UNIVERSITY OF BOTSWANA

DEPATMENT OF LAW

LAW 340: INSURANCE AND AGENCY LAW

SEMESTER 2 2010/11
(Elective course, 3 credits, 3 hours per week)

Lecturer: JONAS
Office: Block 230 Room 123, ext 2332
Email: obonye.jonas@mopipi.ub.bw

AIMS AND OBJECTIVES OF THE COURSE

i. To expose students to the theories, principles, concepts and practice of insu.
ii. rance and agency law in Botswana
iii. To cultivate a critical evaluation of theories, policies, principles, practices and
rules in insurance and agency law in Botswana.
iv. To stimulate debate on law reform.

COURSE REQUIREMENTS

The course carries three credits and meets three hours in a week on Mondays,
Wednesdays and Fridays. Class discussions showing rigorous thought and understanding
of insurance and agency law will be an integral part of the learning process.

ASSESSMENT
The course assessment is based on two pieces of continuous assessment work and a two
hour final examination paper.

OFFICE HOURS
My office hours will be Mondays and Wednesdays from 1000 to 1100 hours.

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AREAS TO BE COVERED

PART 1: INSURANCE LAW

1. INTRODUCTION
a) The need for defining insurance
b) History and development of the contract of insurance
c) Parties to the insurance contract
d) Categories of Insurance
e) Introducing key insurance doctrines

2. REGULATION OF THE INSURANCE INDUSTRY IN BOTSWANA

3. THE INSURANCE CONTARCT

a) Nature of insurance contract
b) Formation and renewal
c) The Premium
d) Illegal Policies

4. INSURABLE INTEREST
a) Nature of the interest
b) Where insurable interest may arise
c) Insurable interest in non- indemnity insurance
d) Insurable interest in indemnity insurance

5. THE DOCTRINE OF DISCLOSURE

a) the uberrima fides concept
b) origin of the concept
c) facts which need to be disclosed (affecting the physical or moral hazard)
d) the test of materiality of non- disclosure
e) facts which need not be disclosed

6. THE DOCTINE OF SUBROGATION

a) definition and scope of application
b) prerequisites to the rights of subrogation
c) situation where subrogation arises
d) circumstances where there is no right of subrogation
e) procedure for enforcing subrogation rights

7. REGULATION OF INSURANCE INTERMEDIARIES

8. EMERGING ISSUES IN INSURANCE LAW

(a) HIV/AIDS and Insurance Law
(b) E-Commerce and Insurance Law
(c) Biotechnology and Insurance Law

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PART 2: AGENCY

1. THE NATURE OF AGENCY

2. TYPES OF AGENTS

3. THE AUTHORITY OF AGENCY

4. DUTIES OF THE AGENT AND RIGHTS OF THE PRINCIPAL

5. DUTIES OF THE PRINCIPAL AND RIGHTS OF THE AGENT

6. TERMINATION OF AGENCY

READING LIST

Birds, J Modern Insurance Law, Sixth Edition (. Sweet and Maxwell

London), 2004.
Gordon & Gertz, The South African Law of Insurance, 4th Edition, (Juta aabd Co.
Johanessburg), 1993
Kiggundu, J Mercantile Law in Botswana (Juta & Co, Cape Town) 1998.
Reinecke & Van der Merwe, General Principles of Insurance (Butterworth, Durban)
1989.

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ANNOTATED READING LIST

1. INTRODUCTION

Definition
In Medical Defence Union v Department of Trade and Industry ( 1979) All ER 421;
(1980) ch 82.

In Department of Trade and Industry v St Christopher Motors Association 1974) 1 All

ER 395

See also Prudential Insurance Co Ltd v Inland Revenue Communication (1904) 2 KB

658 and Gould v Curtie (1913) 3 KB 84.

Categories of Insurance
Classification depends on the purpose of classifying.

2. REGULATION OF THE INSURANCE INDUSTRY IN BOTSWANA

Insurance Industry Act (Cap 46:01)

Non-Banking Financial Regulatory Authority Act (Cap. 46:08)
Pension and Provident Funds (Chapter 27:03)

3. THE INSURANCE CONTRACT

The Premium
Definition
Lewis v Norwich Union Fire Insurance
Busteed v West of England fire Insurance Company

Days of Grace
Statutory days of grace
section 97 OF THE Insurance Industry Act (Non- forfeiture of life policies in certain
cases of non-payment of premiums)
Return of the premium
section 84 of the English Marine Insurance Act of 1906
rn of premium
See Hughes v Liverpool Victoria

Illegal Policies
Harse v Pearl Life Insurance
Dowker v Canada Life Insurance Company (1863) 24 QB 591
The Life Assurance Act of 1774

