Report No. 67

44.31. Object of personal accident insurance.-

We shall now deal more specifically with personal accident insurance. The object of personal accident insurance is to make provision for payment of a sum of money in the event of the insured sustaining accidental injury. It resembles life insurance, and differs from other types of insurance in that it is not a contract of indemnity1; it is merely a contract to pay a sum of money on the happening of a specified event2; namely, the sustaining by the assured of personal injury by such accidental means as may be defined in the policy.3The event may involve the death of the insured, but the insurance is not for that reason a contract of life insurance.4In the case of life insurance, the assured is bound to die some day, the uncertainty being as to the date when the death will take place5. In the case of personal accident insurance, on the other hand, no accident may ever happen; and, even if it does, there is no certainty that it will result in death of disablement of the assured.6

1. Theobald v. Railway Passengers Assurance Co., (1854) 10 Exch 45 (53), per Alderson B. Policy insuring the accused against loss arising from any accident to a third person is, however, a contract of indemnity [Blascheck v. Russell, (1916) 33 TLR 51; affirmed, 33 TLR 74 (CA)].

2. Bradburn v. Great Western Rail Co., 1974 LR 10 Exch 1 (2), per Bramwell B., (1874-1880) All ER Rep 195.

3. Lloyds Bank Ltd. v. Eagle Star Insurance Co., Ltd., (1961) 1 All ER 914 (insurance against personal injuries held to include personal injuries resulting in death). For form of personal accident policy, see 7 Ench. Forms and Precedents (3rd Edn.) 532.

4. General Accident Assurance Corpn. v. Inlend Revenue Commissioners, (1906) 8 F (Ct. of Sess.) 477.

5. See Halsbury's, 3rd Edn., Vol. 22, p. 272.

6. General Accident Assurance Corpn. v. Inland Revenue Commissioners, (1906) 8 F (Ct of Sess.) 477; Cf. Lancashire Insurance Co. v. Inland Revenue Commissioners, (1890) 1 QB 353 (359), per Bruce, J.

44.32. Halsbury, further, states1:-

"584. Need for insurable interest.-As in life insurance, an insurable interest is required by statute2, the interest normally being the potential pecuniary loss of the assured as a result of the disablement, either of himself, or of the third party if a third party is insured."

Halsbury adds, "In fact, personal accident insurance developed out of life insurance2, but it is necessary now to regard it as a different kind of insurance, and it is in fact generally so regarded."

It may be added that the distinction is recognised in England in the Assurance Companies Act3.

1. Halsbury's, 3rd Edn., Vol 22, p. 293, para. 584.

2. Life Assurance Act, 1774 (14 Geo. 3, C. 48), section 1; Shilling v. Accidental Death Insurance Co., 1857 H&N 42.

3. The Assurance Companies Act, 1909 (9 Edw. 7, C. 49), section 1.

44.33. Personal Accident Insurance is ordinarily effected by policies. But there is also a system of "coupon insurance" prevalent in England.

44.34. The nature of "coupon insurance" is thus described in Halsbury1-2:-

"604. Nature of coupon insurance.-The purchase of a newspaper or other article frequently confers upon the purchaser the right to an insurance against personal accident. The insurance arises by virtue of some arrangement made by the proprietors of the newspaper or article sold with insurers, and the position of the purchaser is defined in a document or coupon which is annexed to the article or, in the case of a newspaper, printed as part of it, and in some cares nothing beyond the purchase is necessary to complete the insurance3. In other cases the coupon has to be filled up, and it may, further, have to be registered with the insurers. The protection given by the coupon is usually in a narrow compass, being limited to accidents to vehicles in which the holder of the coupon is a passenger, or accidents to pedestrians.

605. Payment in case of death.-Provision is usually made, in the event of a fatal accident, for payment of the sum insured to a specified person, such as the holder's wife or next of kin. Where the coupon is issued by a newspaper, power is usually reserved to make the payment to the person adjudged by the editor or some other person to be holder's next of kin, in which case his decision is final."

1. Halsbury's, 3rd Edn., Vol. 22, pp. 302, 308, paras. 604-605.

2. Matter in footnotes not important for the present purpose.

3. See Curial v. Carbolic Smoke Ball Co., (1893) 1 QB 256 (CA) (Payment is not essential) (Shanks v. Sun Life Assurance Co. of India, 4 SLT 65).

44.35. As to stamp duty on instruments by way of coupon insurance, the relevant Stamp on coupons section in the English Act is section 1161. Where any. person issuing policies so carries on the business as to render it impracticable or inexpedient that the duty of six pence be charged upon the policies, the section empowers the Commissioners to enter into an agreement with such person. The agreement provides for the delivery of quarterly accounts of sums received as premium on such policies. Duty is charged on the aggregate (of the sums recovered), at the rate of five pounds per cent. as stamp duty. This section, and the Second Schedule, (Second Part) to the Act, make other detailed provisions, which need not be gone into.

1. Section 116, Stamp Act, 1891 (54 & 55 Vic., C. 39).

44.36. Policy.-

We shall now discuss the meaning of the expression "policy". The term "policy is borrowed from the Italian merchants who introduced insurance into England.1 The Italian "polizza"2, it is stated3, may be derived from the word "polythcha"-a tablet of several folds-used in late Latin for an account memorandum book. The expression "policy" may be used to describe any contract of insurance, however, informal4-5. A policy must be issued within a certain time after the receipt of premium.6-7

The definition of "policy" in the Indian Stamp Act8 is not very helpful for a consideration of the question which we have to discuss.

