Legal Concepts of Insurance Flashcards
What is a contract of Adhesion?
A contract that has been prepared by one party (insurer) with no negotiation between the applicant and the insurer. “Take it or leave it”
What is Aleatory?
This is a legal arrangement in which there’s the potential for an unequal exchange of value or consideration between both parties. The insured may never file a claim in an insurance contract, or a claim may be filed after only one or two premiums.
What are Ambiguities?
This refers to terms or conditions that are not clearly defined in an insurance contract.
What is Apparent Authority?
This is the appearance of the insurer providing the agent authority to perform unspecified tasks based on the agent-insurer relationship. This perception of authority must stem from the insurer’s actions, even if the perception is unintended and the perception is in error.
What is a Competent Party?
This is a person who is able to understand the contract to which two parties are agreeing. All parties must be of legal competence - legal age, mentally capable of understanding the contract terms, and not under the influence of drugs or alcohol.
What is Concealment?
This is the failure of an applicant to disclose a known material fact when applying for insurance.
What is Conditional?
This is an agreement that remains in force if certain conditions are met.
What is Consideration?
This is the legal description of the items of value that each party to the contract provides to the other. Applicant - material information and premium. Insurance Company - agrees to pay the cost of the claims that are covered by the policy.
What is the Consideration Clause?
This clause is part of an insurance contract and sets forth the initial and renewal premiums and frequency of future payments
What is the Doctrine of Reasonable Expectations?
This doctrine states that an insurance contract will be interpreted to mean what a reasonable individual would think it means, even if the insurer must pay additional benefits that are not intended by the contract.
What is Estoppel?
This is the legal impediment to one party’s ability to deny the consequences of its own actions or deeds if such actions or deeds result in another party acting in a specific manner or if certain conclusions are drawn.
What is Express Authority?
This is the explicit authority that’s granted to the agent by the insurer, as written in the agency contract.
What is a Fiduciary?
A person to whom property or power is entrusted for the benefit of another person.
What is Implied Authority?
This is an authority that’s not explicitly granted to the agent in the contract of agency, but which common sense dictates the agent has. The authoritative ability to carry out routine responsibilities.
What is Legal Purpose?
This means that an insurance contract must be legal in nature and not in opposition to pubic policy.
What is Material Misrepresentation?
This is a false statement being made by an applicant that influences either an insurer’s decision to accept the risk, or the classification and pricing of a risk that’s accepted by the insurer.
What is Misrepresentation?
This is a statement being made as a legal representation that’s factually incorrect, either totally or in part.
What is the Parole Evidence Rule?
This rule states that, when the parties agree in writing, all previous verbal statements come together. A written contract cannot be changed or modified by parole (oral) evidence.
What is a Policy Rider?
This is an amendment which is added to an insurance contract that overrides terms in the original policy. Riders may add or remove coverages, change deductibles, or revise any other policy feature. In general, a policy owner must pay an additional premium to add a policy rider that enhances policy benefits.
What are Reasonable Expectations?
This indicates that the insured is entitled to coverage under a policy that any sensible and prudent person would expect it to provide.
What are Representations?
These are statements made by the applicant that they consider true and accurate to the best of their belief.
What is the Rule Regarding Ambiguities?
This rule applies to contracts of adhesion. Courts will interpret the terms of an insurance contract in favor of the insured if there’s legal dispute and the court holds the terms of the contract to be ambiguous.
What is Subrogation?
This is the right for an insurer to pursue a third party that caused an insurance loss to the insured.
What is Unilateral?
This is a type of contract in which only one party - the insurer - makes any kind of enforceable promise.
What is Utmost Good Faith?
This statement is based on the belief that both the policy owner and the insurer must know all of the material facts and relevant information. As such, they will provide each other with all the material facts and relevant information.
What is a Valued Contract?
This type of contract pays a state sum regardless of the actual loss incurred. (life insurance contracts)
What is a Void Contract?
This contract is an agreement that has never really been in force because it lacks one of the essential elements of a contract.
What is a Voidable Contract?
This type of contract is an agreement that may be set aside by one of the parties in the contract for a reason that’s satisfactory to the court.
What is a Waiver?
This is the voluntary giving up of a legal, given right.
What is a Warranty?
This is a statement made by the applicant that’s guaranteed to be true in every respect and also becomes a part of the contract. The discovery this is untrue can be grounds for revoking the agreement. In general, all statements that are made by an applicant are representations, rather than this.
Who is responsible for assembling the policy forms for insureds?
Insurance Carriers
Which contract element is insurable interest a component of?
Legal Purpose
A professional liability for which producers can be sued for mistakes of putting a policy into effect is called ____?
Errors and Omissions
What is an example of the insured’s consideration?
A paid premium
