Principles of Insurance

Question 1

The absolute duty to disclose, fully or accurately, all the facts material to the risk being proposed, whether asked for them or not.

Answer 1

Utmost Good Faith

Question 2

Unlike insurance, commercial contracts are governed by this doctrine (let the buyer beware) since the subject matter of the contract is tangible, examinable and evaluable prior to acceptance

Answer 2

Caveat Emptor

Question 3

The latin word that describes the relationship of mutual trust and confidence between the insured and the insurer

Answer 3

uberrima fides

Question 4

The duty to disclose all the information that which would influence the other’s decision to enter the contract rests heavily on

Answer 4

The prospective Insured

Question 5

In terms of duty, the Insurers should not:

Answer 5

1. Accept insurance which they know is unenforceable at law
2. issue the policy in unambiguous terms
3. make no untrue statements in the negotiations with the proposer
4. withhold important information (for eg. the proposer could obtain a discount.

Question 6

The duration of duty of disclosure

Answer 6

up until the contract is in force. From then on it is only subject to ordinary good faith. This is changeable by specific provisions (conditions and warranties)

Question 7

A fact that would influence the mind of a prudent underwriter in accessing a risk

Answer 7

Material Facts

Question 8

Material Facts can include:

Answer 8

1. Those which make the risk greater
2. Those which explain the exceptional nature of the risk
3. Those which support special reasons for insuring
4. Those which relate to the atypical proposer

Question 9

Examples of Material fact:

Answer 9

Life Insurance: that a person has a heart condition ( or other serious illness)
Fire Insurance: that a building stores hazardous substances
Burglary Insurance: that the premises has been broken into several times before
Motor Insurance: that a standard model car had been modified

Question 10

The failure to disclose a material fact, either by accident or because the face was not considered important

Answer 10

Non-Disclosure

Question 11

Breaches of Utmost Good Faith

Answer 11

Non-disclosure, Concealment, Fraudulent misrepresentation and Innocent Misrepresentation

Question 12

Breach of Utmost good faith by Willful non-disclosure of a material fact

Answer 12

Concealment

Question 13

Breach of Utmost good faith by deliberately or intentionally providing misleading information on a material fact

Answer 13

Fraudulent misrepresentation

Question 14

Breach of Utmost good faith that occurs when incorrect information is given about a material fact, but where the error is unintentional

Answer 14

Innocent Misrepresentation

Question 15

Effects of a breach of utmost good faith have the options:

Answer 15

a. To consider the contract void
b. To sue for damages
c. To waive the breach

Question 16

Specifics of Contract Void

Answer 16

The insurer is always the aggrieved party. The insured/offending party is notified that the insurer is ‘coming off’ the risk
If the policy has matured (in life insurance) then no payment will be made

Question 17

Specifics of Suing for damages

Answer 17

The insured would be guilty of ‘tort of deceit’. The insured would then give rise to action but this is ‘virtually unknown’ since the expense is not worthwhile.
This action would be additional to Voiding the contract

Question 18

Specifics of waiving the breach

Answer 18

The insurer overlooks the breach which would make it as if the breach didn’t even occur.
It is the assumed course of action if the insurer takes no action in a reasonable amount of time.

Question 19

Special Provision in motor insurance for breaches

Answer 19

This is an act enforced by the Regional Transportation Authority (RTA). It ensures that the victim of a car accident where the offender has a ‘breached’ policy is paid for the damages caused.

Question 20

A statement of promise made by the insured that some particular thing will or will not be done and is incorporated in the policy as an essential part of the contract

Answer 20

A Warranty - There are 2 types in insurance:

Express and Implied

Question 21

Express Warranty

Answer 21

Expressed in the policy document, specifically or by reference
Eg - Burglary Insurance: Warranted certain types of lick fitted to building

Question 22

Implied Warranty

Answer 22

Not expressed in the policy document but are applicable

Eg - Marine Insurance: warranted that the vessel is seaworthy

Question 23

A written or oral statement made during negotiations for a contract, some of which are about material facts.

Answer 23

Representation

Question 24

The Fundamental Principles of Insurance

Underwear In Inter School Pushed Agendas

Answer 24

1. Utmost good faith
2. Insurable Interest
3. Indemnity
4. Subrogation
5. Contribution
6. Proximate Cause
7. Average Clause

Question 25

The legal right to insure arising out of a financial relationship recognized at law between the subject matter and the Insured.

Answer 25

Insurable Interest