Lloyd's Maritime and Commercial Law Quarterly
TAKING AN INTEREST IN INSURABLE INTEREST
Franziska Arnold-Dwyer*
Western Trading v Great Lakes
Although there is a wide spectrum of views on the extent to which the principle of insurable interest has, or should have, a place in modern insurance law,1 it is relatively rarely litigated. The reasons for keeping “insurable interest” out of the courtroom are twofold. First, generally speaking, an insured has nothing to gain from pleading a lack of insurable interest, as to do so successfully would invalidate the insurance contract2 and any claims thereunder would become unenforceable.3 The premium may not be repayable in so far as the absence of insurable interest also taints the contract of insurance with illegality.4 There
1. See the discussion in: Law Commission and Scottish Law Commission, Insurance Contract Law: Post Contract Duties and Other Issues (LCCP 201, December 2011), ch.3; J Lowry, P Rawlings and R Merkin, Insurance Law: Doctrines and Principles, 3rd edn (Hart, Oxford, 2011), 193–199; M Clarke, The Law of Insurance Contracts, 4th edn (Lloyd’s of London Press, 2009), [4.3A.B]; B Harnett and JV Thornton, “Insurable Interest in Property: A Socio-Economic Reevaluation of a Legal Concept” (1948) 48 Col LR 1162.
2. See Marine Insurance Act 1906, ss 4(1) and 4(2)(a).
3. Macaura v Northern Assurance Co [1925] AC 619 (HL)
4. This would be the case in life assurance (see Harse v Pearl Life Assurance Co [1904] 1 KB 558 (CA)) and marine insurance contracts effected as wagers (see Marine Insurance (Gambling Policies) Act 1909, s.1 and Marine Insurance Act 1906, s.84(3)(c)). Note, however, that in relation to consumer insurance the Financial Ombudsman is unlikely to allow insurers to retain premiums in these circumstances: see Law Commission and Scottish Law Commission, Issue Paper 4 — Insurable Interest (January 2008), [4.20].
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