Chapter Test Revision

Question 1

What is an unincorporated association?

Answer 1

A group of people not formed in the same way as a corportation. Associates are treated as separate legal entities & gre there own natural legal person with their own legal rights & responsibilities. Each member is deemed to be in a contractual relationship with every other member. Examples include social clubs, voluntary organisations and small businesses set up as partnerships.

Question 2

What are the different types of public law & their purpose?

Answer 2

Constitutional law: structures of main institutions of government, treaties with foreign states & power/function of the monarch MPs ministers etc.
Administrative law: law between individuals & government such as taxation, compulsory land acquisition, health, education, licensing etc
Criminal law: law concerning behaviour that harms or threatens peace and stability of the community

Question 3

What is a next friend

Answer 3

Minors must sue through a next friend who is an adult responsible for any costs awarded

Question 4

How is the principal of equity best described?

Answer 4

An add on that developed to address concerns not covered under comma law

Question 5

What is the law commission?

Answer 5

Responsible for consolidation & revision of statute law. They have the general role of reviewing law as a whole & recommending ways to simplify, update & develop the system.

Question 6

What are the main limitation periods in tort?

Answer 6

1 year for claims of libel or slander
3 years for personal injury claims
6 years for most other tort actions (property damage claims)

Question 7

Why is the consumer protection act 1978 important in negligence.

Answer 7

This act introduces strict liability for defective products. The act makes producers liable personal injury or damage in excess of £275 to private property caused by a defect in their product

Question 8

What is strict liability?

Answer 8

When a person is held liable even if their actions are neither intentional or negligent (no-fault liability)

Question 9

What is the general principle if an individual signs a contract without fully reading the details

Answer 9

The individual is fully bound by the terms of the contract

Question 10

How can an exclusion clause be incorporated into a contract that is not signed?

Answer 10

The exemption clause can be displayed at the premises where the contract is made, or in a document given to one party by another, for example a ticket or receipt

Question 11

How can obligations of a contract be transferred?

Answer 11

The burden of a contract in principle can only be transferred by mutual agreement of both parties.
Novation is when both parties agree that the responsibilities are transferred from one party to a third party, creating a new contract (for example transferring of debts). This would not however be assignment as the original party is still liable for any breaches committed by the third party.

Question 12

What is privity of contract?

Answer 12

A doctrine that restricts the rights and duties of a contract to the person who made it. In principle a contract between A and B cannot impose any duties on a third party.

Question 13

What are the types of assignment?

Answer 13

Equitable: this may be done by simply handing the policy to another, providing the intention to assign is clear
Statutory (policies of assurance act (1867): Assignees can enforce a policy as if it’s their own providing the act is complied with. The assignment must have used specific language, endorsed on the policy, and submitted in writing to the insurer.
Law of property act (1925): In line with this act assignment must be absolute, written and expressly made

Question 14

What is Apparent (ostensible) Authority?

Answer 14

A principle is bound not only by acts that are within the actual authority of the agent but also acts that are within the authority they appear to have. Apparent authority only arrises when the agent has the appearance of authority

Question 15

How can agency be terminated?

Answer 15

Agreement between parties
Performance
Lapse of time
Withdrawal of authority
Renunciation by the agent
Death of either party
Bankruptcy of the principle (or agent if this impacts their duty)
Insanity
Frustration

Question 16

What rights do agents have?

Answer 16

The right to remuneration (payment or commission, but work can be gratuitous)
The right to indemnity (reimbursement for reasonable expenses)

Question 17

If an agent completes a proposal form incorrectly and there is a subsequent claim what may the insurer do?

Answer 17

The insurer may avoid the policy for breach of breach of pre contractual information duty. If the insurer avoids the policy the insured may be able to sue the agent for breach of duty.

Question 18

Is communication of acceptance necessary?

Answer 18

In principle an offer cannot be accepted by doing nothing, acceptance must be communicated to the other party. If an insured does not receive renewal notice for their car insurance, they cannot accept the offer of temporary cover and therefore would not be insured when the policy lapses. If they do receive the offer however, it will be deemed they have accepted it if they continue to use the car on the road

Question 19

What is the Macaura principle

Answer 19

An insurable interest must be legal (equitable) and therefore recognised and supported by law. This only applies in England and has been rejected in USA, Australia and Canada

Question 20

What are the key elements of insurable interest?

Answer 20

A subject matter of insurance
An economic or financial interest in the subject matter
The interest must be current (not expected)
The interest must be a legal interest

Question 21

Why does the insured owe a positive duty to the insurer to disclose facts?

