Insurance Contracts & Key terms

Question 1

How does a breach of contract happen?

Answer 1

Failure to comply with a term of the contract

Question 2

What are the rules of construction?

Answer 2

Means the rules of interpretation

Question 3

If a dispute about the meaning of words in an insurance policy end up in court, what is the role of the court?

Answer 3

Merely decide the meaning of the words

Question 4

What statutory control exists over insurance policy wording in the UK?

Answer 4

Very little
They are excluded from the UCTA 1977
The Consumer Rights Act 2015 states-that in consumer contracts a term that was negotiated CAN still be challenged that it is unfair (although terms about the subject matter or the price are excluded as long as they are clear)
- traders cannot exclude or restrict liabilty for death or injury
- provision that neither an unfair term or condition is binding on the insured

Question 5

What are the Common Law Rules for interpretation of insurance policies? (5)

Answer 5

Ordinary meaning

Technical or legal meaning (if there is a clearly established tec or legal meaning)

The importance of context (noscitur a sociis)

Ambiguity (the contra profenetem rule)

Inconsistency rules

Question 6

What is the contra profenetem rule in relation to interpretation of contracts?

Answer 6

The clause is construed against the party that drafted it

Question 7

What does noscitur a sociis mean in relation to interpretation of contract?

Answer 7

A word may be known by the company which it keeps

Question 8

What does Ejusdem generis mean in realtion to interpretation of contracts?

Answer 8

Things of the same kind

Where general words follow specific words are taken as referring to thr same thing
The importance of context

Question 9

What does Expressio unius est exclusio alterius mean in interpreting contracts?

Answer 9

Specifying one thing implies the exclusion of another

The importance of context

Question 10

What are the inconsistencies rules in relation to interpretation of insurance contracts?

Answer 10

Hand written or typed words take precedence over printed

Contradiction between proposal & policy docs means docs take precedence

An express term overrules an implied term

Question 11

What are warranties in insurance contracts?

Answer 11

A promise made by the insured relating to facts or something they agree to do

Question 12

What are continuing warranties in Insurance contracts?

Answer 12

Applied by insurers to ensure good housekeeping or good management by PH

Question 13

How must a PH deal with warranties?

Answer 13

Exactly comply

Question 14

What happens if a warranty is breached in an insurance contract?

Answer 14

Cover is suspended (IA 2015) until remedied
Suspended even if not connected to the loss
Insurer is not liable for claims attributable to something that happened during the breach (no causation required)
Not liable for claims attributable to the breach even if they happened after the breach was fixed by PH must prove causation though

Question 15

What are the two types of warranties in Insurance Contracts?

Answer 15

Express (in the policy itself )

Implied (Marine only) (seaworthiness)

Question 16

What are Basis of Contract clauses in insurance contracts?

Answer 16

Used to convert statements in the proposal into warranties

This was abolished by English law

Question 17

What is a condition in insurance contracts?

Answer 17

Conditions Impose an obligation on the insured

Question 18

What are the three types of Conditions in an Insurance contract?

Answer 18

Precedent to the contract - ph must comply with the term before the policy will come into force

Precedent to liability - allows the insurer to reject a claim if PH breaks a term

Minor terms (collateral conditions) - mere conditons, PH can still claim if these are breached. Insurer might reduce claim

Question 19

What are the ICOB rules concerning the rejection of claims for breach of warranty of condition?

Answer 19

Insurer can reject a claim by a consumer only when the breach did actually cause or contribute to the loss
(Both consumer & business insurance)

Question 20

When is contracting out of IA 2015 allowed in business insurance?

Answer 20

Only allowed if the transparancy requirement of the Act is met

Question 21

When is contracting out of IA 2015 allowed in consumer insurance?

Answer 21

It is prohibited if by doing so the PH would be on a worse position than the Act provides

Question 22

What is a joint policy of insurance?

Answer 22

Interest of the insureds is the same e.g. husband and wofe insure their home

Question 23

What is a composite insurance policy?

Answer 23

The interests of the insured is different e.g. mortgagor & mortgagee

Question 24

What if one person in a joint policy breaches the contract or a duty?

Answer 24

A breach by one can cause the whole policy to fail

Question 25

What if one person in a composite insurance policy breaches the contract or a duty?

Answer 25

A breach by one may only invalidate their own cover and not affect the others right to claim

Question 26

What does the ‘Terms not Relevant to the Loss’ in the IA 2015 do to claims made during suspension of cover for breach of a warranty or condition?

Answer 26

Insurer cannot reject the claim if the insured can prove that the non compliance could not have increased the risk of the loss which actually occured in the circumstances in which it occured