2Outlines Agency Insurance Introduction Creation of Agency Duties of principal and agentTerminationInsuranceNature of a contract of insuranceInsurable interestsMaterial factsExemption clauses
3Definition Part X, CA 1950 S 5 Civil Law Act 1956 S 135 CA 1950 An “agent” is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the “principal”.
4Creation of Agency CAPACITY CREATION of Agency? S 137 CA As between the principal and third persons, any person may become an agent; but no person who is not of the age of majority and of sound mind can become an agent, so as to be responsible to his principal according to the provisions in that behalf herein contained.CREATION of Agency?(a) express and implied appointment(b) ratification(c) by necessity(d) by estoppels
5(a) Agency by express and implied appointment S 140 CA 1950An authority is said to be express when it is given by words spoken or written. An authority is said to be implied when it is to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the caseS 141(1) CA 1950An agent having an authority to do an act has authority to do every lawful thing which is necessary in order to do the act.S 141(2) CA 1950An agent having an authority to carry on a business has authority to do every lawful thing necessary for the purpose, or usually done in the course of conducting such business.
6agent who was duly appointed has exceed his authority; s 149 CA 1950 (b) By Ratificationagent who was duly appointed has exceed his authority; s 149 CA 1950Where acts are done by one person on behalf of another but without his knowledge or authority, he may elect to ratify or to disown the acts. If he ratifies them, the same effects will follow as if they had been performed by his authority.agent who has no authority but acted as if he has the authority; s 188 CA 1950A person untruly representing himself to be the authorized agent of another, and thereby inducing a third person to deal with him as such agent, is liable, if his alleged employer does not ratify his acts, to make compensation to the other in respect of any loss or damage which he has incurred by so dealing.
7Circumstances of ratification: Third party knew he was acted on behalf of his principal and not for himself. (Keighley (1901))Principal must really existed (Kelner 1866)Principal must have full k/ledge of all material facts:s. 151 CA No valid ratification can be made by a person whose knowledge of the facts of the case is materially defective.Principal must ratify the whole act or contract:s. 152 CA A person ratifying any unauthorized act done on his behalf ratifies the whole of the transaction of which the act formed a partRatification must not injure third party:s. 153 CA An act done by one person on behalf of another, without that other person’s authority, which, if done with authority, would have the effect of subjecting a third person to damages, or of terminating any right or interest of a third person, cannot, by ratification, be made to have that effect.Within reasonable time
8(c) Agency by necessity s. 142 CA 1950: an emergency to protect principal from loss.An agent has authority, in an emergency, to do all such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence, in his own case, under similar circumstances.How and Why?(a) Principal must be contacted (Springer)(b) to prevent loss(c) acted in good faith
9(d) Agency by estoppel (Liability of principal inducing belief that agent’s unauthorized acts were authorized)s. 190 CA 1950When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by those acts or obligations if he has by his words or conduct induced such third persons to believe that those acts and obligations were within the scope of the agent’s authority.ExampleA consigns goods to B for sale, and gives him instructions not to sell under a fixed price. C, being ignorant of B’s instructions, enters into a contract with B to buy the goods at a price lower than the reserved price. A is bound by the contract.
10Duties of principal and agent S 164 – 178 CA 1950S 164 CA 1950: Agent is bound according to principal direction. If acts otherwise, responsible for the lossS 177 CA 1950: criminal act, principal not liable expressly or impliedly.S 164 CA 1950: obey instruction. Agent acted acc to usage if no complete instructionS 166 CA 1950: to render proper accounts when requiredS 171 CA 1950: pay principal all sums received; & retain / deduct commission & remuneration– s 170 CA 1950S 167 CA 1950: communicate with principal; use all r/able diligence & discretion if x contact – s 142 CA 1950S 143 CA 1950: Not delegate his authority to oths
11Maxim: delagatus non potest delegare Exceptions: Principal approves to the delegationIt is presumed that the agent have power to delegateCustom & usage permits soNature of the agency requires another personNecessity for unforeseen emergencyAct done is purely clerical and not discretion
12Fiduciary Duties Remedy if happen X disclose confidential info X secret profitRemedy if happenS 168 CA 1950: VoidableIf an agent deals on his own account in the business of the agency, without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his own knowledge on the subject, the principal may repudiate the transaction, if the case shows either that any material fact has been dishonestly concealed from him by the agent, or that the dealings of the agent have been disadvantageous to him.S 169 CA 1950: claim secret profitIf an agent, without the knowledge of his principal, deals in the business of the agency on his own account instead of on account of his principal, the principal is entitled to claim from the agent any benefit which may have resulted to him from the transaction.Refuse to pay commissionAgency revoked without noticeSue 3rd party for damage / loss
13Duties of principal to his agent S 172 CA 1950: pay commission (loss or profit)In the absence of any special contract, payment for the performance of any act is not due to the agent until the completion of the act; but an agent may detain moneys received by him on account of goods sold, although the whole of the goods consigned to him for sale may not have been sold, or although the sale may not be actually complete.S 173 CA 1950: losses his right if performed his duty negligentlyAn agent who is guilty of misconduct in the business of the agency is not entitled to any remuneration in respect of that part of the business which he has misconducted.
