Report No. 21
[Section 5 of the English Act].
(i) The importance of the concept of insurable interest lies in this, that under section 4(2)(a) of the English Act, if the assured has no insurable interest, the contract is deemed to be a wagering contract.
(ii) The amplification in sub-section (2) is said to be based on the observations of Lawrence j.1 to the effect that "Interest does not necessarily imply a right to the whole or part of the thing, nor necessarily or exclusively that which may be the subject of privation To be interested in the preservation of a thing, is to be so circumstanced with respect to it as to have benefit from its existence, prejudice from its destruction".
(iii) Shareholders of a shipping company cannot be said to have an interest, because what section 5(2) requires is, not merely that a person may benefit by the safe arrival of the property, but also that he must stand in legal or equitable relation to the adventure, etc.2
Mortgagees, charterers and bailees of ships stand in such relationship. Similarly, trustees and beneficiaries in England.
(iv) What is required is an interest in the adventure and not in the ship. A person interested financially in the laying of cables in the Atlantic has no interest in the ship, but has an interest in the adventure.
(v) An agent to whom goods are despatched for sale of, commission can also insure, because loss of the goods would mean loss of the commission to him.3 Similarly, a person who is at a risk in the freight has an interest in the freight.
(vi) As to the time when the interest must exist, see section 6 of the English Act. As to contingent interests, etc., see section 7 and as to partial interest, see section 8 of the Act.
Departure from the English Act.-The English Act contains the words "or equitable". These have been omitted, because it would not be accurate to speak in India of "equitable" relations. An Explanation has, however, been added to deal specifically with the case of a beneficiary's interest in trust-property.
1. Lucena v. Crawfurd, (1906) 3 Bos & PNR 269 (302).
2. Lord Chorley Shipping Law, 3rd Edn., p. 275.
3. Thames and Mersey Marine Insurance Co. v. Gunford Shipping Co., 1911 AC 529.