Chapter 5: Insurance contract formation and insurable interest

Question 1

invitation to treat

Answer 1

invitation to negotiate

Question 2

contract certainty

Answer 2

complete agreement of terms between the insurer and insured at the inception of the contract with contract documents provided shortly after

Question 3

renwal notice

Answer 3

comes with an offer of 15 days cover
- if not recieved this cannot be accepted
- if they do receive is and continue to drive on the road it is considered accepted

Question 4

in insurance parties must reach an agreement on

Answer 4

• nature of the risk/subject matter of insurance = whats insrued and what for
• the duration of the contract
• the amount of premium/the method of calculation

the rest doesnt need to be spelled out as long as the usual terms are assumed

Question 5

signing down

Answer 5

unilateral alteration of terms of a concluded contract - allowed
an implied term of the contract

Question 6

accepting renewal

Answer 6

-new contract
-accepted through payment of premium where there is no change to the risk
-where there is a material change in the risk the insured must notify the insurer (counter offer) - for consumer insurance the insurer must ask the insured about the matters they want to know
-insurers are under no obligation to renew

Question 7

unilateral offer

Answer 7

obligation on one offerer who promises to do something if the other does a thing

Question 8

contracts starting

Answer 8

-can be before premium is paid
- ususally stipulated in the contract
-

Question 9

return of premiums

Answer 9

• proportion on early cancelation (where expressed) on a prorata basis
• all if the insurer was never on risk

Question 10

ways a risk doesnt run

Answer 10

-proposal withdrawn
-no consensus ad idem
-void ab initio bcus of the assured negligent misrepresentaiton
-no insurable interest

-if a policy is void for illegality there is no option to recover premium

Question 11

cancellation by insurer

Answer 11

prorate return of premium

Question 12

cancellation by the insured

Answer 12

less then prorata retuen

Question 13

contracts by deed

Answer 13

none

Question 14

insurance contracts that must be in writing

Answer 14

• marine - can be without the existence of a policy but this is required to make a claim
• contract of guarantee
• motor policy (although certification isnt required)
• life insurance

Question 15

contractual capacity of minors

Answer 15

minors bound by
- contracts of necessity
- beneficial contracts (employment)

the rest are nonbinding or voidable
motor insurance is of necessity

can only get full repayment of premiums where there has been no benefit in the policy - not the case as soon as the policy starts to run

Question 16

drunk/disabled

Answer 16

people can avoid the contract if at the time of making it they were didnt understand what they were doing and the other party knew this

Question 17

pra

Answer 17

authorises financially important firms and regulates them for prudentialn issues like capital and solvency

Question 18

fca

Answer 18

authorises smaller firms, financial and insurance intermediaries and regulates them for prudential issues
- new consumer principle = treat customers with good faith

Question 19

insurable interest

Answer 19

the insured will suffer a loss if the event occurs

Question 20

key elements of insurable interest

Answer 20

• subject matter of insurance
• financial interest (monitary value)
  -legal interest
• current interest

usually broadly defined

Question 21

why insurable interst

Answer 21

• stop wagering
• reduce moral hazard

Question 22

creation of insurable interest

Answer 22

• common law
• contract

Question 23

maine insurable interest

Answer 23

a- t loss, not when the contract is made
- lost or not lost = can insure if they aquired interest after the loss and insurer was aware of the loss

Answer 24

motor policies fall into insurance on goods

Question 25

gaming act 1845

Answer 25

- voids contracts with no insurable interest or insurance out of proportion to the value of the subject matter

Question 26

in pari delicto

Answer 26

in equal wrong doing = money paid under an illegal contract cannot be recovered

Question 27

does a lack of insurabel interest mean no payment

Answer 27

- no although loss needs to be proven - lack off ii means it cant be enforced in courts - insurers may waive these rights

Question 28

insurable interest bill

Answer 28

- only applies to life related insurance - insurer doesnt have to return premiums to a nonconsumer - for consumers return based on a fairness assessment

Question 29

insuable interest in life insurace

Answer 29

two types - hard to define financially but persumed (only mariage only grounds for insurable interest) - business relationship (financial interest)

Question 30

insurable interest business relationships

Answer 30

- partners - employer/employee -creditor = someone they owe money to

Question 31

limited interest

Answer 31

-applies to property -can insure the property for the full value -can reain at a maximum their own interst and hold the rest in trust

Question 32

liability insurance

Answer 32

covers people against the cost of compensation claims following fault of negligence brought against them

Question 33

third party

Answer 33

not the insured or insurer

Question 34

negligence

Answer 34

failure to take reasonable care to prevent loss or injury

Question 35

standard for negligence

Answer 35

-establishment of duty -breach of duty -causation -damages covers legal liability no indemnity for criminal libaility

Question 36

reinsurance

Answer 36

subject matter is the original insurers liability to indemnify their policy holders