Agency and Insurance Legal Principles

Question 1

First essential elements of a valid contract

Answer 1

Offer, acceptance and consideration

Question 2

Ways in which agent / principal relationship may be created

Answer 2

consent
necessity
ratification

Question 3

define the principle of insurable interest

Answer 3

the legal right to insure arising out of a financial relationship recognised at law between the insured and teh subject matter of insurance

Question 4

What is meant by ‘utmost good faith’

Answer 4

duty to disclose all material facts relating to risk, whether or not asked

Question 5

material fact from an insurers point of view

Answer 5

would influence the judgement of a prudent insurer in fixing premium or take on risk

Question 6

4 options by which indemnity may be provided under a policy

Answer 6

cash payment
repair
replacement
reinstatement

Question 7

define proximate cause

Answer 7

active cuase which sets in motion a train of events etc

Question 8

6 requirements to be satisfied before contribution arises

Answer 8

2 or more indemn ity policies must exist
policies must cover ca common interest
policies must cover a common peril
policies must cover common subject matter
each policy must be liable for the loss
neither must contain a non contribution clause

Question 9

how might subrogation arise

Answer 9

may arise under tort, contract, statute or subject matter of insurance

Question 10

formula used to calc a claim subject to the pro rata condition of average

Answer 10

sum insured/value of goods @ time of loss x loss = claims settlement