Report No. 67
Policies under the Friendly Societies Act, 1896, section 33, are exempt from stamp duty."
44.20. Contract of insurance.-
We shall now deal with insurance and its various classes. Insurance is a contract whereby one person, called the "insurer", undertakes to indemnify another person, called the "assured", against a loss which may arise or to pay a sum of money on the happening of a specified event.1 It is a contract whereby, for an agreed premium, one party undertakes to compensate the other for loss on a specified subject by specified events2 "Insurance is indemnification against the risk of loss, by distributing the loss over a group."3
1. Slater Mercantile Law, (1956), p. 275; see also Stevens Mercantile Law, (1965), p. 319.
2. Bouvier Law Dictionary, (1914), Vol. 1, p. 1613.
3. Lavine Modern Business Law, (1959), p. 350.
44.21. The two major types of insurance are marine and non-marine.1 For convenience, non-marine insurance may be studied in its various species.
1. Halsbury's, 3rd Edn., Vol. 22, pp 7 et seq. and 179 et seq. deal with the two separately.
44.22. Personal insurance and Accident Insurance.-
In the classification of insurance against main types of non-marine risks, as given by Halsbury1 personal insurance is thus described:-
"(1) Personal insurance in which the event insured against effects the assured in relation to his life and limb and physical well-being. This class includes life insurance, endowment and retirement annuity insurance, personal accident insurance and sickness insurance."2
Accident policies insure against the contingency of accidental injury or accidental death. Accident insurance, liability insurance and automobile insurance, all share this feature-that the insurance covers loss or damage resulting from accident or unanticipated contingencies except fire and the elements.
1. Halsbury's, 3rd Edn., Vol. 22, p. 184, para. 353(a).
2. Emphasis added.
44.23. Contingency and indemnity.-
Every insurance, whatever its nature, postulates that a sum of money will be paid by the insurer on the happening of a specified event.1 In one sense, all categories of insurance are related to a "contingency".2 But, as a distinction is sometimes made between an "indemnity insurance" and "contingency insurance", it would be desirable to discuss "indemnity"3 in some detail.
1. Halsbury's, 3rd Edn., Vol. 22, p. 180, para. 347.
2. See Halsbury's, 3rd Edn., Vol. 22, p. 394, para. 803.
3. As to how far insurance is a contract of indemnity, see the opinion of the Judges in Irving v. Manning, (1847) 1 HLC 287 (307): 6 CB 391 (Case of marine insurance).
The question of indemnity is thus dealt with in Halsbury1:-
"Most contracts of insurance2 belong to the general category of contracts of indemnity in the sense that the liability of the insurers is limited to the actual loss which is in fact proved.3
The happening of the event does not of itself entitle the assured to payment of the sum stipulated in the policy;4 the event must in fact result is a pecuniary loss to the assured5and the assured then and then only becomes entitled to be indemnified, subject so the limitation of his contract.6
He cannot recover more than the sum insured for that sum is all that he has stipulated for by his premium and fixes the maximum liability of the insurers7. Even within that limit, however, he cannot recover more than what he establishes to be the actual amount of his loss;8 the contract being one of the indemnity, and of indemnity only, he can recover the actual amount of his loss and no more,9 whatever may have been his estimate of what his loss would be likely to be, and whatever the premiums he may have paid, calculated on the basis of that estimate. In the strict sense previously indicated,10 contracts of life insurance,11 personal accident and sickness insurance12 and some forms of contingency insurance13 are not contracts of indemnity, in the case of contracts of this class there is normally no necessity to prove a pecuniary loss14.
