This document provides an outline for a course on principles of insurance contracts. It includes an introduction by the instructor, Dr. Yassin El Shazly, and thanks contributions from students. The course plan is divided into parts covering the idea of insurance contracts, the parties involved, formation of contracts, acceptance and issuance of policies. Key concepts explained include insurable interest, risks covered and excluded from policies, and requirements for valid contracts. The document aims to educate students on the fundamental elements and legal principles of insurance agreements.

1. Course HANDOUTS
principles of insurance contract
Faculty of Law - English Section
Prepared by
Dr. Yassin EL SHAZLY
PhD in Law, Lyon Law School, France
Teacher, Business Law Department,
Faculty of Law, Ain Shams University,
Cairo, Egypt
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2. These slides are prepared with the
precious help of the students of 3rd
year :
•Bassma
•Eman
•Aya
•Mohamed hussien
•Mayar
•Nayra
•Salma
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3. Course plan
3

4. Part 1 : The idea of insurance contract
4

5. Part 1 : The idea of insurance contract
5

6. The idea of insurance
• The general rule is that every person should bear his own loss.
• The insurance tends to assure individual protection and provide
guarantee against risk.
• The technique of insurance has a purpose to distribute directly and
effectively as much as possible the risk of loss, among a large
number of persons.
• The premium paid by the insured measures his distributive share of
the risk.
• The idea is to provide a medium through which persons can staisfy
their desire to protection against risk
• It was mainly a technique developed by merchants and
professionals
• The main origin was found in maritime insurance
•
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7. The idea of insurance
• The contract of risk • The contract of
shifting insurance
• Interest suspected to a • Interest suspected to a
pecuniary estimation pecuniary estimation
• The pecuniary interest • The pecuniary interest
subject to risk subject to risk
• The assumption of risk • The assumption of risk
by a third party by a third party
• The party assumes risk
for a large number of
persons 7

8. The requirement of insurance
contract
n insurable interest suspected to a pecuniary
estimation
he insurable interest suspect to risk or peril
he insurer assumes the loss or damage to the
insurable interest
he insurer offer his service for a large group of
persons 8

9. Definition
• According to article 747 of the civil code :
• An agreement by which one party called the insurer
undertakes in return for the agreed consideration,
called premium to pay to another person called the
insured a sum of money, or its equivalent, on the
happening of a specified event.
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10. Parties of insurance contract
10

11. Parties of insurance contract
11

12. • Contracts of indemnity • Contracts of non-indemity
2. The amount recovered is • The amount recovered is
measured according to the
insured pecuniary loss. measured regardless the
3. It is admissible that the insured amount insured pecuniary
accumulate the sum assured loss.
from different insurers. • It is not admissible that the
4. The insurer who paid the sum insured accumulate the
assured is legally entitled to sum assured from different
subrogate the insured against insurers.
the responsible of the accident
insured. • The insurer who paid the
sum assured is not legally
• entitled to subrogate the
insured against the
responsible of the accident
insured.
•
12

13. Contracts of indemnity
13

14. Formation of insurance contract
14

15. The agreement
15

16. Parties of the insurance contract
16

17. Formation Of Insurance Contract

18. The Parties Of Insurance Contract

20. The offer to conclude insurance
contract should designate the second
party by:

21. In some insurance policies the name of
the beneficiary may be left blank.

22. The Insurer

23. The Insured

24. The right of being assured:

26. Consent of the parties of insurance
contract

27. Customary methods of making
insurance contracts:

28. The requirments of a valid offer:

31. The proposal form contains the following informations:
Description Description of Description of Previous history
of the the risk subject circumstances of the proposed
proposed to proposed affecting the risk :assured
:assured :insurance :insured
•His name In case of: The insured answers •Experience of the
•His address questions directed to proposed assured:
•His profession •Personal accident him through which the the insured has to
(the insured “the insured has insurer tries to find state if he has
will not be held to state his age, whether there are suffered loss by the
responsible of weight and height” special circumstances peril subject to
misrepresentat making the risk greater proposed insurance.
ion if he has 2 •Property .than usual •Relations with other
professions insurance •In personal accident insurers:
and stated “he has to give full He should be informed He should state if he
one only) description of the about the past & has ever made a
as the rate of property subject to present state of health. similar proposal to
premium will the proposed •In liability insurance other insurers, and
not be insurance” He should be informed whether this proposal
affected. about state of the was declined or
insured premises,... accepted.

