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IF1 - Insurance, Legal and Regulatory > Chapter 3 - Contract And Agency > Flashcards

Chapter 3 - Contract And Agency Flashcards

1
Q

3 Contact and Agency

  1. What type of law do legal aspects of insurance relate to?
A

English Law.

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2
Q

3 Contact and Agency

  1. Who is a Claimant?
A

The party who brings a civil action in a court of law.

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3
Q

3 Contact and Agency

  1. Who is a Defendant?
A

The party against whom an action is brought in a court of law.

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4
Q

3 Contact and Agency

A Contract Law

  1. What is a contract?
A

An agreement,

enforceable by law,

between two or more persons

to do, or abstain from doing,

some act or acts,

their intention being to operate legal relations

and not merely to exchange mutual promises.

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5
Q

3 Contract and Agency

A1 Essentials of a Valid Contract

  1. What must there be for a contract to be valid and enforceable?
A

Offer and Acceptance

Consideration

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6
Q

3 Contract and Agency

A1 Essentials of a Valid Contract

  1. Name six important principles of a contract?
A

Intention to create legal relations

Capacity to contract

Consensus Ad Idem (genuine meeting of minds)

Legality of Purpose

Possibility of Performance

Certainty of Terms

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7
Q

3 Contract and Agency

A1 Essentials of a Valid Contract

  1. What does Void Ab Initio mean in relation to contract law?
A

(From the beginning)

If a contract is missing any essential elements it is declared invalid from the start

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8
Q

3 Contract and Agency

A1 Essentials of a Valid Contract

  1. What does it mean to say all parties must act in good faith?
A

They must not mislead one another. However, it is for the buyer to satisfy themselves regarding the quality of the product.

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9
Q

3 Contract and Agency

A1 Essentials of a Valid Contract

  1. Does the seller have a legal duty to only comply with recognized product quality standards?
A

Yes.

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10
Q

3 Contract and Agency

A1 Essentials of a Valid Contract

  1. Is a document always necessary?
A

No. Only in certain circumstances.

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11
Q

3 Contract and Agency

A1 Essentials of a Valid Contract

  1. Does a policy need to be issued for cover to exist?
A

No.

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12
Q

3 Contract and Agency

B Offer and Acceptance

  1. When does a contract come into existence?
A

When one party makes an offer which the other party accepts.

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13
Q

3 Contract and Agency

B1 Unconditional Acceptance

  1. What is an Unconditional Acceptance?
A

When an acceptance does not alter any of the terms of the acceptance.

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14
Q

3 Contract and Agency

B1 Unconditional Acceptance

  1. What must an acceptance be to be effective?
A

A Final and unqualified agreement to the offer

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15
Q

3 Contract and Agency

B2 Conditional Acceptance

  1. What is a Conditional Acceptance?
A

When new terms are introduced

The so-called acceptance becomes a new offer which is open to being accepted or rejected by the person who made the original offer

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16
Q

3 Contract and Agency

B3 Postal Acceptance

  1. When is acceptance completed if post is the method of communication?
A

At the point when the letter of acceptance is posted

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17
Q

3 Contract and Agency

B4 Offer and Acceptance in Practice

  1. Can insurers allow their agents to accept liability on their behalf even before all formalities have been settled?
A

Yes.

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18
Q

3 Contract and Agency

C Consideration

  1. What is a Consideration?
A

Some right, interest, profit or benefit accruing to one party

Or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other

Put simply, it is each persons side of the bargain.

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19
Q

3 Contract and Agency

D Renewal of Insurance Contracts

  1. What must insurers alert their customers to under the fair treatment of customers principle?
A

The fact that cover will expire.

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20
Q

3 Contract and Agency

D Renewal of Insurance Contracts

  1. When should policy renewal be offered?
A

“In good time”

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21
Q

3 Contract and Agency

D Renewal of Insurance Contracts

  1. Rules introduced by the FCA in 2017 require insurers renewing general insurance products to provide what to customers?
A

The previous years premium on renewal notices

Text encouraging customers to shop around

Additional notice to customers who have renewed four times in a row

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22
Q

3 Contract and Agency

E Cancellation of Insurance Contracts

  1. What are policy cancellations governed by?
A

The written terms and conditions in the policy.

