Study 3: Policy Contract Analysis - Key terms

Question 1

Proximate cause

Answer 1

A cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would not have happened.

Question 2

Declarations

Answer 2

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

Question 3

Insuring agreement

Answer 3

Describes the intent of the policy, just what insurance coverage is provided by the policy, and in what limits.

Question 4

Contra proferentem

Answer 4

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

Question 5

Contract of adhesion

Answer 5

A type of contract that is effectively non-negotiable because one party drafts the policy wording or offers a standardized contract wording.

Question 6

Occurrence

Answer 6

(1) A happening or event. (2) The continual or repeated exposure to an unfavourable situation neither intended nor expected to cause injury or damage. (3) The grouping of related losses into a single loss situation.

Question 7

Claims-made basis

Answer 7

A provision in some insurance and reinsurance contracts covering only claims made during the term of the contract.