32. Propsal form for life insurance
“questions asked by the insurer relates to”:
. Name,
residence, Sum to Whether the A proposal
profession, be policy is for form has
occupation, insured the benefit ever been
date & place of of insured declined or
birth, hight& Type of accepted at
estate‘s or of
weight of policy an extra
named
proposed required premium
beneficiaries
Name &
Whether a adress of Details of
proposal previous Details of any
the usual
form ha ever illness & of circumstances
medical
been made to medical affecting the
attendant
the insurer advice & suitability of
concerned or treatment the life insured
to other in last 2 for insurance
.insurers years purpose

34. The effect of the proposal form

35. Chapter 6
The acceptance & the issuance of the policy
of insurance
Complete Offer + Acceptance = Complete Insurance
.Contract
Insurance contract is one of the formal •
contracts , written in an instrument called
.” ”Policy

37. The Policy
•The policy contains All terms of
.Agreements
Description of the
risk subject to the
. insurance
Circumstances
.affecting the risk

38. The Policy
•According to Art 750 of the Egyptian
civil code it is considered as void the
following terms if provided in the
All insurance policy : which are not -1
the printed conditions
prominently projected and which are related to one
.of the conditions leading to the annulment of right
An arbitration clause, if it is set in the policy as -2
part of its printed general conditions, and not in the
form of a special agreement independent from the
.general conditions
All other arbitrary conditions, the violation -3
of which has had no effect on the occurrence
.of the insured accident

39. The methods of Acceptance

40. The methods of Acceptance
Issuance of Conduct of
insurance the
policy insurer
Receiving
Formal
the
Acceptance
Premium

41. The methods of Acceptance
Formal
Acceptance
It means that the parties intended to be bound prior •
to the time the policy is delivered, delivery is not
.essential
The contract of insurance takes effect without •
delivery ,it takes effect when the insurer declares to
.be bound either orally or in writing

42. The methods of Acceptance
Issuance of
insurance policy
Issuance of insurance policy = Insurer has accepted the •
proposal form there is no need that the policy should
.be materially delivered
The difficulty arises if the contract is manually delivered or •
.(constructively delivered ( material delivery
The policy is considered as delivered & accepted regardless •
. the type of the delivery once the delivery is valid

43. The conditions of valid delivery are :
A- The intention of the parties executing the policy to
.give it legal effect as a complete legal instrument
B- This intention must be evidenced by some words or
acts indicating that the insurer has put the instrument
beyond his legal control , not necessarily beyond his
.physical control
C- . The insured must be informed about this intention
Dr‘s Point Of View: the conclusion of the contract •
in this case wouldn‘t be affected if the insured didn‘t
treat the delivery as an acceptance, or he negotiated.
But if the policy departs from the proposal by
introducing a new term , it won‘t be considered as an
acceptance but a counter offer needs to be accepted by

44. The methods of Acceptance
Receiving
the
premium
In the case of the insurer has accepted to receive •
the premium and retained it –Although the policy
hasn‘t issued yet– this indicates implicit acceptance
.of the proposal form
In such case, the insurer isn‘t entitled to refuse the •
issuance of the policy and he will be liable to pay
.damages at the happening of the risk to the insured

45. The methods of Acceptance
Conduct of
the
insurer
Sometimes, in spite of the absence of an issued •
policy and payment of the premium by the insured, the
acceptance of the insurer can be concluded from the
surrounding circumstances such as: 1- The mere
demand for the premium by the insurer , 2- The
nomination of an expert to evaluate the damages
.suffered by the insured

46. The Effect Of Acceptance
Thus by the acceptance, the parties become •
bound by the contract, and can‘t withdraw
. from, except by mutual consent
The contract becomes binding from the date •
of the insurer acceptance. And the insured
becomes obliged to pay the premium fixed by
. the terms of the contract
For the insurer it is his duty to issue the •
policy and to accept the premium when it is
paid, and to pay damages suffered by the
. insured

48. • Cover note is one of the formal
contracts.
-This statement is false, because,
Issuing the cover note in a formal
document is not necessary, it might
be issued informally by sending a
letter to the insured by the company
head office.

49. • the insurer may intimate his
rejection of the proposal form to the
insured through phone.
- This statement is false, because the
insurer is obliged to intimate his
rejection of the proposal form to the
insured in writing only not orally.

