INSURANCE LAW - Evening Class - MR Ntegyereize Alauterio-1

KIU LLB IV EVE Insurance Law notes by A.
Ntegyereize 2020
INSURANCE LAW CLASS NOTES FOR LLB IV EVE CLASS 2020
Overview:
Insurance, simply defined, is a social tool for guarding against unforeseen misfortunes. Thus,
Holdsworth1 defines insurance as a contract by which one party (the insurer) in consideration
of a premium, undertakes to indemnify another (the insured) against loss.
This definition of insurance has been codified by the Insurance Act 2017. Under section 2, it
defines an insurance contract as follows:
“ A contract under which one party, known as the insurer, in exchange for a premium,
agrees with another party, known as the policy holder, to make a payment, or provide a
benefit to the policy holder or another person on the occurrence of a specified uncertain
event which, if it occurs, will be adverse to the interests of the policy holder or to the
interests of the person who will receive the payment of benefit.”
See also section 3 of the Marine Insurance Act for the definition of Marine Insurance.
Insurance is divided into types;
i. Marine Insurance
ii. Non-marine insurance
Note: That insurance is a contract between the insured and the insurer. Thus, for one to
benefit from this device, he or she must be in a contract. The common parties to an insurance
contract are;
i. Insured/Assured
ii. Insurer
iii. Agents, and
iv. Brokers
Historical Development of Insurance
1
W.S. Holdsworth, The Early History of the Contract of Insurance, Columbia Law Review, Vol. 17 No. 2 (Feb., 1917),
pp.85-113 at 85
Page 2 of 50
KIU LLB IV EVE Insurance Law notes by A. Ntegyereize 2020
See Article by W.S. Holdsworth, The Early History of the Contract of Insurance,
Columbia Law Review, Vol.17 No.2 (Feb.,1917), pp.85-113, Available online at
https://www.jstor.org/stable/1111672, accessed 12/8/2018
Holdsworth traces the development of insurance to Marine insurance; that Italian merchants
were involved in trading along the high seas. He argues that the practice of insurance can be
traced from their practice i.e that if the goods did not reach, the owner would claim from the
carrier (owner of the ship). This practice had existed over a long period of time and thus
guided the formulation of the principles of modern insurance.
NB:
❖ Ship owners were the 1st insurers
❖ As insurance grew, it became difficult for them to keep on this practice
❖ Two principles developed-insurable interest and salvage (subrogation).
❖ Initially, the contract of insurance needed not take a standard form as there was no
regulation to that effect.
Holdsworth points out that this practice later formed part of the law in Italy. This is the same
position in England. It was not until the 17th century that insurance began to be codified in
England-1774-Life Assurance Act.
Holdsworth links insurance of personal injuries to the era of industrial development where
people were subjected to industrial injuries, etc.
Insurance in Uganda
❖ The 1902 Order-In-Council made laws that were applicable in England before 1902
automatically applicable in Uganda, including the statutes of General application.
❖ The subsequent Judicature Acts confirmed the application of the 1902 Order-In-
Council and the laws thereof.
❖ The 1967 Judicature Act excluded the application of the Statutes of General
application. See: Uganda Motors Limited vs. Wavah Holdings Limited SCCA
No.19/91. Available online-https://ulii.org
❖ Initially, the Government had a major role to play in the provision of insurance.
Page 3 of 50
❖ Nominal Defendants Council-established by statute to help victims of motor vehicle

accidents get compensation.
❖ Motor Vehicle 3rd party insurance-to provide for the safety/compensation of 3rd party
victims. This illustrates the idea/notion of insurance being a social device.
❖ The role of Government has now changed from that of a provider to that of a
regulator. Providers of insurance must be corporate bodies and must be licensed by
the Insurance Regulatory Authority of Uganda.
Read:
1. National Insurance Corporation Act, Cap. 314
2. D. Mabirizi (1979), Ideals and Realities in Uganda’s Consumer Protection; Cases

of Price Control and Product Liability, MUK, Vol. M325, Chapters 1 & 2
-Discusses mercantilism and how it affected law development
-looks at the idea of freedom of contract and its effect on the weaker party to the
contract of insurance
Relevant Statutes
• Insurance Act, No. 6 of 2017
• Marine Insurance Act, No. 11 of 2002
• Motor Vehicle (Third Party Risks) Act, Cap. 214
• Traffic and Road Safety Act, Cap. 361
• The Workers Compensation Act, Cap. 225, ss.18 & 19
• The Companies Act, 2012
• The Insurance Act 2017 (Commencement) Instrument, 2018, Statutory Instrument

No. 9 of 2018
• Marine Insurance Act (Commencement) Instrument, 2006, Statutory Instrument No. 5

of 2006-appointed 10th day of February, 2006 as the commencement date for the
Marine Insurance Act, 2002
Recommended Study Texts

Page 4 of 50
J. Birds, (2000) Modern Insurance Law, 5th Ed. Sweet and Maxwell
J. Birds, (2016) Modern Insurance Law, 10th Ed. Sweet and Maxwell (Published on
24/3/2016)
Colinvaux’s Law of Insurance, Sweet and Maxwell, 7th Edition
Colinvaux’s Law of Insurance, Sweet and Maxwell, 11th Edition (2017 Ed)
Halsbury’s Laws of England, (3rd Ed) Vol. 22
E.R. Ivamy, General Principles of Insurance, 6th Edition, Butterworths
E.R. Ivamy, (1984) Case Book on Insurance Law, Butterworths
J.J. Ogoola, (1999) Business Law, Focus Books
J.Lowry, Casebook on Insurance Law
J.Lowry, (1999) Law of Insurance
Mac Gillivary and Parkington, (1975) Insurance law. 6th Edition, Sweet and Maxwell
Anthony Allot, Essays in African Law, pp.3-10
Issa Shivji, Insurance and Development, E.A.L.Rev. Vol. B No. 1
Lawrence Friedman (1959), Law in a Changing Society, Stevenson and Sons Ltd
Page 5 of 50
Insurance is a social device which provides financial compensation for the effects of
misfortune, although the payments which would be made to the beneficiary arise from the
accumulated contributions of all parties involved in the scheme.
Insurance is generally described as a contract to pay money for providing service on the
occurrence of a future uncertain event or certain event, provided that the insured has interest
in that event.
The contract of insurance requires the insurer to be legally bound to compensate the other
party and not to provide a discretionary benefit. It also requires uncertainty as to whether or
not the event insured against will occur and in case of life assurance the time when it will
occur.
Further to this, the parties insured must have interest in the property insured or life i.e, the
subject matter of insurance. It is also important that the event insured against be outside the
control of the party who assumes the risk (ie insurer).
The Insurer’s obligation should be to pay money or in the alternative money’s worth on the
occurrence of the uncertain event.
H/W
• Medical Defence Union V Department of Trade (1979)2 ALLER 421; (1980) 1 Ch 82

• Prudential Insurance V IRC (1904)2 K.B 658
• Gould V Curtis (Surveyor of Taxes) [1913] 3 KB 84
• Chapter I of John Birds.
Medical defence union v Department of trade
The work of the medical Defence Union (herein Union), accompany ltd by guarantee whose
members consisted of Medical and Defence practitioners, consisted of conducting legal
proceedings on behalf of members, indemnifying members against claims for damages, costs
and giving advice to the members on various matters and providing educational guidance. A
member’s right in relation to legal proceedings and indemnities was merely the right to have
his request for the Union’s help on those matters fairly considered and he had no right to
require the union to conduct legal proceedings for him or to indemnify him.
The Department of Trade sued the Union seeking a declaration that the business the union
was engaged in was insurance business and that since it had not been licensed by the
Department of trade (which was in charge of regulating insurance business under the
Page 6 of 50
provisions of the Insurance Companies Act 1974 laws of England,) it was conducting
insurance business illegally.
Issue: Whether there was a contract of insurance where the benefits are discretionary and not
obligatory & the members’ contract right is no more than a right to require the Union to
consider properly, any request for assistance of this kind that he makes.
Held: That to constitute a contract of Insurance under the general law and therefore such a
contract within the 1974 Act, there had to be, on the occurrence of some event, a right to
receive money or money’s worth and where the entitlement was merely to some benefit other
than money or money’s worth, the contract was not one of insurance. Accordingly, a
member’s right on a claim being made against him, to have his application for help with that
claim properly considered by the Union, did not suffice to constitute the contract between
him and the union, a contract of Insurance.
It followed that the Union was not an insurance company carrying on an insurance business
within the meaning of the 1974 Act & was entitled to a declaration to that effect.
According to Sir Robert Megarry V-C,
“the general of the business carried on by the Union was far removed from the general
nature of the businesses carried on by those who are general accepted as being insurers-the
Union’s business to be fairly regarded as the effecting and carrying out of contracts of
insurance.”
The issue came down to the meaning of the word of “insurance” in the contract of insurance.
Contrast Medical Defence Union’s case with Department of Trade and Industry vs. St.
Christopher Motorists Insurance Association [1974] 1 W.L.R 99
According to the judgment of Channell J in Prudential Insurance Co. V. Inland Revenue

Commissioners as read in light of Gould V. Curtis (Surveyor of Taxes), a contract is a
contract of Insurance if three elements are present:
1. The contract must provide that the assured will become entitled to something on the
occurrence of some event. The huddle (problem) here is how to determine what
“something” is.
In this Medical Defence Union V. Dept of Trade, to counsel for the dept, it meant
“some benefit” whereas to counsel for the Union it was “money or money’s worth”
2. The event must be one which involves some element of uncertainty.
3. The assured must have an insurable interest in the subject matter of the contract.
Page 7 of 50
NOTE:
✓ Some contracts of guarantee or of maintenance might satisfy such a test & yet not be
true contract of insurance.
✓ From Gould V. Curtis (Surveyor of Taxes) ( especially the Judgment of Buckley LJ
and from West Wake Price & Co. V. Ching [1956]3 ALLER 821,826, there are
two categories of Insurance Viz:
i. Indemnity Insurance
ii. Contingency Insurance
Indemnity Insurance provides an indemnity against loss, as in a fire policy or marine policy
on a vessel. Within the limits of the policy, the measure of the loss is the measure of the
payment.
Contingency insurance on the other hand provides no indemnity but instead a payment on a
contingent event, as in a life policy as a personal injury policy. The sum to be paid is not
measured by the loss but is stated in the policy and the contractual sum is paid if the life ends
or the limb is lost, irrespective of the value of the life or the limb.
Prudential Insurance Co.v. Commissioners of Inland Revenue
Revenue-Stamp-Policy of Life Insurance –Old age endowment Policy
The contract was to pay a sum of 951 if the person if the person insured attained the age of
sixty-five and 301 if he died under that age.
Facts: In consideration of weekly payments, Prudential agreed to pay a sum of 951 dollars on
the attainment by the assured the age of 65 or in the event of his dying under that age a
smaller sum (301) to be paid to his executors. Court found that this was a policy of
insurance on a contingency depending on a life within the meaning of section 98 of the
stamp Act 1891.
Note: As Templeman J. (as he then was) emphasized in the Department of Trade .v.
st.Christopher Motorists, the prudential case did not establish whether it was essential for
money to be paid to be assured.2
2
[1974] W.L.R 99
Page 8 of 50
FORMATION OF A CONTRACT OF INSURANCE
In the formation of a contract of insurance, the ordinary requirements of contract apply i.e
there must be an offer, acceptance, consideration, intention to enter into the contract and
consensus ad idem. There is no special form in which the contract must be made although
section 22 of the Marine Insurance Act requires that the contract of marine Insurance must
be in writing, i.e it must be embodied in a policy for it to be of evidential value.
The offer is in practice made by the proposed insured completing a proposal form supplied
by the insurer. The offer must be certain and unambiguous when made. The insurer may then
accept the offer or make a counter offer. In HCCS Civil Suit No. 376 of 2009; Christine
Mawadri t/a Maisha Creative Agencies vs. Brit Syndicates & AON Uganda Ltd, the Plaintiff
had intended to insure against loss and expenses as a result of non-appearance of the musician-Acon,
but never stated so in the proposal form. In fact, the relevant section (part B) was left blank. When
the musician never appeared for the show, the plaintiff made the claim which was rejected by the
insurers on the ground that the plaintiff’s alleged loss was caused by a peril (event) which was not
insured and this was equally the finding of Court.
The acceptance is generally by the acceptance of the proposal form and issuance of the
insurance policy by the insurer. The acceptance must be unconditional and where it is
conditional it amounts to a counter offer. Where a counter offer is made the contract is
completed upon acceptance of the counter offer.
Professor John Birds (2000 Ed.) argues that until the offer has been accepted, either party is
free to withdraw. However, the insurer is bound by the counter offer unless there is a change
in the risk before acceptance. If the risk changes, the tender of the premium by the insured
constitutes a new offer which the insurer is free to reject.
See:
i. John Birds (2000 Ed.)-chapter 4
ii. Suffish International Processors & Anor vs. Egypt Air Corporation t/a Egypt Air
Uganda SCCA No. 15 of 2001, p.8
iii. General Accidents Insurance V. Cronk (1901) 17 T.L. R 233.The

