Chapter 1 - The Influence of Legislation Flashcards
Explain legislation.
- all businesses are governed by legislation
- some laws apply to specific business activites
- others to all business activity
How do provincial laws pertain to legislation?
- the laws of each province govern insurance onctracts within the boundaries of that province
- an insurer’s business may be subject to the laws of more than one province
- an insurance professional must be aware of the variations in the acts and regulations applicable throughout canada
- the most important laws for property insuracnce are the insurance acts of the common law provinces and territories and parts of Book 5 of civil code of quebec
Explain how the insurance act operates.
- govern insurers and contracts for all classes of insurance, but parts of them address specific classes in some detail
- for example: aircraft, auto, liability, marine, and fire insurance
- words and formats of prov insurance acts are similar but not uniform
Explain what the act stipulates in regards to fire insurance.
- fire insurance applies to insurance against loss of or damage to property arising from the peril of fire in any contract made in the province except for insurance in several listed classes such as:
- aircraft
- auto
- sprinkler leakage
- theft
Briefly explain coverage regarding property insurance.
- generally includes loss or damage from other perils in addition to fire
- the parts of the insurance acts that concern fire insurance also apply to property insurance contracts
How does the province of Quebec operate their legislation?
- an act r-especting insurance deals with the technical aspects of forming and operating insurance companies
- legislation governing the terms of insurance contracts is found in the civil code of quebec
- Book 5, articles 1371-2643 is concerned with Obligations
- Articles 1371-1376 deal with obligations in general, our interest is in obligations arising out of contract
- Articles 1371-2388 deal with all classes of contract, including rights and obligations of parties to a contract
- Chapter XV of title 2 in Book 5 concerns insurance and comprises of articles 2389-2628
- Chapter XV contains general and specific provisions for insurance of persons, damage insurance, prop and liab insurance, and marine insurance
- Article 2389-2414 and 2463-2497 apply to prop insurance
When is a contract construed according to the law of the province?
If it is:
1) signed, countersigned, issued, delivered in the province
2) commited to the post office
3) to any carrier, messenger or agent
4) to be delivered, or handed over to the insured/insured’s assign/agent in the province
note: where the subject matter of an insurance contract is property in the province or an insurable interest of a resident of the province, the contract is deemed to have been made in the province.
Explain copy of proposal for insured under the provincal insurance acts.
- the insurer must furnish the insured a true copy of the insureds app or proposal for insurance on request
Explain consistency with insurance act.
- no insurer may make a contract inconsistent with the insurance act.
Explain imperfect compliance by insurer.
- an act/omission of the insurer in contravention of any provisions of the act does not render the contract invalid as against the insured
What are the policy contents?
Every policy shall contain:
1) name of insurer
2) name of insured
3) name of the person(s) to whom the insurance money is payable
4) amt, method of determining amt of premium for insurance
5) subject matter of insurance
6) indemnity for which the insurer may become liable
7) event on the happening of which liability is to accrue
8) effective date of insurance
9) expiry date or method by which it is to be fixed
Explain the process for which a disagreement between insurer and insured occurs. (provisions for appraisal)
- each party will appoint an appraiser and the 2 appraisers will appoint an umpire
- the appraisers will determine the matters in disagreement
- if they fail to agree, they will submit their differences to the umpire
- each party to the appraisal will pay its appointed apprasier and bear equally the expence of the appraisal and umpire
When will a judge decide to appoint an appraiser.
Where:
1) a party fails to appoint an apprasier within 7 clear days of being served written notice to do so
2) the appraisers fail to agree on an umpire within 15 days of their appointment
3) an appraiser or umpire refuses to act or is incapable of acting or dies
note: use of appraisal may arise under Stat Condition #11
Explain relief of forfeiture.
- where the insured has failed to do or omit what is required by stat condition concerning a loss, but the court finds it inequitable that the insurance should be forfeited or avoided as a result, the court may relieve against that result on terms it considers just
Describe waiver of contract terms.
WRITTEN WAIVER
- no contract term shall be deemed to be waived by the insurer in whole or in part unless the waive is stated in writing and signed by a person authorized for that purpose bt the insurer
NON-WAIVER
- neither the insurer nor the insured will be deemed to have waived any term of a contract by any act relating to the appraisal of the amount of loss, the delivery and completion of proofs, or the investigation or adjustment of any claim under the contract
Explain how non-payment of premium works.
