Property Insurance

Question 1

Common Law

Answer 1

System of laws originating and developed in England by judges based on court decisions and similar tribunals. It is also known as case law or law of precedent.

Question 2

Civil Code of Quebec

Answer 2

The civil code in force in the province of Quebec.

Question 3

Precedent

Answer 3

A legal decision that serves as a basis to resolve subsequent disputes in similar cases.

Question 4

Case Law

Answer 4

The body of previously decided cases that courts review for guidance on cases currently in dispute.

Question 5

Statute Law

Answer 5

A law set down in a government act and passed by legislature.

Question 6

Contra Proferentem

Answer 6

Legal term that provides that any ambiguity in a contract must be interpreted against the person who drew the contract because she had the opportunity to make it clear. In Latin this term means “against the offerer”.

Question 7

Relief from forfeiture

Answer 7

A decision by a court, on grounds of equity; to excuse the insured in whole or in part from perfect compliance with a particular policy condition.

Question 8

Material Fact

Answer 8

A fact that would affect a contract of insurance enough to influence an insurer’s decision regarding whether to accept or reject the risk or the premium to be set. Material facts must be disclosed by the applicant if asked about.

Question 9

Ab Initio

Answer 9

Latin term meaning “to go back to the beginning”. When a policy is rejected or made void ab initio, premium is refunded entirely and the contract is treated as though it never existed.

Question 10

Stat 1: Misrepresentation

Answer 10

1. Applicant is in superior position to insurer in that only applicant has knowledge of all material facts to risk.
2. Law imposes duty on insured to disclose information that will affect terms under which the policy may be offered.
3. If info is withheld, applicant interferes with the option of the insurer to rate policy differently or decline risk. This is insurer’s disadvantage.
4. Application requires insured to provide key pieces of info such as location of property, construction, fire protection. Not possible to ask every question, but absence of particular questions doesn’t mean fact it concerns is not material.
5. Utmost good faith requires insured to act with high standard of honesty and disclose those facts that reasonable person ought to know are material.
6. Misrep isn’t often discovered until after a loss has occurred.
7. If it has been determined that info was fraudulently presented or material facts omitted at time of app, and if material may change acceptance of risk or premium charged, insurer may void policy entirely - cancel ab initio though loss has been reported.
8. Premium would be refunded, claim denied on basis policy doesn’t exist. However, onus is on insurer to prove there has been misrepresentation and material to risk.

Question 11

Stat 2: Property of Others

Answer 11

1. Insurer is not liable to pay for losses to any person other than insured unless interest is stated in contract.
2. Property policies clearly define who is an insured within contract - although policy cover spouse, relatives or dependents of insured, they must be residents of household named insured occupies.
3. Contract also requires presence of insurable interest - where person or company stands to benefit from continued existence of insured property or prejudiced by loss.

Question 12

Stat 3: Change of Interest

Answer 12

Under Common Law Doctrine of privity of contract, insured can’t assign rights and obligations under contract to another party without insurer’s consent. There are exceptions which insurer is obliged to insure new interest replacing named insured’s interest:

1. Authorized assignment under Bankruptcy and Insolvency Act
2. Change of Title by: Succession, Operation or law OR death of named insured.

Under these situations, policy protects new interests automatically, from time of change, regardless of whether insurer has been informed. Condition protects only new interests falling strictly under the above stated.
There is an obligation for the successor, to notify the insurer of the change in interest within a reasonable amount of time. Because these changes are often accompanied by other changes, such as occupancy which the insurer should be made aware.

Question 13

Stat 4: Material Change

Answer 13

Stat 1 applies to fraud before contract takes effect. Stat 4 applies after policy takes effect. It concerns change in material fact, within control and knowledge of insured, occurring during policy term.