Applicant/insured refused to pay the premium arguing that the policy contained
different terms from those in the proposal form and further that this amounted to a
counter offer. It was held that he was liable to pay the premium in that the insured is
deemed to have agreed to the usual terms and conditions to be found in the insurer’s
policy.
Page 9 of 50
iv. Taylor V. Allon (1966)1 Q. B. 304
v. Canning V. Farquhar (1886)16 Q.B.D 727.The insurer was held not bound on a
proposal for a life insurance, acceptance of which was conditional upon payment of
premium which was paid subsequent to the proposer falling and sustaining injuries.
vi. Entores V. Miles Far East Corp [1955] 2 QB 322
Because the acceptance must be communicated, silence cannot amount to acceptance.
Also look at: Executed & Executory contracts in contract law
The consideration in a contract of insurance is usually the premium which is assessed

contribution that the insured will pay to the insurer.
In insurance contracts, time is always of the essence and it is crucial to know when an
agreement to insure comes into force because until it comes into force, the insurer is not
bound to indemnify the insured and also the duty to disclose all material facts related to the
contract still binds both the insured & the insurer.
Proposal form
The proposal form is the application by which the proposed insured gives to the insurers
particulars of the risks which he/ she wishes them to undertake. This form is the basis of the
contract because most statements in this form include representations and disclosure of
material facts which affect the contract of insurance. In fact this proposal form usually
includes phrases to the effect that answers to the questions in the form shall be the basis of
the contract of insurance.
See Article by Hanson (Standard form clause in a contract of insurance).
Cover notes
It is common practice in insurance for the insurer to agree to provide temporary cover to an
insured. This is usually referred to as a cover note. Although temporary, the cover note
should have the full effect of the contract of insurance. In most cases, a cover note would
include a statement to the effect that the usual terms & conditions of the insurer shall apply
to the contract. However, where this express condition is not made, the terms & conditions
may not necessarily apply.
The cover note should also provide for the period for which it is to remain in force.
See:
Page 10 of 50
Taylor (supra)
Re Coleman’s Depositories (1907)2 K.B 798.
POLICY OF INSURANCE
The policy of insurance is usually the formal document in which the contract is embodied.
This is where the terms & conditions upon which the insurer accept the risk are documented.
See:
The Insurance Act;
• Different types of insurance

• Who can be an insurer in Uganda
H/W: Read about Insurable interest Cap. 3 Birds, S. 133 of the Insurance Act, 2017.
Entores V. Miles Far East Corp (1955)2 Q.B 322
1. Defendants in London
2. Plaintiffs in USA with agents in Amsterdam
3. Both parties had telex
4. Plaintiffs place order by telex
5. Agent accepted by telex
6. Dispute arose & Plaintiffs sued for breach of contract
Court held same as if in each other’s presence thus contract formed when acceptance
received in London.
It was therefore a proper case for service out of Jurisdiction.
Taylor V. Allon (1966)
The accused’s insurance policy had admittedly expired on the relevant day, but he had been
issued with a temporary cover note which not having been requested clearly amounted to no
more than an offer to insure. Equally clearly on the facts of the case, this offer had not been
accepted by the appellant who had intended throughout to insure with another Company.
Hence no contract was in force & the conviction was upheld.
According to Lord Parker the result might have been different if the appellant had taken out
the car onto the road in reliance upon the offer.
According to his Lordship,

Page 11 of 50
“It may be, although I find it unnecessary to decide in this case, that there can be an
acceptance of such an offer by conduct/ without communication with the insurance company.
It may be, as it seems to me that if a man took his motor car out on the road in reliance on
this temporary cover note, there had been no communication of that fact to the insurance
company, there would be acceptance”
Re Coleman’s Depositories Ltd
The insurance policy in question was a policy covering the liability of an employer to
compensate his workmen for injuries in the course of their employment.
ISSUE: Whether the policy incorporated a condition requiring the employer to give
immediate notice to the insurer of any accident causing injury to a workman & to forward to
the insurer every notice of claim received by the employer within three days after receipt.
There was a further condition that made the time element in these conditions a term of the
essence of the contract. An accident befell a workman. Notice of the accident was not given
to the insurer for over two months. The Court of Appeal held that these conditions had not
been incorporated into the contract. So the claim under the policy succeeded. Vanyhan
Williams LJ said this, at 805/6:
“The only question in the case is the obligation of this condition as to immediate notice. As to
the condition to forward notice of claim received by the employer within three days of the
receipt of such notice, I agree with bray J that there was no obligation to forward such
notice after the association had repudiated”
INSURABLE INTEREST
Insurable interest is a fundamental principle of insurance law, and although it has no

extensive definition, the term is used to describe the insured’s interest in the subject matter/
loss. The interests that are insurable are usually narrow to prevent gambling, the temptation
on the part of the insured to cause the loss.
Insurance Interest may be described as existing where a person is interested in the

preservation of the thing and stands to be prejudiced if it is lost. To constitute an insurable
interest, the insured must have some right which the law recognises as valid and subsisting
either in law or in equity.
As such a mere hope or expectation of a future benefit is not sufficient to constitute an

insurable in an event.
Insurable Interest In Terms Of Property

Page 12 of 50
Insurance interest in property is not confined to legal ownership of the property and
generally any person who is in a position whereby he/ she will suffer loss as a result of
damage or destruction of property has an insurable interest in it.
However, this must arise from a direct and not a remote relationship. Examples include a
person in possession of property, a lessee, a person who has entered into a valid market for
the purchase of property, a mortgagor and a mortgagee.
In the case of LUCENA Vs. CRAUFURD, Justice Lawrence stated that insurable interest
maybe described as follows;
“a man is interested in a thing to whom advantage may arise or prejudice may happen from
the circumstances which may attend it. To be interested in the preservation of a thing is to be
so circumstanced with respect to it as to have benefit from its existence, prejudice from its
destruction.”
In the case of EBSWOTH V. ALLIANCE MARRINE it was held that a consignee had an
equitable interest in the whole consignment while such consigner of the goods and that such
a consignee could insure in their own name the full value of the goods.
However, in this case, it was also stated that such an insured could only apply the proceeds
of the policy up to the extent of his loss and therefore held the rest of the proceeds in trust for
the consignors.
MAURICE V. GOLDSBOROUGH MORT (19....)AC 452
Brokers – market for sale of goods (wool) on behalf of owners – wool – insured against fire
– wool destroyed by fire – Brokers claimed from insurance Company – owner claimed from
Brokers amount received – Brokers sought to deduct expenses incurred and interest thereto –
may the owners got less the amount – owners sued brokers – held that whereas the Brokers
had an insurable interest in the property (wool) arising from fire, they were not entitled to
recover in respect of insurable interest in loss of profit – liable to owners.
PETROFINA V. MAGNALOAD. [1984] QB 127 (Principle Of Co-insurance)
The case related to a constitution project – contractor – subcontracted –subcontractor insured

the full value yet their contract related to the specific part of the work – whether
subcontractors had insurable interest – held that they had insurable interest in the property
and therefore could insure the entire property.
LIFE INSURANCE
Page 13 of 50
In a life policy, insurable interest means the person effecting the policy must by the
happening of the death of the person insured, be likely to sustain some pecuniary loss or
liability. There are also endowment policies whereby at the attainment of a certain age, the
life insured is entitled certain payments. Under S.133 of the Insurance Act, it is a person on
the life of another where that person has no insurable interest in the life or the event.
See: MORRIS V. BRITTANC ASSURANCE CO.
TIME WHEN INSURABLE INTEREST MUST EXIST
The general rule is that the insured must have insurable interest at the inception of the
insurance contract and at loss. But there are exceptions to the rule;
1. For life policies, the interest must exist at inception only . DALBY V. INDIA &
LONDON LIFE ASSURANCE CO. The plaintiff was the Director of the Company
which had insured the Duke of Cambridge & which reinsured the risk with the
Defendant. The original policies were cancelled, but the plaintiff kept paying the
premiums on the reinsurance policy until the Duke died. The Defendant the denied
liability on the ground that the plaintiff had no insurable interest in the Duke’s life at
the date of his death having himself nothing to pay on it. It was Held that the insured
was only required to value his interest at the date of effecting the policy. Thus,
because the plaintiff had interest at the time he reinsured and since there was no
common law requesting that the plaintiff proves interest at the date of loss, he was
entitled to recover.
2. In respect to marine insurance, the insured does not necessarily need to have the
insurable interest at the inception but at the time of loss.
3. In contracts of Indemnity, the insured is also required to have interest at the time of
loss.
See: MACAURA V. NORTHERN ASSURANCE CO.
NB: it should also be noted that the insured is not bond to disclose any information about
the type of insurable interest in the subject matter. However, he is only required to
sufficiently describe the interest.
DUTY OF UTMOST GOODFAITH
Page 14 of 50
The contract of insurance is a contract based on the utmost good faith ( Uberima fide) ie, if
the utmost good faith is not observed by either party, the contract may be avoided by the
other party. See: section 17 of Marine Insurance Act, 2002.
Utmost good faith is peculiar to contract of insurance and it forbids concealing information
known by one party to draw another into the bargain. The reason (rationale) for this principle
is that contracts of insurance are founded on facts which are nearly always in the exclusive
knowledge of one party, usually the insured, and unless this knowledge is shared, the risk
insured against may be different from one which the ignorant party intended. The duty to act
in good faith is three-fold;
➢ A duty to disclose material facts;

