Chapter 7- Insurance Contracts And Key Terms

Question 1

What happens if there are inconsistencies in proposal forms/ insurance policies

Answer 1

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

Question 2

What is a breach of pre contractual information duties

Answer 2

The breach normally arises from a failure to supply full and accurate information in the negotiations before the contract has come into existence

Question 3

What is a breach of contract

Answer 3

The breach arises from a failure to comply with a term of the contract itself

Question 4

What two ways are terms traditionally classified in the general law of contract

Answer 4

Conditions and warranties

Question 5

In the general law of contract what is the effect of a breach of warranty

Answer 5

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

Question 6

In the general law of contract, what happens if there is a breach of contrition

Answer 6

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

Question 7

What two principles of interpretations are used by the courts

Answer 7

Statutory roles i.e. rules laid down in legislation; and

common-law rules i.e. rules developed by the courts

Question 8

Some statutory control of the interpretation of contracts is imposed by what

Answer 8

Consumers rights act 2015

Question 9

Under statutory rules/ interpretation of context. Which make the following changes to consumer contracts

Answer 9

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

Question 10

What are the common law rules of interpretation of insurance policies

Answer 10

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

Question 11

Under common-law rules of interpretation of insurance policies what is the technical or legal meaning

Answer 11

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

Question 12

Under common law rules of interpretation of contract what is the importance of context

Answer 12

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.

Question 13

Under common law rules of interpretation of contract what is the contra proferentem rule

Answer 13

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

Question 14

Under common law rules of interpretation of contract what happens under the contra proferentem rule with ambiguity

Answer 14

an ambiguous wording will generally be construed in favour of the insured.

Question 15

what happens under the contra proferentem rule with ambiguity in the case where a broker is acting for the insured

Answer 15

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.

Question 16

What is a warranty

Answer 16

Essentially a promise made by the insured relating to facts or to something which they agree to do

Question 17

What is a continuing warranty

Answer 17

They are applied by insurers to ensure that some aspect of good housekeeping or good management is observed by the insured

Question 18

What are these an example of:

Rubbish to be cleared up each night
The burglar alarm to be switched on

Answer 18

Continuing warranty

Question 19

Other than good housekeeping what also would be a function of the continuing warranty

Answer 19

To ensure that certain high risk practices are not introduced without the insurers knowledge

Question 20

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

Answer 20

Continuing warranty

Question 21

Does a warranty have to be exactly complied with?

Answer 21

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

Question 22

What happens if a breach can’t be remedied i.e a ship sinks after the insured breaches the warranty

Answer 22

the insurer is not liable for any loss that occurs from when the warranty is breached until it is fixed.

Question 23

Under breach of warranty are insurers liable for losses attributable to something that happened during the time that the insured breached the warranty?

Answer 23

No

Question 24

What two ways can warranties be made?

Answer 24

Express warranties

Implied Warranties

Question 25

What is an express warranty

Answer 25

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

Question 26

What are the standards that the courts apply to determine whether or not a term which is not expressly stated is a warranty are:

Answer 26

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

Question 27

Under what policies can implied warranties be found in only

Answer 27

Marine insurance

Question 28

What are ‘basis of the contract’ clauses

Answer 28

used to convert the statements made by the insured in the proposal form into warranties.

Question 29

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’

Answer 29

that it is sufficient to render the statements as warranties.

Question 30

Is it possible to create an insurance warranty by ‘basis of the contract clauses’

Answer 30

No the insurance act abolished them

Question 31

What is a condition precedent to contract

Answer 31

It’s one which states that the policy will not come into effect if the insured failed to comply with the term in question

Question 32

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

Answer 32

A condition precedent to the contract

Question 33

What is a condition precedent to liability

Answer 33

It allows insurers to discharge themselves from liability for a particular loss if a term is broken

Question 34

What is a collateral condition

Answer 34

Is regarded as a minor term a breach of which will still entitle the insured to make a claim under the insurance contract

Question 35

What happens if it is a serious breach of collateral condition

Answer 35

If it is that serious that it goes to the root of the contract the insurer may repudiate the contract

Question 36

Under collateral condition what is normally the case for a breach

Answer 36

The insurer will have to pay for the insureds loss but may claim damages

Question 37

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

Answer 37

A collateral condition

Question 38

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

Answer 38

collateral condition

Question 39

What is an exception clause

Answer 39

They excuse insurance from liability when the loss is caused by particular peril or when some other circumstances apply

Question 40

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

Answer 40

An exception clause

Question 41

Can an exception clause be broken by the insured

Answer 41

No but they also do not place any obligation on the insured

Question 42

What is a suspensive condition

Answer 42

When cover is suspended during the period of the insured breached the clause and remedied the breach

Question 43

What is the difference between a suspensive condition and an exception clause

Answer 43

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

Question 44

What happened under a breach of warranty

Answer 44

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

Question 45

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

Answer 45

No

Question 46

What happened for a breach of condition precedent to the contract

Answer 46

It is never fulfilled and the contract never comes into existence

Question 47

What happened if there is a breach of condition precedent to liability

Answer 47

The insurer is automatically discharged from liability for the claim which is tainted by the breach but the policy remains in force

Question 48

What happens if there is a breach of collateral condition

Answer 48

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

Question 49

What is a breach of a suspensive condition

Answer 49

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

Question 50

What does a promissory Estopel mean

Answer 50

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

Question 51

What are examples of insurers actions that would support an argument of waiver by Estopel

Answer 51

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

Question 52

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

Answer 52

No as it could not of increased the risk of a loss which actually occurred

Question 53

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

Answer 53

No

Question 54

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

Answer 54

No

Question 55

For EL insurance can insure it reject the claim for breach of conditional warranty

Answer 55

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

Question 56

What does it mean by joint policy is indivisible

Answer 56

A breach by one insured may cause a whole policy to fail

Question 57

What happens if I was a breach under a composite policy

Answer 57

It may invalidate their own cover without affecting the right of other insured persons to claim

Question 58

If the insured share a common interest in the subject matter what kind of policy would this be

Answer 58

A joint policy

Question 59

If the insured have different interest in the subject matter what kind of policy would this be

Answer 59

Composite policy