Chapter 10: Policy Wordings & Renewals Flashcards
What do the operative clauses of a policy wording do?
Specify the cope of the cover in detail.
What are exclusions as far as policy wordings are concerned?
The section which specifies the things not covered by the policy.
What are conditions in a policy wording?
The things parties are obliged by throughout the duration of the policy.
Give some implied conditions of a policy.
- Must act as if uninsured
- Must take reasonable action, but not if this endangers them
- Must not hinder the insurers in the investigation of a claim
Give some examples of market exclusions.
- War and related perils
- Riot and civil commotion (not covered at all in NI)
- Radioactive contamination
- Terrorism
- Pollution
- Marine policies (i.e. if the loss is already covered by a marine policy)
- Contractual liability (if insured has contracted into wider relationships)
- Sonic bangs
Give some examples of common conditions in policy wordings.
- Duty of the insured - to follow the provisions of the wording
- Continuing duty of fair presentation (for property insurance)
- Role of the insured in the event of a claim
- Fraud - fraudulent claims will be rejected and the policy cancelled
- Reasonable precautions (to prevent a loss)
- Contribution (where other policies exist)
- Subrogation
- Arbitration
What is a policy excess?
The first amount of each and every claim for which the insured is responsible, paid by the insured.
What’s the difference between an excess and a deductible?
No difference, a deductible is just a large excess.
What is a franchise?
A fixed amount or period that acts as a threshold to determine whether claims are payable. Claims are only payable once they surpass this threshold.
Benefit policies payable in instalments will pay out for the length of the franchise if the franchise is surpsassed.
Where are franchises used?
- Monetary franchises are quite rare.
- Time franchises are used in sickness policies where the insurer wants to avoid paying out for trivial sickness of, say, less than a week.
What is a warranty?
An ongoing obligation on the insured to provide the insurer with information concerning the risk.
What happens in the event of a breach of warranty?
The insured can only avoid liability where the breach is only related to the loss (IA 2015).
In essence, the insured will not be liable while the warranty is breached, but will be once it’s remedied.
Give some examples of warranties.
- Of a fire policy - only a certain amount of paraffin can be kept on the property at any given time
- Of a theft policy - the building not be left unoccupied overnight
Where are implied warranties used?
In marine insurance only (that the vessel be seaworthy)
What is Pool Re?
A specialist reinsurance company designed to offer for cover due to terrorism.
What did the Deregulation Act 2015 modify in relation to motor insurance certificates.
The insured no longer has to surrender the certificate to the insurer if they cancel the policy.
What is contained in the information and facilities section of a policy?
- Definitions
- Customer service standards
- Complaints procedure
- Claims information (e.g. helpline number)
- Privacy notice
What if the insured can show that the breach of warranty could not have increased the risk?
The insurer may still be liable.
Can proposal forms become warranties?
No, effectively removing the idea of ‘basis of contract’ clauses.
What are the two types of conditions?
- Conditions precedent to the contract
- Conditions precedent to liability
What are conditions precedent to the contract?
Those which must be fulfilled prior to the contract being formed. E.g. insurable interest.
What is a continuing condition?
One which is in force throughout the whole period of insurance. E.g. the vehicle must be roadworthy throughout the contract.
What are conditions precedent to liability?
These must be complied with to have a valid claim.
Insurers may exclude liability for the claim, but not the contract as a whole.
What does the IA 2015 Section 11 state about conditions and warranties?
If a condition/warranty is breached it must be related to the loss that occurred for the insurer to relay on it.
However, if conditions/warranties define a risk as a whole, these can be used to exclude liability.
What option do insurers have in terms of the IA 2015 and conditions / warranties in commercial policies?
Non-consumer insurers can contract out of the IA meaning that any warranties and conditions can exclude liability - regardless of whether they are linked to the loss.
