Basic insurance legal principles and terminology Flashcards
What is the English law of contract
A law of deals or agreements , which involves the relationship between two parties
How does the English law of contract apply within insurance
an insurance contract is an agreement, enforceable by law,
between an insured and an insurer.
The insured will
* pay a premium and abide by T&Cs
- in return the insurer will agree to pay the insured a sum of money / provide something of monetary value if this specified event happens
what are the two MOST important Essentials of a valid contract
- offer and acceptance
- consideration
what are the other 6 important elements of a contract ( CCCLIP )
- Capacity to enter into legal relations - under 18/ mental disability ?
*Consensus ad idem (meeting of minds) - Do both parties believe they are agreeing to the same thing ?
Certainty - Are the terms of the contract clear and
unambiguous and are all parties entirely
clear as to their obligations
*Legality - Is the contract legal EG if it entails a criminal offence
- Intention to create a legal agreement - The parties are acting deliberately
- Possibility of performance - Can what is being agreed in the contract actually be done? -
A contract may be declared invalid or set aside if it is missing
any of these essentials.
what must all parties to a contract Act in ?
Good faith -
- ( that they must not mislead one another)
what type of contract are insurance policies
Simple contracts
What is a Unconditional acceptance
A contract is formed, subject to the other essential elements
being present.
To be effective, acceptance must be the final
and unqualified agreement to the offer.
What is a conditional acceptance
If new terms are introduced, the so-called acceptance
becomes a new offer (a counter-offer) which is open to
be accepted or rejected by the person who made the
original offer.
What is a Postal acceptance
where the parties have agreed to use
the post as the method of communication, acceptance is
complete at the point when the letter of acceptance is posted.
Contracts must be supported by ________ to be valid.
Consideration
what is consideration -
each person’s side of the bargain which supports the contract
** Payment of premium (insured) -> promise to pay valid claims (insurers)
What is Insurable interest
the legal right to insure arising out of a financial relationship
recognised at law, between the insured and the subject matter
of insurance.’
what are the features of insurable interest (FILS)
- Financial value
- insurers insurable interest
- Legal relationship
- Subject matter
what are the two aspects of subject matter
SBJ matter of insurance - What is actually being insured
* EG a building / or potential to be held liable for damage to someone else or their property
SBJ matter of the contract - The relationship the insured has with the SBJ matter of insurance
Legal relationship
The relationship of the insured with the subject-matter must
be recognised in law for insurable interest to exist.
Financial idea
The idea here is that should something bad happen then
the insured may have a financial downside
- This often due to something being damaged or destroyed , or they have legal liability which may result in damages against them
Insurer’s own insurable interest
Insurers have an insurable interest allowing them to purchase
reinsurance to protect them from the risks they have written.
What is required for the creation of insurable interest
Common law -
* Everyone has certain rights under
common law ( EG ownership or exposure to liabilities to others under the law of negligence.)
Contract -
situations in which we accept greater responsibilities and therefore liabilities than those imposed by common law.
Statute
There are some statutes which impose a positive duty, thus
creating an insurable interest
Statutes modifying insurable interest
*There are also statutes which restrict liability and, therefore,
restrict the financial value element of insurable interest.
What is the principle of good faith in pre-contract negotiations?
Both the proposer and the insurer must be open and transparent in sharing key information relating to the risk throughout contract negotiations.
Who does the principle of good faith apply to?
It applies equally to both the proposer and the insurer.
How is a consumer defined under insurance law?
A consumer is someone buying insurance wholly or mainly for purposes unrelated to their business, trade, or profession.
What duty does a consumer have under the Consumer Insurance (Disclosure and Representations) Act 2012?
A consumer must take reasonable care not to make a misrepresentation to their insurer.
What must an insurer prove if a consumer makes a misrepresentation?
The insurer must show that without the misrepresentation, they would not have entered the contract or would have done so on different terms.
Can an insurer decline a claim due to an innocent misrepresentation by a consumer?
no , innocent misrepresentation does not give the insurer the right to decline a claim payment for personal insurances.
