Insurance Law
The governing principles
Core concepts are indemnity, insurable interest, fair presentation, proximate cause, contribution and subrogation. Indemnity restores the insured to the pre-loss financial position, subject to sums insured, limits, excesses and average. It does not apply to life, personal accident or other benefit policies, which pay agreed sums - a frequent trap.
Insurable interest must exist at inception for life policies (Life Assurance Act 1774) and at the time of loss for indemnity business (Marine Insurance Act 1906, ss.4–5).
Fair presentation of risk
Consumers: the Consumer Insurance (Disclosure and Representations) Act 2012 imposes a duty to take reasonable care not to make a misrepresentation. Deliberate or reckless misrepresentation allows the insurer to avoid the policy and refuse the claim; a careless one triggers a proportional remedy. Commercial: the Insurance Act 2015 requires a duty of fair presentation (disclosure, reasonable search, no misrepresentation). Remedies are avoidance, a proportional reduction, or treating a term the insurer would have included as incorporated.
Warranties, conditions and fraud
Under the Insurance Act 2015, breach of warranty suspends cover rather than automatically discharging the insurer; cover revives when the breach is remedied. Contracting out is possible only in non-consumer contracts and must be transparent and not substantially disadvantageous. For fraudulent claims the insurer may refuse the whole claim, recover sums paid and treat the contract as terminated, keeping premiums.
Subrogation and contribution
Subrogation arises in indemnity policies after the insurer has paid, and the insured must not prejudice recovery. Contribution applies where policies cover the same subject matter, interest and peril; liability is shared. Proximate cause is the dominant, effective cause, not necessarily the last event.
Worked example: premium paid £800; correct premium would have been £1,000; claim £10,000. Proportional remedy = (800 ÷ 1,000) × £10,000 = £8,000.