The form and contends of an insurance policy will vary according as to whether it is issued by an insurance company or whether it is a Lloyd’s form of policy.
A. INSURANCE COMPANIES’ POLICIES
1. The form of the policy
There are no restrictions as to form which a policy issued by an insurance company may take. In practice, standard forms of policy are used, and these will vary from company to company.
In general, however, a policy of whatever kind may be regarded for convenience as divided into four parts:
1. The heading.
2. The body of the policy.
3. The back of the policy.
4. The docket.
1. The heading
The heading usually sets out the name of the insurers, the reference number of the policy, the period for which the policy is in force, the sum insured and the amount of the premium.
2. The body of the policy
In the body of the policy the actual contract between the parties is to be found. The following matters are usually dealt with:
a. Recitals, in which the fact that a proposal has been made or that the premium has been paid may be stated.
b. The details of the particular insurance, e g the name and address of the assured, the description of the subject-matter, the amount of insurance, and the period of insurance.
c. The event insured against.
d. The premium.
e. The undertaking of the insurers, and exceptions from liability.
f. Stipulations and conditions.
g Incorporation of other stipulations, including those indorsed on the policy, or contained in the proposal or other document.
The policy may expressed in general terms, and the details applicable to a particular insurance may be brought together in a schedule which is incorporated into the policy. In this case, the risk of omission or mistake in the parts which have to be filled in in writing is minimized.
3. The back of the policy
The back of the policy is a different document from the front of the policy, and nothing printed or written o the back of the policy forms part of the contract contained in the policy, unless incorporated by express reference or otherwise made part of the contract of insurance by the intention of the parties.
The matters dealt with on the back of the policy comprise:
a. The conditions of the policy.
b. Special terms agreed between the parties.
c. The consent of the insurers.
(a) The conditions of the policy
The contract between the parties is usually expressed in broad general terms in the body of the policy. The stipulations and conditions regulating in detail the rights and duties of the parties are in practice indorsed on the back of the policy and made part of the contract by express incorporation.
(b) Special terms agreed between the parties
Where such special terms are available in the ordinary course of business to any person who will pay for them, they are usually printed on a slip of paper and gummed or otherwise affixed to the policy.
If they are affixed to the face of the policy, they form part of the contract. But if they are affixed to the back of the policy, they do not form part of the contract, unless clearly so intended.
(c) The consent of the insurers
Where, by a condition of the policy the consent of the insurers is required, e g in the case of the policy being assigned, or the risk being increased, or another insurance being effected, such consent is usually required to be signified by a signed memorandum indorsed on the policy.
4. The docket
When a policy is folded, the outside portion occupies the place of a cover. Upon this there is frequently printed a docket, or summary of the policy, and there may be in addition various notices or warnings addressed to the assured. These may be made part of the policy by the clause of incorporation. Otherwise, they do not form part of the contract, so as to extend the obligations or diminish the rights of the assured, though they may be taken into account as expressing the meaning and intention of the insurers.
B. LLOYD’S POLICIES
1. The form of the policy
All Lloyd’s policies are in a standard form. A new form of Lloyd’s marine policy was introduced in 1982, the first major change since 1778.
2. The contents of the policy
A Lloyd’s must necessarily cover the same ground and deal with the same matters as any other policy. The only points calling for attention are:
a. The premium.
b. The liability of the underwriters.
c. Conditions.
(a) The premium
The policy usually contains an acknowledgment that the premium has been paid. The effect of this acknowledgment is that the assured is entitled to enforce the policy against the underwriter, although the premium has not been paid.
By usage, the underwriter looks for the premium to the broker and not to the assured. As between underwriter and broker the premium is treated as paid when the ‘slip’ is initialed, irrespective of the actual date of payment. Hence, the underwriter, in addition to being liable for any loss, cannot, as against the assured, deduct the unpaid premium from the amount for which he is liable under the policy; nor, if the assured becomes entitled to a return of premium, can the underwriter refuse to refund it on the ground that he has never received it from the broker. The assured, in his turn, is liable for the premium only to the broker, who may claim it although he has not actually paid the underwriter.
(b) The liability of the underwriters
Though each underwriter insurers the whole amount of the loss, his undertaking, as expressed in the policy, limits his liability to the amount of his subscription. The liability is a several liability, not a joint liability or a joint and several liability; and the policy is, in effect, not one contract, but a number of separate contracts, one with each underwriter, expressed on the same piece of paper. His liability, therefore, under his own contract is not affected by a judgment obtained against any other underwriters who may have signed the same policy, or increased by their insolvency.
It is, therefore, necessary, strictly speaking, to sue each underwriter individually, though in practice, the action is usually brought against the first underwriter who signed the policy for the amount of his subscription, the remaining underwriters undertaking to abide by the result. A formal undertaking is usually given by the solicitors acting on their behalf.
(c) Conditions
Lloyd’s policies generally contain exceptions; but a Lloyd’s policy may contain no express conditions. It is not an uncommon practice, especially in connection with the more modern classes of insurance business, to insert conditions to the same effect as those used in other policies, e g conditions relating to notice and proof of loss.
3. The incorporation of other policies
Where there is another in existence effected by the same assured with an insurance company, it is not unusual to insert in the Lloyd’s policy a clause referring to the company’s policy and giving the underwriters the benefit of its terms.
Where the clause provides that the Lloyd’s policy is to be subject to the same conditions as the company’s policy, such conditions are incorporated into the Lloyd’s policy, and a failure on the part of the assured to comply with them has the same consequences as in the case of the company’s policy. Thus, where the company’s policy contains conditions providing for notice to be given of the cesser of any insurance previously effected, and for the avoidance for cancellation of the policy in the event of such notice not being duly given, a failure to give notice to the underwriters of the cesser of the company’s policy relieves them from liability.
In addition to incorporating its conditions, the clause may contain a statement that the rate of premium, or the interest insured, is to be the same as in the company’s policy. This statement is to be construed as a condition precedent to the validity of the Lloyd’s policy, since it is intended for the protection of the underwriters. It is usually introduced by the word ‘warranted’, though this is immaterial since it is equally a condition precedent if the word is omitted. Where, therefore, it appears that the rate of premium, or the interest insured, is different in the two policies, the condition is broken, and the Lloyd’s policy is avoided. Similarly, where the Lloyd’s policy contains a reference to the sum insured by the company’s policy, the accuracy of the reference is also a condition precedent, and a mis-statement of the sum so insured, therefore, discharges the underwriters from liability.
The Lloyd’s policy may also contain a clause to the effect that the underwriters are to follow the settlements of the company or to pay the same percentage as may be settled upon the company’s policy. Under this clause, which is, strictly speaking, a condition subsequent, of the policy, the assured cannot recover on the Lloyd’s policy unless the liability of the company upon its policy has been established, and the amount of such liability ascertained. If, therefore, the assured is precluded by any condition of the company’s policy from enforcing his claim under it, the condition comes into operation and he cannot recover under the Lloyd’s policy either.
A further condition may provide that no payment is to be made until all other policies are exhausted, which has the effect of making the Lloyd’s policy an excess insurance only.