Chapter 2 Flashcards
What is contract law?
An agreement, enforceable by law, between 2 or more people
What is indemnifying the insured?
Insurer pays claims of the insured if they suffer loss/damage covered by the terms of insurance
What are the 9 essentials of a valid contract?
- Those who made contract need to have capacity
- It was intended to be a contract
- It has to be legal
- Possibility of performance - e.g. it can’t be a ridiculous contract
- Certainty - contract duties must be clear
- Offer - needs to be an offer + can be counter-offer which would invalidate a previous offer
- Acceptance - needs to be communicated when contract is accepted
- Consensus Ad Idem - both parties need to believe they’re agreeing to the same thing
- Consideration - insured pays the premium + the insurer gives cover + promises to pay valid claims
What is conditional acceptance in a contract?
When there’s a counter-offer, the contract is now open to be accepted or rejected
What is postal acceptance of a contract?
Acceptance is complete when the letter of acceptance is posted + touches the bottom of the postbox
What is contract certainty?
All parties involved in the contract need to know what the terms are before inception + need evidence of the contract issued to the insured a short time after inception
What is evidence of contract certainty?
•Market Reform Contract / a slip
•Or a Broker Insurance Contract
What are 3 features of insurable interest?
- Subject-matter
•Of insurance - what’s being insured (e.g. a car)
•Of the contract - relationship insured has w/ what’s being insured - Need for legal relationship between insured + subject-matter
- Financial value - if something bad happens, then insured may have financial downside
How do insurer’s have their own insurable interest?
They want to protect risks they’ve written, so they purchase reinsurance
What are the 4 ways insurable interest can be created?
- Through statue (law) - e.g. repair of benefice buildings measure act 1972
- Through common law - e.g. the law of negligence
- Through ownership - if you own something
- Through contract - e.g: if renting a house n contract says you need to insure
How does timing affect insurable interest?
•Need to have ownership at inception of policy + at time of claim for insurable interest to exist
•Marine insurance: can have insurable interest in expectation of having good, but can’t make claim until ownership
•Life insurance: need insurable interest at inception of policy to take insurance for someone else
What is good faith in contracts?
All parties shouldn’t mislead one another + should be transparent
What is the insurance act 2015?
•Insured is comercial company
•Companies need to present the risk fairly as they have more sophisticated understanding of insurance matters
What is the consumers insurance (disclosure + representation) act 2012?
•Insured is a consumer
•insureds need to answer questions truthfully, but we don’t expect them to tell us something if we don’t ask as they don’t know much about insurance
What facts don’t need to be disclosed by the insured as the insurer should/could know?
•Facts of law
•Facts of public knowledge
•Facts that lessen the risk
•Facts the insured doesn’t know
•Facts covered by the policy terms
•Spent convictions
Which insurances require continuing disclosure of info by the insured?
•Commercial property - about increased risk of damage to property or removal of property to another location
•Motor - about material changes by the insured
•Public liability - about extensions of their activities for cover to apply
What is the road traffic act 1988?
Prohibits the insurer from avoiding liability on the grounds of certain breaches of good faith, so innocent victims of accidents are compensated
If an insured (consumer) hasn’t disclosed info deliberately that would affect the policy, what can the insurer do?
Insurer can decline all claims + act like the policy didn’t exist
If an insured (consumer) hasn’t disclosed info carelessly, what can the insurer do?
Insurer could up the premium or reduce a claim
If an insured (commercial) hasn’t disclosed info deliberately that would affect the policy, what can the insurer do?
Insurer can void the policy + keep premiums
If an insured (commercial) hasn’t disclosed info, but it wasn’t deliberate, what can the insurer do?
•If insurer wouldn’t have written the policy, then can void policy but return premium
•If insurer would have changed the terms, then the contract is treated as it has those terms
Who creates the Market Reform Contract (slip) and what is it?
•The broker
•Summery of risk details for the insurer should
How does estoppel link to insurance?
Insurer mustn’t lead insured into false sense of security concerning the policy validity
What is proximate cause?
• The is about determining the true cause of loss, which is the main/dominant cause of loss
•It is the active efficient cause that sets in motion a train of events