➢ A duty not to misrepresent material facts, and
➢ A duty not to make fraudulent claims.
See: CARTER V. BOEHM (insurance law case bk by Ivamy) (Infra)
In HCCS No. 442/2013; Hajji Kavuma Haroon vs. First Insurance Company Ltd-the
insured took out a motor insurance policy against loss by fire. The Plaintiff misrepresented
his vehicle to be a Benz G55 whereas it was a G300 and valued the same (sum insured) at
Ug. Shs. 250,000,000/= instead of Ug. Shs. 25,000,000/= for a G300. When the vehicle got
an accident, the Defendant repudiated the contract on grounds of fraud, non-disclosure and/or
misrepresentation. Justice Kainamura, at p.7, held as follows:
“........ it is my opinion that the non-disclosure of the adjustments of the vehicle insured
greatly changed a number of things such as the valuation done. The argument that certain
facts were not requested for does not stand in my opinion since the plaintiff clearly knew
about the history of the vehicle which he concealed. The non-disclosure and
misrepresentation claimed by the defendant amounts to the fraud alleged constructively.”
THE DUTY TO DISCLOSE MATERIAL FACTS
See: Joel V. Law Union (1908) 2 K.B 883
Roselodge Ltd V. Castle [1966] 2 Lloyd’s Rep.113
Bassajjabalaba Hides & Skins Co. Ltd vs. United Assurance Co. Ltd HCCS No. 633 of
2002
The insured is required to disclose every fact which would influence the judgment of a
prudent insurer in fixing the premium or in determining whether to take the risk or not.
Page 15 of 50
The test of materiality is not what the insured considers material but rather what a prudent
insures would view as probably tending to increase the risk for which the insurance cover is
sought.
See: S.18 (1) Marine Insurance Act – Recognised as statement of what disclosure means
even in non marine Insurance.
The Scope of the Duty of Disclosure
The duty of disclosure extends only to facts which are within the knowledge of one party but
not with in the knowledge of the other. In Marine Insurance, an insured is deemed to know
every circumstance which in the ordinary course of business ought to be known to him such
that he/ she may be liable to disclose facts of which he/ she is actually unaware only because
they should have been known to him. S.18 (1) Marine Insurance Act 2002.
In non- Marine Insurance, the position is that the insured must disclose only material facts
which are known to him/ her. The insured has no duty to disclose facts which are known to
the insurer or matters of common/ public knowledge or those matters which insurer ought to
know in the ordinary course of business. See: s.18(3)(b) Marine Insurance Act, 2002. Look
at generally subsection 3 of the same section for other circumstances/information that need
not be disclosed to the insurer.
Where the insurer asks the insured to answer specific questions in a proposal form, it is
usually material. However, this doesn’t remove the duty to disclose all other material facts
which are not covered by the question.
Time of disclosure
In terms of time, full disclosure must be made and continue to be made up to and until the
time when there is a contract of insurance concluded such that before the contract is made,
any material fact which comes to the knowledge of either party must be disclosed. Therefore,
unless the contract states so, there is no general duty to notify the insurer in the changes in
the risk during the period of insurance.
Also, if temporary cover is sought and granted and a change in the risk occurs before the
main contract has been concluded, the insured is bound to disclose to the insurer such facts
and if he/ she fails to do so, the insurer may avoid the contract for non disclosure.
Even where the contract is being renewed, at the time of renewal, there is a duty to disclose
to the insurer any changes that might have taken place as regards the subject matter of
insurance.
Page 16 of 50
Effects of failure to disclose
It entitles the innocent party to avoid the contract.
This means that the insurer may or may not avoid the contract, for instance if they have
already paid claims, they may sue for damages arising out of breach of duty to disclose, if
they have not paid the claims, it means that they will not indemnify the insured once the loss
has occurred.
Burden of proof of non- disclosure
It is upon the party who alleges so. Therefore the insurer who alleges that the insured failed
to disclose material facts, must not only establish the materiality of the information which is
un disclosed but also show that they were induced into entering the contract in the sense that
the information would have affected the decision of a prudent insurer. See: Hajji Kavuma
Haroon vs. First Insurance Company Ltd (supra) where the Defendant successfully
proved that it was induced into insuring the Plaintiff’s motor vehicle and setting the sum
insured at Ug. Shs. 250,000,000/= based on its model G55 whereas it was not.
Carter V. Boehm (1766) 97 ER 1162 – Looks at the fact that the duty of utmost good faith
is a reciprocal one. Rationale of utmost good faith – Lord Mansfield said (at Page 1909)
“Insurance is a contract upon speculation and that the special facts upon which the
contingent chance is to be computed like most commonly in the knowledge of the insured; the
underwriter trusts his representation and proceeds upon the influence that he does not keep
back any circumstance in his knowledge, mislead the underwriter into a belief that the
circumstance does not exist”
Joel vs. Law Union(supra) – There must be disclosure of the facts within the knowledge of
the insured. Looks at course of ordinary business.
In this case, one of the issues was whether the proposer was bound to disclose the fact that
she had suffered from a cute depression, it being accepted that she was unaware of the fact. It
was held not and judges were at pains to point out that there is no duty to disclose what the
proposer does not know (especially Fletcher Montton L.J (1908)2 K.B 884).
Economides V. Commercial Union Assurance Plc [1997] 3 W.L.R 636; [1998] Lloyd’s
Rep.9
The insured represented to the insurers that he believed that the full cost of replacing all the
contests (including jewellery) in his flat as new was £16,000. He contended that that meant
that he honestly believed that £16,000 was the full value. The insurers submitted that the
Page 17 of 50
representation meant that the insured honestly believed that £16,000 was the full value and
had reasonable grounds for that belief. Held: that items which had been valued honestly by
the owner for an insurance policy were covered by the policy. That it is insufficient to prove
falsity of a representation of belief simply to establish that there was no reasonable good for
such a belief. An insurance company requiring a valuation should state so clearly in what
was otherwise a consumer insurance contract.
Roselodge V. Castle (supra) – property was insured against burglary – the insured had
committed offences in the previous years – insurer argued that they would not have provided
cover (insurance) if they had known. (one of the managers had been convicted of smuggling
jewellery. Although conviction for bribery was held not material to the insurance of
diamonds, a smuggling conviction was held to be material. Thus, the mere commission of an
offence may be material even if the proposer is acquitted by a jury. However, the insurer
must prove this to the satisfaction of the civil Court that the proposer did in fact commit the
offence.
Banque Keyser V. Skanda Insurance Company ( 1990) 1 Q.B 665 (Insurer’s duty to
disclose material information)
The plaintiff banks had agreed to lend money to someone provided that appropriate credit
insurance policies guaranteeing the loans were obtained. The broker involved told the banks
that full insurance cover had been obtained when in fact at the time it had not been. This fact
later came to the knowledge of the insurers but they failed to tell the insured banks which
made further loans. Setyn,J. Held that the insurers were in breach of a duty of disclosure
imposed on them by reason of the principle of uberrima fidei. He further held that the
insured’s remedy was not limited to avoidance of the insurance contract and recovery of their
premium, but was also entitled to sue for general damages.
Pan Antlantic V. Pine Top (1994) 3 ALLER 581 (on the concept of inducement and
misrepresentation)
Lambert V. Co-operative Society Ltd (1975) 2 Lloyds Rep 485
Mrs. Lambert signed a proposal form for co-operative Insurance all risks policy covering her
own and her husband’s jewellery. The policy was issued and renewed annually. Jewellery to
the value of £311 was lost or stolen and mrs. Lambert claimed under the policy. The insurer
repudiated the contract on two grounds first, that some years before taking the policy, Mr.
Lambert had been convicted of receiving stolen cigarettes and fined £25. Secondly, that Mr.
Lambert had again been convicted of conspiracy to steal and actually stealing shirts and
record players for which he received a 15-months sentence. The insurance company claimed
Page 18 of 50
that these were material facts which ought to have been disclosed. The Court of Appeal
unanimously gave judgement for the Defendant insurers. The Court adopted the objective
test and held that stronger authority existed for the proposition that facts are relevant if a
prudent insurer would consider them material in assessing the premium. Accordingly, Mrs.
Lambert’s claim was dismissed notwithstanding that she had filled the proposal in good
faith.
MISREPRESENTATION
As already noted, a duty of utmost good faith includes a duty not to misrepresent material
facts.
A misrepresentation is a positive statement of fact which is made or adopted by a party to a

contract and which is untrue. A contract is voidable by the innocent party if such a party was
induced to enter into the contract by the misrepresentation of the other party. A
misrepresentation is a statement of fact relating to the present or past but not of the future. As
such, a statement of opinion would not amount to a misrepresentation.
In some instances, misrepresentations are innocent whereby they have been made carelessly
by some mistake or forgetfulness or made under a misapprehension but without carelessness
and with good ground for believing in the truth of the statement.
In other instances, the representations are fraudulent in that they are made knowingly without
belief in the truth of the statement or recklessly without care whether the statement is true or
false.
In the case of Kettlewell vs. Refuge (1908)1 K.B 545, the insured was induced to continue
payment of premiums on a policy by a statement made by an agent to the effect that if she
continued to pay the premiums, she would get a free policy after 5years, Court found that the
fraudulent statement entitled her to avoid the contract and claim for the return of the
premiums paid.
In the case of Economides (supra), it was found that an honest representation of belief must
have some basis, but that there is no implied representation on the part of the person making
the statement that there are reasonable grounds for making it.
A misrepresentation should also relate to material facts in the sense that it would affect the
judgment of a prudent insurer. The Courts have found that the misrepresentation need not
have been the decisive factor, but that it is enough that it was actively present to the mind of
the other party when he/ she decided to make the contract of insurance.
Page 19 of 50
In marine insurance, a representation as to a matter of fact is true if it is substantially correct,

