1. Section 50 Insurance Act 2003

Section 50(1) of the Insurance Act 2003 states that, “The receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk unless the premium is paid in advance.” In the case of Ajaokuta Steel v Corporate Insurance (2014), the Supreme Court pronounced on the provisions of section 50(1) of the Insurance Act 2003. The court held that the no premium no cover condition was a condition precedent to the formation of a valid insurance contract and failure of the insured to pay premium rendered the insurance contract null and void and unenforceable.

  1. Section 23 Marine Insurance Act 1961

Section 23 of the Marine Insurance Act 1961 states that, “A contract of marine insurance shall be deemed to be concluded when proposal of the insured is accepted by the insurer, whether his policy is then issued or not; and for the purpose of showing when the proposal was accepted reference may be made to slip, a covering note or other customary memorandum of the contract.” That section means that a marine insurance contract is valid once a policy is issued even though premium has not been paid.

  1. The No Premium Condition Applies to Marine Insurance

In Jombo v Leadway Assurance (2016), the appellant imported goods and was issued two “marine insurance policies” by the respondent to cover the goods. The ship left port on 6th March 1997 and the two policies were issued on the 10th and 12th March 1997 but premium was not paid before the policies were issued. On 18th March 1997 the appellant was informed that the goods were lost at sea. Therefore a claim was made on the respondent.

The issue for determination was whether or not the no premium no cover condition applied to contracts of marine insurance. The Supreme Court held that there was no valid contract of marine insurance between the parties because the provisions of section 50(1) of the Insurance Act impliedly repealed the provisions of section 23 of the Marine Insurance Act. Sanusi JSC said,

“For purpose of clarity, it can be said that by section 23 of the Marine Insurance Act, marine insurance can be covered and valued upon oral transaction and also permits payment of premium to be made subsequently. Conversely, section 50(1) of the Insurance Decree of 1997 which is later in time of promulgation, makes a contract of marine insurance valid and enforceable ONLY upon condition precedent to the effect that premium MUST be paid in advance, once such condition precedent of prepayment of premium is not met, the contract becomes void and unenforceable. To my mind, the provisions of the later Decree of 1997, which provides a condition contrary to the one in the provisions of section 23 of the 1961 Act, one can say without any fear of contradiction, that the position provided in section 23 of the 1961 Act is no longer tenable or applicable by reason that the legislature provides a contrary provision which can be said to mean that the condition or position provided by Section 23 is no longer valid and no longer subsists.”

The effect of this decision is that even when an insurer has issued a policy, as long as the insured has not paid premium before the policy is issued, there is no valid contract of insurance and the insurer is entitled to repudiate any claim on the policy.

  1. Conclusion

Following the work of the Prof Irukwu reform committee and most recently the Dr Omo-Eboh reform committee, the insurance industry awaits a new single comprehensive insurance legislation which will bring most previous insurance laws (including the Marine Insurance Act and the Motor Vehicle (Third Party Insurance) Act) into one statute. This will remove any confusion in the application of the no premium no cover condition to all classes of insurance business.