Insurance Contract

Question 1

What are the unique characteristics of an insurance contract?

Answer 1

1. Indemnifies policy holder
2. Requires “utmost good faith”
3. Aleatory
4. Adhesion contract

Question 2

Aleatory?

Answer 2

Dollar amount to be exchanged is unequal

Question 3

Contract adhesion?

Answer 3

Not bargain for; “take it or leave it”

Question 4

Contract?

Answer 4

He legally binding promise that creates obligation to perform or not to perform some at

Question 5

Parts of a contract?

Answer 5

Declarations
Insuring agreement
Exclusions
Conditions
Endorsements

Question 6

What’s on the declarations page?

Answer 6

Basic info: 
name of insure/agent
name/address of Insured
Policy
Limits of liability
forms applicable
premium

Question 7

What is the insuring agreement?

Answer 7

“Heart of the policy”
“Coverage pledge”
States with the insurer will do an exchange for insured’s payment a premium

Question 8

What is the exclusions section?

Answer 8

States what losses are not covered by the particular policy

Question 9

What is the conditions section?

Answer 9

Rules and procedures for both insured/insured.

How to file a claim
how/when each party may cancel
what each must do after loss
how disagreements are handled

Question 10

What is the endorsement section?

Answer 10

Provides a way to Taylor a basic policy to better meet needs of a particular insured. Coverages can be added/deleted

Question 11

Analyzing an insurance contract

Answer 11

Who is insured?
What property or activity is insured?
What locations are insured?
What is the time period of the coverage?
What are perils insured against?
Are direct losses, indirect losses, or both types insured?
What are coverage limits?
Any miscellaneous closets?

Question 12

Subrogation?

Answer 12

Recovery from others

Allows insured to pay its customer and then pursue ultimate wrongdoer

Question 13

What are the elements of a contract?

Answer 13

Agreement 
Competent parties 
Consideration 
Genuine assent 
Legal purpose

Question 14

Material fact?

Answer 14

A fact that would influence an insurer in determining whether or not to accept a risk, or in fixing the correct premium to cover risk

Question 15

Representations?

Answer 15

Statements made by an applicant concerning loss exposure

Question 16

Fraud?

Answer 16

Deceptive presentation of a material fact made with intent to deceive. And the fact is then relied on by defrauded party and making decision to enter contract.

Question 17

Misrepresentation?

Answer 17

False statement of immaterial fact relied upon by an innocent party when entering contract.

Does not have to be intent to deceive for misrepresentation.

But either fraud or misrepresentation convoyed a contract

Question 18

Warranties?

Answer 18

Statements/promises in policy that if untrue with render policy voidable regardless of materiality.

Warranties differ from misrepresentations in that misrepresentations must be material; warranties do not have to be material.