10) Insurance

Question 1

what is indemnity insurance?

Answer 1

non-life insurance

Question 2

what is an example of non-indemnity insurance?

Answer 2

medical aid, funeral/dis cover, life insurance

Question 3

what happens under indemnity insurance?

Answer 3

when future uncertain event happens, insured is compensated by actual value lost – places him in position he would have been had loss not occurred

Question 4

what happens under non-indemnity insurance?

Answer 4

insurer pays when future event occurs but amount may not bear relation to actual loss (usually a predetermined amount set in the contract)

Question 5

what are the elements of an insurance contract?

Answer 5

1) premiums paid by insured
2) insurer has obligation
3) insurer only performs when risk occurs (must be an uncertain risk)
4) insured has an insurable interest

Question 6

if insured fails to pay a premium?

Answer 6

contract not necessarily terminated and statutory provisions deal with overdue pmts

Question 7

what is an excess?

Answer 7

a limit to the compensation

Question 8

what is a valued policy?

Answer 8

a policy where the value of item being insured is predetermined

Question 9

uncertainty of risk?

Answer 9

uncertain as to when or whether it will happen

Question 10

descriptions in the contract?

Answer 10

risk AND asset must be properly described in the contract

Question 11

what is a promissory warranty?

Answer 11

• used by insurers to limit their exposure to risk
• insured has a certain obligation that, if not complied with, will result in the insured not having to pay, even if breach did not occur as a result of the breach

Question 12

what does an insurance contract need to be enforceable?

Answer 12

insurable interest

Question 13

what is an insurable interest?

Answer 13

the insured must have a financial interest in prevent the risk being insured against (either monetary loss or failure to derive a financial benefit)

Question 14

does insured have to own the insured interest?

Answer 14

no

Question 15

insured interest in a non-indemnity agreement?

Answer 15

• does not necessarily need to be financial, can be justifiable
• must only exist when contract is taken out, not when the risk actually happens

Question 16

insured interest in a indemnity agreement?

Answer 16

insurable interest must exist when risk actually happens

Question 17

what is an intermediary in the insurance contract?

Answer 17

person not actually party to the contract, but involved in the negotiation in some way

Question 18

who are two intermediaries?

Answer 18

• brokers (for insured)
• canvassing agent (for insurance comps)

Question 19

what does the duty of good faith of the insured entail?

Answer 19

• fully and accurately disclose all material facts to his knowledge relating to the contract
• answer all questions put to him by the insurer truthfully

Question 20

what if the misrep/non-dis is material?

Answer 20

entire agreement is voidable at instance of the insurer. if insurer elects rescindment, he will not have to pay, regardless of cause of risk

Question 21

which PPR rule speaks on the duties of the insurer?

Answer 21

rule 11.4.2(k)

Question 22

what are the insurer duties as per PPR?

Answer 22

1) inform the insured of his duties to disclose material facts
2) ensure they know consequences of failure
3) ensure they know what must be disclosed

Question 23

what if insurer fails PPR duties (1) and (2)?

Answer 23

the court must consider these failures when considering the misrep/non-dis of the insured

Question 24

if insurer fails to ask and insured fails to mention?

Answer 24

no material misrep/non-dis

Question 25

how long does the duty for no misrep/non-dis last for non-indemnity?

Answer 25

until contract is signed / concluded

Question 26

how long does the duty for no misrep/non-dis last for indemnity?

Answer 26

annually – duty revives everytime contract must be renewed

Question 27

affirmative warranty?

Answer 27

insured confirms that they answered truthfully – failure to answer ANY questions truthfully / disclose ANY facts gives the insurer the right to terminate and repudiate liability

Question 28

if agent incorrectly informs insurer?

Answer 28

insurer will be deemed to know what the agent knows

Question 29

if the broker does not disclose to the insurer?

Answer 29

it is the same as if the insured did not disclose = insurer can rescind and terminate

Question 30

when can insurer refuse to perform obligation in contract?

Answer 30

• insured submitted false/fraud/exaggerated loss claim
• material non-dis / misrep
• failed to honor contractual obligations

Question 31

when does termination of insurance contract occur?

Answer 31

• expiry of insurance period agreed upon
• insured no longer has insurable interest
• cancellation by either