Chapter 2: Basic Insurance Legal Principles and Terminology Flashcards
Define ‘insurance contract’
An agreement, enforceable by law, between an insured and an insurer
Define ‘valid contract’
A valid contract must have offer anc acceptance, consideration, the intention to create a legal agreement, the possibility of performance, capacity to enter legal relations, consensus ad idem, legality, and certainty
Define ‘consensus ad idem’
‘meeting of minds’- do both parties think they are agreeing to the same thing?
What happens ifa contract is missing one of the essentials of a contract?
It is void ab initio
Define ‘good faith’
Both parties must not mislead one another
What is contract certainty?
All parties involved in the contract should know exactly what the terms are before inception, and their should be some evidence of this issued to the insured
Define ‘offer and acceptance’
A contract comes in to existence when it is accepted unconditionally
What happens if there is conditional acceptance?
If new terms are introduced, this becomes a counter offer, which rejects the original offer and must be accepted unconditionally
Which case law is relevant to conditional offers?
Hyde v Wrench 1840
If a contract is accepted through the post, when is acceptance complete?
When the letter was posted, not when it arrived- Household Fire Insurance Co. v Grant (1879)
Define ‘consideration’
“each person’s side of the bargain which supports the contract”
What is the case law relevant to consideration?
Currie v Misa (1875)
What is insurable interest?
The right to insure, arising out of a lrgal relationship between the insured and the subject matter of the insurance
Define ‘Subject-matter of insurance’
WHat is actually being insured (not necessarily what is on the contract!)
When do you need insurable interest in life insurance?
At inception
When do you need insurable interest in marine insurance?
At the time of loss
When do you need insurable interest in general isurance contracts?
At both inception and loss
How can insurable interest be created?
Common law, contract, or statute, such as Settled Land ACt 1925, or Reoair of Benefice Buildings Measure Act 1972
What are examples of statute that limits insurable interest?
The Carriage of Goods by Sea Act 1971, Hotel Proprietors Act 1956, Carriers Act 1830
What is the duty of good faith?
No one actively misleads another- the proposer discloses all material facts to the insurer, and the insurer cannot add new non-standard terms, or withhold the knowledge of a discount if a risk is improved
What is a consumer?
Someone who is buying insurance for purposes unrelated to their business, trade, or profession
What does the Consumer Insurance (Disclosure and Representations) Act 2012 say?
The consumer has to take reasonable care to not make a misrepresentation to their insurers- either a careless or reckless misrepresentation
When is a misrepresentation deliberate or reckless?
If the consumer knew it was untrue, or did not care, and knew the matter was relevant to the insurer, but did not care
What happens if an insurer can prove the consumer was deliberate and reckless?
They can avoid the contract, refuse claims, and may not need to return the premium
What happens if an insurer can prove the consumer representation was careless?
Depends on what they would have done without the representation- they can avoid the contract, change its terms, or reduce the claim
Where can you find the law for disclosure and representations in non-consumer insureds?
Insurance Act 2015
What does the Insurance ACt 2015 say?
Insured must make a fair presentation to the insurer, must disclose every material circumstance the insurer shoudl know
What does Carter v Boehm (1766) say?
The insured has to make an accurate representation (about a fort in Sumatra)
According to the Marine Insurance Act 1906, define ‘material’
A circumstance is material if it “would ingluence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk”
