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CHAPTER 4 INSURABLE INTEREST AND THE INDEMNITY PRINCIPLE

Marine Cargo Insurance

4

INSURABLE INTEREST AND THE INDEMNITY PRINCIPLE

The insurable interest requirement defined

The requirement for an insurable interest

4.1 The requirement for an insurable interest reflects the principle of indemnity that applies to cargo insurance in common with other forms of property insurance. The principle of indemnity requires that the assured must show that he has suffered a loss.1 The nature of the “loss” that has to be suffered under the indemnity principle to support a claim is defined, so far as cargo insurance is concerned, in terms of the assured standing in a legal or equitable relationship to the adventure or to any insurable property at risk.2 The importance to cargo underwriters of insurable interest may be seen as twofold. Firstly, an interest in the successful outcome of the adventure is perceived as providing an incentive to the assured to ensure that, for example, the goods are sufficiently packed3 and that reputable carriers by sea, land or air will be employed.4 Secondly, the existence of an insurable interest, flowing from the principle of indemnity, safeguards cargo underwriters from being exposed to the risk of a double payment. This is particularly significant where goods have been traded as it is the principle of indemnity that enables insurers to be satisfied that the assured, whether seller or buyer, has suffered the loss.

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