LAW OF CONTRACTS AND OTHER CONTRACT FEATURES Flashcards
May an insurance contract be voided if an applicant makes a material misrepresentation?
Yes
Who is considered incompetent to enter into a legal contract?
Minors, mentally ill, a person under the influence, anyone forced into a contract, enemy aliens or convicts.
What is the applicant’s consideration, and what is the insurer’s consideration?
applicant’s consideration - premium paid and app. info; insurer’s consideration is the promise to pay legitimate claims.
What is another term for being financially strong?
solvent
T or F: A conditional contract does not require both parties to satisfy terms before it can be executed.
False
What is a contract of adhesion?
An insurance policy drafter by an insurer and accepted/adhered to by an applicant
What court ruling states that a contract should be interpreted to mean what is said verbally or stated in the contract?
Reasonable expectations
What four elements must exist for a contract to be enforceable?
Offer and acceptance, consideration, competent parties, and legal purpose
A contract that pays a larger amount in return for a smaller fee is known as an ___ contract.
aleatory
Who develops the language in a unilateral contract?
A unilateral contract is one-sided and written by the insurer.
A person in a position of trust, particularly with collected premiums, is referred to as a ___.
fiduciary
the offer and acceptance is also known as the ____.
agreement
A policyholder who has filed a false claim is guilty of ___.
fraud
Define the term invitation
when an applicant submits an application without paying an initial premium
Which two legal principles prevent an insurer from denying a claim?
Waiver and estoppel
Define the term warranty
A statement made by an applicant that is guaranteed to be true
Define the term concealment
Failing to disclose a terminal illness when applying for a life insurance policy
T or F: A representation is a statement that is guaranteed to be absolutely true.
False. A representation is a statement that is true to the best of the applicant’s knowledge.
If an insurer discovers that a policyholder lied about his health but fails to void the contract, may a claim be denied?
Due to estoppel, the claim may not be denied since the insurer failed to void the contract.
T or F: The voluntary surrendering of a known right by an insurer is known as a waiver
true
Who is a representative of an insurer?
an agent
Who is a representative of the consumer?
a broker
T or F: An insurer who makes a counteroffer has rejected the applicant’s original offer.
true