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23
Q

3 Contract and Agency

E Cancellation of Insurance Contracts

  1. What is the policyholder entitled to if insurance is bought at a distance?
A

A “cooling off” period.

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24
Q

3 Contract and Agency

E1 Insurer’s Rights

  1. What does the cancellation condition in most general insurances allow the insurer to do?
A

Cancel a policy with 14 days notice.

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25
Q

3 Contract and Agency

E1 Insurer’s Rights

  1. What does the insured receive if the insurer decides to invoke the cancellation condition?
A

A pro rata return of premium, representing the unexpired portion of the risk

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26
Q

3 Contract and Agency

E1 Insurer’s Rights

  1. Is the insured entitled to a return premium if they have acted fraudulently?
A

No.

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27
Q

3 Contract and Agency

E2 Policyholders’ Rights

  1. What right do consumers have regarding cancelling insurances purchased at a distance?
A

Right to cancel without penalty and without giving reason

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28
Q

3 Contract and Agency

E2 Policyholders’ Rights

  1. When does the policyholders right to cancel without penalty or reason not apply?
A

Travel and baggage insurance

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29
Q

3 Contract and Agency

E2 Policyholders’ Rights

  1. Do policyholders have more rights where cover has been purchased face to face?
A

No, they have less rights

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30
Q

3 Contract and Agency

E3 Other means of Terminating Contracts of Insurance

  1. What can cause contracts to be terminated?
A

Fulfillment

Voidable contracts

Breach of warranty

Fraudulent acts

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31
Q

3 Contract and Agency

E3A Fulfilment

  1. Give an example of fulfilment. What happens when fulfilment occurs?
A

Total loss of the subject matter, e.g. an insured vehicle is burnt out so completely it effectively ceases to exist

The policy is automatically terminated

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32
Q

3 Contract and Agency

E3B Voidable Contracts

  1. When do voidable contracts arise?
A

When the insured is in breach of a policy condition

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33
Q

3 Contract and Agency

E3B Voidable Contracts

  1. Give an example of a voidable contract.
A

The insured is required to maintain equipment in good working order and don’t

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34
Q

3 Contract and Agency

E3B Voidable Contracts

  1. Can failure to disclose or misrepresentation void a contract?
A

Yes

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35
Q

3 Contract and Agency

E3B Voidable Contracts

What happens if there was no recognized insurable interest at the outset?

A

The policy is automatically void

36
Q

3 Contract and Agency

E3C Breach of Warranty

  1. What is a Warranty in an insurance contract?
A

A term which must be exactly and literally complied with by the insured, whether material to risk or not.

Part of the Marine insurance act

37
Q

3 Contract and Agency

E3C Breach of Warranty

  1. Departure from the exact requirements of a warranty, even for reasons of necessity, constitute what?
A

A breach.

38
Q

3 Contract and Agency

E3C Breach of Warranty

  1. Are claims before the breach of a warranty still valid?
A

Yes

39
Q

3 Contract and Agency

E3C Breach of Warranty

  1. Can cover be restored if a breach of a warranty occurs?
A

Yes, cover is effectively suspended from the time of the breach until the breach has been remedied

40
Q

3 Contract and Agency

E3D Fraudulent Acts

  1. What can an insurer do if a fraudulent claim is made?
A

They’re not liable to pay the claim

They can recover any amounts already paid for the claim

They can choose to terminate the contract from the date of the fraudulent act

41
Q

3 Contract and Agency

E3D Fraudulent Acts

  1. What can the insurer do if it chooses to terminate the contract because of a fraudulent act?
A

They can refuse liability for all matters occurring after the date of the fraudulent act

They don’t have to return any premiums

42
Q

3 Contract and Agency

E3D Fraudulent Acts

  1. Does fraud committed by an individual affect the other individuals benefitting from a group policy contract?
A

No

43
Q

3 Contract and Agency

F Agency

  1. What is an Agent in a legal context?
A

A person who is authorised by a Principal to bring that Principal into a contractual relationship with another, third party.

44
Q

3 Contract and Agency

F Agency

  1. Will the Agent have any duty once the contract has been concluded?
A

Generally speaking, no.

