Chapter 7 - insurance contracts and key terms Flashcards
What is a breach by an insurer?
fail to indemnify the assured within a reasonable time for a valid claim.
The insurer’s failure to do so would be a breach of an implied term under IA 2015 section 13A.
What is a breach by an insured?
when an insured may fail to pay the premium. In practice, it is
usually the insured rather than the insurer who breaches an insurance contract.
What is a breach of pre-contractual information duties
the breach normally arises from a failure to
supply full and accurate information in the negotiations that lead up to the formation of the contract, in other words, before the contract has come into existence.
What is an express warranty?
expressly stated in the policy itself,
What is a breach of contract?
the breach arises from a failure to comply with a term of the contract itself,
so that the breach occurs after the contract has been made and as a result of one party not keeping to the agreement that has now come into force.
What are statutory rules?
rules laid down in legislation
What are common law rules?
rules developed by the courts
Which act are insurance contracts excluded from?
Unfair Contract Terms Act 1977 (UCTA)
What happens once a breach of warranty is remedied?
Once the breach is remedied, the suspension is lifted i.e. cover is provided again by the insurer.
What is a warranty?
A warranty is, essentially, a promise made by the insured relating to facts or to something which they agree to do.
What is a continuing warranty?
Continuing warranties are often applied by insurers to ensure that some aspect of good housekeeping or good management is observed by the insured.
What is an exception / exclusion clause?
excuse insurers from liability
What is an implied warranty?
Warranties may be implied in marine insurance only. Section 39 of the Marine Insurance Act 1906 carries the implied warranty of seaworthiness automatically into every policy of marine insurance.
Under the Insurance Act 2015 if a warranty is broken what happens?
the insurance cover is suspended from the moment the warranty is breached until it is remedied.
In principle, the cover is suspended, even if the breach did not cause or have any connection with a loss.
What is a condition?
In an insurance context conditions are contractual terms, other than warranties, that impose an obligation on the insured (either risk or claims related). Conditions can also be classified in various ways.
What is a condition precedent to the contract?
A condition precedent to the contract is one which states, in one form of words or another, that the policy will not come into effect if the insured fails to comply with the term in question.
What are conditions precedent to liability?
Conditions precedent to the insurer’s liability are often concerned with, but not limited to, the claims process such as notification of a claim within a specified time, or not to admit liability after causing an accident.
What happens if there is a Breach of condition precedent to liability?
- The insurer is automatically discharged from liability for the claim which is tainted by the breach. Prejudice is irrelevant.
- The policy remains in force
WHat happens is there is a breach of warranty?
–> Under the MIA 1906 and common law, cover terminated automatically and, in effect, the contract ended.
–> However, the IA 2015 repealed any rule of law in a contract of insurance which causes a breach of a warranty to result in the discharge of the insurer’s liability. Under IA 2015 section 10 the insurer has no liability under a contract of insurance in respect of any loss that occurs or is attributable to something that happens after a warranty (express or implied) has been breached but before the breach is remedied. In other words, the breach suspends the insurance cover during this period (assuming that the breach can
be remedied).
–> The insurer does not have to prove a connection between the breach and any loss that has occurred unless the warranty is intended to reduce the risk of loss of a particular kind, location or time, due to the application of IA 2015 s.11 (see Terms not relevant to
the actual loss on page 7/16).
–> The insured is permitted to remedy the breach; once it is remedied the suspension is lifted.
what happens if there is a Breach of a condition precedent to the contract?
If a condition precedent is never fulfilled, the contract never comes into existence.
What happens if there is a Breach of a ‘suspensive condition’?
Cover is suspended for as long as the insured fails to comply with the condition, but resumes if and when they start to comply with it again. The concept of suspension conditions was invented by the common law courts through interpretation of the term in question in order to avoid the draconian consequences of breach of a warranty available
in law at the time.
what happens if there is a Breach of collateral (or ‘mere’) condition?
–> Remedy depends on the seriousness of the breach. In most cases the insurer is not entitled to reject the claim.
–> If the breach is not serious enough to entitle the insurer to terminate the policy, the insurer
cannot reject the claim and has to pay for the loss. However, it may claim damages in the form of reduction from the amount to be paid under the insurance contract.
What is a promissory estopple?
A promissory estoppel means that an insured who has broken a warranty cannot enforce the contract unless they can prove that the insurers clearly indicated, by their words or conduct,
that they do not intend to rely on the breach of warranty as a defence to further liability under the policy.
How would you distinguish between a breach of the duty of fair presentation of the risk and a breach of condition or warranty in insurance?
A breach of the duty of fair presentation of the risk normally arises from a failure to supply full and accurate information in the negotiations which lead up to the formation
of the contract – before the contract has come into existence. A breach of condition or warranty arises from a failure to comply with a term of the contract itself, so that the breach occurs after the contract has been made.