Answer 21

The insurer often has to rely solely on the information provided by the insured. This goes beyond the duty not to misrepresent seen in commercial insurance. The insurance act 2015 says insured have the duty to disclose facts the “know” and “ought to know”. In the case of a company the act requires the company disclose anything “known by the insured’s senior management”

Question 22

What are the Insurance Conduct of Business (ICOB) rules?

Answer 22

The ICOB rules, managed by the FCA, aim to ensure that customers are treated fairly. Consumers are given more protection than commercial customers. These requirements have generally been enacted in CIDRA 2012

An insurer must not unreasonably reject a claim (including by termination or avoiding a policy)

Question 23

What happens if a fraudulent claim is made?

Answer 23

Making a fraudulent claim is in breech of the duty to act in good faith, with the remedy expressly stated in the IA 2015 as avoidance of the whole claim. In the case of actual fraud the insurer also has the right to repudiate the contract. The act must be substantial, deliberate and material. The burden of proof for fraud rests on the insurer

Question 24

What statutory controls does the Consumer Rights Act 2015 impose?

Answer 24

The act removed insurance contracts from the scope of the Unfair Terms in Consumer Contracts Regulations 1999 and imposed the following statutory controls:
An unfair consumer term or an unfair consumer notice is binding on neither party
Prohibition of excluding or restricting liability for death or personal injury due to negligence
Removal of requirement for terms to have been negotiated before they can be challenged for being unfair

Question 25

What rights are there under joint and composite policies?

Answer 25

For joint policies the rights of the insureds stand and fall together, for composite policies each party has a separate interest and can make a separate claim. This is important where breaches or fraud is committed by one individual but not the co-insured. In the case of an estranged spouse causing damage to a joint property that is jointly insured the ombudsman rules that the innocent spouse should be entitled to their share.

Question 26

What might a breach in a composite policy result in?

Answer 26

A breach by one party might invalidate their cover without impacting on the interests of others

Question 27

What is a collateral (mere) condition?

Answer 27

Collateral conditions are not conditions precedent and are treated as minor terms. If broken an insured can still claim but the insurer may charge for additional costs incurred due to the breach. If the breach “goes to the root of the contract” the contract may be terminated.

Question 28

What is a warranty regarded as in an insurance contract?

Answer 28

A promise made by the insured relating to facts or to something which they agree to do

Question 29

In an insurance claim where does the burden of proof lie?

Answer 29

The burden of proving a loss lies with the insured. It is in their best interest to complete claims forms, provide as much information as possible and cooperate with the investigation.

The insured must establish “on the balance of probabilities” that the loss was caused by an insured peril and the amount of the loss

Question 30

What are the different types of fraudulent claims?

Answer 30

Falsification of a loss - a claim when there is no loss
Deliberate loss - a claim for a loss caused by the insured
Exaggeration of loss - a claim for an exaggerated amount
Lying about circumstances of a genuine loss to improve chances of payment. An insurers rejection of a claim on this basis is known as the “fraudulent device” loss

Question 31

Can the insured spend the money from a claim as they wish?

Answer 31

If a cash payment is made to settle a claim, there is no obligation to spend the money on restoring the property (unless required to by a 3rd party). In the case of “new for old” or “reinstatement” cover where the full cost of replacement is paid, then the property must be restored, otherwise the claim would be paid on an indemnity basis and therefore be reduced for betterment.

Question 32

When might a claim settlement be more than the items actual value?

Answer 32

In the case of “agreed value” cover, a fixed value is paid that is agreed at inception following a total loss

Question 33

What is constructive total loss?

Answer 33

If the subject matter is damaged but not destroyed, and the insured is subsequently deprived of their possession they can claim for a constructive total loss if they serve a notice of abandonment indicating their willingness to give up the subject matter to the insurers

Question 34

When does the insured have the legal right to insist on payment of money?

Answer 34

When a policy does not include a clause in the policy relating to how the claim will be settled.

Question 35

In law how should the calculation of contribution with liability insurance be calculated?

Answer 35

The independent liability method should be used.

Question 36

What is the maximum liability method?

Answer 36

The loss is shared by the insurers in proportion to the maximum amount of cover that is available under each policy

Policy sum insured / total sum insured * loss

Question 37

What is the independent liability method?

Answer 37

The liability for the particular loss is assessed as if it were the only policy in force, the figure that results represents the independent liability of each insurer. The loss is then shared in proportion to the independent liabilities of each insurer

Loss =£15k
A sum insured = £10k so independent liability = £10k
B sum insured = £20k so independent liability = £15k

Individual liability / combined liabilities * loss
For A 10/25 * 15 = £6k
For B 15/25 * 15 = £9k

Question 38

What impact would an escape clause have on the insured?

Answer 38

An escape clause prohibits the insured from having another insurance policy without the agreement of the first insurer