Chapter 2 Flashcards
Consensus ad idem (meeting of minds)
Do both parties believe they are agreeing to the same thing
Good faith
Both parties must not mislead one another.
Contract certainty
Requires all parties involved in the contract to know exactly what the terms are before inception and that some sort of evidence of the contract is issued to the insured a short time after inception.
Evidence of contract (2)
1) Market reform contract - slip
2) Broker insurance document
Unconditional acceptance
When terms re not changed by the potential insured
Conditional acceptance
When there is an acceptance but conditional to a change to the proposed cover proposed by the insured
Postal acceptance
Acceptance is complete when letter is posted
Insurable interest
the legal right to insure arising out of a financial relationship recognised at law, between the insured and the subject-matter of insurance.’
Life insurance contracts
Insurable interest must exist at inception but need not exist at
the time of a loss.
Marine insurance contracts.
Insurable interest must exist at the time of a loss but need
not exist at inception although a reasonable expectation of acquiring one is required.
General insurance contracts.
A general rule that insurable interest must exist both at
inception and at loss; however, an anticipated interest may be sufficient at inception.
Estoppel
legal term used for a bar or impediment that precludes a person from
asserting a fact or a right
Proximate cause
there are occasions when the cause of the loss is not so easily defined, either because there is a chain of events or there is more than a single cause.
Indemnity
financial compensation sufficient to place the insured in the same financial position after a loss as they enjoyed immediately before the loss occurred.
Agreed value policies
In agreed value policies the value of the subject-matter of the insurance is agreed at the start of the contract and the sum insured is fixed accordingly.
First loss policies
the insured believes that the full value of the insured property is not really at risk, in other words, a total loss or even a very substantial loss is unlikely at least in relation to some perils that are being insured against. In this case, the insured may
Sum insured
The maximum amount that can be recovered under a property insurance policy is limited to the sum insured.
What is an excess
An excess is an amount that is deducted from each claim and is paid by the insured.
Deductible vs Excess vs Franchise
Policy with limits of US$1m and a $100,000 deductible.Insurers will only ever pay US$900,000 any one loss and the insured will pay US$100,000 (plus any amount over and above US$1m).
1 mill limit and 100,000 excess - insurer will pay 1 mill and insured will pay US$100,000 (plus any amount over and above US$1m).
Policy of 1 mill and franchise of 100,000 - if above franchise level insured will pay 1 mill and insured pays nothing
Contribution
Contribution is defined as ‘the right of an insurer to call upon others similarly, but not necessarily equally, liable to the same insured to share the cost of an indemnity payment’.
Subrogation
the right of an insurer following payment of a claim, to take over the insured’s rights to recover payment from a third party responsible for the loss.
