Chapter 13

Question 1

What is meant by ‘Policy contest’

Answer 1

a court action to determine the validity of a life insurance contract.

Question 2

Define the difference between performing vs contesting a life insurance contract

Answer 2

performing the contract means not paying out the death benefit based on the rules of the contract( exclusions) contesting the contract means not paying out d/t validity of the contract.

Question 3

Define what is meant by material misrepresesntation

Answer 3

it is misrepresentation that has the insurers known the truth- the contract would have been voided.

Question 4

Most jurisdictions require that an insurer prove what 3 elements, to be considered material misrepresentation

Answer 4

!. applicant failed to disclose or misrepresent a fact

2. the fact was within the person’s knowledge at the time of misrepresentation
3. the fact was material- or relevant- to the insurer’s acceptance of the risk,

Question 5

Define representation

Answer 5

it is a statement made by contracting parties that can be used to invalidate the contract if the statement is not substantially true and the statement induced the other party to enter into the contract.

Question 6

What is the purpose of a misstatement of age or sex provision?

Answer 6

it describes the actions an insurer will take to adjust the amount of the policy benefit in the event that the age or sex of the insured is incorrectly stated.
(usually adjusting deth benefit - premium amount that would have been paid)

Question 7

Name 4 other barries that may arrise to a contest on the grounds of material misrepresentation

Answer 7

1. an agents knowledge of misrepresentation is imputed to the insurer
2. insurer delays in acting on its knowledge of misrepresentation
3. insurer fails to inquire more about ambiguous answers on the app
4. insurer does not provide the policy owner with a copy of the insurance application.

Question 8

What is the incontestability provision?

Answer 8

is a life insurance provision that denis the insurer the rights to avoid the contract on the grounds of material misrepresentation in the application after the contract has been in force for a specified period of time.

Question 9

What is the contestable period

Answer 9

the time period within which the insurer has the right to avoid a life insurance policy on the gournds of a material misrepresentation in the application.

Question 10

How is a typical incontestability provision written on life insurance contracts?

Answer 10

we will not contest the validity of this policy after it has been in force during the lifetime of the insured for two years from the date of issue.

Question 11

How long is the contestable period?

Answer 11

2 years (max)

Question 12

What is considered the effective date of a contestable period?

Answer 12

date of issue. If not specified the date will be judged in a situation more favourable for the client and would be considered the date of effect (signed contract date)

Question 13

What happens to the contestable period when a policy is reinstated?

Answer 13

it restarts, and is usually the same as the original policy.

Question 14

What is a collusion?

Answer 14

an agreement between two or more people to defraud another person of his rights.

Question 15

Name some additional grounds for contesting a contract an insurer can take while the contract is in force.

Answer 15

• defect in the formality of the contract

- mistakes

Question 16

Mistakes on a contract can be characterized as either mistakes of law or of fact. What is a mistake of law?

Answer 16

occurs when, with full knowledge of the facts, the parties makde a mistake as to the legal effect of those facts.
(has not effect on the validity of the contract)

Question 17

Mistakes on a contract can be characterized as either mistakes of law or of fact. What is a mistake of fact

Answer 17

Occurs when one or both parties is mistaken as to the existence of something or as to the identity of something or someone.
(either party can contest a contract’s validity on these grounds)

Question 18

What is a unilateral mistake?>

Answer 18

a mistake made by only one of the parties to the contract.

- the effect on the contract depends on the type of mistake.

Question 19

What is a bilateral mistake?

Answer 19

occurs when both parties are mistaken when they enter into a contract. They are either common or mutual

Question 20

What is a common mistake?

Answer 20

when two people make the same mistake.

• if its about the identity or existence of the subject matter- the contract is void.
• if tis about general characteristics bout the subject matter of the contract- its valid.

Question 21

What is a mutual mistake?

Answer 21

occurs when both parties to a contract make a mistake, but they make different mistakes.
- contract is not voided if both parties are in agrrement as to what the terms of the agreement should have been

Question 22

If a beneficiary is convicted of wrongfuly killing the insured (but not originally intended too when the policy was created). Are the benefits paid out?

Answer 22

In this situation yes, but they will be paid to another beneficiary or estate.

Question 23

Define legal remedies

Answer 23

primarily involve the payment of money damages to injured parties

Question 24

Define equitable remedies

Answer 24

are based on moral rights and concepts of justice.

Question 25

NAme common equitable remedies granted to plaintiff’s in civil actions involving life insurance contracts (6)

Answer 25

1. rescission
2. reformation
3. interpleader
4. declaratory
5. judgement
6. restitution

Question 26

A party who has the right to avoid a contract can do so by what 2 methods?

Answer 26

1. notifying the other party of the decision to rescind the contact
2. returning the other party the consideration given for the contract.

Question 27

What is reformation?

Answer 27

an equitable remedy in which a written contract is rewritten to express the original agreement of the contracting parties.

Question 28

A person who seeks reformation of a contract must present the court with clear and convincing evidence as to the terms of the parties’ actual agreement. What does this mean

Answer 28

means the evidence must show that the truth of the facts asserted is highly probably and leaves no reasonable doubt as to the truth of those facts.

Question 29

Define interpleader

Answer 29

a court proceeding under which an insurer that cannot determine the proper recipient of a policy proceeds pays the proceeds to a court and asks the court to decide the proper recipient.

Question 30

Define a declaratory judgement

Answer 30

is a judicial statement that declares or denise the parties legal rights but does not include specific relief of any means to enforce those rights.

Question 31

What is restitution?

Answer 31

a remedy under which a party is ordered to return property to its owner or to the person entitled to it.
- can be etiher legal or equitable remededy.