Insurance as Peculiar Specie of the Law of Contract
CHAPTER ONE
OBJECTIVES OF THE STUDY
As Insurance is an intricate economic and social device for handling of risks to life and property. This work seeks to:-
- To make seemingly difficult and intricate Insurance terminologies easy and understandable so that people can correctly appreciate what insurance is all about, use and apply them in their daily life experience.
- To enlighten the general public about the area of Insurance which though seems insignificant yet is the basis of the Insurance Contract.
- To explain the basic distinction between the Insurance Contract and the law of Contract by elaborating on the basic principles of Insurance Law which include indemnity, subrogation,
- To increase the level of education of insurance education. Hence it analysis the fundamental and basic principles that Insurance Contract deals with.
- To enlighten people about the importance of having Insurance in our ever growing dynamic world.
CHAPTER TWO
INSURANCE LAW AND THE GENERAL LAW OF CONTRACT.
INTRODUCTION
Insurance is an intricate and social device for the handling of risks to life and property. It is social in nature because it represents the cooperation of various individual for mutual benefit by combining together to reduce the consequence of similar risks: many people pay premium to bear out or indemnify the unfortunate few for the losses that may occur.
To combat the risks, Insurance Law make statutory provision to regulate the operation of Insurance business. In reality, every human being is faced with risks personal or otherwise and the possibility of risks happening for many years to come. As individual has risks staring on his face, so economic enterprise faces business risk. Risks are diverse in nature. It is not all risks that are insurable. Some risks involve the physical destruction of properties by fire like Necom House Anambra Broadcast House, or Cocoa House Motor Vehicle became total loss by accident and others involve consequential risks or indirect damage, Risks are thus classified into two2, pure or static risks and speculative or dynamic Risks. Pure risks involve physical loss or damage to or destruction of goods; it may be by fire, theft or any other peril and loss of lives by death.
Such risks can be calculated mathematically and therefore insurable; speculative risks involve risks transition in nature, sometimes incidental to or consequential upon the pure risks. The profits on account of trade dispute or depression changes in fashion or new product, political risks that can neither be neither foreseen nor determined. Such risks are not insurable as they cannot be accurately determined social and economic change open up new areas in which insurer are called upon to provide insurance coverage. Apart from natural risk to live, that is death coming as a necessary end, the risks to life from coup, kidnapping and political assassination have become real and economic so also are the wave of armed robbery and terrorism to property like rampant car theft to motor insurance policy holder. This problem of port congestion and piracy constitutes new threat to marine insurance, hijack of plane. These areas should be under insurance coverage for economic survival. It has thus become a device to rescue the individual and business from ruination, and it introducing security into business and as a way of capitulating future care.
DEFINITION OF INSURANCE
Since the Insurance Law do not provide a definition, it is not easy to define but describe what is insurance. Insurance is a social institution as well as an economic device4. A good definition must not be based exclusively on legal requirement but combination of both legal and functional approaches. The economists see Insurance as an economic device for the protection of risks in business5. The lawyer conceives Insurance as a legal contract to give protection to people.
CHAPTER THREE
FORMATION OF INSURANCE CONTRACT
INTRODUCTION
Insurance Contract are generally governed by the general Law of Contract. Like other Commercial Contracts, there is no particular form required, but in practise, the contact is always in a standard form. The Contract of Insurance may not be in any particular form as long as the contract can be proved. An oral contract is legally binding.
However, entering into contractual relations and obligations are generally phenomena in our society, from time immemorial, contractual transactions had been entered into by our people to the extent that such contractual relations have form part of our customary legal system. The indigenous contracts are still common in the country and they have played important roles in the life of many Nigerians, in particular, in the rural areas. However, with the introduction of the English legal system, the rapid economic growth and internalisation of contractual, the indigenous legal system has been relegated to the background in favour of modern contractual concepts consequently to meet international standard. The Law of Contract is now concern with the modern Law of Contract. Thus consist of the Common Law, The Doctrines of Equity, Applicable English Statutes, the Nigerian Legislation as contained in Law Reform (contract) Law,1973, Contract Law1959, Partnership Law,1959, and the Sales of Goods Law. The Nigerian court decision have contributed immensely to the richness of the Nigerian Weekly Law Reports from 1985 to date and other law reports.
In Insurance transaction, a Contract of Insurance is one of utmost good faith, “uberima fide‟. The insurer and the insured must be ready and willing to engage voluntarily in such a transaction. The court cannot foist on a party by a coercive order to enter into a contractual transaction more especially that of insurance which also follows the normal characteristic of ordinary contract54. the ingredient as to a contract and what constitutes a valid contract was given judicial pronouncement in Orient Bank (nig) plc .V. Bilante International ltd55 where Tobi J.C.A held that a contract is an agreement between two or more parties which create reciprocal legal obligation to do or not to do a particular thing. For a valid contract to be formed there must be mutuality of purpose and intention, the two or more minds must meet at the same point, events or incidents i.e. they must be saying the same thing at the same time.