CONTRACT STILL BINDING
- where the policy has veen delivered, the contract is binding on the insurer even if premium has not been paid and policy has been delievered by an officer/agent of insurer without authority
- insurer may sue for unpaid premium and deduct if from amt for which insurer is liable under contract
WHEN CHEQUE IS NOT HONORED
- the insurer may terminate contract forthwith by giving 15 days notice by reg mail or 5 days face-to-face as required by Stat Condition #5
Describe the provisions regarding proof of loss forms.
- an insurer in any event, not more than 60 days after receiving notice of loss, must furnish the insured/person to whom insurance money is payable with forms to make the required proof of loss
- an insurer that neglects/refuses to do so is guilty of an offence and the 60-day prohibition against an action for recovery by insured does not apply
- in furnishing the forms, the insurer admits neither liability nor that a valid contract is in force
Explain when action may be brought under contract provision.
NO ACTION BEFORE 60 DAYS
- no action may be brought for recovery of money payable under a contract of ins for 60 days after proof of loss or happening of event
- the insurer loses this protection if it neglects /refuses to provide a proof of loss form
Describe insurance as a collateral security for a mortgage provision.
NO COMMISSION FOR MORTGAGEE
- neither a mortgagee or any of its officers/employees is entitled to a commission for arranging insurance under which loss would be payable to the mortgagee as the mortgagee
- and no insurer/agent/broker may pay such a commission
- any insurer/other person that contravenes this section is guilty of an offence
What does a basic fire policy insure against?
1) fire ( actual ignition - visible flames)
2) lightning
- loss/damage to insured property
- does not cover destruction/loss to electril devices or appliances caused by lightning unless fire originates outside the article itself (and then only for loss/damage that occurs from fire)
3) explosion of natural, coal, manufactured gas
- covers insured property against loss/damage in a building not forming part of a gas works whether fire ensures or not
- coverage does not apply if explosion is a result of riot, civil commotion, or any other excluded causes for fire peril
What are the exclusions under fire peril?
1) goods undergoing any process involving the application of heat
2) riot, civil commotion, war, invasion, act of foreign enemy, hostiles, civil war, rebellion, revolution, insurrection, or military power
- precise meanings of many of these terms have been determined by courts
3) Radioactive contamination
- does not cover insured property for loss/damage caused by radioactive cont. directly or indirectly resulting from fire, lightning, or explosion
4) Damage to electrical appliances/devices caused by lightning
- unless fire originates outside the article itself, and then only for loss/damage that occurs from fire
What does the removal of insured property provision include?
- insurance acts extend coverage to insured property necessarily removed to prevent loss or damage or further loss/damage (by fire)
- the amt of insurance that exceeds the insurer’s liability for a loss automatically covers the property removed and any property remaining at the original location
- the extension applies for 7 days/unexpired term of contract, whichever is less
- this extension needs to be considered in conjunction with Stat Cond #9, Salvage
- the insured is obliged to take all reasonable steps ro minimize loss
- the insurer is obliged to contribute to the insured’s expenses and also to continue to insure poroperty that is removed
- insured must notify the insurer of the new location and the amts of insurance required at each of the unspecified locations if property moved wthere will remain longer than 7 days
- this will allow the insurer to adjust policy and determine appropriate rates of premium at new location
- the total amt of insurance on property, whether is is saved or detroyed by fire, is unchanged
- to accomplish this, the remaining amt of insurance i limited to the difference between the amt stated in the policy and the amt of loss actually suffered at described location
- the remaining amt is split to provide a seperate amt of each location at which insured property is situated
Define distribution.
- the splitting of a single amt of insurance to apply to property at more than on location
What is the Distribition Provision?
PAYMENT REDUCES INSURANCE
The distribution provision is based on 2 conditions:
1) The contract must be one in which the insurer agrees to pay a claim in certain described circumstances, and the amt of insurance is reduced accordingly.
- thus, the amt of insurance is only the difference between the original amt of insurance and the amt of loss already suffered when exposed property is removed
2) If the amt of loss is equal to or greater than amt of insurance for insured property, the full amt of insurance is payable.