10) Insurance Flashcards
what is indemnity insurance?
non-life insurance
what is an example of non-indemnity insurance?
medical aid, funeral/dis cover, life insurance
what happens under indemnity insurance?
when future uncertain event happens, insured is compensated by actual value lost – places him in position he would have been had loss not occurred
what happens under non-indemnity insurance?
insurer pays when future event occurs but amount may not bear relation to actual loss (usually a predetermined amount set in the contract)
what are the elements of an insurance contract?
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
if insured fails to pay a premium?
contract not necessarily terminated and statutory provisions deal with overdue pmts
what is an excess?
a limit to the compensation
what is a valued policy?
a policy where the value of item being insured is predetermined
uncertainty of risk?
uncertain as to when or whether it will happen
descriptions in the contract?
risk AND asset must be properly described in the contract
what is a promissory warranty?
- 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
what does an insurance contract need to be enforceable?
insurable interest
what is an insurable interest?
the insured must have a financial interest in prevent the risk being insured against (either monetary loss or failure to derive a financial benefit)
does insured have to own the insured interest?
no
insured interest in a non-indemnity agreement?
- does not necessarily need to be financial, can be justifiable
- must only exist when contract is taken out, not when the risk actually happens
insured interest in a indemnity agreement?
insurable interest must exist when risk actually happens
what is an intermediary in the insurance contract?
person not actually party to the contract, but involved in the negotiation in some way
who are two intermediaries?
- brokers (for insured)
- canvassing agent (for insurance comps)
what does the duty of good faith of the insured entail?
- fully and accurately disclose all material facts to his knowledge relating to the contract
- answer all questions put to him by the insurer truthfully
what if the misrep/non-dis is material?
entire agreement is voidable at instance of the insurer. if insurer elects rescindment, he will not have to pay, regardless of cause of risk
which PPR rule speaks on the duties of the insurer?
rule 11.4.2(k)
what are the insurer duties as per PPR?
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
what if insurer fails PPR duties (1) and (2)?
the court must consider these failures when considering the misrep/non-dis of the insured
if insurer fails to ask and insured fails to mention?
no material misrep/non-dis
how long does the duty for no misrep/non-dis last for non-indemnity?
until contract is signed / concluded
how long does the duty for no misrep/non-dis last for indemnity?
annually – duty revives everytime contract must be renewed
affirmative warranty?
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
if agent incorrectly informs insurer?
insurer will be deemed to know what the agent knows
if the broker does not disclose to the insurer?
it is the same as if the insured did not disclose = insurer can rescind and terminate
when can insurer refuse to perform obligation in contract?
- insured submitted false/fraud/exaggerated loss claim
- material non-dis / misrep
- failed to honor contractual obligations
when does termination of insurance contract occur?
- expiry of insurance period agreed upon
- insured no longer has insurable interest
- cancellation by either
