PRINCIPLES AND LEGAL CONCEPTS IN RELATION TO INSURANCE OF BUILDINGS
Insurance of buildings is an important consideration for property owners, landlords, and tenants. It provides financial protection in the event that the building is damaged or destroyed by a covered event. However, it is important to understand the principles and legal concepts that govern insurance of buildings to ensure that the policy provides adequate coverage and to avoid potential disputes with insurers.When it comes to insurance of buildings, there are several important principles and legal concepts to keep in mind. Here are some of the key ones:
1. Principle of indemnity: This principle states that the purpose of insurance is to restore the insured to the same financial position they were in before the loss occurred. In other words, the insurance payout should be equal to the amount of the loss, but not more than that.
2. Principle of subrogation: This principle allows the insurer to take legal action against a third party who caused the loss, in order to recover the amount of the payout made to the insured. This helps to prevent the insured from receiving a windfall.
3. Principle of contribution: If the building is insured under more than one policy, each insurer will only pay their proportionate share of the loss. This is known as the principle of contribution.
4. Material facts: When applying for insurance, the insured has a duty to disclose all material facts about the building, such as its age, construction materials, and any previous damage. Failure to disclose such information could result in the policy being voided.
5. Insurable interest: In order to insure a building, the insured must have an insurable interest in the property. This means that they stand to suffer a financial loss if the building is damaged or destroyed.
6. Standard of care: The insurer has a duty to act in good faith and to handle claims in a reasonable and efficient manner. Failure to do so could result in legal action being taken against the insurer.
7. Policy exclusions: Insurance policies will typically contain exclusions, which are events or circumstances that are not covered by the policy. It is important for the insured to be aware of these exclusions so that they can take steps to protect themselves against these risks.
8. Policy limits: Insurance policies will also have limits on the amount that will be paid out in the event of a loss. It is important for the insured to ensure that these limits are sufficient to cover the full value of the building and any associated costs, such as demolition and debris removal.
Overall, understanding these principles and legal concepts is essential for anyone who is considering insuring a building. It is important to read the policy carefully and to ask any questions to ensure that the policy provides adequate coverage and meets the insured’s needs.
