Module 7 Flashcards
the sources of legal principles stem from
judicial precedents, statutes, customs, and other sources of the law.
provide a pathway to interpreting legal issues and their solutions based on past remedies and the knowledge of the Constitution and other
statutes.
legal principles
TYPES OF LEGAL PRINCIPLES
The rule of law
The principle of equality before the law
The principle of fairness.
Due process
Separation of powers
is a contractual obligation of one party to compensate the
loss incurred by another party due to the relevant acts of the indemnitor or any other party.
indemnity
In a legal sense, refers to the transfer of liability for damages. A legally enforceable contract between two parties, termed an indemnity agreement, specifies the conditions related to this transfer.
indemnification
is when a Person stands to gain or benefit from the continued
existence or well-being of a Person or an Insured Property and the Person would suffer
a financial loss from the absence of the Person or the Property.
insurable interest
is the legal right of the person to insure the subject-matter with which they have a legal relationship recognized by law.
insurable interest
is one of the fundamental principles of Insurance. It
forms the legal basis on whether Insurance can be taken or not. The Insured must have an Insurable Interest in the subject matter for which they want an Insurance Policy
principle of insurable interest
What are the types of Insurable Interest?
Common Law
Contractual Interest
Statutory Interest
Insurable Interest as per relates to Self, Spouse, Children, Parents and Assets.
common law
relates to Employer-
Employee relationship, Bank-Mortgage Relationship, Company-Keyman Relationship etc.
Contractual Interest
relates to Executor-Trustee relationship and Bailee Relationship.
statutory interest
in insurance is a legal right of the insurance company to legally pursue a
third-party responsible for the damages/insurance loss caused to the insured.
subrogation
also known as uberrimae fidei, is a fundamental concept in insurance and legal contracts. This principle imposes a duty on all parties involved to act honestly and disclose all relevant information at the time the contract is formed. This principle is particularly applicable in insurance contracts and is crucial for the smooth functioning of the insurance industry.
principle of utmost good faith
refers to the practice of substituting one party for another in a legal setting.
subrogation
Key aspects of the principle of utmost good faith include:
Full Disclosure
Duty of Good Faith
Continuing Duty
Consequences of Breach
Application to Underwriting
The insured party (policyholder) is obligated to provide complete and accurate information
about the subject matter of the insurance, including any known risks or factors that might
affect the insurer’s decision to underwrite the policy.
full disclosure
Both parties, the insurer and the insured, are expected to deal with each other in good
faith. This means being honest, fair, and transparent in all aspects of the insurance
contract.
duty of good faith
The duty of utmost good faith is not limited to the inception of the contract; it continues
throughout the life of the policy. If there are any material changes in the risk during the
policy period, the insured is generally required to inform the insurer promptly.
continuing duty
Failure to adhere to the principle of utmost good faith may result in serious consequences.
If the insured provides false or incomplete information intentionally or with reckless
disregard for the truth, the insurer may have grounds to void the policy or deny a claim.
consequences of breach
Insurers rely on the information provided by the insured to assess risks and determine
premiums. The principle of utmost good faith ensures that the underwriting process is
based on accurate and complete information.
application to underwriting
REQUIREMENTS OF AN INSURABLE CONTRACT
Insurable Interest
Utmost Good Faith
Offer and Acceptance
Legal Capacity
Lawful Purpose
Certainty and Definiteness of Terms
Possibility of Loss
Offer, Payment, and Acceptance of Premium
Agreement of 2 people/ parties
Voluntary
Should be written
Binding
Contract
Basic Element of Contract
- Consideration
- Meeting of the Minds
- Capacity to Contract
- Offer and Acceptance
Special Characteristics of Insurance Contracts
- Unilateral Contracts
- Conditional Contracts
- Aleatory Contracts
- Contracts of Adhesion
Insurance agents are typically subject to various laws and regulations governing their
licensing, conduct, and professional responsibilities.
regulation
The relationship between law and insurance agents involves several key aspects:
Regulation
Duties and Responsibilities
Liability
Contractual Relationships
Insurance agents have a duty to act in the best interests of their clients and provide
accurate information about insurance products and coverage options.
duties and responsibilities
Insurance agents can be held liable for negligence or misconduct in their professional
duties.
liability
Insurance agents often act as intermediaries between insurance companies and clients, facilitating the purchase of insurance policies and managing ongoing interactions
between the parties.
contractual relationships
Like any other contract, an insurance contract requires a clear offer by one party (typically
the insured) and an acceptance by the other party (the insurer). Both parties must agree
on the terms of the insurance contract for it to be valid.
offer and acceptance
The parties involved must have the legal capacity to enter into a contract. This means
they must be of sound mind, not under the influence of drugs or alcohol, and of the legal age to contract.
legal capacity
The purpose of the insurance contract must be legal and not against public policy. For
example, insurance contracts that encourage illegal activities or involve illegal gains may
be deemed unenforceable.
Lawful Purpose
The terms of the insurance contract must be clear, specific, and not open to multiple
interpretations. This helps prevent disputes and ensures that both parties understand
their rights and obligations.
Certainty and Definiteness of Terms
The subject matter of the insurance must involve a potential for a financial loss. If there
is no risk of loss, there is no need for insurance. Insurance is designed to provide
protection against unforeseen events that could result in financial harm.
Possibility of loss
The insured typically makes an offer by applying for insurance, and the insurer accepts
this offer by issuing a policy. Premium payment is a critical component, as it represents
the consideration for the insurer’s promise to provide coverage.
Offer, Payment, and Acceptance of Premium
