Chapter 3 Flashcards
What is insurable interest?
Insurable interest is the requirement that the policyholder must have a financial or legal interest in the subject of the insurance to ensure the contract is valid.
What is consideration in an insurance contract?
Consideration is the exchange of value between parties; the insured pays the premium, and the insurer promises to pay valid claims.
What key legal reforms were introduced by the Insurance Act 2015?
The Insurance Act 2015 introduced the duty of fair presentation and proportionate remedies for breaches, replacing the harsh avoidance rules from the Marine Insurance Act 1906.
What did the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA) change?
CIDRA replaced the duty to volunteer information with a duty of reasonable care when answering insurer’s questions for consumer policies.
What is the duty of fair presentation under the Insurance Act 2015?
The insured must disclose every material circumstance they know or should know to the insurer in a clear and accessible way before the contract begins.
What are the remedies for breaches of the duty of fair presentation?
Proportionate remedies include reducing the claim amount, imposing different terms, or avoiding the contract if the breach was deliberate or reckless.
What happens if a breach of warranty occurs under the Insurance Act 2015?
The insurer can only avoid liability if the breach directly relates to the loss, and the loss occurred during the breach of warranty.
What is a condition precedent in insurance?
A condition precedent is a policy term that must be fulfilled before the insurer’s liability is triggered, such as notifying a claim promptly.
What change did the Enterprise Act 2016 introduce?
It amended the Insurance Act 2015 to include a requirement for insurers to pay claims within a reasonable time, or they could be liable for additional damages.
What is the significance of utmost good faith in insurance contracts?
Both the insurer and the insured must be honest and transparent with each other during contract negotiations, especially regarding material facts.
What is the significance of the Marine Insurance Act 1906 in modern insurance law?
It was the main statute governing insurance contracts, particularly emphasising the duty of utmost good faith and remedies for breaches, before being updated by the Insurance Act 2015.
How does the Insurance Act 2015 address deliberate or reckless misrepresentation?
If the insured is found to have deliberately or recklessly misrepresented information, the insurer can avoid the contract and refuse all claims while retaining the premium.
What happens in cases of careless misrepresentation under the Insurance Act 2015?
The insurer can apply proportionate remedies, such as reducing the claim payout or imposing different terms, depending on what they would have done if they had known the true facts.
What are warranties in insurance, and how were they treated before the Insurance Act 2015?
Warranties are strict conditions in a policy. Before the Insurance Act 2015, any breach of warranty would automatically void coverage, even if unrelated to the loss.
How did the Insurance Act 2015 change the treatment of warranties?
The Act abolished the automatic voiding of cover due to breach of warranty. Now, insurers can only refuse claims if the breach directly relates to the loss.
