] 7 Ulr 194
Mirembe Wire Products Ltd V. Gold Star Insurance Co. Civil Suit No. 54/2002
Re Coleman’s Depository Ltd & Health Assurance Association [1907] 2 Kb 798
The major features of the insurance contract include the following:
The Insuring Agreement: This provides the perils insured.
Exlusions: This provides the items excluded: locations, perils, property, losses
Conditions: Includes: NOTICE and PROOF of loss, Suspension of coverage, cooperation between parties, examination and investigations
Endorsement And Riders: Endorsements and riders essentially mean the same thing, hence, they make a change in the contract to which they are attached. The former is used in property/liability insurance while the latter in life/health insurance.
What is an insurable interest?
The insurable interest is the most important feature of the insurance contract. Essentially it means that the party to the insurance policy who is the insured must have a particular relationship with the subject matter of the insurance contract to which he/she is exposed. Absence of this relationship renders the contract illegal, void or simply unenforceable. The insurable interest varies depending on the nature of the risk and category of insurance which can be assessed at the Cover Note stage.
Insurable Interest in Property and Life Insurance
For an insured to be deemed to have an insurable interest in property insurance contract, he/she must a proprietary interest in the subject matter in the form of a right to a legal or equitable interest or a right under contract. Persons with contingent interests and beneficiaries of property under a will are not deemed to have an insurable interest.
In Macaura V. Northern Assurance Company Ltd [1925] Ac 619 , the sole shareholder of a limited company who was also a substantial creditor of the company insured in his own name timber owned by the company. When the timber was destroyed by a fire, he claimed for indemnification under the policy. The House of Lords observed that he had no insurable interest in the property owned by his company.
SEE:
Mark Rowlands Ltd V. Bernni Inns Ltd [1986] Qb 211
United Bus Service Ltd V. The Indian Insurance Co. Ltd [1969] Ea 242
Kinyanjui V. South Indian Assurance Company Co. Ltd [1969] Ea 160
Insurable Interest in Life Insurance
The insurable interest in a life insurance is the life of the insured. In the case of Dalby V. India And London Life Assurance Co. [1854] 15 Cb 365, the court observed that the insurable interest must exist at the time the policy is effected and need not to continue thereafter. Unlike the insurable interest in property which requires the insurable interest to exist at the commencement and execution of the policy to the occurrence of the loss, the court in DALBY stated that in life insurance the interest should exist at the time of execution of the agreement and need not exist at the occurrence of the death. more on this is discussed in the post about Waiver of insurable interest. The consequence of this has led to the treatment of the life insurance policy as an asset that could be used as a security or guarantee.
Note: Spouses have an unlimited insurable interest in each other’s lives. refference case: Griffins V. Fleming [1909] 1 Kb 805
The insurable interest is the most important feature of the insurance contract. Essentially it means that the party to the insurance policy who is the insured must have a particular relationship with the subject matter of the insurance contract to which he/she is exposed. Absence of this relationship renders the contract illegal, void or simply unenforceable. The insurable interest varies depending on the nature of the risk and category of insurance which can be assessed at the Cover Note stage.
Insurable Interest in Property and Life Insurance
For an insured to be deemed to have an insurable interest in property insurance contract, he/she must a proprietary interest in the subject matter in the form of a right to a legal or equitable interest or a right under contract. Persons with contingent interests and beneficiaries of property under a will are not deemed to have an insurable interest.
In Macaura V. Northern Assurance Company Ltd [1925] Ac 619 , the sole shareholder of a limited company who was also a substantial creditor of the company insured in his own name timber owned by the company. When the timber was destroyed by a fire, he claimed for indemnification under the policy. The House of Lords observed that he had no insurable interest in the property owned by his company.
SEE:
Mark Rowlands Ltd V. Bernni Inns Ltd [1986] Qb 211
United Bus Service Ltd V. The Indian Insurance Co. Ltd [1969] Ea 242
Kinyanjui V. South Indian Assurance Company Co. Ltd [1969] Ea 160
Insurable Interest in Life Insurance
The insurable interest in a life insurance is the life of the insured. In the case of Dalby V. India And London Life Assurance Co. [1854] 15 Cb 365, the court observed that the insurable interest must exist at the time the policy is effected and need not to continue thereafter. Unlike the insurable interest in property which requires the insurable interest to exist at the commencement and execution of the policy to the occurrence of the loss, the court in DALBY stated that in life insurance the interest should exist at the time of execution of the agreement and need not exist at the occurrence of the death. more on this is discussed in the post about Waiver of insurable interest. The consequence of this has led to the treatment of the life insurance policy as an asset that could be used as a security or guarantee.
Note: Spouses have an unlimited insurable interest in each other’s lives. refference case: Griffins V. Fleming [1909] 1 Kb 805
Tags : Insurance Law