1.4 - The Development of Insurance Contracts Flashcards
Plain-Language Policy
Policies written in everyday language so that they are easily understood. Technical terms with their technical meanings are used only where required by law or when substitutions would be misleading
-Insurance Acts require certain clauses to be present in either the policy’s declarations or in the body of the contract wordings
Limitation of Liability clause
The Insurance Acts require that a policy that limits the indemnity the insured may receive must be clearly marked to that effect
Identified articles
If a policyholder carries specific insurance on a particular item or object, the policy that is specific to that item shall respond as first-loss insurance. Only after all coverage is used under a primary policy can any other policy respond to the loss
Named and unnamed locations
-property policies contain the location of the property specifically on the declarations page
-this ensures that following a loss, the subject of the insured can be compared against the damages claimed.
-a couple of circumstances where the policy will respond even though the location of the loss is not identified in the policy declarations
-this includes newly acquired locations or property temporarily removed
Special Stipulations - Warranties
Warranty - statement or stipulations or promise in an insurance contract, the breach of which may nullify the contract
-restricts coverage specifically regarding the use, condition, or maintenance of the insured property.
-these are differentiated from normal policy conditions such as general conditions or statutory conditions, which apply to all property policies
-in order for warranty to be enforceable, it must be material to the UW of the risk and be acknowledged by the insured (usually by signature on warranty doc)
-courts typically do not favour warranties that delete fundamental coverages such as fire ins. therefore woodstove warranty is not generally used
-a court may not hold an insured responsible for the violation of a warranty by another person who is not insured under the policy (eg. friend staying at the house does not set the alarm)
Examples of Warranties in habitational policies
-alarm warranty
-jewellery in a vault warranty
-backwater valve warranty
-woodstove warranty
Automatic Reinstatement
-after a loss is paid out by an insurer during the policy term, the policies limits are restored to the full amount shown on the dec page
-payment of any claim - even for policy limits - does not affect the insured’s entitlement to receive a refund of premium if the policy is cancelled before the end of the term
Renewal of contract
-renewal is offered by sending a written notification (typically a renewal dec with a payment statement) informing the insured of the renewal terms
-the insured should be given reasonable notice of a pending renewal so that he or she may review the information the insurer has identified regarding the risk itself and the applicable terms being offered
-if there are changes concerning the risk the insured must notify the insurer.
Waiver of Contract terms
-no contract term will be deemed to be waived be the insurer in whole or in part unless the waiver is stated in writing and signed by a person authorized for that purpose by the insurer
-neither the insurer nor the insured will be deemed to have waived any term of a contract by any act relating to the appraisal of the amount of loss; the delivery and completion of proofs; or the investigation or adjustment of any claim under the contract
Fortuity
-loss under an insurance policy must be fortuitous. That means the loss must be accidental and not something that is bound to happen in the ordinary course of events
-non-fortuitous loss - reasonable person would have known it was going to happen with the condition of the item (rotted fence falls down in the wind)
Proximate Cause
-a cause that, in natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the even would not have happened
-the law will not go back along the chain of events indefinitely, rather it will look for the immediate and effective cause of the loss - the occurrence that in a series of incident leads naturally and directly to the loss
-if the proximate cause is an insured peril the loss will be covered, if it is not, it will be denied
Concurrent causation
-A Doctrine that hold that is a loss to proper
-sometimes damage sustained may be due to more than one cause, any one of which is covered by the insurance policy, the loss is payable under the policy
-when all the perils that contributed to the loss are insured against by the policy, it may be easy to determine coverage for the loss
-however in many losses, one of the perils may be covered and another may not
-when both perils occur simultaneously and cannot be separated, the question of coverage for the loss must be decided in favour of the insured
-if insured will not cover a loss caused by certain perils, they must make the policy contract very clear so all parties understand what damage is NOT insured, regardless of circumstances
Basis of payment
-the principal of indemnity is to leave the insured in the same financial position as before the loss
-the basis of payment clause entitles that insured only to the least of the following:
>The ACV of the property at the time the loss occurred
>The interest of the insured in the property
> the limits specified in the policy
Actual Cash Value
the fair market value of property, taking into account factours that might augment or reduce the value of the property in question. ACV is usually calculated in one of three ways:
1. cost to repair or replace less depreciation
2. fair market value
3. consideration of all relevant evidence of the value of the damaged property
Replacement Cost
Insurance coverage that indemnifies for LoD to insured property at the current market price rather than at a depreciated value. Thus the rating and premium are based on the current cost to replace the insured property
