Chapter 7- Insurance Contracts And Key Terms Flashcards
What happens if there are inconsistencies in proposal forms/ insurance policies
An endorsement (ie a document or note recording a change in the insurance contract) is likely to overrule anything in the printed policy
A policy document will take precedence over a proposal form
An express term of the contract will overrule any implied term
What is a breach of pre contractual information duties
The breach normally arises from a failure to supply full and accurate information in the negotiations before the contract has come into existence
What is a breach of contract
The breach arises from a failure to comply with a term of the contract itself
What two ways are terms traditionally classified in the general law of contract
Conditions and warranties
In the general law of contract what is the effect of a breach of warranty
As it is only a minor term if it is broken the injured party has a right to claim damages but it’s not in general to treat the contract as repudiated
In the general law of contract, what happens if there is a breach of contrition
As it’s more of an important aspect of the agreement i.e. goes to the route the victim has a right not only to claim damages also to terminate the contract
What two principles of interpretations are used by the courts
Statutory roles i.e. rules laid down in legislation; and
common-law rules i.e. rules developed by the courts
Some statutory control of the interpretation of contracts is imposed by what
Consumers rights act 2015
Under statutory rules/ interpretation of context. Which make the following changes to consumer contracts
Removal of the requirement of the term must not have been individually negotiated before term could be challenged on the grounds that it was unfair
Prohibition from referring to either return the consumer contract or consumer notice to exclude or restrict liability for death or personal injury resulting from negligence
Provision neighbour and unfair term is binding on the consumer
What are the common law rules of interpretation of insurance policies
Ordinary meaning (the same as the literal rule that applies to the interpretation of statutes)
Technical or legal meaning
The importance of context
Ambiguity the contract profentem rule
Inconsistencies
Under common-law rules of interpretation of insurance policies what is the technical or legal meaning
Where the presumption is that words are intended to bear their common meaning may not apply if the word in question has a clearly established technical meaning
Under common law rules of interpretation of contract what is the importance of context
it a meaning is doubtful, the court will consider the immediate context and if necessary the wider context. Also known as the noscitur a sociss rule.
Under common law rules of interpretation of contract what is the contra proferentem rule
where words are ambiguous the clause is construed against the party who proposed it (i.e the drafter of the clause) so that the other party is given the benefit of the doubt
Under common law rules of interpretation of contract what happens under the contra proferentem rule with ambiguity
an ambiguous wording will generally be construed in favour of the insured.
what happens under the contra proferentem rule with ambiguity in the case where a broker is acting for the insured
if they put forward causes that he wants to incorporate in the policy, any ambiguity will be interpreted in favour of the insurer because the broker will be acting as an agent of the insured when proposing the clauses.
What is a warranty
Essentially a promise made by the insured relating to facts or to something which they agree to do
What is a continuing warranty
They are applied by insurers to ensure that some aspect of good housekeeping or good management is observed by the insured
What are these an example of:
Rubbish to be cleared up each night
The burglar alarm to be switched on
Continuing warranty
Other than good housekeeping what also would be a function of the continuing warranty
To ensure that certain high risk practices are not introduced without the insurers knowledge
What are these examples of:
that no inflammable oils may be stored
no work carried out a greater height than 12 metres
no woodworking should take place
Continuing warranty
Does a warranty have to be exactly complied with?
Yes, if cover is broken cover is suspended from the moment the warranty is breached until it is remedied- even if the breach did not cause the loss
What happens if a breach can’t be remedied i.e a ship sinks after the insured breaches the warranty
the insurer is not liable for any loss that occurs from when the warranty is breached until it is fixed.
Under breach of warranty are insurers liable for losses attributable to something that happened during the time that the insured breached the warranty?
No
What two ways can warranties be made?
Express warranties
Implied Warranties
What is an express warranty
Where they can expressly stated in the policy itself. The court made decided that a term in a contract is a warranty even if they don’t use the word warranty
What are the standards that the courts apply to determine whether or not a term which is not expressly stated is a warranty are:
Whether it goes to the root of the transaction
Whether the terms bears materially on the risk
Whether damages would be an adequate remedy for breach
Under what policies can implied warranties be found in only
Marine insurance
What are ‘basis of the contract’ clauses
used to convert the statements made by the insured in the proposal form into warranties.
