Chapter 1 Flashcards
What 3 things must be present for legal contract?
Offer, acceptance and consideration
Why does good faith govern insurance contracts rather than caveat emptor (buyer’s beware)?
Based on promise to do something in event of certain circumstances, promise not tangible until loss occurs
What is the Latin for good faith?
Uberrima Fides
What does good faith do?
Imposes duty on proposer to provide all information asked for
What is the Marine Insurance 1906 definition of material fact?
That which would influence judgement of prudent insurer in fixing premium or deciding to take a risk
What was the position under the Marine Insurance Act 1906
Disclose all material facts
What information doesn’t need to be disclosed?
Facts of law / public knowledge, spent convictions, improve risk, insured waived rights, survey should have revealed, insured didn’t know, covered in policy terms or insurer already knows (including their employees)
What is the position under CIDRA 2012?
Consumer must take care not to make a misrepresentation, answer all questions asked by insurer and answer fully and accurately - abolishes duty to volunteer material facts
What is a consumer?
Individual who purchases insurance for own private needs and not related to profession, business or trade
What is the position under the IA 2015?
Creates duty to make a fair presentation of the risk, still need to disclose relevant info even if insurer doesn’t ask as often transacted by brokers who are paid to provide advice
What is a fair presentation of the risk?
- Disclose every material circumstance know or ought to know - failing this need to notify insurers they need to enquire further
- Ensure clear and accessible with adequate signposting
- All MC substantially correct and made in good faith
What did the IA 2015 define a material circumstance as for non-consumers?
Material if would influence judgement of prudent insurer in determining to take risk and what terms
FCA Guidance 2021 fair treatment of vulnerable customers definition
Vulnerable customer = due to personal circumstances eg poor health or literacy are especially susceptible to harm
What does IA 2015 not require insured to disclose?
Diminishes risk, insurer knows, ought to or presumed to know, insurer waives
What is the effect of contracting out of IA 2015?
Both parties agree IA 2-25 provision don’t apply then reverts back to Marine Insurance Act 2015, burden on insurers be transparent when explaining implications - if not then there’s no legal effect
What is the duration of the duty of fair presentation?
Starts when negotiations begin and lasts throughout life of policy, change mid-terms then duty revived and new contract is formed
What is a breach under CIDRA 2012?
Took reasonable care then no breach and no remedy, only a qualifying breach leads to remedies - depends on insured’s mindset
What is a qualifying breach under CIDRA 2012?
Insured failed to take reasonable care and insurer entered insurance contract, breach either:
- Deliberate / reckless and knew or didn’t care was
- Careless
What is the remedy for a deliberate / reckless breach under CIDRA 2012?
Void policy and refuse claims
Burden of proof with insurer
What is the remedy for a careless breach under CIDRA 2012?
Depends on what insurer would have done:
- Accepted on different terms, policy treated to include those
- Charged higher premium, proportionately reduce claims
When doe insurers have a remedy for a breach under IA 2015?
Insured breached duty and this resulted in insurer entering into contract or on different than would have done
Remedy depends of if deliberate / reckless
What is the remedy for deliberate / reckless breach under IA 2015?
Insured knew / didn’t care deliberate / reckless
Insurer avoid policy and keep any premiums paid
What is the remedy for a not deliberate / reckless breach under IA 2015?
- Insurer not written policy, avoid but return premiums
- Accepted on different terms, contract now includes those
- Charged higher premium, proportionately reduce claims
What remedies are available if the misrepresentation is fraudulent?
Known as concealment
Policy is voidable, keep premiums and sue for damages, or ignore breach of good faith so policy continues and pay claim
What is a peril?
That which gives rise to a lose
What is a hazard?
That which influences operation of a peril
- Physical - nature of risk or measurable dimension
- Moral - attitude and conduct of people
How do insurers obtain information?
- Proposal forms
- Brokers
- Surveys
- Supplementary questionnaires
- Meetings with clients
- Call centres
- Internet