14Right to indemnification : Recover commission & money paid (on behalf of principal) & all losses suffered by him.S. 175The employer of an agent is bound to indemnify him against the consequences of all lawful acts done by the agent in exercise of the authority conferred upon him.S.176 CA 1950Where one person employs another to do an act, and the agent does the act in good faith, the employer is liable to indemnify the agent against the consequences of that act, though it cause an injury to the rights of third persons.When?acted according to instruction & authturbulence while on duty
15Termination 2 ways: the act of the parties by operation of law by frustration
161. act of the parties S 154 - 163 CA 1950: Revocation by Principal: S 154 CA 1950An agency is terminated by the principal revoking his authority; or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated or declared a bankrupt or an insolvent.Revocation (notice) by Agent: s 159 CA 1950Reasonable notice must be given of such revocation or renunciation; otherwise the damage thereby resulting to the principal or the agent, as the case may be, must be made good to the one by the other.S 158 CA 1950 – premature termination:Loss his commissionExpensesDamagesS 154 CA 1950: termination by performance
172. by operation of law 3. by frustration S 154 – revokes Principal/Agent dies (s 154 CA 1950)Principal/Agent becomes insane (s 154)Principal bankruptAmendment of relevant law3. by frustrationUnlawful agency
19IntroductionInsurance Act 1996Common Law (S 5 Civil Law Act 1956)
20Definition of insurance contract: One person (Insurer) agrees to indemnify another person (the insured) against a loss which may arise on the occurrence of some event or to pay a certain definite sum of money on the occurrence of the particular event.
21Nature of InsurancePremium – the consideration paid to the insurer by the insured either as lump sum or periodically.Risk – is the loss which is being insured against, eg: theft, fire, accident etc.Policy – document issued by insurer (terms & conditions) when parties enter into a contract of insurance.
22S 4(1) IA 1996 – 2 classes: life business & general business Classifications:S 4(1) IA 1996 – 2 classes: life business & general business(a) life business, which in addition to all insurance business concerned with life policies shall include any type of insurance business carried on as incidental only to the life insurer’s business; and(b) general business, which means all insurance business which is not life business. (all insurance business example: marine, fire, accident, motor & aviation).
23Contract of indemnity – the insured entitled to be indemnified, i. e Contract of indemnity – the insured entitled to be indemnified, i.e. be compensated or recover actual loss.Indemnity – actual loss only, not making money.
24Elements of Insurance Contract 1. offer & acceptanceoffer – the insured fill the proposal formAcceptance : insurer agrees n satisfies material fact givenPremium & policy as agreed by the insurer
252. consideration 3. Intention Premium paid without fail. Insurer: ready to indemnify3. Intention
264. CapacityMinor 10 – >16 yrs may affect a life policy upon his own life.16 yr & below: writing consent from parent16 yr & above: as adult.S 153(1) IA 1996 – Capacity of minor to insure(1) Notwithstanding any law to the contrary, a minor who has attained the age of ten years but has not attained the age of sixteen years, with the consent in writing of his parent or guardian—(a) may effect a life policy upon his own life or upon another life in which he has an insurable interest; or(b) may assign the life policy on his own life.(2) A minor who has attained the age of sixteen years—(b) may assign the life policy on his own life, and is as competent in all respects to have and exercise the powers and privileges of a policy owner in relation to a life policy of which he is the owner as he would be if he had attained the age of majority.
275. certainty Risk very uncertain, ordinary contract= voidable Insurance contract? To protect risk.
28Cover note = actual policy S 2 IA 1996 Chop Eng Thye v MNI (1977): fire, claim after 1 year.S 2 IA 1996Policy – insurance policy and includes a cover note or a contract of insurance, whether or not embodied in or evidenced by an instrument in the form f an insurance policy & references to:Issuing policy (formal or not)A policy of the insurer (liability, transfer of liability etc)
29Borhanuddin v AIA (1987)Paid 1st month with proposal form, policy still not documentedHeld; insurer liable, payment was premium & policy will be sent.
30AgentWho? S 2 IA 1996 –a. solicits a proposal on behalf of the insurerb. offers to act on behalf of the insurer in negotiating a policyc. does any act on behalf of insurer (issuance, renewal or continuance)
31S 151(1) IA 1996 – knowledge of, and statement by insurance agent: shall be deemed to be the kledge of insurer.effect: insurer liable.
