Chapter 3 - Contract & Agency Flashcards
What is a claimant?
The party who brings civil action in a court of law
What is a defendant?
The party against whom action is brought in a court of law
Explain simply what is the definition of contract law in insurance?
Contract, enforceable by law, between insurer and insured. Premium and abiding by T&cs for payment on the happening of a specific event
What are the two main essentials of a valid contract?
- Offer and acceptance
- Consideration
Explain what is meant by unconditional acceptance
When an acceptance does not alter any terms. Contract form subjected to essential elements being present
What is meant by conditional acceptance
If there is a counter-offer… conditional on another premium/endorsement
Give a brief explanation of postal acceptance
Where the parties have agreed to use the post for the method of communication, the acceptance is complete at the point where the letter of acceptance is posted. Rule applies even if the letter is delayed, lost or destroyed.
Explain what is meant by consideration of a contract.
Where ‘each persons side of the bargain supports the contract’ often payment of money for one of the parties. Parties can exchange promises to perform certain acts or promises to do something in return for the act of another.
What are the 4 key factors for the insurance of a renewal contract?
- Customer must be treated fairly and notification of the end of contract given ‘in good time’
- Disclose the previous years premium
- Include text to encourage the consumer to check cover and shop around for best renewal
- Identify consumers who have renewed 4 times and give these consumers notice to shop around
These factors are introduced by FCA to benefit consumers as were often paying more than new customers.
What are the Insurer’s rights when cancelling an insurance contract?
Insurer can cancel a contract provided a letter of cancellation is sent to last known address giving notice of cancellation (recorded delivery). Invokes cancellation condition a pro-rata return of premium is sent to Insured with the unexpired portion of the risk.
What are the Policyholder’s rights when cancelling an insurance contract? Differences for at a distance and in-person.
Right to cancel without penalty or reason for most insurance purchased at a distance (internet/phone). For a payment protection contract must be within 30 days. Only have to pay for the service actually provided by the firm and cannot be charged for the cancellation.
For in person: Less common to have cancellation rights but is in some policy wordings. Insurer charge for period cover was in place & pro rata the premium for return and Insurer can charge flat fee to cover admin costs. If these are unfair, goes against Unfair Terms in Consumer Contracts Regulations 1999
Under Deregulation Act 2015, motor certs do not need to be returned if cancelled mid-term.
Explain terminating a contract of insurance through fulfilment
When there is a total-loss of the subject matter, the contract is terminated i.e. private car is burnt out, policy goes.
Explain the 4 types ‘avoidable contracts’ when terminating an insurance contract
- Can arise if Insured is in breach of a policy condition, Insurer can treat policy as void.
- Can also occur in relation to a claim, where the payment for the claim is void but the policy is still in place.
- Insurer can also void a contract entirely ‘ab initio’ as a consequence of non-disclosure or misrepresentation of information
- If no insurable interest, policy is automatically void but is not termination as contract was never in force
Explain what is meant by ‘breach of warranty’ when cancelling an insurance contract
According to the Marine Insurance Act 1906 warranty is a term which must be exactly and literally complied with by the Insured, whether material risk or not. Departure from the contract = breach.
Prior to Insurance Act 2015 - breach of warranty would discharge liability from Insurer automatically without need to terminate the contract but this was redressed as in favour of the Insurer. Now if there is a breach, cover only ceases from the time of breach to when it is remedied. Insurer is then liable to subsequent losses as long as they are not attributed to something that happened during the period of the breach
How do fraudulent acts affect the cancellation of an insurance contract?
Under IA 2015, Insurers can terminate a contract with effect from the fraudulent act without a return in premium. If it is a claim, can recoup amount paid, not liable and can choose to terminate contract from the date.