Under ‘basis of the contract clauses’ what did a reference in the contract to the effect of ‘all the statements made by the insured in the proposal form are the basis of the contract’
that it is sufficient to render the statements as warranties.
Is it possible to create an insurance warranty by ‘basis of the contract clauses’
No the insurance act abolished them
What is a condition precedent to contract
It’s one which states that the policy will not come into effect if the insured failed to comply with the term in question
What is it an example of
A life insurance policy may contain a condition that the policy will not come into effect until the premium is paid
A condition precedent to the contract
What is a condition precedent to liability
It allows insurers to discharge themselves from liability for a particular loss if a term is broken
What is a collateral condition
Is regarded as a minor term a breach of which will still entitle the insured to make a claim under the insurance contract
What happens if it is a serious breach of collateral condition
If it is that serious that it goes to the root of the contract the insurer may repudiate the contract
Under collateral condition what is normally the case for a breach
The insurer will have to pay for the insureds loss but may claim damages
What is this an example of
A clause in an employers liability policy which requires insured to keep a record of wages in a proper wages book
A collateral condition
If A clause does not refer to the words condition precedent or does not contain some strong words such as the insurer will not be liable for the loss if the insured does not comply with condition what sort of condition would this be
collateral condition
What is an exception clause
They excuse insurance from liability when the loss is caused by particular peril or when some other circumstances apply
What is it an example of
A fire policy makes exclued fire caused by earthquake and a theft policy makes exclude theft of money or theft involving collusion by employee of the insured
An exception clause
Can an exception clause be broken by the insured
No but they also do not place any obligation on the insured
What is a suspensive condition
When cover is suspended during the period of the insured breached the clause and remedied the breach
What is the difference between a suspensive condition and an exception clause
A suspensive condition is like exclusion and cover a suspended when not a day to wear an exclusion does not to spend, but simply narrows it
What happened under a breach of warranty
The insurer has no liability in respect of any loss that occurs or is attributable to something that happens after a warranty has been breached but before the breach is remedied
For a breach of warranty does the insurer have to prove a connection between the breach and any loss has occurred unless the warranty is intended to reduce the risk of a loss
No
What happened for a breach of condition precedent to the contract
It is never fulfilled and the contract never comes into existence
What happened if there is a breach of condition precedent to liability
The insurer is automatically discharged from liability for the claim which is tainted by the breach but the policy remains in force
What happens if there is a breach of collateral condition
The remedy depends on the seriousness of the breach but in most cases the insurers are not entitled to reject the claim
If the breach is not serious enough to terminate the policy insurer cannot reject the claim and has to pay for the loss but in my claim damages
What is a breach of a suspensive condition
Cover is suspended for as long as the insured fails to comply with a condition but resumes if and when they start to comply with it again
What does a promissory Estopel mean
That an insured he was broken a warranty cannot enforce the contract unless they can prove that the insurers clearly indicated that they do not intend to rely on the breach of warranty as a defence to further liability under the policy
What are examples of insurers actions that would support an argument of waiver by Estopel
Knowing of the breach, the insurers;
Issued a renewed the policy
Accepted further premiums
Advised the insured about future loss prevention
Resisted the claim on grounds other than breach of warranty
Eva loss occurs and the term has not been complied with under terms not relevant to the actual loss can insure ever like a non-compliance to exclude limit or remove liability
No as it could not of increased the risk of a loss which actually occurred
If an insured is required to maintain a burglar alarm system with in the insured property and they do not comply with this requirement and the property is damaged by flood would insurance be able to rely on the breach to deny liability
No
Under the Road traffic act can insurers reject a third-party traffic accident victim claim by relying on certain types of policy condition or warranty
No
For EL insurance can insure it reject the claim for breach of conditional warranty
No they can’t rejected on the grounds of late late notification or because the insured has failed to comply with policy the condition or the use of policy excesses
What does it mean by joint policy is indivisible
A breach by one insured may cause a whole policy to fail
What happens if I was a breach under a composite policy
It may invalidate their own cover without affecting the right of other insured persons to claim
If the insured share a common interest in the subject matter what kind of policy would this be
A joint policy
If the insured have different interest in the subject matter what kind of policy would this be
Composite policy
