Insurance as Peculiar Specie of the Law of Contract

Insurance as Peculiar Specie of the Law of Contract

ABSTRACT

Looking at the concept of Insurance which revolves around companies that deal with risk. This transaction operates by the customer paying a certain amount of money to the Insurance Company, that payment is known as premium. The effect of which is to guide against unforeseen accidents over the insured property and at the instance of such accident, the insurance company is obligated to subject to some conditions to pay the customer back the cost of the insured property.

Thus, this type of transaction is a contract that is based on trust and is normally a contract between the insured and the insurer, this contract involves a promise by a promise by a party called insurer to another party called the insured that on the occurrence of certain specified events, the insured will be put back to the position he occupied before the occurrence of the loss.

It is worthy of note that the Contract of Insurance is governed by the rules which form part of the General Law of Contract, but there is equally no doubt that over the years it has attracted many principles of its own to the extent that it is perfectly proper to speak of a law of insurance. Some of these principles of Insurance Law owe their existence to the fact that the documents of the standard Insurance Contract, principally the proposal form and the policy have long been drafted in a fairly uniform way. However, a very insignificant amount of people consider the importance of reading and understanding those principles of Insurance Law which include the terms and conditions of Insurance policies. Of the few who bothers to read through the basic principles, only a small proportion of them understand them.

Similarly, people usually find it very difficult to distinguish between the insurance law and law of contract, the result of this is that when a claim arises and it is found that the particular loss is not covered by the terms of the Insurance or Insurance Contract, there is always the tendency to blame it all on the insurance company. There might however be some „black sheep‟ amongst the insurer but a lot of the unpleasantness is due to a lack of understanding of the basic principles of insurance law and knowing the difference between insurance law and law of contract.

Thus, this study seeks to elaborate the terms and principles of Insurance Law, Law of Contract and also to discuss the basic features of Insurance Law as distinct from that of Law of Contract.

CHAPTER ONE

GENERAL INTRODUCTION

INTRODUCTION

Insurance is an intricate economic and social device for the handling of risks to life and property. It is social because it represents the various individuals for mutual benefits by combining funds to reduce the consequence of similar risks. The purpose of Insurance cannot however be farfetched as this can easily be seen from the various definition of Insurance, Insurance Contract has been defining in the case of PRUDENTIAL INSURANCE COMPANY .V. INLAND REVENUE COMMISSIONER1 AS “a contract whereby a person called the “insured” undertakes in return for the consideration called the premium to pay another called the “assured” a sum of money or its equivalent on the happening of a specified event. But simply put, Insurance is the placing back of a person who has suffered a loss in the same position he was before the loss occurred. It aims to eradicate the consequence of a loss by not allowing the victim [insured] to suffer the consequential loss.

This project work examines the basic principles of Insurance Law, these principles are numerous and they are the basis upon which Insurance.

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Contract are based failure to adhere to any of these principles may render an Insurance Contract void, the need to understand as well as having sound knowledge of the basic principles of Insurance Contract cannot be overemphasized.

These basic principles as would be discussed in this work include:

Indemnity

Subrogation

Contribution

Average

Insurable interest

Utmost good faith.

The aforementioned principles are the bedrock of the Insurance Contract, the absence of any of which the purpose of insurance will defect. However, as earlier stated unless one meets the requirements of all the basic principles of insurance, he will be estopped from claiming under an insurance contract.

1.1.0 BACKGROUND TO THE STUDY

Insurance Law arises from Maritime Contract around 1350 which has since extended into other areas and today it has covered almost all aspect transactions in the world.

But due to the high level of illiteracy in our society, many people are unaware of the Insurance policies but with the enactment of the Insurance Act No 68 of 2003, the awareness of Insurance policies was enhanced, thus more people took steps to ensure their properties or life but unfortunately, much as the high percentage of them normally ends up unable to have their claims indemnified either as a result of a breach of one Insurance principle or another.

The motive for writing this work is the difficulty often encountered by many people when it comes to Insurance Contract, they are often gripped with the fear of having to combats risk, but in reality, every human being is faced with risks, personal or otherwise and the possibility of risks happening appear relevant at any moment, sometimes imminent, even though it may not happen for many years to come. This is however caused by the low awareness of the understanding of basic principles of Insurance Contracts.

However, in other to make people patronize the Insurance companies very well, there is the need to make people understands the distinctive Insurance principles and their peculiarity from Law Of Contract, these have however necessitated the writing of this project work.

1.2.0: OBJECTIVES OF THE STUDY

Insurance is an intricate economic and social device for the handling of risks to life and property. This work seeks to:-

To make seemingly difficult and intricate Insurance terminologies easy and understandable so that people can correctly appreciate what insurance is all about, use and apply them in their daily life experience.

To enlighten the general public about the area of Insurance which though seems insignificant yet is the basis of the Insurance Contract.

To explain the basic distinction between the Insurance Contract and the law of Contract by elaborating on the basic principles of Insurance Law which include indemnity, subrogation,

To increase the level of education of insurance education. Hence it analysis the fundamental principles that Insurance Contract deals with.