45
Q

3 Contract and Agency

F1 Contacts and the Agent

  1. In Law, who is an Agent?
A

Anyone who acts on behalf of another person

46
Q

3 Contract and Agency

F2 Methods of creating an Agent/Principal relationship

  1. What are the three methods of creating an agent/principal relationship?
A

Agency by Consent
Agency by Necessity
Agency by Ratification

47
Q

3 Contract and Agency

F2A Agency by Consent

  1. What is the most typical way of establishing an agent/principal relationship?
A

Agency by Consent

also known as Agency by Agreement

48
Q

3 Contract and Agency

F2A Agency by Consent

  1. How is Agency by Consent created?
A

Both parties enter into a legally enforceable agreement

49
Q

3 Contract and Agency

F2A Agency by Consent

  1. What do insurers issue when they enter an Agency by Consent relationship?
A

Terms of Business Agreement (TOBA)

50
Q

3 Contract and Agency

F2A Agency by Consent

  1. What does a Terms of Business Agreement (TOBA) include?
A

Terms and Conditions

Level of Authority

How much money is to be handled and accounted for

51
Q

3 Contract and Agency

F2A Agency by Consent

  1. Can Agency by Consent be created in an implied way?
A

Yes

52
Q

3 Contract and Agency

F2A Agency by Necessity

  1. When does Agency by Necessity arise?
A

Where a person is entrusted with someone else’s goods and it becomes necessary to act in a certain way to preserve the property in an emergency

53
Q

3 Contract and Agency

F2C Agency by Ratification

  1. What type of situation leads to Agency by Ratification?
A

Where an agent acts without authority, but the principal accepts the act as having been done on their behalf

54
Q

3 Contract and Agency

F2C Agency by Ratification

  1. Where Agency by Ratification is done, can the Principal vary the terms of the contract or pick and choose which elements to accept?
A

No, they must ratify the whole contract

55
Q

3 Contract and Agency

F3 Relationship of Agent to Principal

  1. In general, do agents represent more than one contracting party?
A

No, they generally represent only one

56
Q

3 Contract and Agency

F3 Relationship of Agent to Principal

  1. What type of agent is the exception and may represent more than one of the contracting parties?
A

Independent Insurance Intermediaries

They may, at different times, act for the insured and the insurer

57
Q

3 Contract and Agency

F3A Agent of the Insured

  1. What services does an Independent Intermediary provide when acting as an agent for the insured?
A

Help arrange insurance
Assist with claims

Give advice on cover
Give advice on placing insurance
Give advice on how to make a claim

58
Q

3 Contract and Agency

F3A Agent of the Insurer

  1. When does an Independent Intermediary act as an Agent for the Insurer?
A

Handling proposal forms

Surveying property on the insurers behalf

Collecting premiums

Paying claims

59
Q

3 Contract and Agency

F4 Duties of an Agent

  1. What duties does an Agent have to their Principal?
A

Obedience

Personal Performance

Due care and skill

Good faith

Accountability

60
Q

3 Contract and Agency

F5 Duties of a Principal

  1. What duties does a Principal have to its Agent?
A

Remuneration - in insurance this usually paid as commission

Indemnity - an agent has the right to claim indemnity for all expenses incurred from the principal

61
Q

3 Contract and Agency

F6 Undisclosed Principal

  1. Does English Law permit an Agent to act for an undisclosed principal while seeming to act on their own behalf?
A

Yes, the terms between the principal and agent must be clear and set out though

62
Q

3 Contract and Agency

F7 Consequences of an Agents’ actions

  1. What are the three extents of agent authority?
A

Actual authority

Apparent authority

No authority

63
Q

3 Contract and Agency

F7A Actual Authority

  1. What are the two types of Actual Authority?
A

Express

Implied

64
Q

3 Contract and Agency

F7A Actual Authority

  1. How does Express Authority arise?
A

Arises from terms of an agency agreement

65
Q

3 Contract and Agency

F7A Actual Authority

  1. Must the terms of Express Authority always be written? How are they expressed in insurance?
A

No, they can be oral as well.

