Morris insured his house against fire with Desny Insurance Company. Before the insurance cover expired, Morris sold the house to Tony. Tony was aware that Morris had insured the house. However, Morris failed to inform Desny Insurance Company that the ownership of the house had changed. Two months later, the house got substantially damaged by fire. Tony claimed compensation from Desny Insurance Company but the insurer declined. Tony is aggrieved and intends to sue the insurer for compensation. Explain the legal principles applicable in this case. (10 marks)November 2022

The legal principles applicable in this case include insurance law, contract law, and property law.

1. Insurance law: The insurance of Morris’s house by Desny Insurance Company is governed by the laws of insurance, which regulates the relationship between the insurer and the insured. Under insurance law, the insurer has a duty to compensate the insured for any loss or damage covered by the policy.
2. Contract law: The insurance contract between Morris and Desny Insurance Company is a legally binding agreement, and both parties are bound by the terms and conditions of the contract. The contract is also binding on any subsequent owners of the property, as long as they are aware of the insurance policy.
3. Property law: The sale of Morris’s house to Tony is governed by property law, which regulates the transfer of ownership of property. Property law requires that the seller of the property inform the insurer of any change in ownership of the property.
4. Duty to disclose: Under insurance law, the insured has a duty to disclose all material facts that are relevant to the risk being insured. In this case, Morris’s failure to inform the insurer of the change in ownership of the house could be considered as a failure to disclose a material fact, which could void the insurance policy.
5. Subrogation: Under insurance law, the insurer has the right to be subrogated to the rights of the insured in the event of a loss or damage. This means that the insurer can pursue recovery from a third party that caused the loss or damage, in order to recover the amount paid out to the insured. In this case, the insurer may argue that it has the right to be subrogated to the rights of Tony and can pursue recovery from Morris for his failure to disclose the change in ownership.
6. Bailment: The insurer may argue that the house is in the possession of Tony as a bailee, and that Tony has a duty to take care of the house and inform the insurer of any change in possession. This is because the insurer has an insurable interest in the house, and the failure of Tony to inform them of the change in possession of the house may be considered a breach of the bailment contract.
7. Estoppel: Tony may argue that Morris’s failure to disclose the change in ownership to the insurer has estopped the insurer from denying coverage, as Tony relied on the insurance policy and the insurer’s silence on the change in ownership. This means that the insurer would be barred from denying coverage due to Morris’s conduct or lack of action.

In this case, Morris sold the house to Tony and failed to inform Desny Insurance Company of the change in ownership. When the house got substantially damaged by fire, Tony claimed compensation from Desny Insurance Company, but the insurer declined. Since Tony was aware of the insurance policy and the insurer was not informed of the change in ownership, the insurer may argue that the policy was not valid and therefore, it does not have the obligation to compensate Tony. However, Tony may argue that the insurer had the duty to compensate him as the subsequent owner of the property, since he was aware of the insurance policy and Morris’s failure to inform the insurer does not relieve the insurer of its obligations.