Chapter 7 - Insurance Policy Analysis Flashcards
Contract of Indemnity
A contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of the loss
Collateral Source Rule
A legal doctrine that provides that the damages owed to a victim should not be reduced because the victim is entitled to recover money from other sources, such as an insurance policy.
Distinguishing Characteristics of Insurance Policies
- Indemnity
- Utmost good faith
- Fortuitous losses
- Contract of adhesion
- Exchange of unequal amounts
- Conditional
- Nontransferable
Information Asymmetry
Exists when one party to a contract has information important to the contract that the other party does not
Utmost Good Faith
Obligation to act with complete honesty and to disclose all relevant facts
Fortuitous Loss
Losses that happen accidentally or unexpectedly. Reasonable uncertainty must exist about its probability or timing
Contract of Adhesion
Any contract in which one party must either accept the agreement as written by the other party or reject it
Reasonable Expectations Doctrine
A legal doctrine that provides for an ambiguous insurance policy clause to be interpreted in the way that an insured would reasonably expect
Consideration
Something of value or bargained for and exchanged by the parties to a contract
Conditional Contract
A contract that one or more parties must perform only under certain conditions
Principle of Indemnity
The principle that insurance policies should provide a benefit no greater than the loss suffered by an insured
Self-contained Policy
A single document that contains all the agreements between the insured and the insurer and that forms a complete insurance policy
Monoline Policy
Policy that covers only one line of business
Package Policy
Policy that covers two or more lines of business
Modular Policy
An insurance policy that consists of several different documents, none of which by itself forms a complete policy
Manuscript Form
An insurance firm that is drafted according to terms negotiated between a specific insured (or group of insurers) and an insured
General Rules of Policy Interpretation for Endorsements
- Takes precedence over any conflicting terms in the policy
- Handwritten supersedes computer generated
Policy Provisions
Contractual term included in an insurance policy that specifies requirements or clarifies intended meaning
Declarations Page
An insurance policy information page or pages providing specific details about the insured and the subject of the insurance
Insuring Agreement
A statement in an insurance policy that the insurer will, under described circumstances, make a loss payment or provide a service
- comprehensive and limited
Exclusions
A policy provision that eliminates coverage for specified exposures
- eliminates coverage for uninsurable loss exposures
- assists in managing moral/morale hazard
- reduces likelihood of coverage duplications
- eliminates coverages not needed
- eliminates coverages requiring special treatment
- assists in keeping premiums reasonable
Policy Conditions
Any provision that qualifies an otherwise enforceable promise made in the policy