i.e if the difference between what is represented and what is actually correct would not be
considered material by a prudent insurer. In other words, the error in marine insurance must
be material in order to amount to a misrepresentation.
In Pan Atlantic case (supra), it was stated that the representation must not only be material
but it must also have induce the actual representee to contract in the sense that he must have
relied on it. As such, if the maker of the representation can prove that the representation did
not reach the mind of the recipient, then it does not induce the contract.
Further to this, if the maker of the statement can prove that the recipient of the
misrepresentation, though aware of it, did not allow it to influence his judgment, then there is
no inducement in fact. Accordingly, if insurers have not been induced, they will not be
allowed to avoid the contract.
The degree of inducement is not very high and what is usually required is that the
misrepresentation was one whereby the insurer still would have been willing to make the
contract but only on different terms.
Where the insurer’s question in a proposal form is ambiguous, it cannot rely on the answer as
a misrepresentation of fact if that answer is true, having regard to the construction which a
reasonable man must put upon the question and which the proposed insured did in fact do.
Likewise, where the insured makes ambiguous statements and leads the insurers into an
error, he cannot turn around and argue that insurers put a wrong construction to the words.
Therefore, if as a result of the proposed insured’s statement, it is capable of more than one
interpretation, it is always open to the insurer to argue that they understood it in a particular
sense and that in that sense it was a false statement.
See: Yorke vs. Yorkshire insurance Co. Ltd(1919) 1 K.B 662
This case brings out the principle that evidence of an expert is admissible to prove what facts
are material.
In this case, one of the questions in a proposal form for life insurance dated 12 Dec. 1916
stated; “what illnesses have you suffered ?” The proposer answered; “ None of
Consequence.” The truth of his answers was made the “basis” of the policy. He died
3months later from an over dose of veronal. When a claim was made against the insurers by
the assignee of the policy, they repudiated liability on the ground that there had been non-
disclosure of a material fact, namely that in 1911, the proposer had been ill as a result of
taking an overdose of veronal. The insurers called a doctor as an expert witness to give
Page 20 of 50
evidence as to (i) whether it was material for them to know of a veronal habit on the part of
the proposer &(ii) whether the illness of 1911 should be regarded as “one of consequence”.
A question arose as to whether such evidence was admissible, and it was held that it was
admissible. Court stated that since the statement was ambiguous, the insurers were entitled to
give it their own interpretation and if it turned out to be untrue, then it would amount to a
misrepresentation.
Sometimes, there is no need to prove what facts are material for it will be obvious to the
Court that they are so.
See: Glicksman vs. Lancashire & General Assurance [1925]2 K.B 593
Here, the action was on a burglary policy – whether the fact that the insured had been refused
burglary insurance by another insurance company was material and should have been
disclosed to the insurers- The insured argued that it was necessary to call evidence as to
materiality –Held (C.A) that no evidence need be called, for it was obvious in a case of
burglary insurance that the fact was material.
Burden of proof
The burden of proof is on the party who relies on the misrepresentation to avoid the contract.
See: Hajji Kavuma Haroon vs. First Insurance Company Ltd (supra)
Remedies
* Avoiding (Rescission)
* The innocent can also sue for damages
FRAUD & ITS EFFECT IN INSURANCE
-Insurance contracts are contracts uberrimae fidei
- Fraud would undermine the essence of utmost good faith.
-Delays compensation because the exercise of investigating whether the insured is fraudulent
or not takes long.
Most of the cases have dealt with insureds who have wilfully concealed material facts.
Page 21 of 50
Suffish v. Egypt Air (supra) – Fish was being airlifted out of the country. The insured was
aware that fish, which was the subject matter of insurance, had already gone bad, but sought
to take out an insurance policy in respect of the same.
Also see: Bassajjabalaba Hides & Skins Co. Ltd vs. United Assurance Co. Ltd (supra)
Derry v. Peek (1889) LR 14 App. Cases 337 – Fraudulent - misrep. Held: A proposer is
guilty of fraudulent misrepresentation if he makes a statement which is false, knowingly
without belief in its truth, or recklessly as to whether it is true or false, and that this entitles
the innocent party (insurer) to avoid the contract and also claim for the damages.
Kettlewell case (supra) -The insured who had been induced by the insurers’ agent to continue
paying premium in consideration of a free policy was held to be entitled to recover the
money which she had paid on the ground that the agent had fraudulently misrepresented to
her. Sir Gorell Barnes P, at p.899 held that the plaintiff having discovered the fraud ,was
free to treat the policy as void on the ground of misrepresentation.
Page 22 of 50
PREMIUMS
Ss.63-66; 90 Insurance Act, 2017
A premium is the consideration given by the insured in return for the insurer’s undertaking to
cover the risks insured against in the policy of insurance . See: Lewis v. Norwich Union
Fire Insurance Co. (1916) A.C 509
It usually takes the form of a money payment. This payment is determined by the insurers,
with the approval of the Insurance Regulatory Authority (IRA) (s.64 Insurance Act, 2017).
Thus, IRA however reserves the right to prescribe minimum premium rates for any class or
type insurance business (s.64(2)).
The insured is required to pay the premium in full on or before inception of the policy or
renewal of the policy (S.63)(1) Insurance Act, 2017. The insurer shall not be at risk until the
premium is paid. In HCCS No. 10 of 2011; Daniel Ssebowa vs. Paramount Insurance
Company Ltd, the plaintiff had been allowed by the defendant insurer to pay the premium in
instalment [this was allowed under section 34 of the repealed Insurance Act, Cap. 213]. However, he
did not pay it in full. The defendant rejected the claim and Court agreed and dismissed the suit as
there had been failure of consideration.
Generally, the mode of payment of insurance premium is cash or by cheque, although

payment by cheque is usually conditional on the cheque being honoured.
Circumstances under which Return of premium can arise:
Generally an insured is not entitled to a return of premium unless in circumstances where

there has been a total failure of consideration on the part of the insurer. This is because
where there is no failure of consideration, it is taken that the insurer has been at risk & the
contract has been in force. In Wolenberg v. Royal Co-operative Collecting Society (1915)
83 L.J K.B 1316, the insured had insured with different insurers and wanted to recover
funeral expenses on the death of her mother. Having been paid by one insurer, she sought to
recover back premium paid to the second insurer & she failed. Court held that there could be
no return of premiums as the insurer had been at risk.
There are usually two circumstances where there is a total failure of consideration entitling
the insureds to recover premiums:-
(1) Where the contract is void abinitio as was the case in Kettlewell case (supra).
(2)Where the contract is illegal. For instance, it is illegal for any insurer to lower the
approved premium rates without the approval of IRA. See: s.66 of the Insurance Act, 2017.If
Page 23 of 50
such happens, IRA may order the cancellation of the policy and upon such cancellation, the
insured shall be entitled to a refund of the premium but only for the remaining (unexpired)
period of the policy(s.66(1)). However, even where the policy is not cancelled, IRA can
order the insurer to make an adequate refund of premium to the insured (s.66(2)).
RISK IN INSURANCE
Risk refers to an uncertain event that one person wishes another to provide protection
against.
What risks can be insured & which ones can’t be insured?
- Insurer has to weigh the risk in terms of the likelihood of the risk happening & in terms of
how much premium to charge for that risk.
-There must be a pool of similar risks for the risk to be insured.
Exceptions
-Reckless acts on the part of the insured (moral hazards)
-Wilful misconduct so as to cause the risk insured to occur.
-Inherent vice especially in relation to insurance/policy of goods.
Refer and read: Chapter 11- John Birds, 2000 Edn.
Risk relates to uncertain events which may befall the insured within a specified period of
time. The determination of risk is an important part of the insurance because an insurer can
only adjust premium if he accurately knows the nature of the risk which he is required to
take up, & on the other hand the insured will be able to know the actual extent of cover being
provided so that in the event that it is insufficient, he or she may takeout additional
insurance.
In general practice, any risk is insurable although this usually depends on whether the
insurers are willing to insure it. However, the important considerations are that;
(1) The event must be uncertain with regard to whether it will happen & when it will happen
&there must be fortuity i.e. the event happening by chance.
Page 24 of 50
Qn: Would the Insured’s negligence affect the possibility of recover ship?
Generally, the fact that the loss is caused by the negligence of the insured is not important,
although insurance does not cover losses that are deliberately caused by the insured or
recklessly caused by the insured. However, it should be noted that where the express terms
of the policy exclude loss arising from the insured’s negligence, then the insured would not
be able to recover under such a policy.
Harris V. Poland (1941) /K.B 462
Fire policy – subsequently the insured put the jewellery in a fire place in a bid to hide it from
thieves- lit fire & it got destroyed –insurers argued that they were not liable as loss was out
of her negligence- Court rejected that argument. Held that there had been a loss by fire
against which the property (jewellery) was insured and that it mattered not whether that fire
came to the insured property or the insured property came to the fire.
Comprehensive policies
Comprehensive insurance cover is that which is usually intended to cover all risks. This kind
of insurance is common especially in relation to household goods, goods in transit & motor
vehicles. Whereas it is referred to as being comprehensive, it generally does not include
ordinary wear & tear, inherent vice, the wilful misconduct of the insured & risks that are
unlawful to cover.
British & Foreign Marine Insurance Co. Vs. Gaunt [1921]2 A.C 41
Comprehensive cover for wool purportedly up to the warehouse – Court looked at what this
meant –Court was of the view that a comprehensive policy does not include ordinary
wear&tear &inherent vice. Read the case. Look at the Judgment of Lord Birkenhead
Wear & Tear
This refers to the ordinary damage that would be expected to occur in the normal use of
property. It is not accidental or fortuitous & is not included in all risks for comprehensive
policy.
Inherent vice
Inherent vice refers to internal defects of property. These internal defects are also excluded
from risks covered under a comprehensive policy because in such cases the damage which
arises comes from inside the property itself which is the subject of insurance.
Page 25 of 50
Noten vs. Harding (1990) 2 Lloyd’s Rep.527-Leather gloves–damaged by moisture-

moisture a result of the very nature of the gloves– Held that it was a risk an all risks
insurance cover could not provide protection against.
Soya vs. White (1983) 1 Lloyd’s Rep. 122
Consignment of soya damaged by moisture - argument that the moisture was part of soya
itself. Held in affirmative.
Wilful misconduct
Where as one may recover where loss is due to negligence, a loss that is caused by the wilful
misconduct of the insured or loss caused by another with the insured’s consent, does not
entitle the insured to indemnification.
An insured who acts intentionally to cause a loss would not be able to recover because such
loss would not be fortuitous & also because it would be contrary to public policy. However
in some cases, the Courts have weighed “acting contrary to public policy” as against
compensating victims who have been innocent.
Gray vs. Barr (1971) 2 Q.B 554 – Plaintiffs were administrators of an estate-sued the
defendant having shot dead the deceased on ground of a suspicious affair with his wife –
defendant sought to add the insurer as a third party – Court rejected on the ground that the
defendant would in effect be benefiting from his own wrong . Court looked at the situation
that a deliberate or wilful act will disentitle the insured from recovering from the policy since
in such a case the loss would have been caused intentionally, i.e wilfully.
Charlton vs. Fisher (2001) Lloyds’ Rep. 387
This case was decided differently from Gray’s case. Court looked at balancing the interests
of victims with those of the insurer and allowed the victim compensation.
Here, the motor vehicle was comprehensively insured – knocked someone while walking in a
pedestrian area –was driving recklessly in a car park –M/vehicle owner also sought the
insurance company to compensate the victim –whether to allow the tortfeasor to recover &
compensate the victim or to through all the process as to individually compensate the victim.
Beresford v. Royal Insurance (1938) A.C 586
Life insurance policy – assured committed suicide - it is was proved that he was sane when
he decided to commit suicide- Estate sought to recover the value of the policy (life policy) -
insurers refused on the basis of deliberate cause of act - whether beneficiaries could recover
Page 26 of 50
when in fact the life insured had been ended by the insured deliberately when he was actually
sane. Held that could not recover from his (insured’s) own wrong; that on grounds of public
policy, suicide was a crime.
Other limitations on recovery
1) Loss of the subject at matter
The protection given by the insurance is only to loss of damage to the subject- matter of the
insurance. Therefore, an insured cannot recover under a policy unless there is actual loss,
except where the policy relates to the marine insurance. This means that a mere likelihood of
recovery does not constitute a loss & does not entitle an insured to recover.
Mitsui vs. Mereford (1915) 2 K.B 27 – World War-consignment of timber bought in an