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4. INSURABLE INTEREST

Definition
Little John v Norwich Fire Insurance 1905 TH 374 at p 380 per Wessel J.
Macaura v Northern Assurance Co. (1925)AC 619.
Lynco Plant Hire & Sales v UV Bk 2002 (5) SA 85 (T)
Brightside Enterprises (Pvt) Ltd v Zimnat Insurance Co. Ltd 2003 (1) SA 318 (ZH)

1745 the Marine Insurance Act and 1774 the Life Assurance Act
Insurable Interest in Life Insurance
Insurance Industry Act (Cap 46:01)
Dalby v India and London Life Co.(1854) 15 QB 365.
English Life Assurance Act, 1774.
Harse v Pearl Life Assurance (1904) 1 KB 558.
Hughes v Liverpool Victoria (1904) 2 KB 482.
Griffiths v Fleming (1909) 1 KB 805.
N.B Every person has an insurable interest in his /her life and also in the life of spouse.

Under English Law one should prove both a financial interest and the loss of a legal right
on the death of the life insured
Thus a mere moral right / obligation will not suffice.
See Harse V Pearl Life Insurance Co. (1)
As regards the time when insurable interest in life insurance should be established, the
locus classicus is the case of Dalby v The India and London Life Assurance Company
139 ER 465 (2)
see Hebron v West 122 E.R 218 (3)
See Griffiths v Fleming [1909]1 KB 805.(4)
Section 66 of the Insurance Industry Act confirms this legal position.
Insurable Interest in Property
This field has a lot of English law influence
Lucena v Crawford 1826 127 ER 630.
See section 83 of the Fires Prevention (Metropolis) Act, 1774.( England).
Lucena v Craufurd (1806) 127 ER 630.
Macaura v Northern Assurance (1925) AC 619.
Little John v Norwich Union Fire Insuarance1905 TH 374
Phillips v General Accident Insurance Co.(SA) Ltd 1983 (4) 652 (W)
Where insurable interest may arise:
Lien
Malcher and Malcomess v Kingwilliamstown (1883) 3 EDC 271at 282.
Moran, Galloway & Co v Uzielli (1905) 2 KB 555.

Lease
Green v Heyman 1963 (3) SA 360- A lessee has an insurable interest in property leased
where he is liable to repair the plate glass windows.

Possession

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Van Achterberg v Walters 1950 (3) SA 390 (T). - Where a person who is in possession of
another’s property is obliged to repair that property should it be damaged , that person
has an insurable interest in the property.
S A Railways & Harbours v Anderson 1917 CPD

Ownership
Petreas & Com. v London Guarantee and Accident Co. 1925 AD 371 at 375.

Custodian
See Malcher (supra)

Purchaser and Seller

Van de Westhuizen v Santam VB 1975 (1) SA 236 (E).

5. THE DOCTRINE OF DISCLOSURE

Introduction
Carter v Boehm (1776) Burr 1905.

Scope of Duty of Disclosure

The duty cannot be avoided by simply failing to answer questions

See Roberts v Avon Insurance Co. (1956) 2 LLR 240.

It is clear from that where a question has been asked a failure to answer would be
construed non- disclosure entitling the insurer to avoid the policy.

The test of materiality

A fact will be deemed material if it has a bearing on either the physical hazard (state of
the property insured) or the moral hazard (includes previous losses, previous convictions,
previous refusals to insure and any other factor which indicates that in the ordinary
course of events the insured is a person whom the insurer would not ordinarily engage in
contractual relations without further inquiries)

The leading case on the test in English law is Lambert v CIS (1975) 2 LLR 485.
In this case the judges considered 4 possible tests to determine the materiality of the of
the non- disclosed facts namely

i) the test of the reasonable insured

ii) the test of the reasonable insurer
iii) the test of the actual insurer
iv) the test of reasonable man
The final test adopted was that of the reasonable and prudent insurer

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Rules governing disclosure
Insurer entiltled to be informed of all the facts known to the insured
Fine v General Accident, Fire and Life Assurance 1915 AD 213
Bodemer v American Insurance Company 1960 (4) SA 428
Southern Life Association Vv Johnson 1993 (1) SA 203 (E)
Munns & Anor v Santam Ltyd 2000 (4) SA 359 (D)

