Study 2 - Underwriting The Risk: An Overview

Question 1

Define contra proferentem

Answer 1

A legit term that provides that any ambiguity in a contract must be interpreted against the person who drew the contract because they had the opportunity to make it clear

Question 2

Define replacement cost clause

Answer 2

A provision, generally in property insurance coverage, to provide a substitute of the damaged or loss property with something similar, including having the same use but not necessarily identical to the property being replaced, without extra cost to the insured

Question 3

Define actual cash value

Answer 3

The fair market value of property, taking into account factors that might augment or reduce the value of the property in question. Actual cash value (ACV) is usually calculated in one of three ways: 1) Cost to repair or replace less depreciation, 2) Fair market value or 3) Consideration of all relevant evidence of the value of the damaged property

Question 4

What simple way is contra proferentem described?

Answer 4

Against the offeror

Question 5

What is a manuscript policy?

Answer 5

Specialty policy; unique risk

Some features may be standard while others are not

Question 6

How did liability policies adjust to the liability crisis in the mid 1980s?

Answer 6

Policies were on an occurrence basis previously

They created claims made policies

Question 7

What two cases set the basis for exclusions regarding abuse and molestation?

Answer 7

Sansalone v. Wawanesa Mutual Insurance Co.

Non-marine underwriters, Lloyds of London v. Scalera

Question 8

What was the relevance of Dittmann v. Aviva Insurance Company of Canada in 2017?

Answer 8

How companies define the use of a motor vehicle

Lady in drive through spilt McDonalds coffee on herself, Aviva took the stance it was not an auto accident as she was not in motion, the courts disagreed and she was eligible for accident benefts

Question 9

Define contract

Answer 9

An agreement or promise between two or more persons that is intended to be legally enforceable and is constituted by the acceptance by one or more party of an offer made to him by the other party, to do or abstain from doing a specific act. The offer and acceptance may either be expressed or be inferred through the conduct of the parties

Question 10

Define consideration

Answer 10

The value received to bind a contract. It is an essential part of a binding contract. Consideration is either expressed or implied. The money, or whatever is being used in substitution of money, paid for the article or contract is the consideration

Question 11

What are the five elements of a contract?

Answer 11

GLACC

Agreement (offer & acceptance)
Capacities of the parties to contract
Consideration
Genuine intention (meeting of the minds)
Legality of the object

Question 12

What are the four requisites to a binding contract in Quebec?

Answer 12

Consent
Capacity to Contract
Cause of Contract
Object of Contract

Question 13

Define insurable interest

Answer 13

An interest that the insured must have in the subject matter of the insurance purchased so that if the event insured against occurs, the insured will suffer a pecuniary loss

Question 14

Define indemnity

Answer 14

A contract, expressed or implied to repay the event of a loss. The insured neither gains nor loses

Question 15

What other three elements are unique to an insurance contract?

Answer 15

Insurable Interest
Indemnity
Utmost Good Faith

Question 16

Define utmost food faith

Answer 16

A legal principle calling for the highest standards of integrity on the part of the insured and the insurer

Question 17

Define declarations

Answer 17

Statements included in a policy that are agreed to by the insured and form the basis of the contract of insurance

Question 18

What are the five different sections of a policy?

Answer 18

1) Coverage summary
2) Insuring agreements
3) Statutory conditions / Quebec general conditions
4) Policy conditions
5) Signature clause

Question 19

What is detailed on the coverage summary / declarations page?

Answer 19

• Parties of the contract
• Commencement date, term and expiry date
• Premium and rate
• Amounts insured

Question 20

What is detailed in the insuring agreements?

Answer 20

• Subject matter of insurance
• Perils insured against
• Exclusions
• Circumstances under which the insured may receive the proceeds of the insurance

Question 21

What three types of policies do statutory conditions apply to?

Answer 21

• Automobile
• Accident & Sickness
• Fire Insurance

Question 22

Define subscription policy

Answer 22

A single policy covering a risk that is divided among a number of insurers; the policy is issued by the “lead” company (usually the one with the largest percentage) and signed by all participating companies

Question 23

What are the five skills in an underwriter’s toolkit?

Answer 23

• The environment
• The legal system
• The business
• The product
• The risk

Question 24

What should an underwriter’s understanding of the legal system encompass?

Answer 24

• Three sources of law in Canada; common law, statute law, civil code of Quebec
• Division of jurisdiction beteen federal, provincial and territorial
• Structure of federal, provincial and territorial court systems
• Distinction between civil and criminal law
• Aspects of civil law including law of tort and especially law of contract
• Insurance contract itself

Question 25

What happened in Al’s Towing Service v. Sovereign General Insurance Co. (1991)?

Answer 25

Court ruled that exclusions did not apply as the crane was used in the way it was designed, and the plaintiff action against the insurer was not allowed

Question 26

What are some examples of an underwriter’s technical skills?

Answer 26

Technology, research, rating and ratemaking

Question 27

What two analytical skills must underwriters be comfortable with?

Answer 27

Words and numbers

Question 28

What other skills may an underwriter need?

Answer 28

Technical
Analytical
Communication
Organizational