enemy country – as a result it could not be shipped – the insured sought to recover from the
insurers – fact of existence of the timber, which was the subject matter of insurance- the
insured could not recover as the subject matter hadn’t been lost.
Moore vs. Evans (1918) A.C 185 - Seller of jewellery /pearls set it to another country of the
buyer - subsequently was broke out – enemy country & therefore no transactions could be
allowed - jewellery/pearls had been kept in safe custody of the bank - due to long period of
war the seller sought to recover from the insurer as a loss – argument rejected that it still
existed despite the war taking long.
Note: In marine insurance, where the ship is lost or damaged, it can be imputed that such
goods are lost & therefore recover from the insurer. This does not apply in non-marine
insurance. Read about the doctrine of abandonment.
2) Consequential Loss:
Generally, the contracts of insurance do not cover loss consequential to the risk insured
against. Where an insured wishes to insure against consequential losses, this must be
expressly stated. Consequential losses may include loss of profits ,rent, etc.
In the case of Re Wright & Pole (1834) 1 Ad & E1 621, an insured, whose Inn was burnt
down, was unable to recover consequential of losses of rent, cost of hiring other premises &
for loss of customers while the Inn was being rebuilt.
Page 27 of 50
Maurice V. Goldborough Mort (1939) AC 452 - Loss of profits having insured the goods -
Court reasoned that the insured could only recover the value of the goods & not loss
expected to be incurred.
Note: It does not mean that the loss of profits cannot be insured. However, it must expressly
be provided for in the policy of insurance. In Maurice v. Goldborough Mort, it was
decided that where it is desired to insure against loss of profits, the cover must be specially
requested & a special policy wording used.
Commencement of Risks
This is about when the risk benefits to run. The risk begins to run at the time agreed upon
between the parties, e.g it may run from the date of acceptance of the offer or from the date
of payment of the premium. However, where there is no specific date or time agreed upon,
the presumption will be that risk runs from the date of the policy.
Once risk begins to run, the insurer will be liable for losses relating to the insured peril
within the agreed period of cover or up to the agreed amount of cover. This therefore means
that in order for the insurer to be liable to the insured, the loss must occur during the
subsistence of the insurance cover and the time of loss will be taken to be the time of the
original accident. This means that where damage is suffered earlier prior to the insurance
contract, which damage manifests itself during the term of the policy, the insurer will not be
liable to indemnify the insured.
See:
-Kelly vs. Norwich Union (1989) 2 ALL ER 888
-Suffish vs. Egypt Air (supra)
-Bassajjabalaba Hides & Skins Co. Ltd vs. United Assurance Co. Ltd (supra)
CAUSATION/ DOCTRINE OF PROXIMATE CAUSE
For an insured to recover, it is not enough to show that the loss falls within the perils or risks
insured against. The insured must also show that the loss was proximately caused by an
insured peril. It therefore becomes relevant to identify the proximate cause of a loss
particularly in the circumstances where a series of events has led to a loss. The proximate
cause of a loss has been described as meaning the effective, dominant or real cause of the
loss as opposed to the last cause in a series of events.
Page 28 of 50
See:-Becker Bray & Co. vs. London Assurance Corp. (1918) AC 101
- Leyland Shipping vs. Norwich [1918] AC 350
- -Symington vs. Union Insurance of Canton (1928) 97 L.J KB 646
It was held that where the peril, which is insured against, has happened and is so imminent
that its absolutely necessary to take action to avert the danger, then the loss which occurs
would be covered, thus making the insurer liable to indemnify the insured.
Leyland’s case - ship insured against perils of the sea with the exception of loss from
hostilities - during world war I - ship hit by a torpedo and it had been lowered to a harbour
where it was safe. Subsequently, the harbour authorities refused to keep it there and it was
moved to a place just outside the harbour. It was constantly being hit by sea water which
consequently led to its sinking. Court was of the view that the real and dominant cause of the
loss was the fact that the ship had been hit by a torpedo and not that it had subsequently been
exposed to the movement of sea water. Court therefore found that since the real, dominant
cause was one which was excluded, the insurers were not liable for the loss.
Wayne Tank & Pump Co. Ltd vs. Employers’ Liability Insurance co. Ltd (1974) 1 QB
57 – the plaintiff had supplied equipment to a factory. It was found that the equipment was
defective and one worker left it on throughout the night causing a fire which gutted the
factory. Court found that the proximate cause of the loss was the defective nature of the
equipment, but not the fact that it was left switched on.
There are also instances where the cause of the loss may not be expressly excluded, yet it is
one which would deny an insured an opportunity to seek indemnification on the ground of it
being contrary to public policy. In Gray vs. Barr (1971) 2 QB 554, the Court found that it
was not the firing of a gun but the deliberate conduct of the defendant in approaching the
deceased while holding a loaded gun.
CONDITIONS AND WARRANTIES
-Nature of the warranties
-effect to insurance contracts
-How Courts have treated warranties
Page 29 of 50
Meaning of Warranties
A warranty is an essential term of the contract of insurance and it has the place of what is
otherwise referred to as “a condition of the contract” in general contract law. This is because
the liability of the insurer depends upon the existence of the fact or the thing warranted.
The essential characteristics of a warranty are that it:
-must be part of the written contract;
-must be literally fulfilled;
-the matter warranted does not have to be material to the risk, and
-the breach of the warranty discharges the insurer notwithstanding that the loss has no
connection with the breach or that the breach has been remedied before the loss.
Courts have stated that the insurer is discharged from liability as from the date of the breach
of the warranty for the simple reason that fulfilment of the warranty is a condition precedent
to the liability or the future liability of the insurer. Courts have also stated that the rationale
for this position is that the insurer only accepts the risk provided that the warranty is
fulfilled.
Warranty must be part of the written contract
The warranty must be found either in the policy or some other written or printed document
which is incorporated by reference to the policy.
Materiality of the warranty
The facts or the matter which is warranted does not have to be material to the risk. This
proposition is based on one of the early decisions, namely, the case of Sceales vs. Scanlan
(1843) 6 Lr.L.R 367 where it was stated that the insurer and the insured are entitled to make
a bargain that the whole contract shall depend on the existence of certain facts, and if such a
bargain is made, it must be adhered to even though the thing warranted may be trivial.
It follows therefore, that one cannot seek to avoid the contract of insurance by pleading non-
materiality of the term breached.
See: Thompson vs. Weems (1884) 9 AC 671 (HL) –a question in a proposal form asked:
(a) “Are you temperate in your habits and, (b) have you always been strictly so”. The
proposer answered: “(a) temperate; (b) Yes.”
Page 30 of 50
The form contained a basic clause which expressly said that in the event of untruth, the
policy is void. Held: The insurer was entitled to repudiate the policy. It was said that
materiality was irrelevant, even though, in fact, the matter must have been material on the
facts of the case.
Also See: John Birds (2000 edn), pp.106 & 124.
Warranty against loss
The loss does not have to be as a result of or in consequence of the insured’s breach of the
warranty. If the warranty is breached, the insurer is discharged of the obligation/liability and
it is immaterial as to how the loss has occurred.
Warranty must be literally fulfilled
This implies strict and literal compliance-meaning that the actual thing stipulated must be
presented or done. Otherwise, failure entitles the insurer to repudiate the contract. However,
the only option available to the insurer is repudiation, lest he or she will be taken to have
waived the right to do so. In West vs. National Motor & Accident Insurance (1955) 1
W.L.R 343, the insured was alleged to be guilty of breach of warranty by mis-stating the
value of property he insured. When he subsequently suffered a loss, the insurers purported to
reject the claim and to rely upon a term in the policy to refer the dispute to arbitration. It was
held that by relying on the policy, they had waived any right to avoid the policy for breach of
warranty which was the only right they might have had. Accordingly, they had no right to
reject the particular claim.
It should be noted that where warranties require strict compliance, the rule is that in
interpreting the meaning of a warranty, it should be read liberally in favour of the insured
and against the insurance company. Therefore, if the insurer seeks a warranty on any
particular matter, it must be expressed in clear terms and without any ambiguity.
See: Joel vs. Law Union (1908) 2 KB 863 & National Insurance Corporation vs.
Kakugu Sylvan, HCCA No. 40/2015 – a policy of insurance was interpreted contraferentum
against the appellant insurance company due to ambiguities in the policy schedule.
Conditions
Conditions on the other hand refer to matters which are not fundamental to the risk covered
by a policy. They usually relate to matters which are collateral, promises or matters which
confer rights upon the insurer, e.g that the insured will give the insurer notice of loss or that
Page 31 of 50
the insurer has a right to subrogation, i.e a right to sue the 3rd party on behalf of the insured
and right over the wreckage.
Effect of breach of a condition
It entitles the insurer to claim the damages which he might have suffered as a result of the
breach. However, such breach would not entitle the insurer to be discharged from liability,
unlike in warranties.
See:
1. Mac Cormick vs. National Motor Insurance (1934) 50 T.L.R 528; (1934) 40 Com
Cas 76
2. Provincial Insurance vs. Morgan (1933) A.C 240
The C.A was of the view that the question and answer were descriptive of the risk. Thus,
from the constitution of the said question and answer, the insurers were held liable because
the lorry was carrying only coal at the time of the accident.
Also see: Daniel Ssebowa case (supra), where Justice Musalu Musene, citing with approval
the case of Mason vs. Harvey (1853) 8 Exch. 819, dismissed the plaintiff’s claim for compensation
on grounds of breach of several conditions of the policy and stated that if the condition goes in
details, then performance must strictly be in accordance with the details required however,
burdensome.
Page 32 of 50
MAKING AN INSURANCE CLAIM
Once loss has occurred, it is for the insured to notify the insurer that the peril has occurred.
Eventually, the insured must also prove to the extent required by the insurer the loss that has
occurred. IRA has developed claims guidelines, which require insurers (claims officer or broker) to
visit the scene of loss within three (03) working days from the date of receipt of claim from the
insured or within 5 working days if its a complex claim that require approval of IRA. For details see
the claims guidelines.
Some of the issues which arise with regard to claims are whether the loss was caused by an event
covered by the policy; whether the loss was caused by the deliberate actions of the insured; whether
the claim made is fraudulent and/or exaggerated, and also whether the procedure has been followed.
In policies where the insured is claiming in respect of the loss suffered only by him, and where such
loss is caused by his deliberate actions (moral hazard), he cannot recover.
Where the loss involves 3rd parties and is caused by deliberate actions of the insured, the competing
public policy considerations of allowing the insured to benefit from his on wrong as against enabling
victims to be compensated would be put into account.
See:
1. Charlton vs. Fisher (2001) Lloyds Rep 12 387
2. Gray vs. Barr (1971) 2 Q.B 554
3. Beresford vs. Royal Insurance (1938) AC 586
All the three cases relate to deliberate actions of the insured.
The claims procedure
Usually, the policy of insurance would have specific terms on what claims procedure the insured is
required to follow. These terms would address the issue of notice and what proof needs to be
submitted. However, where the policy is silent, the law would imply any reasonable period and also
any reasonable facts that ought to be proved.
With respect to notice, the basic obligation is to give notice of the loss to the insurer or the insurer’s
agent. Oral notice may be sufficient unless the policy expressly excludes it. The notice should be
given in time as far as is reasonably possible although in cases where time limits have been
expressly included in the policy, the Courts have found that such clauses should be complied with
strictly.
See: Cassel vs. Lancashire & York Accident Insurance Co. (1885) 1 TLR 495
Page 33 of 50
Time clause-notice must be given within 14 days-involved in accident-injury manifested itself after
eight months-insurers sought to evade liability on the basis that the claim/notice was out of time.
Held: That notice ought to have been given within 14 days; that once 14 days had elapsed; the
insurer was absolved of liability.
The notice should be given to the insurer or the insurer’s agent. However, it is not sufficient for the
insured to give notice to his own agent.
In terms of particulars, it is usually anticipated that the insured will provide some general but
reasonable information relating to the loss and not full details of the loss. Where particulars of the
loss are required in detail, these would be expected to be given within reasonable time.
See also: HCCS No. 10 of 2011; Daniel Ssebowa vs. Paramount Insurance Company Ltd
(Musalu, J.) where the insured failed to give notice of the accident to his insurers-the Defendant for
seven months. The insured could not recover compensation because he was in breach of conditions
of the contract of insurance relating to notice.
FRAUDULENT CLAIMS
A claim will be regarded as fraudulent if it can be shown that the insured intended to defraud the
insurer or put forward false evidence. Contracts of insurance require the insured and the insurer to
act in good faith and therefore in a sense there seems to be a continuing duty to act in good faith
throughout the term of the contract.
See: Boulton vs. Houlder (1904) 1 K.B 784 at pp.791-792
In the case of Orakpo vs. Barclays Insurance Services (1995) Lloyds Reps.443, the Court stated
that the duty of good faith is a continuing duty although it should be taken as having
differing/varying degrees of severity; that at the time of contract inception, the duty is a very
demanding duty, whereas at the claims stage the insured will be expected not to make wilful
falsehoods of a substantial nature when making a claim with the insurer.
In this case, the insured’s property (house) had been damaged. He claimed that he was renting it and
exaggerated the number of rented rooms i.e amount. The issue was whether the exaggeration was a
fraudulent claim and whether it tainted the whole contract, and whether the insured was required to
make a claim with good faith. Court held in the affirmative and noted that an exaggeration up to
10% amounts to a substantial falsehood.
Galloway vs. Royal Guardian Royal Exchange (UK) Ltd [1999] Lloyds Rep. I.R 209
Burglary policy-house had been burgled and some property lost-the insured was required to give list
of property lost while making a claim-included a computer when in fact it had not been lost-also
attached a forged receipt for a computer-found to be fraudulent-other properties had actually been
lost-whether the whole claim would be affected by the fraudulent claim in respect of the computer.
Page 34 of 50
Court concluded that the whole claim and not just the fraudulent claim would be voidable because
the insured would be in breach of their duty to act with utmost good faith.
With regard to exaggeration of claims, in the earlier cases, exaggeration was not considered to be
fatal, but the more recent decisions have taken the position that exaggeration is dishonesty and fraud.
However, in practice, insurance companies will still pay the part of the claim which is genuine and
only avoid that which is exaggerated. This is because in some instances the insured’s claim may be
substantially genuine and the exaggeration may have been simply to gain a better bargaining position
with the insurer.
Proof of the fraud
The proof of fraud lies with the insurer and like in all matters relating to fraud, the burden and
standard of proof that is required is slightly higher than that required in civil matters.
See: Hornal vs. Neuberger (1957) 1 QB 247
Effect of fraud on insurance claims:
The effect of fraud is that the insurer is entitled to avoid the entire claim.
SETTLEMENT OF CLAIMS
❖ Reinstatement
❖ Indemnity/Compensation
❖ Life settlement-endowment policies-benefit of others-agreed payment-may be

