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MO5 Insurance Law - 2022 - Chapter 1 and 2 > Insurance Contract Formation and Insurable Interest > Flashcards

Insurance Contract Formation and Insurable Interest Flashcards

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1
Q

Who provides the offer in an insurance broker contract?

A

Either party

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2
Q

What is considered the offer and acceptance?

A

Quote = offer, Acceptance = Acceptance
Proposal submitted by proposer = Quote, terms = acceptance
MRC (Lloyds) = offer, scratch = acceptance

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3
Q

What does concensus ad idem mean?

A

Meeting of the minds

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4
Q

What must the insurer and the insured consensus ad idem on?

A

Subject matter of insurance
Nature of Risk
Policy Length
Premium

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5
Q

What are the other criteria around acceptance that must be met still?

A

It must be a true offer not an invitation to treat
Offer cant be accepted by doing nothing
Acceptance must be communicated

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6
Q

When renewing a policy what is considered the offer and acceptance?

A

Renewal terms = offer
Premium paid = acceptance

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7
Q

Is a renewal a fresh contract?

A

Yes

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8
Q

Is an insurance product legally binding?

A

Yes and as it is a commercial transaction it is assumed both parties expect it to be legally binding.

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9
Q

Is a promise consideration?

A

A promise is not legally binding unless supported by consideration
Consideration need not be adequate
The promise to pay is good consideration

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10
Q

Once the risk has started to run which is usually inception, is the insured entitled to a refund of premiums paid if it is ended prematurley?

A

No

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11
Q

How can refund terms be amended?

A

Expressly by the parties by agreement, ususally in the terms of a contract

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12
Q

What is total failure of consideration?

A

Where:
1. Proposal is withdrawn after premium is paid
2. Policy is void through mistake or no consensus ad idem
3. Void due to no insurable interest
4. Policy is avoide3d ab inito

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13
Q

What happens to the premium if there is a total failure of consideration?

A

The insurers will allow a full refund with the exception of fraud by the insured

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14
Q

What is a cancelation clause?

A

A clause where the policy is amended to allow a partial refund.

Canceled by:

Insurer = pro-rata usually
Insured = something less than pro-rata usually

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15
Q

What insurance contract must be in writing?

A

Marine Insurance as per Marine Insurance Act 1906

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16
Q

What insurance contracts must be evidenced in writing?

A

Contracts of guarantee such as some fidelity.

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17
Q

What policies need the person names in them?

A

Life Insurance Policies as per Life assurance Act 1774

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18
Q

Prior to the Deregulation Act in 2015 what were you required to have in motor insurance?

A

A certificate of insurance. No longer required.

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19
Q

What capacity do minors have for insurance?

A

Minors are bound my contracts of necessity and beneficial contracts.

As you can legally drive at 17, and car insurance is a legal required. Minors are bound by it.

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20
Q

What contractual capacity do insurance companies have and who are they governed by?

A

Goverened by The Financial Servies and Markets Act 2000 and the Financial services Act 2012.

Before insurers can write insurance they must get authorization from a UK regulator.

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21
Q

What regulator is there for banks and smaller firms/intermediaries?

A

Banks/Large firms = PRA
Small firms/intermediaries = FCA

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22
Q

What is Insurable Interest?

A

The legal right to insure arising out of a financial relationship recognised at law between the insured and the SUBJECT MATTER of the insurance.

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23
Q

What is the subject matter, subject matter of the contract and the interest??

A

The thing that is insured
The interest in the subject matter of insurance
Usually a financial one, Must be one that English Law recognizes as supports.

24
Q

When you insure a house you own what are you insuring? What is the subject matter and what is the interest?

A

You insure your interest in the house.
SM = House itself
Interest = Subject matter of insurance.

25
Q

What caviat is ther to interest?

A

It must be a current interest not an expectancy of acquiring an interest in the future.

26
Q

Why is insurable interest necessary?

A

To reduce moral hazards and discourage wagering and gambling.

Insurance must be a pure risk ie. you must be unable to gain from a loss.

27
Q

Where does a moral hazard arise?

A

When granting insurance increases the likelihood of a loss occurring as it changes the behavior of the insured.

28
Q

Are insurance contracts and wagering contracts enforceable at law?

