Unit 2

Question 1

concealment

Answer 1

failure to disclose; hiding information

• if intentional and the information is material (important), coverage could be voided
• if not intentional, coverage can not be voided

Question 2

warranty

Answer 2

• promise
• always made by the insurance company
• breach of warranty may void contract
• may be made by insured
• breach of warranty may void contract
• statement guaranteed to be true
• refer to material fact

Question 3

unilateral

Answer 3

• only one legally enforceable promise made
• insurance company promises to pay for a covered loss
• insured may cancel at anytime
• insured doesn’t pay premium? insurance company will cancel
• insurer doesn’t pay claim? insured can sue, legally bound once policy is issued

Question 4

utmost good faith

Answer 4

the insured and insurance company have a right to expect honesty from each other

Question 5

misrepresentation

Answer 5

information given that is not true but would not affect the insurance company’s decision

Question 6

aleatory

Answer 6

• unequal value
• small premium for a large amount of coverage
• pay premiums for many years without a claim

Question 7

personal

Answer 7

contract between the insurance company and the insured; cannot be changed to someone else

Question 8

fraud

Answer 8

intentional act to cheat another

Question 9

representation

Answer 9

believed to be true

statements on application considered this

Question 10

estoppel

Answer 10

once a waiver has been created, it cannot be reinstated

• continue to wave that right
• impression that a certain fact exists

Question 11

conditional

Answer 11

insured must pay the premium for coverage and file a claim if a loss occurs

Question 12

counteroffer

Answer 12

• agrees to issue policy but with higher premium or restrictions/ exclusions
• insured either accepts the conditions or withdraws their application

Question 13

material misrepresentation

Answer 13

information given that is not true and does affect the insurer’s decision

Question 14

waiver

Answer 14

voluntarily giving up a right

Question 15

indemnity

Answer 15

• restore to whole, pre-loss state
• pays for the loss with no gain
• no more! no less!
  imdemnification

Question 16

adhesion

Answer 16

• policy written by the insurance company
• contract is like glue, cannot be changed
• insured has no input
• if ambiguous (not clear), court will take side of the insured

Question 17

A cceptance

Answer 17

• offer must be unconditional and unqualified
• accepted by insurer
  CLOAC

Question 18

C ompetent parties

Answer 18

legal age
sane
sober
CLOAC

Question 19

O ffer

Answer 19

proposal made by one of the potential parties to the contract
insured submits application and first month premium to insurer
insurer accepts or declines risk
CLOAC

Question 20

L egal purpose

Answer 20

risk transfer does not violate the law

CLOAC

Question 21

C onsideration

Answer 21

giving something of value exchange
premium ($) and statements made on application
CLOAC