reinstatement or indemnity
In insurance law, the question of how much an insured is entitled to after the risk insured against has
occurred usually requires a consideration of the nature of the insurer’s liability and a consideration
of the principles underpinning contracts of indemnity. An insurance contract requires the insurer to
promise to provide protection against a particular loss. As a result of this theory, it has been
established by Courts that a claim under an insurance contract is a claim for damages for breach of
contract. This is why settling a claim tends to refer to compensation. The promise of indemnity in an
insurance contract is a promise to hold the insured harmless against a specified loss or expense.
The insured’s entitlement in policies relating to life is based on the nature of the policy, e.g in an
endowment policy the insured will be entitled to claim an agreed sum of money after attaining a
particular age - usually retirement age, whereas in policies for life, the insured’s named beneficiaries
would be entitled to a specific sum of money upon the death of the insured/assured.
See: Prudential Insurance vs. Commissioner of Inland Revenue (supra)

Page 35 of 50
Held: That the contract was based on a contingency depending on life.
With respect to property-related insurance, the insured will be entitled to compensation based on the
principle of indemnity.
Principles applied in indemnifying losses related to property
The insured cannot recover more than the maximum amount of money that is expressly stated in the
policy. There are instances where property may be totally or partially lost. Total loss refers to the
property being totally destroyed, whereas partial loss refers to damage only to property.
The measure of indemnity would differ according to the extent of the loss. In cases where indemnity
/compensation is not limited to the sum insured, the compensation will be measured in terms of
value at the time of loss, even though this value may not necessarily correspond to the value at the
date of commencement of the policy. Because indemnity relates to making good the loss, it follows
therefore that the insured should be in a position to prove the loss before being entitled to
compensation.
See: Holmes –v- Payne [1930] 2 QB 301 ( Also pp.180&212 of John Birds, 2000 edn)
- Moore – v- Evans pg.180- John Birds (supra)
- Orakpo –v- Manson Investments (1978)AC 95 pg.238-John Birds
- Napier & Ettrick – v- Kershaw (1993)1 ALLER 385
- Yorkshire Insurance Co. –v- Nisbett Shipping Co. (1962)2QB 330; [1961]2ALL ER487
- Rice – v- Baxendale (1861)7 H& N 96 - value based on the market price in the place where
sold /valued.
Reinstatement
Reinstatement is one of the options available to the insurer to indemnify the insured. It refers to the
option to repair or replace the insured’s property. This option exists for insurers dealing with
property related policies. Where the insured wishes to reinstate or repair the insured’s property
rather than paying the insured money, the insurer must notify the insured of this decision within
reasonable time, and once such a decision has been communicated , the insurer is bound by it. As a
result the insurer would be bound to reinstate the property to its original condition.
Further to this, once the insurer has decided to reinstate, they are obliged to ensure that the work
done is of good quality. As such the insurer becomes directly responsible for the quality of the work
Page 36 of 50
and the standard of repairing or reinstating the property.3 This is irrespective of the reinstated
property being made better than it was prior to the loss.4
Because the insurer is bound by their decision to reinstate, it does not matter that the reinstatement
costs more than was originally anticipated or that it costs more than the sum insured in the policy,
unless there is a clause in the policy which expressly limits the cost of reinstatement.
In Holmes –v- Payne (supra), the insurers were held bound by the replacement agreement of an
insured necklace which was mislaid and could not be found despite all the insured’s efforts. This
again was held binding on the insurers irrespective of the fact that months later the necklace was
found in the insured’s cloak.
In Leppard – v – Excess Insurance Co.,5 the Court stressed that the insured was entitled to an
indemnify against the amount of the insured’s loss and no more.
In that case, the insured had purchased a cottage which was worth 4,500 pounds including site value
at the time it was burnt. It would cost some 8,000 pounds to rebuild. As the insured had purchased it
for resale and never intended to live in it, he was held only entitled to what he lost by not being able
to sell it i.e his loss was the market value of the cottage.
Note: The judgement indicates however, that in the normal case of the insured who lives in or
otherwise occupies his house, office or factory, the measure of indemnity will be the cost of
rebuilding, because otherwise his actual loss will not be made good.
THE PRINCIPLE OF SUBROGATION
The insurer’s right of subrogation arises in the contracts of insurance which are contracts of
indemnity. i.e those where the insured is making good or compensating the insured for a loss e.g.
Property, M/vehicle and fire insurance.
Subrogation arises as a result of the insurer indemnifying or compensating the insured. There are two
major aspects of subrogation which are;
1. That where the insurer has indemnified the insured, the insurer has a right to benefit from the
compensation given by the party who causes the loss.
3
The insurer must provide standard workmanship to ensure the quality of the work.
4
This is an exception to the strict principle of indemnity which is meant to put the insured in the same position as he
enjoyed before the loss.
5
[1979]1 WLR 512; [1979] 2 ALL ER 668
Page 37 of 50
2. That the insured should not benefit or make a profit from their loss.
It follows that the right of subrogation will come into operation where the insurer has fully
indemnified the insured and where the insured has rights both against the insurer and the third party
in respect of the same loss.
Once the insured is fully compensated by the insurer, and the insured thereafter receives further
compensation relating to the same loss from the third party, then the insured holds the second sum of
money in trust for the insurer. As the insurer has a right of subrogation, the insured is obliged to sue
the 3rd party or to allow the insurer to use his name in suing the 3rd party to recover payment.
Castellian – v- Preston (supra)
Napier & Ettrick – v- Kershaw (supra)
The doctrine of subrogation requires the insured to institute Court proceedings against a 3rd party to
diminish the loss, to account to the insurer for the proceeds received from the 3rd party, to act in
good faith in conducting Court proceedings against the 3rd party and in the alternative to allow the
insurer to use the insured’s name in proceedings against the 3rd party.
Note: The insurer can only recover or exercise their right to subrogation after they have indemnified
the insured and also only up to the extent that the insurer has indemnified the insured. Court have
found that the doctrine comes into play only after the insurer has fully indemnified (compensated)
the insured.
See: Yorkshire Insurance vs. Nisbett Shipping (supra)
A suit had been filed relating to a ship which had sunk. It took ten years for Court to decide the
matter. When the judgment was finally delivered, general damages were awarded in pounds yet the
sum insured was in dollars. As a result, the difference was high. The insurer got lured into taking the
whole sum. Court held that the insurer was entitled to the right of subrogation only to the extent they
had indemnified the insured.
Suffish International Processors & Anor vs. Egypt Air Corporation t/a Egypt Air Uganda
SCCA No. 15 of 2001, p.7 (copy of the unreported authority availed by lecturer –it is online). It
is also reported as (1997-2001) UCL 55
This case explains the circumstances the insurer can benefit from the right of subrogation i.e up to
the extent of indemnity. It also explains the basis under which the insurer can bring a case against a
third party.
Facts: export of fish-insurance cover by the Plaintiff-fish destroyed-no proof of insurance-Court

looked at the basis upon which the insurer can bring a suit. Held: There must be evidence of their
relationship with the 1st party and existence of insurance cover.
See: Unicof Ltd vs. Interfreight Forwarders HCCS No. 912/96; (1997-2001) UCL 447, and
Page 38 of 50
Edwards vs. Motor Union (1922) 2 K.B 239
Note: Everyone should read Suffish vs. Egypt Air case (supra)
Practice question:
“The doctrine of subrogation is to the effect that the insurer is only liable to indemnify the
insured only and only when he or she [insured] is unable to recover from the 3rd party.
Accordingly, the insured is not bound to indemnify the insured once it is established that he
or she can recover his loss and damages directly from that third party. This is because, once
the insurer compensates the insured, the third party, who caused the loss to the insured is
discharged from liability. So, it is prudent that the insured recovers his compensation
directly from such an able and affluent 3rd party.” Mwajjuma, an LLB III student at Kampala
International University asserts.
Do you agree? With relevant authorities, discuss the principles underpinning the
application of the doctrine of subrogation in the law of insurance.
Page 39 of 50
CONSTRUCTION/INTERPRETATION OF INSURANCE CONTRACTS
See: Conditions and warranties (supra)
See also: Joel vs. Law Union, &
NIC vs. Kakugu Syvan HC Civil Appeal No. 040 of 2015
In the Kakugu case (supra) Musota, J (as he then was) restated the rules governing
interpretation of insurance contracts as follows:
1. The words must be given their ordinary meaning and proper sense known as the literal
rule of interpretation. Words are to be understood in their plain and literal meaning. See
also Yorke vs. Yorkshire Insurance Company Limited [1918] 1 KB 662 & HCCS Civil
Suit No. 376 of 2009; Christine Mawadri t/a Maisha Creative Agencies vs. Brit
Syndicates & AON Uganda Ltd.
2. When general words are linked with more particular words, those words must be
construed as limited to the meaning similar to the one particular words known as the ejus
dem generis rule;
3. The policy must also be interpreted as a whole;
4. Terms of art or technical meaning must be understood in their proper sense unless the
context controls or alters their meaning;
5. Where the wording of the policy is ambiguous and therefore capable of two alternative
interpreations, it must be construed strictly against the person seeking to rely on it, i.e the
party which/who drafted the contract of insurance or re-insurance and in favour of the
party who accepts the wording. This is called contra proferenteem rule.
In HCCS No. 319/2012; Lucy Kabege t/a Ideal Surveyors, Valuers & Real Estate
Management vs. NICO Insurance (U) Ltd, the Defendant drew a policy in which they
incorporated the clause of fidelity then when it came to the policy schedule, it mentioned
libel and slander and loss of documents whose premium they did not disclose. The
Defendant said nothing on the fidelity clause in the policy schedule. Court found this to
be an ambiguity and resolved it in favour of the Plaintiff (per Justice Wangutusi.)
See also Simmonds vs. Cockell [1920] 1 KB 843 & Kakugu case. In the latter case, In
this case, the wording of the policy schedule was ambiguous and confusing and Court
construed it against the appellant, which was ordered to compensate the Respondent.
Page 40 of 50
6. Liberal interpretation
Where warranties require strict compliance, the rule is that in interpreting the meaning
of a warranty, it should be read liberally in favour of the insured and against the
insurance company. Therefore, if the insurer seeks a warranty on any particular
matter, it must be expressed in clear terms and without any ambiguity.
Page 41 of 50
INSURANCE INTERMEDIARIES
The law applicable is the Insurance Act, 2017 s.2, part ix, ss. 82-95.
Who is an insurance intermediary-s.2-is an insurance agent, an insurance broker, a risk advisor, a

