2 - Basic Insurance Legal Principles and Terminology Flashcards
What are the three essential elements of a contract?
Offer
Acceptance
Consideration
What is ‘meeting of minds’?
When both parties believe they are agreeing to the same thing.
What is ‘consideration’?
Each person’s side of the bargain, ie. promise to pay premium and pay for a claim.
What is ‘insurable interest’?
The legal relationship between an insured and the subject-matter of insurance.
Does ‘insurable interest’ require ownership
No.
What is the ‘subject matter’ of the insurance?
What is being insured
What is ‘good faith’?
Two-way concept where both insured and insurer disclose material information to each other.
Under good faith, what can the insurer NOT do?
- Introduce new non-standard terms that were not discussed during negotiations
- Withhold the fact that discounts are available for mitigating risk
Under good faith, what must the insured do?
- Disclose all material information
- Know what is material
What act covers the obligation of the parties in commercial insurance?
Consumer Insurance Act 2012
Why do insurers on long-term policies only require disclosure ‘at inception,’ whereas short-term policies require it at every renewal?
Each renewal is the creation of a new policy of insurance.
What is ‘fulfilment’?
Contract has been fully resolved, all paid out.
If there is a deliberate breach of duty of disclosure, what can the other party do?
Cancel the contract.
what is ‘proximate cause’?
The dominant and operative cause of the loss.
The concept of putting the insured in the position they were in before the loss is known as:
Indemnity.
