Chapter 2 - The Role of Policy Wording Flashcards
What is a joint insurance policy?
Two or more parties are insured and they have the same interests
What is a composite policy?
Two or more parties involved but interests are different
When does an insured have unrestricted access to a contract?
When they do not require the main insured to claim on the policy also
Why is clarity on who has obligation important?
If not clear, it may be breached unintentionally
How would a breach of policy by an insured affect other insureds in a joint policy?
Contract is indivisible therefore all insureds treated equally
How would a breach of policy by an insured affect other insureds in a composite policy?
Other insureds do not suffer invalidation for one insured’s breach
What does the Third Party (Rights against Insurers) Act 2010 make possible?
Provides rights to claim on an insolvent insureds insurance can be transferred to injured third party
What does the Rights of Third Parties Act 1999 state?
Third parties may claim on a contract if the contract is enforcable by a third party and may appear to confer a benefit on the third party (intentionally)
What is consensus ad idem?
Both parties at the time the contract was entered into are in complete agreement
What is contract certainty?
complete and final agreement of all terms by both parties at the time they enter into the contract
What are the contract certainty code of practices for a single insurer?
- when entering into contract all terms are clear by the time the offer is made / accepted
- after entering into contract documentation provided to insured promptly
- demonstrate achievement of 1 and 2
- contract changes need to be certain and documented promptly
What are the contract certainty code of practices for multiple insurers?
- when entering contract, must include an agreed basis outlining each insurer’s participation
- after entering, final participation must be provided to each insurer promptly
- insurer and broker have responsibility to resolve exceptions to 1 and 2 as soon as practical and without undue delay
What are the benefits of a standardised MRC?
- mandatory headings make sure key data not missed
- guidance for what should go in each section avialble
- felxibility to add extra sections for lob specifics
- data will always be in the same place in document
- evidence of insurance for the client
What is a service of suit clause?
Compulsory wording in US insurance contracts stating insurer’s are prepared to be sued in cour
What are side letters?
Used to include matters deemed sensitive where one party does not want information shared with wider parties which may have access to contractual documentation
How else can side letters be used?
- clarification: to confirm additional detail not known when main document finalised or to clarify certain points
- variation: to deal with last minute changes instead of changing the whole document
What is reverse engineering for wordings?
Direct insurance is a middle man, essentially just between insured and reinsurer but direct there for regulatory
Define a consumer of insurance
Someone buying insurance other than for their trade, business or profession
What does the Consumer Rights Act 2015 say?
Contract term is transparent if it is in plain and intelligible language.
If a term in a consumer contract could have other meanings, meaning most favourable to consumer takes precedence
Language should be clear, fair, and not misleading
Why would insurers use non-London Market wordings?
- model wording from overseas is wider and customer wants that
- placement lead by non-London insurer
What are issues to look out for if using overseas wordings?
- interpretation (e.g. which country’s law it refers to)
- legality of clauses
What are the two types of meanings of a term in a contract?
ordinary and technical / legal meaning
What is ejusdem generis?
“of the same kind” - what else would reasonably be contained in a list that ends with etc
What is contra proferentum?
Ambiguities will be interpreted or construed against the drafter
Who is the drafter of the slip if a broker puts the document together?
The insurer as they are given the opportunity to read and detect any ambiguities
How are inconsistencies in a contract dealt with?
If additional clause conflicts with unamended wording, additional claise will be taken as the intent
What does a wording specialist do?
Review contracts to see that they are clear, fair, non-misleading, cohesive and consistent
What are the four main objectives of solvency II?
- deeper integration of the EU insurance market
- policyholder protection
- increased competitiveness
- better regulation