CHAPTER FOUR
DISTINCTIVE FEATURES OF INSURANCE CONTRACT
INTRODUCTION
In the world at large people find it very difficult to go through their Insurance Policies in order to understand and note the terms and conditions of the Insurance well in advance of a claim. The result is that when a issue arises and it is found that the particular loss is not covered by the terms of the Insurance Contract, there is always the tendency to blame it all on the Insurance company. There might of course be some „black sheep‟ amongst the insurers, but a lot of this unpleasantness is due to either a lack of understanding of the terms of an insurance contracts. Generally, the aims of this chapter are to discuss the basic features of an Insurance Contract for the benefit of the parties who might likely take part in an insurance transaction.
BASIC PRINCIPLES OF AN INSURANCE CONTRACT
We have seen that insurance contract in addition to being subject to the general rules of law relating to contracts generally, they are also subject to those special rules of law applicable to insurance transactions. Insurance is a contract between two or more person enforceable at law with a number of principles regulating it as a contract. It is governed by the general rules of law regulating all contracts such as:
- Intention by the parties to create a legally binding obligations
- Offer and acceptance
- Furnishing of a valuable consideration by one party for the promise of the other
CHAPTER FIVE
CONCLUSION AND RECOMMENDATION
CONCLUSION
It is trite that whenever you open a discussion with an average Nigeria on the issue of Insurance, you would be amazed at the level of ignorance exhibited on the subject matter. The average does heap on himself the burden he should not ordinarily, by refusing to subscribe to Insurance noting that in a situation of loss or misfortune, such an individual is compelled to shoulder the burden but which he sometimes transfer to his relation.
This work is aimed at educating the public on what Insurance is all about, as to distinguish it from an Ordinary Contract and also to shed more light on the insured‟s interest known as “Insurable Interest”. Insurance is however not about death or misfortune, it is about the creation and perfection of wealth. The Practise of Insurance can help create wealth for the individual through provision of financial assistance for setting up of business either through direct loan, polices or target saving plan.
In conclusion, having dealt extensively with the basic fundamental principles that enhance Insurance Contracts under the Insurance Law, it is my belief that this work will be a valuable assistance to a proposer who desire to take an insurance policy by observing the rules of the insurance business.
Similarly, the careful explanation of the various Fundamental Principles of an Insurance Contract has shown its difference between an Insurance Contract and that of a General Contract.
Also, for any Insurance Contract to be enforceable, it must possess all the Basic Principles of Insurance. Moreover, Insurance interest is the backbone of an Insurance Contract, it distinguishes a genuine transaction from Gambling. The interest does not necessarily refer to ownership, possession or any legal or equitable interest but is merely descriptive of the pecuniary interest of the insured in the subject matter of the Contract.
RECOMMENDATION
Though some statute have made effort to help the assured and the insurer to play fair game in Insurance Contract, particularly the Marine Insurance Contract Act 1961, the Insurance Decree of 1997 and the recent Insurance Act of 2003. In addition to the provision of section 58(2) of the Insurance Act 2003 on the declaration clause which is normally the basis of Insurance Contract, the adoption of the British Insurance Association of England which provides that
The declaration should be strictly completed according to the proposer‟s knowledge and belief.
That the declaration be displayed by:
- Drawing the attention of the proposer to the consequences of failure to disclose all material facts
- Warning that the proposer should disclose all facts and materials considered being in doubt.
That the insurer should avoid question requiring expert or value knowledge beyond which the proposer could reasonably be expected to posses or obtain.
Sections 57 &58 of the Insurance Act 2003 generally will go a long way in protecting the insuring public and at the same time enhance a fair contract between the insurer and the insured if strictly adhered to by the parties to an Insurance Contract.
Similarly, before any Insurance Contract is being entered into, the insured must be aware of all the basic and fundamental principles associated with an Insurance Contract. This must be done in other to remove the possibilities of any doubt in the insured mind of mixing an Insurance Contract with that of a General Law of Contract.
Finally, a robust information technology and data collecting and processing system will be of utmost importance to both the insured and the insurer as this will enable the insurer organise an elaborate and educative forum which can help to educate and inform the proposed insured on the basic and fundamental principles associated with an Insurance Contract so as to help the insured distinguish between an Insurance Contract and that of a General Contract.
REFERENCES
- Olusegun Yerokun, Insurance Law in Nigeria, (7th ed. Nigeria revenue projects Publications, Nigeria 1992).
- Irukwu J.O, Insurance Law and practise in Nigeria, Ibadan”, the caption press (West African) limited Modern Practise 1968, vol.28 insurance 1 to 301. S west publishing co.
- Hardy Ivamy E.R, General Principle of Insurance Law (6th ed. London Dublin and Edinburgh Press, Butter Worths 1993).
- Funmi Adeyemi, Nigeria Insurance Law,(4th ed. Dalson Publication Limited.Nigeria,1992).
- Andrew Iwobi, Essential Trusts (1st ed.Cavendish Publishing Limited.Nigeria,1997)
- Olusegun Yerokun The Law of Contract (2th ed. Folarin Nig. Company. Lagos 1999)