Contract Law: Insurance Applications Flashcards
Incontestable clause
Insurer cannot contest policy after being in force for a specified period of time
Contracts of adhesion
In which one party must either accept agreement as written or reject it
Principle of indemnity
Insurance policies should provide a benefit no greater than the loss suffered by the insured
Valued policy
Insurer pays a stated amount regardless of the value of the loss
Ex: paintings, antiques
Law of agency
Insurance agents’ commitments can be binding on insurers
Binder
Temporary written/oral agreement to provide insurance coverage until a formal written policy is issued
Necessary terms in insurance contracts
Types of coverage
Object to be insured
Amount of insurance
Insured’s name
Duration of coverage
Uniform Vender and Purchaser Risk Act
Innocent losses occurring during contract period are allocated to seller unless buyer has taken possession before closing
Elements to establish false representation
A statement made is false or misleading
Statement relates to material fact(s)
Insurer relies on statement in issuing the policy
Bases of materiality
“What would a reasonable insurer have done with the knowledge of true facts?”
“What should the insurer have done with knowledge of misrepresented facts?”
Two requirements to make a promise a warranty
Parties must have clearly and unmistakably intended it to be a warranty
Statement must form a part of the contract itself
Estoppel
Legal principle prohibiting a party from asserting a claim that is inconsistent with that party’s past statement or conduct on which another party has detrimentally relied
Estoppel vs. waiver
Waiver is contractual; estoppel arises from false representation
Waiver gives effect to waiving party’s intention; estoppel defeats inequitable intent
Parol evidence rule applies to waiver and not to estoppel
Nonwaiver agreement
Signed agreement indicating that an investigation does not waive rights under the policy
Insurance contract characteristics
Conditional
Contract involving fortuitous events and exchange of unequal amounts
Utmost good faith
Contract of adhesion
Contract of indemity
Nontransferable