50. • In all cases, the cover note of a
fixed period comes to an end by the
expiration of this period.
- This statement is false, because it is not
necessary that the cover note remain in
force during its whole fixed period, since
it may come to an end in an earlier time
by the acceptance of the insurer (issuing
the policy), or by the declaration of the
rejection of the proposal form by the
insurer to the insured in writing.

51. • Acceptance of the insurer is the
only way to end the cover note.
-This statement is false, because the cover
note comes to an end by three ways. The
first one is the acceptance of the insurer
(Represented in issuing the policy). The
second one is the expiration of the period
specified in the cover note without issuing
the policy (implicit rejection). The third
one is the declaration of the rejection of
the proposal form by the insurer to the
insured in writing.

52. • the cover note is one of the
insurance contract components.
-This statement is false, because the cover
note represents an insurance contract and
determines the rights and duties of its
parties in the event of loss or injuries,
taking place during its validation.
Therefore it is not one of the insurance
contract components but it is
a separated independent contract.

54. The ObjecT Of The
cOnTracT
• Introduction :
• The English Doctrine makes distinction
between the Subject matter of insurance and
the subject matter of the contract .
• The contract can’t give protection against the
accident , as it cant prevent the accident from
happening.
• The contract secures  Sum of money.
(subject matter of contract = money )

55. • as that under circumstances there an option
to spend the money in rebuilding the house
destroyed or fired .
• The subject matter of insurance is ACCIDENT
which may :
*happen to a physical object.
*Harmful consequences happen to insured

56. B) The Egyptian doctrine doesn’t adopt this
distinction .
The subject matter of the contract and subject
matter of insurance is the same , (object of
insurance contract ) is the Risk or peril
insured against .insurable interest and the
premium .

58. I)The rIsk Or PerIl Insured
agaInsT
• The happening of the risk may appear as
an injury for the insured also can be
against the damage or destroy of the
insured property .
• The Risk = fundamental element for the
existence of insurance contract.
• Conclusion : if the possibility of
happening of the peril insured against is
inexistent = VOID contract.
( Art, 749 of E.C.C )

59. The Conditions must be fulfilled in
the Risk or peril :
1) The happening of the risk should be
eventual or probable .
2) The happening of the risk insured
against must not depend on the sole
will of insured party.
3) The risk insured must be lawful and
not in contradiction with rules of
public policy .

60. 1)Risk should be eventual or
probable:
• The word risk involves the idea of
something fortuitous and unexpected.
• The insurance contract is aleatory one.
Which mean that risk insured against may
happen and may not.
• If the risk is impossible to happen the
contract is considered void.
• Ex. Fired house.

61. 2) risk insured against must not
depend on the sole will of insured
party:
• the loss or injury should not be caused
deliberately by the insured’s own act .
• If it so , it wouldn't be an accident .
• The Art, (768) confirm this condition
according to :
* the insurer shall be responsible for the
damages resulting from an unpremeditated
fault by the person insured for.
* losses and injuries premeditatedly caused
by the person insured for shall not render

62. • Thus, Life insurance doesn't cover the
insured death by him self.
• But the insurance cover self-killing by
accident or by mistake .

63. 3) The risk must be lawful:
• The contract would be considered as void
if the insurance covers risks prohibited by
statutes or violating settled rules of public
policy.
• The courts will not lend their aid to the do
any insurance contract ,bec. If it do that it
will encouraging crime

64. • . THE annulment of contract giving
insurance against miscarriage of justice,
since this contract cause disrespect to the
courts , also death by legal execution is not
enforceable and against public policy

65. II) rIsk Or PerIls excluded
frOm Insurance POlIcy
• There are some risks, commonly excluded
from the scope of insurance policy .
• The most important of these exceptions
generally inserted in insurance polices are :
A) Exceptions relating to causes that may lead
to the insurer liability for beyond the ordinary
course of business.
B) Exceptions related to the conduct of the
assured.

66. A) Exceptions relating to causes that
may lead to the insurer liability for
beyond the ordinary course of business:
• Damages caused by a foreign enemy being
in a state of war with the country of
insurance.

67. • Damages or injuries caused by riots, riot
means disturbance of peace by three or
more persons.
•

68. • Damages caused by civil war that has the
special characteristics of being civil and
representing an internal conflict rather
than external.