loss assessor, a third party administrator, or a re-insurance broker. For definition of each of these
intermediaries, see section 2 (interpretation section.)
s.82-To carry on the business of an insurance intermediary, one must apply for and obtain an
insurance intermediary license from Insurance Regulatory Authority of Uganda (IRA). See: s.83 (3).
Otherwise, that business would be illegal. See also: s.83(1) for different types of intermediary
licenses.
s. 84-To carry on business as an insurance Broker and re-insurance broker, one must first incorporate
a company.
s.85(3) &(4)-IRA shall grant or renew an insurance intermediary license unless the applicant is a fit
and proper person. It will grant or renew where it is satisfied that the applicant is not disqualified
from receiving it, has sound financial capacity, its principal officer possesses adequate knowledge,
skill and expertise in insurance and is likely to comply with this Act and regulations applicable to
this Act. An applicant for a broker license must also have obtained a professional indemnity policy
of not less than the equivalent of UGX. 100,000,000/= (One Hundred Million Shillings Only). See:
s.85(4)(c) & s.89(6) of the Insurance Act, 2017. The criteria for determining whether one is a fit and
proper person to be granted a licensee is set out in schedule 2 to the Act, i.e must be a personal of
high moral character, competent, with sound Judgment, diligent and that who, in the opinion of IRA
will safeguard the interests of policyholders or prospective policy holders. A person who has been
convicted of the offence of fraud or any other offence involving dishonesty or violence, has
contravened the law meant to protect members of the public against financial loss, has defaulted on a
loan or a company in which he or she is a director has defaulted on a loan, etc, will not be granted a
license or renewed in that sense as he or she deemed not to be a fit and proper person. See: Schedule
2 to the Insurance Act, 2017.
s.87-Persons who do not qualify to be insurance agents
-public officers or employees of local governments
-administrators, managers, directors, auditors or employees of insurers or re-insurers or insurance

brokers or re-insurance brokers, risk advisor or loss assessors
-A person who is not fit and proper.
Note: An insurance agent is not allowed to act for two or more insurers dealing in the same
insurance business-must first seek written permission of the IRA (S.87(2)).
Page 42 of 50
Sec 95- variation, revocation or suspension of an intermediary’s license on any grounds it could have
refused to grant the same. (Powers of refusal and revocation are wide.) However, prior written notice
must be given by IRA to the affected intermediary stating reasons why its license is set to be varied,
revoked or suspend (s.95(3)). This is to afford such intermediary, an opportunity to be heard in line
with the principles of natural justice. However, IRA may vary, revoke or suspend the license without
given such prior notice if it is in the interest of the policyholders to do so (s.95(6)). A person
aggrieved by the decision of IRA may appeal to the Insurance Appeals Tribunal within 30 days from
the date IRA communicates its decision (s.95(5) and 137(1)).6 The Tribunal shall review the decision
of IRA and give its decision within 90 days from date of the appeal. The decision must be in writing.
It may uphold, reverse, revoke or vary the decision of IRA. A party dissatisfied with the decision of
the Tribunal shall appeal to the High Court by lodging a notice of appeal in the High Court within 30
days from the date of communication of the decision of the Tribunal (not date of decision as the two
might defer). Time begins to run from the date the decision is brought to the attention of the party
concerned.
NB: Read s.136 for the composition of the Tribunal.
Criticism; the discretion is too wide.
General scope and implication of having agents
The law is that the general law of agency applies to insurance intermediaries. The principal is bound
by the actions of the agent. Insurance looks at ostensible/apparent authority of the agent; it does not
look at the actual authority. “Apparent” is something the public sees i.e did the agent appear to be
what he is?
In Murfitt v Royal Insurance(1922)38 Times Law Rep. 334, the agent was held to have implied
authority to enter into temporary oral contracts of fire insurance for he had been giving such covers
for two years with knowledge and consent of his supervisors.
The liability of the principal is based on the principle of estoppel.
See also Mackie v European Assurance society (1869)21 LT 102
The Plaintiff insured his mill and warehouse through W, at the time an agent for the commercial
union. Subsequently W became an agent of the defendant. The Plaintiff’s policy with the
commercial union expired and he asked W for a new one. W gave him a cover note in form of a
receipt, for a month in the name of the defendant. Despite the fact that at the time the Plaintiff did
not realize that the insurer was different and despite the fact that the defendant no longer transacted
fire business, it was held that there was a binding temporary contract of insurance between the
6
Insurance Appeals Tribunal was established under the repealed Act and given continuity by section 136 of the
Insurance Act, 2017 and its mandate is to review decisions of IRA.
Page 43 of 50
parties because having provided W with cover notes, the defendant had conferred authority on him
to bind it.
Even if an intermediary’s contract is terminated by the principal, a third party who has dealt with
him/her without notice of termination will recover from the principal.
In Willis, Faber v. Joyce (1911) 27 TLR 388, it was held that where an underwriter fails to give
notice to the assured that a certain agent has been terminated, he/she/it will be liable on policies
made on his behalf by one who has ceased to be his agent.
Read, Alfa Insurance ltd v Empire Insurance Group HCCS No 79/93
-Issue: what happens to the intermediary’s commission after termination? Can he continue to earn it?
The principal is liable for wrongs of the intermediary and this extends to fraud, misrepresentation,
etc.
Read, Lloyd v Grace smith and co. (1912) AC 716, 725 ( Loreburn, J.)
It was stated in that case that the essence of ostensible authority is the representation made by the
principal to the third party, for it matters not what the agent says, nor whether he is acting
fraudulently. This is because by word or conduct, the principal holds out his agent as having
particular authority.
“ ……a principal is liable for the fraud, misrepresentation or wrongs of his agent where the
agent is acting or purporting to act in the course of business such as he was authorized or
held out as authorized to transact on behalf of his principal.”
According to Ivamy,7 even if the agent did the wrong for his own benefit, the principal will still be
liable. See Lloyd v Grace Smith & Co.( supra)
The relationship can be extended by the intermediary to his subcontractors. The principal will
equally be liable even if he did not authorize subcontracting.
Adoption of agent’s actions
If the principal takes benefit from wrongs of the agent, then it will be taken as to have adopted the
actions. Lloyds v Grace (supra) p.738 it was stated that it does not matter whether the act was
intended for the principal’s benefit or for the sole benefit of the agent. Lord Macnaghten held that by
keeping or taking benefit of the agent’s fraud, the principal must be taken to have adopted that
agent’s act.
7
Ivamy, General Principals of Insurance Law
Page 44 of 50
Exceptions
1. Actions by directors or officers of the company. If the agent is a director, the general principles of
company law apply/come in handy. Thus, the actions of directors will at all times bind the company.
Colinvaux at p.311 says that the powers of company directors are deemed to be free from
limitation, even in favour of the person aware of those limitations.
2. Where there is notice of limitations to the authority of the agent. It is sometimes included in the
policy; can be printed on receipts or vouchers i.e as long as there is notice.
Horn Castle v Equitable Life (1906)22 TLR 735 held that where the assured has notice by a
condition in a proposal form, receipt or policy he cannot afterwards make the insurer liable.
3. Where by usage of trade one proves that a certain limitation exists to the agent’s authority. Read,
Willis, Faber vs. Joyce (supra)
4. Where the action of the agent is clearly outside the scope of his apparent authority. Newsholme v
Road transport insurance (1929) 2 KB 356 the insurer was held not liable for the warranties given
by an agent who was employed to canvass proposals only.
Lloyds vs. Grace (supra)
5. By ratification. It is similar to adoption but is different in a sense that adoption arises

