Insurance Law
insurance law

Insurance Law



By Dorcas Atukwa

Natural disasters such as the recent Cyclone Idai that destroyed parts of Manicaland province trigger a lot of legal issues. In the aftermath of the disaster, survivors begin to pick up the broken pieces  as they commence to rebuild their lives. In this exercise, survivors relate to legal issues on both corporate and personal levels. We will herein focus on aspects of insurance law with particular focus on insurance claims.

Pursuant to the disaster, victims can file insurance claims for indemnification for loss suffered as a result of the cyclone and any other natural disaster. The question arising is whether or not insurance policies cover risk emanating from natural disasters. Answering this question will assist in ascertaining situations in which parties can effectively file claims with insurance companies and receive compensation for their loss.

It is important to discuss the requirements/essential elements of insurance policies to enable us to understand situations that are covered by insurance policies and those that are not. An insurance contract is a contract between an insurer and an insured whereby the insurer undertakes in return for the payment of premium to pay to the insured a sum of money, or its equivalent, on the happening of a specified uncertain event in which the insured has some interest. [1]

In light of this definition the contract exists when:-

  • An insured pays a stipulated premium
  • There is possibility of occurrence of an uncertain event.
  • An undertaking to perform in exchange of premium
  • An insurable interest exists on the insured’s part.

We will use the comprehensive motor vehicle insurance cover to explain an insurance contract. When one procures this policy, it is common cause that the parties agree on the value to be ascribed to the motor vehicle. The insured is then advised of the sum of money that is required to be paid in order for one to obtain an insurance policy.  This amount payable is the premium.

When one takes out the policy, there is possibility that one will either be involved in a road traffic accident, that the vehicle’s parts may be stolen, that the vehicle may be engulfed in a fire and or somewhat damaged.  This is possibility of occurrence of an uncertain event, which is the risk covered.

The insurance company undertakes to pay a certain agreed value to the insured should the above mentioned eventualities occur. The payment of money by the insurer is meant to compensate the insured for loss he/she has suffered.

In this example the insured has an insurable interest in that loss of damage to the motor vehicle would cause him/her financial loss or other conceivable kinds of losses.

Having explained the essential ingredients of a contract of insurance,  we turn to address the question of whether or not insurance policies cover risks emanating from natural disasters.

It is imperative to look at the insurance policy under which one intends to file a claim. A general answer cannot suffice as the insurance policy constitutes a contract between the insurer and the policy holder. The insurance policy therefore outlines the terms and conditions binding the parties to the contract. The insurance contract will stipulate situations that the policy covers and those to which insurance cover will not be extended. It is therefore unwise to conclude the situations to which insurance cover is extended without reading the policy document.

Coverage for damages caused by vis major are often excluded in insurance contracts. An occurrence like Cyclone Idai constitutes a vis major. Vis major/ force majeure is a Latin term which describes a natural occurrence resulting in damage or destruction, and the event or occurrence is neither caused by nor preventable by humans even when due diligence, skill and care is exercised. Vis major is therefore a term used to denote an act of God.

It is important to note that one can procure a specialised policy covering specified perils which constitutes vis major. For example, farmers sometimes procure agriculture insurance contracts. Through these contract, farmers are able to insure their crops, livestock, buildings and machinery against natural disasters that are uncertain but possible. In like manner, residents in areas that are prone to floods like Muzarabani may obtain insurance coverage against property loss emanating from flooding. The insurance claims in such  circumstances will be honoured notwithstanding that floods constitute an act of God. The extent to which an insurance contract will cover certain events will inadvertently be spelt out in the contract itself.

In light of the foregoing, in order for one to file a claim, it is essential for policyholders to read their respective insurance policies and ascertain whether or not they were insured against a specific natural disaster or not. Insurance contracts, like most legal documents, are often complex to understand. It is essential for one to obtain legal advice regarding whether or not a specific natural disaster is provided for in their insurance contract.

[1] Lake vs Reinsurance Corporation Ltd 1967 (3) SA/24 (w)

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