C1B Flashcards
What is needed for a contract to be legally binding?
Offer
Acceptance of the offer
Consideration
What are many contracts dealt with?
Caveat Emptor aka Buyer Beware
What is meant by the principle of utmost good faith?
imposes a duty that any party wanting to take out insurance (aka proposer) must provide all information asked by the insurer, make fair presentation to the insurer
Difference between consumers & non-consumers in regards to Utmost Good Faith?
Consumers - ensures all information provided in response to the insurers questions is FULL and ACCURATE
Non-consumers - ensure that a ‘reasonable search’ has been carried out of the proposer’s business and important information has been SIGNPOSTED
Define a Material Fact?
Marine Insurance Act 1906 states ‘Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk’
Consumer Insurance (Disclosure & Representations) Act 2012 - CIDRA - consumers & material facts
Consumers are only obliged to answer questions asked by them by insurers in the PROPOSAL FORM, but they must do so FULLY & ACCURATELY
Insurance Act 2015 - non-consumers & material facts
Non-consumers - a circumstance is material if it would influence the judgment of a PRUDENT INSURER in determining whether to take the risk and if so on what terms
Examples of Material Information / Circumstances
Special or unusual facts relating to the risk
Any particular concerns which are leading to the request for insurance
CIDRA 2012 & definition of Material Fact
Can be classed as material if it could influence the judgment of a PRUDENT insurer
What is the core change under CIDRA
It abolishes the duty on consumers to volunteer material facts. They must answer all questions asked by the insurer fully and accurately & they must take care not to make a MISREPRESENTATION
Define a consumer
A consumer can be defined as an individual who purchases an insurance policy primarily for their own private needs & not related to their profession, business or trade
Insurance Act 2015 Key Difference
Makes provisions for non-consumers (eg. commercial risks and businesses)
Insurance Act MAIN POINTS
Duty on non-consumers to make a FAIR PRESENTATION OF THE RISK
What are the 3 key elements of a fair presentation of risk
1) Proposer must disclose every material circumstance which it knows or ought to know
2) Proposer must ensure its representation of the risk is CLEAR & ACCESSIBLE - relates to how information is presented hence SIGNPOSTING
3) ALL material circumstances represented must be substantially correct & made in good faith
When does the duty of fair presentation start?
When negotiations begin (aka when quote is requested) & lasts throughout the life of any policy
What happens to the duty of fair presentation if there is a MTA?
The duty of disclosure if revived as if a new contract is formed
Insurers must draw attention to insured’s answers to questions & confirm there are still accurate & explain significance of non-disclosure & misrepresentation
Does the duty of fair presentation exist at renewal?
Yes
Does the duty of fair presentation exist in the event of a claim?
Yes
What are the 2 categories of breaching the duty of fair presentation?
Non-disclosure
Misrepresentation
What happens if the breach was deliberate or reckless?
The insurer could avoid the policy & refuse claims
What happens if the breach was careless
The insurer could alter their terms or proportionally reduce the amount paid for a claim
What happens if the breach is fraudulent? (aka concealment)
Policy is voidable
Insurer can keep the premium & sue for damages
insurer can ignore the breach of good faith in which case the policy continues & would pay the claim
What is a peril?
That which gives rise to a lose
What is a hazard?
That which influences the operation of the peril
What is a physical hazard?
Relates to the physical nature of the risk
What is a moral hazard?
Arises from the attitude & conduct of people
What is the most common way of attaining information?
A Proposal Form
When are risk surveys used?
To obtain information where the risk is too large / complex
When are supplementary questionnaires used?
When dealing with specific aspects of risks eg. hairdresser where the extent of dyes / tints may require further investigation
Under the Insurance Act 2015, what type of breach allows the insurer to proportionately reduce the amount paid for a claim?
A breach that is neither deliberate or reckless
What is consideration?
It is a benefit received by one party in return for the promise of the performance of an act by another
For a commercial customer, the meaning of the term ‘material circumstance’ is defined in
Insurance Act 2015
Misrepresentation on the part of the insured involves
making a statement about the risk to be insured which is substantially false
The Consumer Insurance (Disclosure and Representations) Act 2012 applies to
Consumers Only
The Insurance Act 2015 specifically requires a proposer to ensure that its representation of the risk is:
Full & Accurate
The principle of ‘caveat emptor’ applies to
contracts in general but not insurance contracts.
Under the Consumer Insurance (Disclosure and Representations) Act 2012, when assessing whether a consumer has taken reasonable care, insurers must consider
how clear the insurer’s questions are
