Flashcards in Insurance Law Deck (49)
What is the difference between assurance and insurance?
- Assurance has a certainty of happening but unsure of when
- Insurance is based on some future event that may or may not happen.
Why was the Insurance Act 2015 and the Consumer Insurance (DR) Act 2012 introduced?
- As a means of redressing the existing law which was deemed to be too favourable to insurers.
- The primary aim was to make insurance fairer.
What is insurable interest?
- An interest in the subject matter of what is being insured
- This may be financial or pecuniary interest
- A prime example of insurable interest may be in life assurance policies where there is a financial interest between a father and son for payments of aliment.
What is meant by Uberrimae fidei?
Utmost good faith
What did the common law "uberrimae fidei" contract impose on insured persons?
- An insured was required to disclose all material facts that would influence the judgment of a prudent insurer
- Not to misrepresent material facts to the insurer.
Why was the concept of Uberrimae fidei flawed prior to the 2012 and 2015 Act?
- Insured persons often did not know what insurers deemed as 'material' for disclosure.
- As the onus was very much on the insured, non-disclosure of certain facts meant the insurer would likely refuse to pay out on a claim.
Why may the upmost good faith principle, prior to the 2012 Act be described as a 'win win' for the insurer?
- No stipulations as to what was material meant insurers could refuse claims for failure to disclose information (even where the insured was unaware of its importance)
- And then of course if there was no claim they were still gaining premiums.
What is the duty of disclosure?
- The simple definition is that the insured has to disclose all relevant facts and circumstances to the insurer.
- This obligation was made fairer by the 2012 act but is still present.
Who does the Consumer Insurance (Regulations and Representations) Act 2012 apply to? And what does it deal with?
- The 2012 Act deals with the issue of what a consumer is obligated to tell an insurer before entering a contract of insurance.
How has the 2012 Act altered the previous law on the duty to disclose material facts? And what is the statutory duty imposed by this act?
- Consumers are no longer required to disclose ALL material facts.
- The new legislation provides that consumers must only answer questions the insurer puts to them.
- The insured has a statutory duty to take reasonable care not to make misrepresentation before the contract is formed or varied.
- In order to comply with the duty answers should be given fully and accurately.
Does an insurer have to pay out to a consumer if they mistakenly give false information?
See schedule 1 3 - 8
- An insurer has the option of satisfying the claim or not dependent on certain circumstances.
If an insurer is willing to fulfil an insurance contract despite CARELESS misrepresentation, what remedies will be available to the insurer?
SCH.1(7) 2012 Act
- if the different terms would have imposed higher premiums then the insurer is entitled to reduce proportionately a percentage from any claim made to reflect such a difference.
In circumstances where the consumer insured makes a CARELESS misrepresentation to the insurer what remedies are available to the insurer?
SCH.1(6) 2012 Act
- If the insurer would not have entered the contract on different terms then they are entitled to avoid the contract and refuse all claims BUT must pay back all premiums
- where insurer would have entered the contract but on different terms the contract is taken to have included the terms missing.
When does CARELESS misrepresentation occur?
If the misrepresentation is not deliberate or reckless then it is careless.
When would DELIBERATE or RECKLESS misrepresentation occur?
- If the consumer provides information to the insurer which is false and they are aware that such information is false or misleading
- It is enough to satisfy reckless misrepresentation if the consumer insured did not care whether the information was untrue or misleading.
- The consumer must be aware that such information is relevant to the insurer
What remedies are available to the insurer where DELIBERATE or RECKLESS misrepresentation has occurred?
CONTRACT IS VOIDABLE
- The insurer is entitled to treat the contract as through it never existed.
- This means that any claims made can be rejected.
- The insurer can retain the premium of the insured so long as it is not unfair to the consumer (in certain circumstances).
What may be regarded as the main principle of the Consumer Insurance (Disclosure and Representation) Act 2012?
- To revoke the current burden placed upon the insurer under the common law.
- Original position is that it was for the insurer to DISCLOSE ALL MATERIAL FACTS
- The onus is now on the insurer who must ask questions which are comprehensive enough to provide MATERIAL understanding of risks involved in entering in to the consumer insurance contract with the insured.
What is the indemnity principle?
Indemnity principle entitles insured persons to compensation where they have suffered loss - therefore if there is no loss there is no right to be indemnified
Why may life insurance be distinguished from a contract of indemnity?
- Life insurance contracts involve insurance over a certain event occurring (death of the assured person)
- In these circumstances the assured does not sustain any financial loss but the happening of the event triggers the insurance to be paid.
- Indemnity insurance has the general rule that the insured is only entitled to be reimbursed for what is actual lost.
Provide an example of indemnity insurance and how it works.
- A painting valued at £1million pound is insured.
- It sustains £200,000 worth of damage
- The insured is entitled to claim £200,000 as that is the value that is actually lost.
Who does the Insurance Act 2015 apply to?
Prior to the Insurance Act 2015 what was the law relating to disclosure on the part of the insured?
Similar to consumer insured
- must disclose every material circumstance which is known the insured.
What is the statutory duty placed upon business insured's after implementation of the Insurance Act 2015?
- The insured must make a fair presentation of the risk involved in entering in to the contract
What is meant by "fair presentation of risk" in the Insurance Act 2015?
- insured must disclose all material circumstances which they know, or ought to know about; OR
- disclosure by the business insured that the insurer should make further enquires in to the insured to find material circumstances.
How may a "material circumstance" be defined to the lay person?
- Something that could influence the decision the insurer makes when deciding whether to offer insurance
When making material presentation to facts what must the insured be cautious of?
The the presentation of the material facts are substantially correct.
In respect of material presentation as to expectation or belief, what must the insured ensure?
That the material presentation as to expectation or belief is made in good faith.
Why is the business insured prevented from 'turning a blind eye' to matters which may increase the risk of the insurer entering in to the commercial insurance contract?
- As the insured is expected to know information that should have been reasonably revealed by a reasonable search of information available to the insured.
- This may be by means of an enquiry or otherwise
When will a breach under a commercial insurance contract be DELIBERATE or RECKLESS?
- If the insured knew they were in breach of the duty of fair presentation, or they did not care whether they were in breach.