Facts are material to the risk when a reasonable person consider such facts to be
reasonably relative to the risk
Mutual and Federal Insurance v Oudshoorn Municipality 1985 (1) SA 419
Anderson Shipping v Guardian National Insurance 1987 (3) SA 506
Potocnik v Mutual & Federal Insurance Co. Ltd 2006 (6) SA 559 (SE)
A warranty in insurance transactions must be strictly complied with whether material
to the risk or not
Heslop v Gen Accident, Fire and LifeAssurance Corp Ltd 1962 (3) SA 511 (A).
Insured not under a duty to disclose material facts which the insurer knows or ought to
know, or which are imputable to it through an agent
Petreas v London Guarantee & Accident Co. 1925 AD 371
Auto Protection Insurance Co. Ltd v Hanmer-Strudwick 1964 (1) SA 349 (A)
Insurance Company is under a duty to make questions, in the proposal form, clear and
unambiguous
British American Assurance v Cash Wholesale 1932 AD 70

Moral Hazards

Duty to disclose previous refusals to insure

See Locker & Wolf v Western Australia Insurance (1936) 1 KB 408.

Duty to disclose previous convictions

Schoolman v Hall (1951)1 LLR 139.

Roselodge v Castle (1966) 2 LLR 113.

Duty of Disclosure in Life Insurance

Godfrey v Britannic Assurance Co. (1963) 2 LLR 169. - Medical condition problem-lack
of appreciation of seriousness by the layman.
Joel v Law Union (1908) 2 KB 863.
Reynolds v Phoenix Assurance (1978) LLR 440.
Kelly v Pickering & Another 1980 ZLR 61.-. duty to disclose rumours and suspicions
Pickering v Standard Insurance Co. Ltd 1980 ZLR 280.

i) .

6. THE DOCTRINE OF SUBROGATION

Definition

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Groenewald N.O & Anor v Behr & Ors NNO 1998 (4) SA 583 (T).
Goodwin Stable Trust v Duchex (Pty) Ltd & Anor 1998 (4) SA 606 (C).

Scope of Application

Prerequisites to rights of subrogation

The insurer would be entitled to exercise the rights of subrogation provided that all of the
following 5 elements have all been established.

1. the subject matter of insurance must relate to indemnity insurance

2. the insurer has made payment in terms of the policy. . Paige v Scottish Insurance
Company 1929 140 Law Times (LT) 571.
3. the rights in regard to make subrogation apply are capable of being enforced by
the insured. Simpson v Thompson 1877 3 A.C 279.
4. the rights to which subrogation relates has some connection with the subject
matter insured. Young v Merchants Marine Insurance Co Ltd 1932 2 KB 705.
5. the insurer’s right of subrogation has not been excluded by a term of the party’s
contract or a contract with another insurer or any other circumstances.Coupar
Transport v Smith 1 1959 Lloyds’ Reports 369.

Gifts to the insured

When the insured has been indemnified by the insurer and receives a voluntary payment
from third party by way of a gift, provided that the gift results in diminishing or
extinguishing the loss sustained the insurer would be entitled to claim the benefit of the
gift. See Stearns v Villagemen Reef Gold Mine and Co. 1905 10 CLMCIS 89.

Where more is recovered from the third party

It should be remembered that that the insurer can never recover more than he has paid.

Where more is recovered from the third party than the insurer paid, the insured is entitled
to retain the surplus. Yorkshire Insurance v Nisbert 1962 2 QB 330.

Situations where subrogation arises

1. Seller – Purchaser situation , see Castellain v Preston ( 1833) 11 QBD 380.

2. Employer- Employee situation, see Lister v Ramford Ice Co. 1957 AC 555 ;
Morris v Ford Motor Co 1973 QB 732.
3. Lessor – Lessee Situation See Commercial Union Assurance of SA Ltd v
Golden Era Printers and Stationers (Bophuthatswana) (Pty) Ltd 1998 (2) SA
718 (B);

Circumstances where there is no right of subrogation

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 1. Where the wrongdoer is a co-insured see Petrofiria v Magnaload 1983 3 ALL
ER 35.see also Samuel v Dunis 1924 AC 431.
2. Where the insured and the third party have agreed that the insurance policy shall
be for the benefit of both parties. See Rowlands v Beni Inns 1985 3 ALL ER
473.
3. Where the rights of subrogation has been expressly excluded. See Cooper
Transport v Smith
4. Where there is a knock agreement See Morly v Moore 1936 2 KB 359. see also
Hobbs v Marlowe 1978 AC 16.

Procedure for enforcing subrogation rights

See Horse Carriage and General Insurance Co v Petch 1960 33 Times L R 133.

N.B If the rights are abandoned before loss; exemption clause not prejudicial. See
Cooper case supra

If rights are abandoned after the loss, there is prejudice and no indemnification from the
insurer. See West of England Fire Insurance Co. v Isaacs 1987 1QB 226.

