LML4805
Assignment 1
Semester 2 2023
, QUESTION 1 (2 answers provided)
Some commentators argue that good faith and insurable interest should
not be regarded as essential requirements of an insurance contract due to
the following reasons:
1. Practicality: The requirement of good faith can be difficult to define
and prove, making it subjective and open to interpretation. This can
lead to uncertainty and disputes between the parties involved in the
insurance contract. Similarly, determining insurable interest can be
complex and may restrict the ability of individuals or entities to
obtain insurance coverage for legitimate risks.
2. Modern insurance practices: Over the years, the insurance industry
has evolved, and new types of insurance policies have been
introduced that may not necessarily require a strict adherence to
the concept of insurable interest. For example, in certain types of
liability insurance, the insured may not have a direct insurable
interest in the property or person being insured.
3. Legal reforms: South African law recognizes that the requirement of
insurable interest has been relaxed in some cases. For instance, in
the case of marine insurance, the South African Marine Insurance
Act of 1941 specifies that insurable interest can exist even if the
insured does not have a direct interest in the subject matter of the
insurance. This shows that there is flexibility and willingness to
depart from the traditional concept of insurable interest.
4. Consumer protection: Requiring good faith and insurable interest as
essential elements of an insurance contract may lead to a lack of
access to insurance for certain individuals or entities, particularly
those who are considered high-risk or vulnerable. Not having
insurance coverage can have severe financial consequences and
limit access to necessary services.
The South African courts have taken a pragmatic approach regarding the
requirement of insurable interest. In the case of South African Eagle
Insurance Co Ltd v Bfn Board & Packaging (Pty) Ltd 1994 (3) SA 262 (E),
the court held that insurable interest is not an essential requirement of a
contract of indemnity. The court recognized that, in
Assignment 1
Semester 2 2023
, QUESTION 1 (2 answers provided)
Some commentators argue that good faith and insurable interest should
not be regarded as essential requirements of an insurance contract due to
the following reasons:
1. Practicality: The requirement of good faith can be difficult to define
and prove, making it subjective and open to interpretation. This can
lead to uncertainty and disputes between the parties involved in the
insurance contract. Similarly, determining insurable interest can be
complex and may restrict the ability of individuals or entities to
obtain insurance coverage for legitimate risks.
2. Modern insurance practices: Over the years, the insurance industry
has evolved, and new types of insurance policies have been
introduced that may not necessarily require a strict adherence to
the concept of insurable interest. For example, in certain types of
liability insurance, the insured may not have a direct insurable
interest in the property or person being insured.
3. Legal reforms: South African law recognizes that the requirement of
insurable interest has been relaxed in some cases. For instance, in
the case of marine insurance, the South African Marine Insurance
Act of 1941 specifies that insurable interest can exist even if the
insured does not have a direct interest in the subject matter of the
insurance. This shows that there is flexibility and willingness to
depart from the traditional concept of insurable interest.
4. Consumer protection: Requiring good faith and insurable interest as
essential elements of an insurance contract may lead to a lack of
access to insurance for certain individuals or entities, particularly
those who are considered high-risk or vulnerable. Not having
insurance coverage can have severe financial consequences and
limit access to necessary services.
The South African courts have taken a pragmatic approach regarding the
requirement of insurable interest. In the case of South African Eagle
Insurance Co Ltd v Bfn Board & Packaging (Pty) Ltd 1994 (3) SA 262 (E),
the court held that insurable interest is not an essential requirement of a
contract of indemnity. The court recognized that, in