unconsciously by action whereas ratification is approved.
Ratification has to be looked at carefully. The following can negate ratification.
1. If the action is ultra vires, i.e it cannot be ratified see: Asbury Rly vs. Riche
2. For ratification to be effective the ratifier should be the person who would have made the contract
at the time of the policy see Colinvaux p. 1504.
3. Ratification isn’t valid if it takes place after the loss has occurred (with exception to marine cases
where ratification may be effected even after the loss)
Grover and Grover v Mathews (1910)2KB 401, a broker effected a renewal of the insured’s policy
without the authority of that insured. The insured suffered loss before he knew about the broker’s
actions but later attempted to ratify the renewal. It was held that the insurer was not liable even
though the insured ratified what the broker had done.
See also Suffish vs. Egypt Air case & Oriental insurance Brokers v Trans ocean (u) ltd SCCA No
55/95
-Policy had been concluded and cover concluded after the loss had occurred. Look at what the
Courts said i.e C.A & SC.
Page 45 of 50
In Oriental case, the issue was whether a broker can sue for premiums from the assured.
The general rule is that an agent can’t sue or be sued unless he is a party to the contract. The only
exception is that an agent can sue for premium due to the insurers. Qualification is that if the agent
recovers such premium, he recovers it as a trustee for the insurer. See Pan Atlantic v Pine Top
(1989)1 Lloyds (supra)
In the oriental case (supra) the judge extended the meaning of sec 87 (now section 63 and 90)
Sec 90 (3) is to the effect insurance brokers or insurance agents who receive any premiums in cash,
collects it on behalf of the insurer and must remit the same to insurer not later than the next working
day and in full.
In oriental case, the SC held sec. 87 imposes a duty on brokers to collect and remit the premiums.
That because of this duty and failure to do so being a criminal offence then the agent should be able
to enforce payment. The judge therefore extended the wording in this section to allow a locus
standing on the agent to sue on premium.
NB: This position may no longer be the case as section …of the Insurance Act, 2017 requires that
payment of premiums must be made directly to the insurer. For that reason, the agent or broker is
obliged to remit the money collected in cash as premium to the insurer not later than next working
day. A further limit is placed on agents and brokers not to accept cheques or any payable order from
a policyholder or a prospective policyholder unless that cheque or order is made payable to the
insurer or HMO. See: s. 90. Secondary, well as section 87 of the old section allowed insurers to give
credit on premiums so that the policyholder would pay within 30 days, section 63(1) of the 2017 Act
makes it mandatory for premium to be paid in full on or before the date of inception of the policy.
The rationale behind this change appears to have been intended to guard against defaults that would
come giving of credit on premiums.
A broker can be sued for damages for breach of warranty of authority if he exceeds his authority.
The agent may also be liable under collateral agreements.
See: Woolcott vs. Excess Insurance Co. Ltd [1979] 2 Lloyd’s Rep. 210; [1978] 1 Lloyd’s Rep.
633
There is also the issue of tort. Can an agent be sued in tort?
See, Federation General (1990) 1 Lloyd’s Rep. 98
The general rule is that such damages (in tort) are too remote, which makes it almost impossible to
recover.
Page 46 of 50
There is also a question of dual capacity, i.e can someone act as an agent and broker at the same
time?
The insurance agent is not allowed to act as a broker at the same time. See, s. 87(1)(b) Insurance
Act, 2017. In the same spirit, an insurance agent is barred from acting for two or more insurers
transacting in the same class of insurance (s.87 (2) & (3)), but can do so if those two insurers (or
more) are dealing in different classes of insurance, e.g where one insurer is dealing in life insurance
and another is dealing non-life insurance (s.87 (4)). This is meant to guard against such an agent
diverting business/clients (policy holders or would be policyholders) to either insurer when they
actually wished to be insured by a particular insurer.
Excess Life v Fireman Fund Insurance (1982) 1 Lloyd’s 599, 619
Similarly, an insurance broker is not allowed to engage in business of a loss assessor. See, s.87(5) of
the Insurance Act, 2017.
In North and South Trust v. Buckley (1971) 1 ALL ER 980, the brokers refused to hand over
documents to the insureds concerning the investigation of claims on the policies which they had
prepared for the insurers. This was held a breach of duty on ground that their true principals were the
insureds. Accordingly, they could not act on the instructions of insurers without insured’s consent.
Imputation of knowledge
Is there a principle of constructive notice in the law of insurance?
Generally, under agency, knowledge may be extended but under insurance, there is no such a thing
like constructive notice. In commercial matters, the doctrine of constructive notice is not favoured.
See, the explanation of Lindley LJ in Machester Trust vs. Furness (1895) 2 QB 539 and
Blackburn, Low & Co. vs. Vigors (1887) 12 AC 531. A broker employed to effect an insurance
heard of a fact of the risk and did not tell his principal. That broker did not effect that insurance, but
later, the principal effected an insurance on that risk. On loss occurring, the underwriters alleged that
the knowledge of the 1st broker was the knowledge of the principal, and that as the principal had not
disclosed a fact he must be taken to have known; that the insurance was void. The House of Lords
held that this contention was erroneous; that while it was true that if the 1st broker had effected a
policy, he would have been bound to disclose his actual knowledge to the underwriters, he was not
so bound to disclose his knowledge to his principal that his principal, though it was not disclosed,
must be taken to know it.
What about waiver?
Is an agent’s waiver the principal’s waiver? Yes.
Page 47 of 50
See, Grace Smiths case (supra) at p.74-discusses imputation of knowledge visa-a-vis waivers. The
rationale given for waivers of agents is that those who deal with the agent deal with him in good
faith and are entitled to think that the agent is carefully executing his duties.
See, Evans vs. Employers Mutual …… (1936) 1 KB 505. This case extends the principle to lower
members of staff.
What about if a broker fills the proposal form on behalf of the assured and misrepresents on the
forms?
See, Royal London case (1914) 30 LR 350
What if it is the insurer’s agent that fills the proposal form on behalf of the assured and
misrepresents on such a form before asking the assured to sign?
There are two approaches here i.e;
1. Where the insurer’s agent acts for insured he becomes the insured’s agent and the insurer is
not liable for his (agent’s) wrongs.
2. The rule of parole evidence applies. The insured will not be allowed to contradict the form
they signed. In other words, the he or she will be estopped from denying his signature on the
proposal form.
See, Newsholme vs. Road Transport & General Insurance Co. (supra), an agent who was
employed by insurers only to canvass for proposals, filled and warranted answers in a
proposal form for a motor insurance as true, which in fact and to his knowledge were untrue.
While overruling the arbitrator’s decision that the knowledge of the agent was imputed on the
insurer, C.A held that as the agent had acted at the request of the proposer (insured), he was
the proposer’s agent not insurer’s and that as he was negligent in signing the proposal
without reading it.
Newsholme case distinguished the case of Bowden vs. London, Edinburg & Glasgow Assurance
Co. [1892] 2 Q.B 534.
In Bowden’s case, it was held that knowledge of the insurance agent was the knowledge of insurer.
In that case defendant insurance company’s agent filled the proposal form on behalf of the proposer
and misrepresented/warranted in the proposal that the proposer had no physical deformity when in
fact the agent knew that the proposer was single eyed. When the insured suffered an accident and
lost the sight of the 2nd eye, he was held entitled to recover for total loss of sight.
One would wonder why Bowden case, insurer’s were bound by their agent and Newsholme, they
were not! The distinction is that in Bowden, the insured was illiterate and did not know that the
insurer’s agent had misrepresented. Otherwise, if the proposer, who is literate, signs the proposal
Page 48 of 50
form, without first reading and confirming its contents, if the answers turn out to be untrue, he is
estopped from running away from the consequences of his negligence by saying that the person he
asked to fill it up for him is the agent of the person to whom the proposal is addressed.
The general practice however, is that Courts tend to lean towards the insureds than insurers.
See Stone v Mitcho (1972) 1 Lloyd’s 469.
Pearl life v Johnson (1909)2 kb 288
INSURER’S AGENTS
At common law there are two types of insurer’s agents i.e.
1. General agents-those within the company structure, and

2. Special agents/local agents-those commissioned by the insurer to look for business. See, s.2
of the Insurance Act, 2107 for the definition insurance agents.
In insurance it is the ostensible authority of the insurer’s agent that is important.
How do you determine the extent of this authority? It is a question of fact-meaning each case must
be determined on its own peculiar facts. See, Colinvaux pp. 256-257.
See, Murffit v Royal insurance co. (supra) on the question of determining the boundaries of an
agent. The agent was held to be vested with implied authority to enter into the temporary oral
contracts of fire insurance for he had been giving such cover orally for two years with the knowledge
and consent of his supervisor.
Note: Compare London and Lancashire life vs. Flemming (1897)AC 499 and Oriental insurance
Brokers case (supra)-specifically on brokers.
According to Lancashire case, brokers have authority to receive premium and not necessarily
authority to give credit or receive overdue premium, but according to Oriental case, it is about
balancing accounts. Accordingly, a broker can give debts (credit) and pick overdue debts/premiums.
Note: This should be reconciled with section 63 of the Insurance Act, 2017 which requires all
premiums to be paid before or at the inception of the policy and to the insurer. This because
Oriental case was based on section 87 of the repealed Insurance Act, Cap. 213, which allowed
payment of premium within 30 days after the inception of the policy.
Page 49 of 50
INSURANCE BROKERS
There are two things here;
1. Common law definition, and
2. Definition in the Act-s.2-an insurance broker means a person, not being an insurance agent and
acts as an independent contract for commission or remuneration. He solicits or negotiates business
on behalf of an insurer or prospective insured and advises insureds or prospective insureds on their
insurance needs and requirements.
At common law, the definition is wider. See, Smith case (1788) 2 TR 187 i.e, anyone who
undertakes to make or whose duty is to make a contract of insurance for the assured is his agent.
Duties of brokers
Prima facie, this depends on the contract between the insured and the broker. Generally speaking
their duty is to solicit or negotiate and conclude insurance contracts and give advice to the insured.
They also have a duty to act with care and skill. See, Colinvaux at page 25.
1. Get adequate insurance cover
2. To ensure that regulation of cover is adequate
3. To choose financially sound insurers
4. To choose an insurer who licensed. S.82 of the Insurance Act, 2017
5. To ensure that the insurer is willing and in position to cover the class of risk in issue.
6. To ensure that they don’t misrepresent to the insured
See Warren v Sutton (1970) 2 Lloyd’s 276- the plaintiff successfully sued the broker in damages for
having represented to them that no previous accidents, convictions or disabilities would hinder the
extension of the plaintiff’s motor policy to the friend whom he wished to share the driving. Thus, the
insurer avoided the contract on the friends appalling previous convictions. Also see, John Birds,
p.149.
7. Duty to correctly advise the insured e.g as to the meaning of clauses in the policy and insurability
of a particular risk. See, Osman v Moss [1970] 1 Lloyd’s Rep. 313 and Moulton’s case (1942)73
Lloyd’s Rep. 104.
8. Duty at the stage of renewal of policies to disclose to both parties (insured & insurer) any change
in circumstances surrounding the cover. See, Coolee vs. Windhealth (1930) 4 TLR 78
Page 50 of 50
Remedies in the event of breach of duty by the broker
Basically, the aggrieved part is entitled to damages, being the money he would have received if there
had been an effective insurance cover without the breach. Therefore, any mitigating factors have to
be considered see Fraser v Fireman (1967) 1 WLR 898
Assignment question:
The doctrine of subrogation is a corollary right to the contracts of insurance. Per
Oder, JSC in Suffish Air vs. Egypt Air Uganda (1997-2001) UCL 55. Discuss
Page 51 of 50

INSURANCE LAW - Evening Class - MR Ntegyereize Alauterio-1

Uploaded by

Copyright:

Available Formats

INSURANCE LAW - Evening Class - MR Ntegyereize Alauterio-1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

INSURANCE LAW - Evening Class - MR Ntegyereize Alauterio-1

Uploaded by

Copyright:

Available Formats

KIU LLB IV EVE Insurance Law notes by A.

INSURANCE LAW CLASS NOTES FOR LLB IV EVE CLASS 2020

Insurance is divided into types;

ii. Non-marine insurance

iii. Agents, and

Historical Development of Insurance

❖ Ship owners were the 1st insurers

❖ As insurance grew, it became difficult for them to keep on this practice

❖ Two principles developed-insurable interest and salvage (subrogation).

❖ Nominal Defendants Council-established by statute to help victims of motor vehicle

1. National Insurance Corporation Act, Cap. 314

2. D. Mabirizi (1979), Ideals and Realities in Uganda’s Consumer Protection; Cases

-Discusses mercantilism and how it affected law development

• Insurance Act, No. 6 of 2017

• Marine Insurance Act, No. 11 of 2002

• Motor Vehicle (Third Party Risks) Act, Cap. 214

• Traffic and Road Safety Act, Cap. 361

• The Workers Compensation Act, Cap. 225, ss.18 & 19

• The Companies Act, 2012

• The Insurance Act 2017 (Commencement) Instrument, 2018, Statutory Instrument

• Marine Insurance Act (Commencement) Instrument, 2006, Statutory Instrument No. 5

Recommended Study Texts

Colinvaux’s Law of Insurance, Sweet and Maxwell, 7th Edition

Halsbury’s Laws of England, (3rd Ed) Vol. 22

E.R. Ivamy, General Principles of Insurance, 6th Edition, Butterworths

E.R. Ivamy, (1984) Case Book on Insurance Law, Butterworths

J.J. Ogoola, (1999) Business Law, Focus Books

J.Lowry, Casebook on Insurance Law

J.Lowry, (1999) Law of Insurance

Anthony Allot, Essays in African Law, pp.3-10

Issa Shivji, Insurance and Development, E.A.L.Rev. Vol. B No. 1

• Medical Defence Union V Department of Trade (1979)2 ALLER 421; (1980) 1 Ch 82

Medical defence union v Department of trade

According to Sir Robert Megarry V-C,

According to the judgment of Channell J in Prudential Insurance Co. V. Inland Revenue

Prudential Insurance Co.v. Commissioners of Inland Revenue

Revenue-Stamp-Policy of Life Insurance –Old age endowment Policy

FORMATION OF A CONTRACT OF INSURANCE

i. John Birds (2000 Ed.)-chapter 4

iii. General Accidents Insurance V. Cronk (1901) 17 T.L. R 233.The

iv. Taylor V. Allon (1966)1 Q. B. 304

vi. Entores V. Miles Far East Corp [1955] 2 QB 322

Because the acceptance must be communicated, silence cannot amount to acceptance.

Also look at: Executed & Executory contracts in contract law

The consideration in a contract of insurance is usually the premium which is assessed

See Article by Hanson (Standard form clause in a contract of insurance).

Re Coleman’s Depositories (1907)2 K.B 798.

The Insurance Act;

• Different types of insurance

Entores V. Miles Far East Corp (1955)2 Q.B 322

It was therefore a proper case for service out of Jurisdiction.

Taylor V. Allon (1966)

According to his Lordship,

Re Coleman’s Depositories Ltd

Insurable interest is a fundamental principle of insurance law, and although it has no

Insurance Interest may be described as existing where a person is interested in the

As such a mere hope or expectation of a future benefit is not sufficient to constitute an

Insurable Interest In Terms Of Property

MAURICE V. GOLDSBOROUGH MORT (19....)AC 452