32Agent filling proposal form, inaccurate statement or misstatement?. Ong Eng Chai v China Insurance Co Ltd (1974): def (insurer) pleaded the policy void as contained untrue statement. Held: untrue statement avoid the contractChina Insurance v Ngah ah Kau (1972): plaintiff left it to the agent. Fact that he ever made a claim more that three yrs prior to the proposal. Held; UNTRUE statement is condition but subject to judge whether the question of material facts or not.
33S 151(3)(a) IA 1996 – no liability for insurer if collusion between agent and proposer S 151(3)(b) IA 1996 – insurer must take duty of care to inform , bring to the kledge (insured & public) if terminate his agent
34Insurable InterestsA person is said to have insurable interest if he will suffer loss in the event of property being destroy.Lucena v Craufurd (1806) – loss in term of financialChong Soo Sin v I&C Insurance (1992) selling of car based on ‘Sale or return’. Accident, whether still have insurable interest? Held: yes, still x transfer.
35S 152(1) IA 1996 – life insurance not affecting other person A life policy insuring the life of anyone other than the person effecting the insurance, or the life of a person mentioned in subsection (2), shall be void unless the person effecting the insurance has an insurable interest in that life at the time the insurance is effected and the policy moneys payable, or where the policy moneys are payable in instalments, the discounted value of all future instalments under the life policy, shall not exceed the amount of that insurable interest at the time the event resulting in payment of policy moneys occurs.S 152(2) IA 1996 – except:spouse, child under the age of majority.EmployeeA person wholly or partly depends on him.
36Ultimate Good Faithmaxim: Uberrimae fidei – ultimate good faith: contracting parties disclose to each other all info which would influence either’s party decision to enter contract (material fact)S 150(1) IA – the insured disclose:-he knows to be relevant to the decision of the insurer on whether to accept the risk or not and the rates to be applied;a reasonable person in the c/stances could be expected to know to be relevant.
37S 150(4) IA – the insurer cannot: (a) make a statement which is misleading, false or deceptive; (fraud or otherwise)(b) fraudulently conceal a material fact;(c) use sale brochure or sale illustration not authorised by the insurer (by agent)I million ringgit penalty
38Asia Hotel Sdn Bhd v Malayan Insurance (M) Sdn Bhd (1992) – insurer repudiate the contract if the insured refused to disclose.S 150(5) IA – if insurer fail to follow s 150(4) a –c, the insured can avoid the contract.No licensed insurer, insurance agent, licensed financial adviser or financial adviser’s representative, in order to induce a person to enter into or offer to enter into a contract of insurance with it or through him—shall make a statement which is misleading, false or deceptive, whether fraudulently or otherwise;shall fraudulently conceal a material fact; orin the case of an insurance agent, a licensed financial adviser or a financial adviser’s representative, use sales brochure or sales illustration not authorised by the licensed insurer.
39Fact must be materialS 150(1) IA – so material as the insurer will decide to accept the risk or not and the rates and terms to be applied.(1) Before a contract of insurance is entered into, a proposer shall disclose to the licensed insurer a matter that—(a) he knows to be relevant to the decision of the licensed insurer on whether to accept the risk or not and the rates and terms to be applied; or(b) a reasonable person in the circumstances could be expected to know to be relevant.
40Material factsS 147(5)AI – means a matter of fact which, if known by the insurer, would have led to its refusal to issue a life policy to the owner OR would have led it to impose terms less favourable to the policy owner than those imposed in the life policy.
41Abu Bakar v Oriental Fire (1974) – fire of premises where there were 4 grinding mills (x disclose). Held: proposer in particular c/stances did not know / expect as material fact. His failure to disclose shd x be regarded as breach (reasonable man test)
42S 150(2) IA – proposer not have duty to disclose: (a) diminishes the risk to the insurer(b) is of common k/ledge;(c) insurer knows or in the ordinary course of his business ought to know;(d) insurer has waived any requirement for disclosure
43S 147(1) IA – life insurer shall not dispute liability by reason only a mis-statement of age. 147(2) & (3) IA – may vary the sum insured by ; and the bonuses allotted to (if any).
44S 147(4) IA – insurer shall not dispute the validity of life insurance after 2 yrs Except: statement was material and was fraudulently made by the owner.
45Subrogation : Insurer sue third party who cause the loss Teo Kim Kien v Lai Sen (1980) – accident by third party (who service the car). Held: can claim.
46Exemption clause : Exempt the insurer from liability. Tan Keng Hong v Fatimah (1974) – death of forester (who was getting a free lift) when the lorry overturned. Exemption clause : x protection for death not employee.