Report No. 21
(i) Interest at the time of loss ("as interest may appear").-The effect of section 6(1) is that an expectancy is insurable. The reason for this relaxation can be found in the exigencies of business. Modern business practice, it is stated, necessitates the taking out of insurance long before the goods become the property of the assured, and hence section 6(1) is complied with if the assured has an interest at the time of the loss. This concession saves the time which would otherwise lapse between the acquisition of interest and the taking out of the policy. For example, carriers of goods may take out policies "as interest may appear".
At the time of the insurance they may be carrying no goods, but the moment the goods are loaded, the policy comes into play. Similarly, a purchaser of a cargo of wheat may, under the agreement to sell, undertake the risk when the wheat is loaded on board. Now, the loading may take some days. As soon as such parcel of wheat is loaded, the risk passes to him, but not before. The law, however, enables him to insure the whole cargo so that he need not take insurance every time when a parcel is loaded.
(ii) Interest after loss.-It must, however, be noted that he cannot acquire an interest after a loss has occurred.1
(iii) Lost or not lost.-The proviso to section 6(1) makes a special provision whereby interest can be acquired even after the loss, provided that the assured had, at the time of effecting the insurance, no knowledge of the loss. See also rule 1 of the First Schedule to the English Act, as to "lost or not lost".
(iv) One result of the rule that there must be interest at the time of loss is, that if the ship-owner insures a ship for a certain period and sells the ship before that period expires, he cannot recover.
1. Except as provided by section 6(1), proviso, English Act-clause 10(1) proviso.