Chapter 2

Question 1

Contra proferentem

Answer 1

A legal term that provides that any ambiguity in a contract must be interpreted against the person who drew the contract because she had the opportunity to make it clear

Question 2

Replacement cost clause

Answer 2

A provision, generally in property insurance coverage, to provide a substitute of the damaged or loss property with something similar, including having the same but not necessarily identical to the property being replaced, without extra cost to the insured.

Question 3

ACV

Answer 3

The fair market value of property, taking into account factors that might augment or reduce the value of the property in question. ACV is usually calculated in 1 of 3 ways

1. Cost to repair or replace less depreciation
2. Fair market value
3. Consideration of all relevant evidence of the value of the damages property

Question 4

Manuscript policies

Answer 4

A specifically tailored policy to meet the needs of the insured.

The Underwriters should understand that some features of the manuscript wording may be standard while others are not.

The Underwriters should also look for typographical errors, contradictions between parts of the manuscript wording and any lack of continuity or consistency in the manuscript. Underwriters may also draft their own manuscript wording on behalf of the insurer to design coverage uniquely for a particular risk

Question 5

Why do wordings of policy evolve ?

Answer 5

To reflect the change in industry wordings. Policy wordings change over time to reflect changes in society and risks.

Question 6

Describe an example of a liability crisis

Answer 6

Before the liability crisis of the mid 1980s, liability policies were drafted on an occurrence basis that is, these policies responded to claims for any loss that occured during the period of the policy, even if the occurence was discovered and the claim made after the policy expired.

The liability crisis was a shortage of capacity causes in part by losses.

Question 7

Define contract

Answer 7

An agreement or promise between two or more persons that is intended to be legally enforceable and is constituted by the acceptance by one or more party of an offer made to him by the other party to do or abstain from doing a specific act. The offer and acceptance may either be expressed or be inferred through the conduct of the parties

Question 8

Define consideration

Answer 8

The value recieved to bind a contract. It is an essential part of a binding contract. Consideration is either expressed or implied. The money or whatever is being used in substitution of money, paid for the article or contract is the consideration

Question 9

List 5 elements of a contract

Answer 9

1. Agreement ( offer and acceptance)
2. Capacities of the parties to contract
3. Consideration
4. Genuine intention (meeting of the minds)
5. Legality of the object

Question 10

List the 4 requisites for a contract in Quebec

Answer 10

1. Consent
2. Capacity to contract
3. Cause of contract
4. Object of contract

Question 11

Insurable interest

Answer 11

An interest that the insured must have in the subject matter of the insurance purchased so that if the event insured against occurs the insured will suffer a pecuniary loss.

Question 12

Indemnity

Answer 12

A contract expressed or implied to repay in the event of a loss. The insured neither gains nor loses.

Question 13

Utmost good faith

Answer 13

A legal principle calling for the highest standards of integrity on the part of the insured and the insurer

Question 14

Declarations

Answer 14

Statement included in a policy that are agreed to by the insured and form the basis of the insurance contract

Question 15

List the 5 main sections of insurance policy sections

Answer 15

1. Coverage summary
2. Insuring agreement
3. Statutory conditions
4. Policy considerations
5. Signature clause

Question 16

Describe coverage summary what info does it contain?

Answer 16

It contains:

• The parties to the contract
• The commencement date, term, and expiry date
• The premium and rate
• The amounts insured

Question 17

Describe what the insuring agreements contain

Answer 17

• The subject matter of the insurance - description of the property covered
• the perils insured against
• the exclusions
• the circumstances under which the j shred may recieve the proceeds of the insurance

Question 18

Describe statutory conditions

Answer 18

Statutory conditions are applicable to automobile, accident and sickness, and fire insurance policies. They must be printed on every one of these policies but do not necessarily on the intern cover notes or binders or endorsements, although these documents will always be subject to these conditions in the same way as the policy would be.

Question 19

Describe policy conditions

Answer 19

Well the policy conditions are sometimes considered as part of the ensuring agreements they are referred to separately to draw attention to them. Certain former policy conditions have overtime become statutory conditions but statutory conditions do not apply to every class of insurance

Question 20

Describe signature clause

Answer 20

The clause is found immediately following the ensuring agreements or the conditions. A policy is signed either underhand or under seal, but the former method is more general. There is for practical purposes no difference between the two methods. The policy is signed by the inters only, the insurance signature is not required.

Question 21

Describe subscription policy

Answer 21

A single policy covering a risk that is divided among the number of insurers, the policy is issued by the lead company. ( Usually the one with the largest percentage) and signed by all participating companies

Question 22

List five components of the underwriters toolkit

Answer 22

1. The environment
2. The legal system
3. The business
4. The product
5. The risk

Question 23

Describe the environment in the toolkit ?

Answer 23

To understand a risk, and underwriter must be able to place it inappropriate context. The largest context in which to understand a risk it is political, social, and economic environment.

Question 24

Describe the six concepts of understanding the legal system in the underwriters toolkit

Answer 24

1. All three sources of long Canada: , statute law, and the civil code of Quebec
2. The division of jurisdiction between federal, provincial, and territorial levels of government
3. The structure of the federal, provincial, and territorial court systems
4. The distinction between civil law and criminal law
5. Aspects of civil law including the law of tort and especially the law of contract
   6 the insurance contract itself

Question 25

Describe the business components of the toolkit of Underwriters

Answer 25

The business in this context refers both to the insurance industry and to any number of industries that produce risk for the underwriter to accept or reject. The underwriter should understand as much as possible but both the structure and the dynamics of those industries

Question 26

Describe the product in the underwriters toolkit

Answer 26

In broad terms, the insurers product is Insurance - the promise of indemnity in the event of a loss, or piece of mind. More specifically, the insurers product is the insurance policy - the evidence of the contract it undertakes with the insured.

Underwriter should understand the legal aspects of the insurance contract and be familiar with the many types of policies that may Express a contract of insurance. Different kinds of risk require different kinds of policies.

A risk represents a need for insurance, and the insurer meets the need by providing insurance. And insurance policy balances the risk

Question 27

Describe the risk in the underwriters toolkit

Answer 27

The underwriter needs to understand as much as possible about the applicant and about the perils and hazards the risk faces

Question 28

List 5 skills an underwriter needs to apply their knowledge

Answer 28

1. Technical skills
2. Analytical skills
3. Communication skills
4. Organizational skills
5. Other requirements ( cooperation with other professionals).