In a Terms of Business Agreement (TOBA)

66
Q

3 Contract and Agency

F7A Actual Authority

  1. When does Implied Authority apply?
A

Implied authority can reflect a person’s job title or the wearing of uniform/name badge, displaying a company logo, all of which imply authority

67
Q

3 Contract and Agency

F7B Apparent Authority

  1. If an agent has never been appointed, but claims to act on behalf of a principal, does this create a binding contract?
A

No

68
Q

3 Contract and Agency

F7B Apparent Authority

  1. What does Apparent Authority require?
A

It requires the principal’s conduct to indicate that the agent is acting on their behalf

69
Q

3 Contract and Agency

F8 Termination of Agency

  1. Name some ways an Agency may be terminated.
A

Mutual agreement between the principal and the agent

The agency being withdrawn by the principal

The death, bankruptcy or insanity of either part

70
Q

3 Contract and Agency

F8 Termination of Agency

  1. What important step must a principal do if an agency is terminated?
A

Notify all relevant parties of the termination

71
Q

3 Contract and Agency

G Terms of Business Agreement (TOBAs)

  1. What is a TOBA?
A

One of the key documents of an insurance policy

72
Q

3 Contract and Agency

G1 General Requirements

  1. What should all TOBAs do?
A

Be clear and succinct

Reflect the business relationship

Define and allocate responsibilities and rights

Ensure compliance with regulatory or statutory rules

73
Q

3 Contract and Agency

G2 Status

  1. What obligation should a TOBA place on the broker?
A

Obligation to advise the insurer of their regulatory status and any change to that status

74
Q

3 Contract and Agency

G2 Status

  1. What restrictions should be clearly stated in the TOBA?
A

Restrictions on the classes of business applicable to the TOBA

75
Q

3 Contract and Agency

G3 Commission

  1. With regards to commission, what should be clearly stated in the TOBA?
A

Any scale of rates

If commission is variable

The minimum notice period for changes

The date commission will be paid

76
Q

3 Contract and Agency

G4 Material Information

  1. What must an intermediary/agent do with material information? And what is the only exception to this rule?
A

Provide all material information to the insurer as agent of the policyholder

Where the insurer has granted delegated authority

77
Q

3 Contract and Agency

G5 Premiums and Credit

  1. What does the Premiums and Credit section of the TOBA deal with?
A

Responsibility for the Credit risk

78
Q

3 Contract and Agency

G5 Premiums and Credit

  1. Under FCA rules, what does an insurer accept when they agree to a Risk Transfer Agreement
A

Full responsibility for the premium, even though it is not physically transferred to them until later

79
Q

3 Contract and Agency

G5 Premiums and Credit

  1. What does the Premiums and Credit section of a TOBA specify?
A

Terms of credit

Terms for cancelling

Responbilities in the event of a breach by the policyholder

The brokers obligation to release all statutory documentation

80
Q

3 Contract and Agency

G6 Claims Money

  1. What does the Claims Money section of a TOBA specify?
A

Whether the insurer or the broker is to bear the credit risk in relation to claims money held by the broker

81
Q

3 Contract and Agency

G7 Broker/Client Relationship

  1. What does the ABI suggest insurers consider including in TOBAs?
A

A non-solicitation clause, effectively barring the insurer from acquiring business currently placed through the broker, for five years.

82
Q

3 Contract and Agency

G8 Direct Administration Arrangements

  1. What does the Direct Administration section of a TOBA clarify?
A

It reaffirms that the insurer should deal with the policyholder via an intermediary.

The Insurer’s role in dealing directly with the policyholder is limited to fulfilment of regulatory or contractual responsibilities.

83
Q

3 Contract and Agency

G10 Termination

  1. What does the Termination section of a TOBA specify?
A

The arrangements for termination where there is no fault

The arrangements for termination where there is fault

84
Q

3 Contract and Agency

G10 Termination

  1. Give examples of where there is fault for termination?
A

Suspicion of fraud or dishonesty

Change of regulatory status

Failure to remedy a breach

Bankruptcy

85
Q

3 Contract and Agency

G12 Additional Sections

  1. Name additional sections that can be to a TOBA?
A

Accounting procedures
Arbitration options
Signature
Indemnity

IF1 - Insurance, Legal and Regulatory (9 decks)

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