Chapter 3

Question 1

Duty of Good Faith

Answer 1

Both parties must act in good faith, meaning honest and accurate disclosure

Question 2

Consumer vs Non-Consumer

Answer 2

Consumer - an individual purchases insurance mainly for personal, non/professional purposes

Non-Consumer - contract apply to entities like businesses

Question 3

Types of Motor Insurance Cover

Answer 3

• RTA or “Act Only”
• Third Party Only
• Third Party Fire and Theft
• Comprehensive

Question 4

Recital Clause

Answer 4

Explains the nature of the contract, specifying that the policy is between the insurer and the policyholder, and third parties cannot enforce rights under the contract

Question 5

Operative Clauses

Answer 5

• duration of the policy
• territorial limits
• may combine with the recital clause
• some policies extend cover to EU countries per EU directive

Question 6

DOC Cover

Answer 6

• must have owner’s permission
• does not cover damage to the vehicle being driven
• exclusions include having a valid certificate of insurance for the other car
• excludes coverage if the car is disposed or or beyond economical repair

Question 7

Personal Accident Cover

Answer 7

• covers accidental injury resulting in death, permanent loss of sight, or loss of limbs
• most paid by an insurer in any period is £5000
• no coverage for persons over 79 or under 18

Question 8

Personal Effects Cover

Answer 8

• pays up to £100 for personal belongings lost or damaged due to an accident, fire or theft
• no coverage for money, stamps, tickets, documents or certificates

Question 9

Medical Expenses Cover

Answer 9

pays up to £250 for medical expenses for anyone carried in the insured vehicle injured in an accident

Question 10

Foreign Use Cover

Answer 10

• EU minimum coverage
• full coverage can be extended to other countries for an additional premium

Question 11

Car Sharing

Answer 11

• the car carried no more than 8 passengers
• the car is not used as part of a business of carrying passengers
• the total contributions received do not involve profit

Question 12

Car Laid Up

Answer 12

Cover can be suspended, with exceptions for fire and theft

Question 13

General Exclusions for Motor Policies

Answer 13

• use by an unauthorised driver
• using the vehicle for an unauthorised purpose
• driving without a valid license
• liability from a contract agreement not covered by law
• losses due to war or nuclear

Question 14

Avoidance of certain terms and right of recovery

Answer 14

The insurer may recover any amount it has to pay under the RTA that it would not otherwise covered due to a breach of policy terms

Question 15

Different classes of use for a Motor Policy

Answer 15

Class 1/A - social, domestic, pleasure and personal business use

Class 2/B - social, domestic, pleasure and business use for the policyholder and their employer

Class 3/C - social, domestic, pleasure and business use for the policyholder, employer or business partner

Question 16

Motorcycle TP Liability

Answer 16

• some policies may not indemnify employers
• DOMC is usually limited to TP cover
• DOMC cover applies only for motorcycles over certain engine sizes
• DOMC is not valid outside home territorial limits

Question 17

Motorcycle AD, Fire and Theft

Answer 17

• accessories and spare parts are only covered if on the vehicle or stolen with it
• a minimum excess, typically £100, applies

Question 18

Motorcycle General Exclusions

Answer 18

• driving restricted to the policyholder or named persons
• coverage in the hands of the motor trade or parking services is often not provided
• sidecars are covered if declared and requested

Question 19

Commercial Vehicle Policies

Answer 19

cover follows motor car policies but differs in scope due to higher claim frequency and severity

Question 20

Commercial TP Liability Limits

Answer 20

• unlimited liability for death or bodily injury
• property damage liability is often lower for commercial vehicles, often £1.2 million or higher

Question 21

Commercial Vehicles Cover

Answer 21

• covers unloading/loading by the driver/attendant, but not by others
• coverage is limited to events occurring on the road or pavement
• typically does not extend indemnity for non-driving use
• no DOC usually provided
• excludes liability for damage to goods carried, the insured vehicle or items under the custody

Question 22

Indemnity to Hirers

Answer 22

hire using a vehicle without a driver required indemnity for negligence

Question 23

Cover for Trailers

Answer 23

• TP cover provided for trailers when towed by the insured vehicle
• detached trailers may require additional cover

Question 24

Contingent Liability

Answer 24

• provides coverage when a person relies on another’s insurance, but it becomes inoperative
• example: when a principle hires a contractor and the contractor’s insurance fails

Question 25

Occasional Business Use

Answer 25

- provides primary insurance for employees using personal or third-party cars for their employer’s business - SD&P is excluded

Question 26

Fleet Policies

Answer 26

- insures multiple vehicles owned by an organisation under a single policy - examples: delivery vehicles, cars for sales representatives, forklifts

Question 27

Motor Trade Insurance

Answer 27

- covers businesses such as car sales, repair shops and auto electricians - main covers are road risks and internal risks - TPD limit can vary between £1.2m and £5m

Question 28

Breakdown Policy Requirements

Answer 28

- vehicles must be serviced, maintained and have a valid MOT certificate - trailers and caravans must meet size, weight and towing specifications

Question 29

Breakdown Insurance Exclusions

Answer 29

- cost of parts or labor not incurred roadside - pre-existing breakdowns or unroadworthy vehicles at policy inception - costs for locksmiths, tires or body glass specialists - recovery from ditches, bogs, sand, snow or water

Question 30

Uninsured Loss Recovery

Answer 30

Covers pursuing compensation for losses not covered by motor policies, such as alternative transport costs or PI claims

Question 31

Before The Event (BTE) Legal Expenses Insurance

Answer 31

- taken out before an incident occurs - covers legal costs for insured drivers and passengers pursuing or defending claims related to the insured vehicle

Question 32

Prospects of Success

Answer 32

Means it is more likely than not that the insured person will recover damages, make a successful defence, or win an appeal

Question 33

Legal Expenses Insurance Policy

Answer 33

Covers: - damage to the car or personal belongings in it - death or bodily injury to the insured person Indemnity limits range from £50k to £100k

Question 34

Legal Expenses Exclusions

Answer 34

- claims deliberately caused by insured - costs incurred without the insurer’s agreement - legal actions not agreed upon by the insurer - fines, penalties or damages ordered by a court - prosecutions for dishonesty, violence or drug/alcohol related offences

Question 35

Legal Expenses Conditions

Answer 35

- appeals must be reported at least 10 working days before the deadline - incident must be reported no later than 180 days after the insured becomes aware of them - cover doesn’t apply if the insured can claim under another policy

Question 36

ATE Legal Expenses Insurance

Answer 36

- obtained after an accident or dispute - it covers the policyholder’s own and the opponents legal cost if they lose

Question 37

Conditional Fee Agreements

Answer 37

- solicitors don’t charge the claimant if they lose, but may recover a success fee - since April 2013, success fees are no longer recoverable from the losing party - general damages for non-pecuniary loss were increased by 10% though up to 25% may be used to pay solicitor fees