Chapter 9 Flashcards
Where indemnity insurance gives the insured the amount for the loss, what does non indemnity insurance do?
Pays out a specified sum
Eg life insurance
What does indemnity mean?
Save from loss or harm and protect against damage
What’s an example of modification to the principle of indemnity?
Excess in insurance policies
What is meant by unliquidated damages?
A policy of indemnity the claim is unliquidated because they don’t know how much it will cost in advance
What’s the general rule for indemnity
The measure of indemnity for the loss of any property is determined by its value at the date of the loss and at the place of the loss
For buildings what is the normal basis for indemnity?
The cost of repair or reconstruction with a deduction for betterment
What are two examples of betterment
1- when a building is fixed part of it may then be new
2- when a building is fixed they may add extra floors or systems
Indemnity for machinery and equipment
The cost of repair less wear and tear or
If repair is not possible the cost of replacement less wear and tear
Indemnity for manufacturers stock
Manufacturers stock is raw materials, work in progress and finished stock
Indemnity is what it will cost them at the time and location of the stock
But for raw materials this is replacement cost plus delivery to site
Indemnity for farming stock?
For livestock and produce the local market price is the normal basis
Sometimes government min prices come in.
What is pecuniary insurance
Financial loss that contrasts with property.
Eg business interruption to cover loss of profit
Most contain a trends clause
Measure of indemnity in liability insurance
The amount a court would award
Indemnity in marine insurance
Valued and unvalued policies. Most are valued.
For unvalued it is the insurance value which is the value of the subject matter at the commencement of the risk.
For partial loss, if it cannot be repaired it is the amount the vessel devalues
Average clause
Where under insurance takes place an average clause can work out the sun of indemnity under the policy.
(Sum insured at loss x amount of loss) /value at risk at loss
What’s an excess or deductible
The insured must bear the first x amount
What is a franchise
It’s similar to an excess in that there is no liability for loss in the franchise figure. But once the franchise is exceeded the loss is payable in full.
Eg excess £1000 claim £1045 insurer pays £45
Eg franchise £1000 claim £1045 insurer pays £45 but if under £1000 insured pays all
Methods of providing indemnity
Money
Reinstatement (statutory reinstatement from the fires prevention act)
Repair
Replacement
In marine insurance when total loss is claimed what is the insurer entitled to?
To claim for their own benefit anything that remains of the subject matter.
This is because the insured “abandons” their subject matter and the insurer taking is is known as “salvage”
What is constructive total loss?
When the subject matter is damaged and the insured deprived of their loss but it’s not destroyed.
- cannot recover
- repair costs more that the value
This is not recognised outside of marine insurance
What is successive partial loss
Where a policy grants a fixed amount of cover, the cover reduces for each claim and once user to the policy lapses. The cover is restored if extra premium is payed.
Why are life insurance policies not indemnity contracts
Because you cannot value human life
What is betterment
Two forms
1- repair gives new
2- new floors etc built in
3 circumstances a person under a property policy may receive less than full indemnity
- inadequate sun insured
- another policy limit
- an average clause
Is average an implied term?
Yes in marine insurance
Possibly in commercial property
Bit in household insurance
Excess vs franchise
Excess where insured bears first of all risks
Franchise insured bears all cost if under x but insured pays all of it if breaches x
What is a valued policy
A sun fixed at the outset is payed in the case of a loss
Policies subject to the fires prevention act
Fire insurance of building in England and wales but not Lloyds policies
Salvage and abandonment
Abandonment is giving up the subject matter
Salvage is the insurer taking that subject
What is notice of abandonment
The insured must serve a notice if they want to claim total loss. If no notice then the insured is deemed to have suffered partial loss
Effect of a policy when insurers pay a total loss
Cover will the. Usually terminate unless agreed otherwise
