Section 2 [1] Insurance Act, provides that a broker is an intermediary concerned with the pacing of the insurance business with the insurer or re-insurer for or in expectation of payment by way of brokerage, commission, fee, allowance, return or otherwise for or on behalf of an insurer, policy holder or proposer for the insurance or Re-insurance. A broker is a person who promises to place insurance business with the most competent insurer or re-insurer. Broking I insurance has a long history traceable to the Lloyds of London Association.
Insurance Agents
Section 2[1] of the Insurance Act, defines an agent as a person who being a salaried employee of an insurer who in consideration of a commission solicits or procurers insurance business for an insurer or broker.
An insurance agent commits both parties to the transaction. At common law, an insurance agent is the agent of the insured, if the proposer engages him to complete the proposal form. This is justified on the doctrine of non-disclosure which assumes that the proposer is in control of the material fats affecting the subject matter. Consequently any incorrect statements affect th4e proposer adversely.
However in cases of active fraud, the agent is deemed to be the agent for the insurance company.

  • Hughes Vs Liverpool Victoria Legal Friendly Society[ 1916] 2 KB 482
  • Harse Vs Pearl Life Assurance Co. Ltd [1904] 1 KB 558

Are premiums recoverable where there is no insurable interest?

In the first case the premiums were recoverable. in the second case both parties were not aware or did not know whether there was an insurable interest in “ pari delicto’

Harse Vs Pearl Life Assurance Co. Ltd [1904] 1 KB 558
Where the policy is illegal, the premium cannot be recovered if the insured is in pari delicto with the insurers. The plaintiff was induced to insure his mother’s life by the insurer’s agent’s innocent misrepresentation that the policy would be a valid one. The policy was illegal under the Life Assurance Act 1774, Sec 1since the plaintiff had no insurable interest. The plaintiff sought to recover the premium which he had paid. It was held by the Court of Appeal, that the premium was not recoverable because the parties were in pari delicto. Moreover it was found that there was no mis-statement of fact nor fraud on the part of the agent. That there was non greater impropriety on the part of the agent than there was on the part of the plaintiff.

Under the provision of the Insurance Act 1881 of England. Insurance Agents are deemed top be agents of the Insurer, and in the event of fraud, the insurer is liable.

O’Conner Vs B.D.B Kirby and Co and Another
[1971] 2 ALL ER 1415.

The proposer who owned a motor vehicle took out an insurance policy through the defendant insurance broker. He supplied the necessary information and the broker completed the proposer form. In response to one question, the proposer indicated that he had no garage and that the motor vehicle would be parked by the side of the road. The broker indicated on the proposer form that the motor vehicle would be kept in a garage.
The proposer signed the proposer form without detecting the mistake and a policy was subsequently issued. The insured lodged a claim and the mistake was discovered. The insurer repudiated liability whereupon the insured sued the broker in damages for the loss suffered on the ground that the broker had breached his contractual duty to complete the proposal form correctly.
Held: The broker was not liable in that, first, it is the duty of the proposer for insurance to make sure that the information contained in the proposal form is accurate and should not or ought not to sign it if it is inaccurate. As it was the insured’s duty to confirm the contents of the form, the effective failure of the loss is his failure to do so.

Davis L.J. Said at 1421

It was the duty of the insured to read this form. It was his application, he signed it and if he was so caress as not to read it properly, then in my opinion, he has himself to blame

however under section 81[2] of the Insurance Act, where an agent or servant of an insurer writes or fills in a proposal form for a policy of insurance with an insurer, a policy issued in pursuance of the proposal shall not be avoided by reason only of an incorrect or untrue statement contained in the particulars so written or filled in unless the incorrect or untrue statement was in fact made by the proposer to the agent or servant for the purpose of the proposal and the burden of proving that the statement was so made shall lie upon the insurer.


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