Other Cases
Ackerman v Lobster 1918 OPD 31
Castellain v Preston 11 QBD 380
Botswana Insurance Co Ltd v Mazwi Civil Case No F739/04
Commercial Union Assurance of SA Ltd v Golden Era Printers and Stationers
(Bophuthatswana) (Pty) Ltd 1998 (2) SA 718 (B)
Drotsky v Kim’s Auto Motors (Pty) & Anor 2003(1) BLR 498.

7. REGULATION OF INSURANCE INTERMEDIARIES

Insurance Industry Act (Cap 46:01)
Cases to be provided in due course.

8. EMERGING ISSUES IN INSURANCE LAW

(d) HIV/AIDS and Insurance law

1. Aidsmap, “Botswana expects HIV treatment numbers to reach 225,000 by 2016”
(2008, December 10th)
2. Booth C., “The insurance industry and AIDS: An insider's perspective.” (1993);
9(1) South African Journal on Human Rights.
3. Bovbjerg R., “Aids and insurance: how private health coverage relates to
HIV/AIDS Infection and to public programs.” (1992); 77 Iowa Law Review.
4. Clifford K, & Inculano R., “AIDS and insurance: the rationale for aids-related
testing” (1987); 100 Harvard Law Review Association.
5. Fagan A., “Dignity and unfair discrimination: a value misplaced and a right
Misunderstood” (1998); 14 South African Journal on Human Rights.

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 6. Farley F., "At AIDS Disaster's Epicenter, Botswana Is a Model of Action: During
U.N. conference, leader speaks of national 'extinction,' but country plans
continent's most ambitious programs", Los Angeles Times, 27 June 2001
7. Louw L., “HIV/AIDS and human rights in SADC” (2003); unpublished.
8. UNAIDS, “Expenditures by Finance Source and Spending Category - Botswana,
2007’’(2008)
9. Visser C., “AIDS and Insurance Law: A Preliminary Laundry List of Issues”
(1993); 9(1) South African Journal on Human Rights.
10. Widiss A., “To insure or not to insure persons infected with the virus that causes
AIDS’’ (1992); 77 Iowa Law Review.
11. Canadian HIV/AIDS Legal Network & Canadian AIDS Society ‘Responding to
stigma and discrimination’
http://www.aidslaw.ca/Maincontent/issues/discrimination/e-infoda7.pdf
12. IRIN ‘Insurance controversy for people living with HIV/AIDS http://www.
aegis.com/news/irin/2002/IR020513.html [accessed 22 September 2010].
13. Jennings R, Mulaudzi J, Everatt D, Richter M and Heywood M Discrimination
and HIV/AIDS (2002) 12. Also available at
http://www.alp.org.za/view.php?file=/ resctr/paprs/200210_Research.xml
14. Okonmah A. ‘Social and economic impact of HIV/AIDS in Africa’ http://www.
democracyafrica.Org/hivaids.htm
15. UNAIDS ‘HIV/AIDS, human rights and law’
www.unaids.org/en/in+focus/hiv_aids _human_rights.asp
16. Wood S ‘HIV/AIDS: a complex issue in the assurance industry’
http://free.fiancial .mail.co.za/report/metropolitan03/cmetropol.htm

(e) E-Commerce and Insurance Law

(f) Biotechnology and Insurance Law

PART 2 AGENCY

The nature of Agency

Actual Authority
a) Express Authority
1. Mahomed v Padayachy 1948 (1) SA 772
2. National Board (Pretoria) v Swanepoel 1975 (1)
b) Implied Authority
1. Coertzer v Mosenthals Ltd 1963 (4)
2. Kahn v Leslie and Son 1928 EDL 416

Apparent Authority
1. Monzali v Smith 1929 AD 382
2. Henry v Annesley 1960 (4) SA 462
3. Witwatersrand Military Insttution 1953 (1) SA 155
4. Reed v Sager’s Motors 1970 (1) SA 521

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5. Stewart v Zagreb Properties 1971 (2) SA 521
6. Strathsomars Estate v Nel 1953 (2) SA 254
7. Harriram v Khan 1950 SA 200
8. Jing and Com 1902 AC 325 (HL)
9. Dicks v South African Mutual Fire and General Insurance 1963 (4) SA
10. Strachan v Blackbeaard 1910 AD 282 at 287.

Negotiorum Gestor
1. Khug & Khug v Penkin 1932 CPD 401
2. William’s Estate v Molensehoot and Sehep (Pty) Ltd 1939 CPD 360.
3. Lawrie v Union Government 1930 TPD 402

Relations Between Agency and Third Parties

1. Chappell v Gohl 1928 CPD 47.
2. Blower v Van Noorden 1909 TS 900.

Termination of Agency
Kotze v Benjamin 1929 TPD 930.

The End

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