A

Contract of insurance = enforceable at law
Wager contract = neither party can enforce.

29
Q

What is your interest in a insurance and wagering contract?

A

Insurance = must have a financial interest in the subject matter of the contract.
Wager Contract = interest is limited to the stake you have won/lost.

30
Q

How is insurable interest created both in common law and contract?

A

Common law = own life or ownership
Contract = when a person agrees to accept responsibility for something for which they are not ordinarily liable eg tenant maintenance clause in a lease.

31
Q

What happens within marine insurance when there is no insurable interest?

A

Void as per Marine Insurance Act 1906

32
Q

When does insurable interest need to be present in a Marine Insurance Policy?

A

At the time of loss not inception.

33
Q

When does Insurable Interest need to be present on any non goods of marine Insurance Policy? and who governs life insurance policies?

A

At the time of inception but not death/claim.
Governed by the Life Assurance Act 1774.

34
Q

When does insurance interest need to be present on policies on goods?

A

No requirement of insurable interest.

35
Q

LIFE AA Act: If the person benefiting from an insurance policy has no Insurable interest in the life or event insured what happens?

A

If no insurable interest the contract is void.

36
Q

LIFE Act: Whos needs to be named and where?

A

The name of the person for whose benefit the policy has been effected must appear in the policy.

37
Q

LIFE ACT: What is the maximum the insured can recover?

A

No more than the amount of the value of their interest.

38
Q

LIFE Act: What insurances does the act not apply to?

A

Ships, goods or merchandisers.

39
Q

How clear is the law on policies on goods?

A

Very grey following the repealing of the gambling act 2005. (went live 2007)

40
Q

What type of policies are insurance policies and how does this mean in terms of what you can recover?

A

Contracts of indemnity so you cant recover more than the actual loss

41
Q

Although there is no statutory requirment for insurable interest on goods, what in reality would hapen if there is none?

A

Generally makes a policy void.

42
Q

Can policyholders recover premiums for void policies? and void policies due to no insurable interest?

A

Void policies - yes.
Void due to no insurable interest is technically illegal so no refunds are recoverable.

43
Q

Can you waive insurable interest on a life or marine policy?

A

No

44
Q

Can insurers issue a marine or life policy where there is a doubt that insurable interest exisits?

A

Yes

45
Q

Can a marine or life policy with no II be enforced in a court?

A

An insurer can issue a policy where there is doubt around insurable interest however it cant be enforced in law.

46
Q

What insurable interest does someone have in there own life and that of there spouse?

A

Unlimited

47
Q

What insurable interest does someone have in there sisters life?

A

None, under English law no relationship has an interest in the other parties life unless it is there spouse.

48
Q

What insurable interest does someone have in there buisness partners life?

A

In the event that there business partners life causes a loss to the other partner they have an insurable interest in that loss.

49
Q

What insurable interest does an employee have in the life of there employer?

A

Limited, only to a sum limited to there wages or salary for the minimum period of notice under their contract of employement.

50
Q

What insurable interest does an employer have on the life of there employee and what insurance policy would this typically be?

A

Key man insurance.
It is based on the cost of training up another person to fill the shoes of a key employee.

51
Q

What insurable interest does a creditor have in the life of there debtor?

A

Limited to the sum of the debt + interest owed.

52
Q

What insurable interest does a debtor have in there creditor?

A

None

53
Q

What do outright property owners, part/joint owners, landlord and tennats, mortgagees mortgagors, executors, trustees, situations with bailees all have?

A

An insurable interest in something

54
Q

What is a bailee?

A

Someone who has legal possession of goods belonging to another

55
Q

What insurable interest might a spouse or couple co-habiting possibly have?

A

Any property belonging to the other if its use + possession is shared.

56
Q

If someone finds some property but they don’t legally own it and the possession is wrongful, do they have a right to insure it?

A

Yes

57
Q

When you have a mortgage you only have limited liability in the part of the property you own. How does the insurance work on the property?

A

Rather that the bank and the mortgagee having separate policies on the same property it is typical that one party will insure the home however you are only liable for the insurance money of the portion you own as you cant be put into a better financial situation that you started in by an insurance claim.

MO5 Insurance Law - 2022 - Chapter 1 and 2 (10 decks)

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