2: Basic Legal Principles and Terminology Flashcards
Definition: Consensus ad idem
Meeting of minds - do both parties believe they are agreeing on the same thing?
Birmingham, UK vs Birmingham, US
Definition: Consideration
Each persons side of the bargain which supports the contract - normally the premium, and claim payment
Definition: Deductible
The amount of the policy limit which the insured has to pay.
Definition: Duty of fair presentation
One which makes disclosure of every material circumstance which the insured knows
Definition: Estoppel
And impediment that precludes a person from asserting a fact or right.
When one party is reliant on another and cannot be misled into a false sense of security (an insurer should share any investigations with the insured)
Definition: Excess
The amount the insured must pay before an insurer pays the full policy limit.
Definition: Financial value
The financial value of something bad happening
Definition: Franchise
Similar to a deductible or excess, but once the franchise limit of the insured is exceeded, the insurer pays the full amount
Definition: Fulfilment of a contract
The contract has been fully performed
Definition: Good faith
All parties to a contract must not mislead each other
Definition: Inception
Post negotiation, once the contract is formed.
Definition: Indemnity
Compensation to return the insured to the same financial position as immediately before the loss occurred
Definition: Insured perils
Those named in the policy as covered
Definition: Unconditional acceptance
When both parties accept all terms without a counter offer (conditional acceptance). Only when does an offer become unconditional is the policy finalised.
Definition: Proximate cause
The dominant cause which created the loss (the first domino)
Definition: Sum insured
The maximum amount which can be recovered under an insurance policy
Definition: Tort
A breach of a persons duty to act in a reasonable way towards others
Definition: Underinsurance
If the insured does not insure the full value of the subject matter, meaning they effectively insure the remaining amount
What are the features of valid contracts?
Offer and acceptance
Consideration
Consensus ad idem
Definition: Void ab initio
A contract that is declared invalid from the beginning
Definition: Subject-matter
Of insurance: the thing actually being insured
Of contract: the relationship that the insured has with the thing being insured
Definition: Material information
Physical or moral hazards which should be disclosed in order to act with good faith.
Things which do not need to be disclosed:
Matters of law
Public knowledge
Factors that lessen the risk
Waived information
Information a survey should have revealed
What are the different types of peril?
Insured: those named in policy as covered
Excepted or excluded: those named in the policy as not covered
Uninsured or unnamed: those not mentioned at all
Definition: Benefit policy
Losses which cannot be priced, such as loss of a limb or sight
What are the different ways of providing indemnity?
Cash
Repair
Reinstatement
Replacement
Definition: Contribution
When the insured has more than one policy covering a particular loss (household and travel when losing a gadget abroad)
There are usually specific conditions which restrict an insurers liability to its rateable proportion of a loss
Definition: Subrogation
The right of an insurer to take over the insured rights to recover payment from a responsible third party.
Sometimes, policies can be written to exclude and subrogation such as mutual hold harmless agreements