1. Chitty Contracts, (1961), Vol. 2, pp. 344, 345, paras. 803, 804 and f.n. 5.

2. The full word is "polizza d'assecurazione"; see Arnould Marine Insurance, (1961), Vol. I, p. 9.

3. Chitty Contracts, (1961), Vol. 2, p. 344, 345, paras. 803, 804 and f.n. 5.

4. Forsikring Saktiesed Skaber v. Attorney-General, 1925 AC 639 (642).

5. For detailed discussion, see Halsbury's, 3rd Edn., Vol. 22, p. 209, paras. 393, 395, "Meaning of Policy" and footnote 10.

6. Section 66, Indian Stamp Act, 1899.

7. Cf. section 100, Stamp Act, 1891 (54 & 55 Vic., C. 39).

8. Sections 2(19) and 2(19A), Indian Stamp Act, 1899.

44.37. English law.-

The definition of policy in the English Act of 1891 (as amended in 1959), relevant to the topic under discussion, may be quoted1:-

1. Section 91, Stamp Act, 1891 (54 & 55 Vict., C. 39); Monroe The Law of Stamp Duties, (1964), p. 229.

"Policies of Insurance"

"91. For the purposes of this Act the expression 'policy of insurance' includes every writing whereby any contract of insurance is made, or agreed to be made or is evidenced, and the expression "insurance" includes assurance."

44.38. Policy of life insurance has been thus defined in English Act of 1891 (as amended in 1959).

"98. Policies of Insurance except policies of sea insurance

(1) For the purposes of this Act the expression "policy of life insurance" means a policy of insurance upon any life or lives or upon any event or contingency relating to or depending on any life or lives except a policy of insurance for any payment1 agreed to be made upon the death of any person only from accident or violence or otherwise than from a natural cause.2

The stamp duty is thus prescribed in the Act of 1891 (as amended in 1959).

"99. The duty of six pence3 upon a policy of insurance (other than policy of 4 life insurance) may be denoted by an adhesive stamp which is to be cancelled by the person by whom the policy is first executed."

1. Omitted words were repealed by Finance Act, 1959, section 37, and Schedule VIII.

2. Omitted words were repealed by Finance Act, 1959, section 37, and Schedule VIII.

3. "Six pence" was substituted for "one penny" by the Finance Act, 1920, section 40(2); see also the Finance Act, 1959, section 30(1).

4. Omitted words were repealed by the Finance Act, 1959, section 37, and Schedule VIII.

44.39. Definition of policy of insurance against accident.-

The definition of "policy of insurance against accident" which was given in section 98(1) of the (English) Stamp Act, 1891 is useful. The definition has now been repealed by the Finance Act, 1959, which places all policies other than life insurance policies in one class. The definition, so far as is relevant, was as follows1:-

"the expression 'policy of insurance against accident' means a policy of insurance for any payment agreed to be made upon the death of any person only from accident or violence or otherwise than from a natural cause, or as compensation for personal injury, and includes any notice or advertisement in a newspaper or other publication which purports to insure the payment of money upon the death of or injury to the holder or bearer of the newspaper or publication containing the notice only from accident or violence or otherwise than from a natural cause2."

1. Halsbury's, 3rd Edn., Vol. 22, p. 229, footnote (o).

2. Stamp Act, 1891 (54 & 55 Vict., C. 39), section 98(1), before its amendment by the Finance Act, 1959.

44.40. Resemblance between life and accident insurance.-

There are, no doubt, some points of resemblance between life insurance and accident insurance. A policy of insurance against accidents, as usually drawn, is not a contract of indemnity .1 It is a contract to pay a certain fixed sum per week in case of injury, and a certain other fixed sum in case of death.2

1. Chitty Contracts, (1961), Vol. 2, paras. 856-857.

2. Chitty Contracts, (1961), Vol. 2, para. 857.

44.41. The position regarding indemnity in regard to accident has been thus stated1 by a writer on mercantile law:

"Accident Insurance-An accident insurance can be a contract of indemnity, but it can also be a contract for the payment of specified sum in the event of accidental death of the assured or of his losing, say an eye or a limb. This kind of accident insurance is similar to the valued policies which are common in mating insurance and in the insurance of art treasures against fire. Where, in the event of an accident, the insurers pays the sum named in the policy, he is not subrogated to the rights of the insured. Accordingly, the assured, or in the case of his death his personal representative, can claim damages against the person who has caused the death or the injury, for the insurance has been effected against this very contingency."

1. Slater Mercantile Law, (1956), pp. 280-281.

44.42. The distinction between "indemnity insurance" and "contingency insurance" is recognised in some decisions.1-2 The observations of Bramwell, J. in Bradburn's case, state the position accurately3:-

"A man pays the premiums upon these accident policies upon this kind of footing, namely, that his right to an indemnity in case of an accident shall be an equivalent for the mischief or injury that happens to him. He gets more, no doubt, if the mischief happens than all the premiums which he has paid would amount to; but he runs the chance that he will not get any thing at all; and therefore it is, I say, that he ought to have this sum in addition to the damages that he may have sustained at the hands of the defendants by reason of the accident itself; for otherwise he would be a loser by insuring against accidents in a case where the railway company was in the wrong. I am, therefore, clearly of opinion that the verdict stands at present for the right amount."

1. Cf. West Wake Price & Co. v. Ching, (1957) 1 WLR 45 (51).

2. As to "indemnity", see Miller, Gibb & Co. Ltd. (in re:), (1957) 1 WLR 703 708.

3. Bradburn v. Great Western Rail Co., 1874 LR 10 Exch 1: (1874-1880) AER Rep 195 (196) (per Bramwell, B.).