Chap2 Flashcards
Principle of indemnity
The individual is restored to the same financial position as before the loss
What are the 5 principles of insurance?
1) Principle of indemnity
2) incurable interest
3) reasonable expectation
4) subrogation
5) utmost good faith
Insurable interest
The insured loss must have a financial impact on the insured
Reasonable expectation
The insurer will provide the agreed upon coverage for the expected loss
Subrogation
If the damage is caused by negligence of a third party, the insurer has right to recover its loss from said third party
Utmost good faith
No intentional misleading or withholding of critical information
What are the 4 basic characteristics of an insurance contract?
1) pooling of loss
2) loss must be fortuitous
3) transfer of pure risk
4) indemnification of pure losses
Contract (law)
Agreement between 2 parties that can be enforced in a court of law
5 elements of a valid contract
1) Offer and and acceptance
2) Consideration
3) Legal objective
4) Competent parties
5) Intention to create legal relationship
Offers and acceptance (insurance contract)
The offer is made by the person who wants to buy the insurance
Consideration (insurance contract)
In the case of an insurance: premiums. A life insurance is not valid until the insurer has received the first premium
Legal objective (insurance contract)
For a contract to be binding the purpose of the contract must be legal
Competent parties (insurance contract)
A contract involves a meeting of the mind for which all parties must be able to consent
Negligence
Failure to exercise standard of care
Standard of care
Care required of a reasonably prudent person
4 elements of negligence
1) duty of care
2) failure to perform that duty
3) proximate cause
4) damages
4 defences against negligence
1) contributory negligence
2) comparative negligence
3) last chance rule
4) assumption of risk
Contributory negligence
The insured person’s conduct falls bellow the standard of care for their protection and contributed to the injury
Comparative negligence
Both injured and injuring party share damages
Last chance rule
The injuring party had a last clear chance to avoid the accident but failed to do so
Assumption of risk
The person recognize and understand the danger inherent to a particular activity
Imputed negligence
Negligence resulting for a party’s special relationship with the original negligent party
6 imputed negligences
1) Employees employer relationship
2) vicarious liability
3) family purpose doctrine
4) joint venture and partnership
5) dram shop law
6) Res ispa loquitur (the thing speaks for itself)
Tort law
Civil wrong or injuries either intentional or by negligence
2 conditions under which a contract can be voided
- discharge
- voidable or unenforceable contract
4 reasons for a contract to be discharged
1) performance
2) agreement
3) frustration
4) breach
6 reasons a contract may become void or voidable
- mistake
- misrepresentation
- concealment
- warranty
- Duress
- undue influence
Common mistake
Both parties make the same mistake
Mutual mistake
Each party makes a different mistake
Misrepresentation
One of the parties makes a wrong statement about some material element of the contract
Concealment
Hiding of material element that invalidate the contract
Warranty
A statement that is part of the contract and is guaranteed to be true in all respects
Duress
Using coercion and intimidation to force another person into a contract
Undue influence
A person in a dominant position deprives another person of an independent decision
Aleatory V commutative contract
Theoretically in a commutative contact the considerations are exchanged at the beginning of the contract and are of equal value. Insurance contract are aleatory
Bargaining V adhesion contract
There is no bargaining in an insurance contract
Unilateral V bilateral contract
In a unilateral contract such as an insurance contract, only one party makes a legally enforceable promise that can’t be canceled by that party
9 elements of an insurance policy
1) declaration
2) definitions
3) insuring agreement
4) exclusion and restrictions
5) conditions
6) miscellaneous provision
7) endorsement and riders
8) deductible
9) co-insurance requirement
