Question

1. What is the insurance significance of the incoterms? Does it have anything to do with the insurable interest doctrine?
2. Say that you bought a life insurance policy against the early death of your neighbor down the street. Then the neighbor dies. Will the insured be allowed to collect on the policy?
3. Now let’s change the scenario. You have a manufacturing business and you employ salespersons. Your business would be in major trouble if anything were to happen to your star salesperson. Your revenue would take a major hit, so to protect against this peril, you decide to buy a life insurance policy against the early death of your star salesperson. Then the salesperson dies. Will the insured be allowed to collect on the policy?
4. Does having insurance against a given peril mean that you are “protected” against that peril? Please explain what you mean by protected.
5. Imagine that you have one house in a neighborhood of 1,000 essentially identical houses. Please explain why the fire risk to your house is higher in your hands than it would be in the hands of the Really Local Insurance Company that had written policies on all 1,000 houses.
6. Now let’s change the scenario slightly. The Really Local Insurance Company now faces competition from State-Wide Insurance Company that also insures 1,000 essentially identical houses, but those houses are located all over the state. Which insurer has less risk? Why do you say so?

Answer 1

Solution-

Insurance Significance of the incoterms

Its the responsibility agreements between supplier and customer for loss or damage of any goods. Therefore, The seller is responsible for loss or damage until the goods "pass the ship's rail" .

Incoterms cover various practical elements of a sale contract such as the primary obligations of the seller and the buyer; the responsibilities of each; time of delivery and the transfer of risk

Insurance, under INCOTERMS definition, would attach once the goods "pass the ship's rail". In practice most insurance companies use the date on which the On Board bill of lading is issued .

Does it have anything to do with the insurable interest doctrine?

Insurable interest is an essential requirement for issuing an insurance policy that makes the entity or event legal, valid and protected against intentionally harmful acts. People not subject to financial loss do not have an insurable interest.

Therefore, in the case , any loss happens in case of damages of good, supplier can claim the damages. Hence , Insurable interest doctrine principle shall apply in this case.

Case 1: Say that you bought a life insurance policy against the early death of your neighbor down the street. Then the neighbor dies. Will the insured be allowed to collect on the policy?

Comments : You can take out a life insurance policy on someone else as long as you have insurable interest and their signature on the policy.

Not only do you need to prove insurable interest to buy life insurance on someone, you also need their consent. It would be nearly impossible to buy life insurance on someone without them knowing because most insurance companies will require a medical exam from the insured person. ... Consent Forms.

Case 2. You have a manufacturing business and you employ salespersons. Your business would be in major trouble if anything were to happen to your star salesperson. Your revenue would take a major hit, so to protect against this peril, you decide to buy a life insurance policy against the early death of your star salesperson. Then the salesperson dies. Will the insured be allowed to collect on the policy?

Comments : Doctrines of Insurance and their Legal Implications Insurance is based on two basic elements: risk transference and the law of large numbers. Risk:-In a contract of insurance, the insurer undertakes to protect the insured from a specified loss and the insurer receives a premium for running the risk of such loss.

However ,The common law requirement of insurable interest is simply that it is an essential element of a contract of insurance that “there shall be a subject in which the insured has an interest”.

2 This contrasts with English law where there is no common law rule prohibiting contracts of insurance made without interest.

In this scenerio, the claimant can take general insurance to the goods and building or revenue loss to which he has direct interet. The life insurance policy of the sales person for his business loss does not qualify the principle of "insurable interest doctrine".

-Peril means exposure to the risk of injury, damage or loss. ... The cause of a risk can be fire, accident, theft, forgery, earthquake, flood or illness. Perils insured against refers to the kinds of risk against which the insurance is granted. Yes , Insured is protected against a given peril for the loss or damages like fire, accident , floods,etc.

Protected against any perils means any physical loss or damages to the property shall be covered for claim purposes under insurance policy.

Scenerio 1. - Imagine that you have one house in a neighborhood of 1,000 essentially identical houses. Please explain why the fire risk to your house is higher in your hands than it would be in the hands of the Really Local Insurance Company that had written policies on all 1,000 houses.

Comments - the ‘insurer’ is the one calculating risks, providing insurance policies, and paying out claims. The ‘insured,’ on the other hand, is the person (or people) covered under the insurance policy. the insurer in the case is "Really Local Insurance Company".

And insured is person who is buying insurance policy for the cover of loss of property due to fire.

Therefore, the risk of loss is acquired by the insurance company at the time seeling policy.

they access all the technical as well as future possibilities of loss through professional. There fore , Insurer keeps all the risk associated with the policies whethe its for all household or one single household.

Scenerio 2- The Really Local Insurance Company now faces competition from State-Wide Insurance Company that also insures 1,000 essentially identical houses, but those houses are located all over the state. Which insurer has less risk? Why do you say so?

Comments - The risk assesment may differ according to geographical factors but in the case the one insurer is selling policies statewide and other is selling policy in on area for 1000 households. The risk possibility in case of state wide case may be higher or lesser for reality insurance company due to its technical evaluation.