If the assured chooses, for example, to value a leg or an eye at £ 50,000, and to pay premium accordingly, he is entitled to recover the, stipulated sum in the event of his losing the member in question. His estimate of his possible loss is, in effect, regarded as genuine and acceptable, even if not agreed, because no one is likely "deliberately to inflict such damage on himself, and no one can in fact foresee, even at the date of loss of the member, what the full pecuniary loss is likely to be. Similarly a person can value his life at any figure that he can afford, particularly as he is unlikely to be able to foresee, at the date when he taken out the policy, what at the date of his death his financial obligations to dependants may be. Indeed, as has been said,15 such an insurance is really a form of investment."
1. Halsubry's, 3rd Edn., Vol. 22, pp. 180, 181, 182, paras. 348, 349.
2. Exceptions are life insurance, personal accident and sickness insurance, and some forms of contingency insurance; see Halsbury's, 3rd Edn., Vol. 22, pp. 181, 182, 394, 395.
3. See e.g., Darrell v. Trihbitts, (1880) 5 QBD 560 (CA); Caste!lain v. Preston, (1883) 11 QBD 380 (CA); Meacook v. Bravant & Co., (1942) 2 All ER 66
4. Dane v. Mortgage Insurance Corpn., (1894) 1 QB 54 (61) (CA), per Lord Esher M.R.; see also West Wake Price & Co. v. Ching, (1956) 3 AER 821 (825), per Devlin, J.
5. Garden v. Ingrain, (1852) 23 LJ Ch 478 (479) per Lord St. Leonards.
6. Dalby v. India and London Life Assurance Co., (1854) 15 CB 365.
7. Westminster Fire Office v. Glasgow Provident Investment Society, 1 (1888) 13 App Cas 699 (711) (HL), per Lord Selborne, L.C.; Cf. Curtis & Sons v. Mathews, (1918), as reported in 35 ILR 189 (CA).
8. Chapman v. Pele P.O., (1870) 22 LT 306 (307), per Cockburn,
9. Caste!lain v. Preston, (1883) 11 QBD 380 (386) (CA), per Brett, L.J.
10. See Halsbury's, p. 120, ante.
11. Dalby v. Indian and London Life Assurance Co., (1854) 15 CB 365.
12. Theobald v. Railway Passengers Assurance Co., (1854) 10 Exch 45 (53), per Alderson, B. A Policy insuring a third person against personal accident is, however, a contract of indemnity [Blascheck v. Russell, (1916) 33 TLR 51: 3 B&S 5791.
13. Halshury's, p. 394, et seq.
14. Dalby v. Indian and London Life Assurance Co., (1854) 15 CB 365; Law v. London Indisputable Lift Policy Co., (1855) 1 K&J 233; ,Gould v. Curtis, (1913) 3 KB 84 (95) (CA) (per Buckley, L.J.).
15. Gould v. Curtis, (1912) 1 KB 635 (640), per Hamilton, J.; affrmed, (1913) 3 KB 84 (CA).
44.25. As, however, we shall show later1 there are many points of difference between life insurarce and accident insurance.
1. Para. 29, infra.
44.26. History of accident insurance.-
We shall now trace in brief the history of accident insurance. We would like to quoted a passage from the judgment in an Australian case,1 where the history is lucidly stated.
"Personal accident insurance began with railways. Many companies were formed between 1845 and 1850 to insure passengers against the consequences of railway accidents. From this beginning, personal accident insurance was extended to death or disablement resulting from other accidents, and then to various forms of insurance against incapacity from sickness. But all this occurred long alter life insurance policies had become well-known distinctive instruments. And originally accident insurance was transacted by companies not engaged in other forms of insurance. It was only towards the end of the nineteenth century that companies which had been engaged in fire insurance began to undertake accident insurance.2
The separate and late origin of accident insurance emphasises its distinctive character, and emphasises, I think, that in a strict sense the term life policy is not appropriate for modern forms of combined insurance. Insurances against accidental death do in some ways resemble life policies; and they are within the Act of 1774.3 Yet ordinary accident policies providing for payment on accidental death have been held not to be life policies for the purposes of provisions in bankruptcy and similar legislation by which life policies are protected."4
1. National Mutual Life Association v. Federal Commissioner for Taxation, (1959-60) 33 Australian Law Journal Reports 16 (21-22) (Windeyer, J.).
