The ‘Prudential’ definition of insurance (
GIM1030) remains the starting point for a
discussion of the legal basis of insurance. For example, Chitty on
Contracts (paragraph 39-001 28th edition) summarises a contract of
insurance as follows:
‘A contract of insurance is one whereby
one party (the insurer) undertakes for a considerationto pay money or provide a corresponding
benefit to or for the benefit of the other party (theassured) upon the happening of an event which
is uncertain, either as to whether it has or willoccur at all, or as to the time of its
occurrence, where the object of the assured is to provideagainst loss or to compensate for prejudice
caused by the event, or for his old age (where thatevent is the reaching of a certain age by the
assured) or for the benefit of others upon hisdeath. It is these objectives which
distinguish insurance from gaming or wagering.’
Case law relating to insurance has also established a
general principle that the substance of the contract prevails over
its form. This follows from the decisions in
Fuji v Aetna [1997] Ch.173 (CA) and in
Sentinel Securities [1996] 1 WLR 316. In the Fuji case the Court
also held that the regulatory consequences of treating a contract
as insurance are not relevant to the classification of that
contract.
Contracts of insurance will be either
‘contingent’ against the happening of an event, life
assurance being the most common example, or ‘indemnity’
against loss suffered – see
GIM1060.
