Civil Engineering Reference
In-Depth Information
14.1.2 Definition of insurance
Generally speaking, a contract of insurance is a contract whereby, for a consideration
(normally involving payment of a premium), the insured obtains a benefit (usually
payment of money) upon the happening of a certain event in respect of which there is
uncertainty as to either whether it will happen or when it will happen. The insurance
must be 'against something', see
Prudential Insurance Co
.v.
IRC
(1904).
14.1.3 Legal characteristics of insurance
herequirementthatinsurancemustbe'againstsomething'isgenerallytakentomean
that the insured must have an 'insurable interest'. This means that the insured must
haveapecuniaryinterestinthesubjectmatteroftheinsurancesothatupontheoccur-
renceoftheinsuredeventtheinsuredhas,asaresult,eitherhimselfsuferedalossor
incurred a legal liability.
The other fundamental principle to which all insurance contracts are subject is that
of
uberrimae fidei,
, or utmost good faith. This principle requires each party to make a
full disclosure of all material facts which may influence the other party in deciding to
enter into the contract. A failure to disclose such material facts may render the policy
void, which in practical terms would allow the insurer to refuse to meet a claim. This
wouldapplyevenintheabsenceoffraudulentintent.
14.1.4 Joint names insurance
A construction contract will usually require insurance in respect of the works to be
in the joint names of the contractor and the employer, and where appropriate, may
also include as co-insured funders or other third parties having an insurable interest.
Under a joint names policy, each co-insured has its own rights under the policy and
is entitled to claim under the policy in respect of its own interest. This is to be dis-
tinguished from noting a party's interest on the policy. In the latter case, the party in
question may have a right to share in the insurance proceeds (provided of course that
it has an insurable interest) but it cannot make a claim under the policy. In addition,
whileitisusuallythoughtthatsubrogationrightsagainstaco-insuredunderajoint
names policy are excluded (subject to the comments in Section 14.1.5), there is no
such implied exclusion in relation to a party whose interest is noted on the policy.
Examples of contractual requirements to maintain joint names policies are those to
be effected under Insurance Options A-C of the SBC and the SBC/DB and clause 84.2
of the NEC3 (see Sections 14.2.4 and 14.3.1). Where a joint policy is also a composite
policy,thenintheeventoffraudornon-disclosurebyoneofthenamedinsureds,
the rights of the other insured parties (provided they are not also guilty of fraud or
non-disclosure) will survive. If the joint policy is not specifically taken out as a com-
posite policy (e.g. as required by the SBC and the SBC/DB), there is a risk that the