2. See Raynes History of British Insurance, pp. 283-299, 373-376.
3. Shilling v. Accidental Death Insurance Co., (1857) 2 H&N 43: (1853) 1 F&F 116.
4. Corteen (in re:), 1941 VLR 254; Farley (in re:), 1933 VLR 271; Karr (in re:), 1943 SSR 8; Packer (in re:) (Clyne, J.-not yet reported).
44.27. Industrial Revolution.-
The inception of accident insurance is bound up with the Industrial Revolution1 With the use of mechanical transport, the whole outlook changed. Serious accidents upon railways occurred with frequency in the early days and the demand for accident insurance was manifest. Travel by air also increased the demand. With the passing of the Employer's Liability Act, 1880, which placed a burden on the employers, a demand came for shifting that burden. The advent of motor vehicles led to the further development of insurance. Further (in respect of motor vehicles) legislation made third party insurance compulsory.2
If the past history is any indication, it would seem that with the passage of time, the scope of insurance against accidental risks is bound to increase.
1. See Stone and Cox Accident Insurance Year Book, (1963), p. 7.
2. See Stone and Cox Accident Insurance Year Book, (1963), pp. 8-9.
44.28. Accident insurance scope of.-
The scope of "accident insurance"1, in insurance business practice, seems to be rather wider than mere "personal accident" insurances2-3. The scope of accident insurance will be best understood from its classification, which has been thus given4.
"Accident Insurance for the purpose of classification may be divided into the following main clauses, viz.,
(a) Insurance of the person.-Personal accident and sickness risks, with which must be considered coupon and similar facilities.
(b) Insurance of property against personal loss, of which burglary and plate glass are good examples.
(c) Insurance of liability, such as employers' liability and public liability risks where the insured is not the claimant with whom settlement has to be made.
(d) Insurance of interest, such as fidelity guarantee.
Certain types of accident business represent a combination of two or these classes, while others include no less than three. Comprehensive motor policies (private cars) embrace (a), (b) and (c) under the one policy, as do Household Policies."
1. As to "accident", see Chitty Contracts, (1961), Vol. 2, para. 837.
2. The definition in section 98(2), Stamp Act, 1891 (now partly repealed), was narrower, as it was confined to personal accidents.
3. See also Lancashire Insurance v. Inland Revenue, (1899) 1 QB 535.
4. Stone and Cox Accident Insurance Year Book, (1963), p. 12.
It has been said that the business transacted by the Accident Department of a composite office comprises all these sections of Insurance business for which provision is not made by a Marine, Life and Fire Department1. The variety of its scope will be evident from the contents of the Accident Section of one of the year Books on Accident Insurance2, which covers persons accident, disease and sickness insurance, burglary insurance, "All Risks" Insurance, Insurance of Money, Baggage Insurance, "Combined Travel" Insurance, Storm & Tempest Insurance, Houseowners, Insurance, Subsidence Insurance, Glass Insurance, Public Liability Insurance, Product Liability Insurance, Personal Liability Insurance, Motor Insurance, etc.
1. Stone and Cox Accident Insurance Year Book, (1963), p. 11.
2. Stone & Cox Accident Insurance Year Book, (1963), Table of Contents.
44.30. In England, policies on motor vehicles are wider1 than required by the Road Traffic Act2, and may cover-(a) damage to the vehicle, (b) liability for damage to property, (c) death or, injury to, the assured and (sometimes) his or her spouse, (besides liability to third parties.)3
1. Chitty Contracts, (1961), Vol. 2, para. 908.
2. Road Traffic Act, 1960 (8 & 9 Eliz 2, C. 16).
3. See also analysis in Halsbury's, 3rd Edn., Vol. 22, pp. 353, 354, paras. 726(7) and 727.