69. B) Exceptions related to the
conduct of the assured:
• The peril or risk related to the insured conduct is gnarly
covered by the policy.
• The most important is the negligent acts of the insured.
• But the conduct of the insured may be considered in
policy as an exception to exclude the insurer liability in
the following cases:
1) willful act.
2) express stipulation in the policy.

70. 1) willful act :
• A willful act weather of misfeasance or omission which
brings the peril insured against into operation it will
exempts the insurer from liability .
• But a willful act is not be excluded from insurance , if it
committed for purpose of averting a greater danger or
for saving human life.
• In this case willful act is excused.

71. 2) express stipulation in the policy:
• The insurer may exclude his responsibility for the
conduct of the assured and of the persons for whom he
is responsible .
• The stipulation excluding the insurer responsibility ,
may express what law already implies

72. The legal insurable interest, as a
subject matter to insurance contact.
1. The requirement of an insurable interest to
support a contact of assurance is based
upon a consideration of public policy.
2. The parties have to establish the facts
proving the insurable interest, & the satisfy
the court that they are not engaged in
harmful bet.
3. According to art.749, a legal insurable must
exist in all kinds of insurance.

73. The insurable interest means to be
interested in the preservation of a thing, as
to have benefit from its existence and
prejudiced by its destruction.
 It can be expressed in the following
insurance:
3. Property insurance.
4. Personal accident insurance.
5. Liability insurance

74. 1- In property insurance:
Where the subject matter of the insurance is a
physical thing exposed to certain perils. In this
case an insurable interest is constituted by the
fact that the insured will suffer prejudice if the
subject matter is lost or damaged by such perils.
2- In personal accident insurance:
The insured will suffer prejudice by the loss of life or a
limb.

75. 3- In liability insurance:
 The happening of an accident, engaged his
responsibility to a third person or persons,
constitutes the insurable interest, in this
kind of insurance.
 Thus the insured interest is found by the
insolvency of the insured debtor. In this case
the insured is considered to have an
insurance policy.

76.  The existence of insurable interest
requires, fulfilling with the following
conditions:
1. The insurable interest must have a pecuniary value.
2. The insurable interest must be a real interest.
3. IN property insurance, the insurable interest should
exist at the time of the loss and not only at the time
of making the insurance.

77. 1-The insurable interest must have a
pecuniary value.
• The pecuniary value means that the insurable interest
could be measured or evaluated by money.
• The insurable interest maybe permanent or continuing,
as in insurance related to property or real rights.
• Also it could be precarious if there are other persons
who are entitled to restore the object.
• Thus a person having mere right of possession of
property may insure it to its full value & in his own
name.
• Thus a bailee may recover under a policy insuring goods
gratuitously kept in store for another.

78. 2-The insurable interest must be a real interest.
• According to this condition, the expectation of acquiring a
probable interest isn‘t enough to support a contract of
insurance.
• But a future interest, It is not enjoyment of the object
insured, since the insured‘s prospect of benefit is clear.

79. • The insurable interest may be the ownership
of goods or other property. This ownership
may be sole or joint & it can be founded upon
contact or inheritance. A bailee having
contracted expressly or impliedly to be
responsible for the safety of a vehicle
belonging to another has an insurable
interest.
• the existence of a contract isn‘t necessary
to prove an insurable interest. The mere fact
of lawful possession is enough to be a subject
matter of insurance contract.

80. 3- In property insurance, the
insurable interest exist at the time of
the loss and not only at the time of
making the insurance:
• In fire insurance:
To recover the sum payable under of the policy,
the insured has to prove, that at the time of the
loss he had an insurable interest in the object
destroyed. If this interest was inexistent at the
time, he cannot claim that he has suffered any
loss and his demand to be indemnified would be
considered as unjustified.

81. • In life insurance:
It is sufficient that the insured has an
interest at the time of making the
contract.

83. Obligations arising from the insurance
contract
83

84. 84

85. 85

86. 86

87. 87

88. 88

89. Obligation of the insuruer
89

90. Obligation of the insuruer
90

91. Calculation of the sum assued
• Method 1 : express condition
• Actual loss = 100,000
• Insurance = 80,000
• Insurer Payment= 80,000
• Method 2 : Proportional condition
• Insurance policy value = 400,000
• Subject matter value = 500,000
• Actual Loss = 100,000
91

92. The life cycle of insurance contract
92

93. 93

94. 94