To enlighten people about the importance of having Insurance in our ever-growing dynamic world.

1.3.0 FOCUS OF THE STUDY

As Insurance Contract is governed by the rules which form part of the General Law of Contract but over the years it has attracted many principles of its own that it can be proper to speak of a Law of Insurance. However, this study is set to examine the distinctions between the Insurance Contract and the Law of Contract by showing the distinctive features of Insurance Contract, and, overview similarities between the Insurance Contract and that of Law of Contract will be examined.

1.4.0 SCOPE OF THE STUDY

This study will cover a whole lot of areas which includes the various definition and historical evolution of both Insurance Law and the Law Of Contract, it will also cover the similarities between the Insurance Law and the Law Of Contract which is usually refers to as the Insurance Contract, finally, it will critically examine the peculiarities between the Insurance Contract and the law of contract by discussing the distinctive features of Insurance Law.

1.5.0 METHODOLOGY

For this project work to achieve its aims and objectives, information and hypothesis will be based on both primary and secondary sources. The primary source to be used include legislative enactment such as the Insurance Act of 2008, other primary sources include decided cases from both within and outside the country. Secondary sources to be used in this work include textbooks written by different authors on insurance law and the law of contract, also articles from newspapers and the internet.

1.6.0 LITERATURE REVIEW

Although, many foreign books did not treat the topic of this project in detail except one of its concepts insurable interest. Most Nigerian authors however lightened the burden of this work with their tactful treatment of the basic principles of Insurance law. Important among the author in this regard include

IRUKWU. J.O. In his book Principle of Insurance Law where he explained in detail the basic features of Insurance law. But although Irukwu on this subject has principles laid down before the now operating Insurance Act in Nigeria, some of these principles remain in conformation with the Insurance Act of 2008.

BIRDS. In his book “Modern Insurance Law” also laid more emphasis on the basic principles of Insurance law which will help immensely in the treatment of this study.

PROF. OLUSEGUN YEROKUN in his book Insurance law in Nigeria serves as a major source of material for this work, as is book contains recent cases reported and these cases have enriched the law in so many ways, the book neatly explained the distinctive principles of the insurance contract and also the similarities between the insurance law and the law of contract which is always referred to as the insurance contract Similarly, his book The Law of Contract which is meant for all law of contract student also serve as a major source of material for this work.

FUNMI ADEYEMI also in her book Nigeria Insurance Law wrote quite on the issue of the Insurance contract. He observed the definition of insurance law, its types and also the contractual requirements of the insurance contract. The book also went further to explain the basic principle of Insurance which has helped to make the project work an updated one also.

Similarly, to make this project an updated one, regards is made to the note given by DR SHITTU BELLO Esq. to his students of the University of Ilorin when he was a lecturer with the school. The note provides meanings to some insurance terminologies as will be used in this project work.

However, all these authors and their book fails to discuss the principles of Insurance Contract as distinct from that of any other types of Contract which necessitated the writing of this project work.

1.7.0: DEFINITION OF TERMS

INSURED: This refers to a person who is covered by Insurance. Simply put a person or property which has been covered by an insurance policy could be either properties or lives.

ASSURED: – This refers to the second party in an Insurance Contract, This party is usually an Insurance company that deals in risk.

PREMIUM: – This describes the consideration given by the insured in return for the insurer undertaking to cover the risk insured against in the policy of insurance.

PHYSICAL HAZARD: – This is the physical or tangible aspect of the risk. It affects the likelihood of occurrence of and severity loss.

MORAL HAZARD: – This defines the attitude and conduct of the person connected with the risk and the society at large. Examples include the submission of false or overestimated claims.

THIRD-PARTY: – There are two parties to an Insurance Contract, the insurer and the insured. All others are strangers to the contract and are referred to as the third parties because they are not parties to the Insurance Contract between the insured and the insurer.

CLAIMS: – It is a demand for something considers one due, i.e. a request for compensation under the terms of an Insurance policy. Simply put a request (money) under the terms of an insurance policy.

1.8.0: CONCLUSION

This chapter has been able to explain what this project work is meant for, its aims and objective, the general overview of what is expected in this study, and also has been able to define those terms which are expected to be used in this project to make it a success. It has also gone further to enumerate the names of books and their authors that will be used in this study to make it an updated and successful one. It is social because it represents the various individuals for mutual benefits by combining funds to reduce the consequence of similar risks. The purpose of Insurance cannot however be farfetched as this can easily be seen from the various definition of Insurance, Insurance Contract has been defining in the case of PRUDENTIAL INSURANCE COMPANY .V. INLAND REVENUE COMMISSIONER AS “a contract whereby a person called the “insured” undertakes in return for the consideration called the premium to pay another called the “assured” a sum of money or its equivalent on the happening of a specified event. But simply put, Insurance is the placing back of a person who has suffered a loss in the same position he was before the loss occurred. It aims to eradicate the consequence of a loss by not allowing the victim [insured] to suffer the consequential loss.