Principles of Insurance Flashcards
(25 cards)
The absolute duty to disclose, fully or accurately, all the facts material to the risk being proposed, whether asked for them or not.
Utmost Good Faith
Unlike insurance, commercial contracts are governed by this doctrine (let the buyer beware) since the subject matter of the contract is tangible, examinable and evaluable prior to acceptance
Caveat Emptor
The latin word that describes the relationship of mutual trust and confidence between the insured and the insurer
uberrima fides
The duty to disclose all the information that which would influence the other’s decision to enter the contract rests heavily on
The prospective Insured
In terms of duty, the Insurers should not:
- Accept insurance which they know is unenforceable at law
- issue the policy in unambiguous terms
- make no untrue statements in the negotiations with the proposer
- withhold important information (for eg. the proposer could obtain a discount.
The duration of duty of disclosure
up until the contract is in force. From then on it is only subject to ordinary good faith. This is changeable by specific provisions (conditions and warranties)
A fact that would influence the mind of a prudent underwriter in accessing a risk
Material Facts
Material Facts can include:
- Those which make the risk greater
- Those which explain the exceptional nature of the risk
- Those which support special reasons for insuring
- Those which relate to the atypical proposer
Examples of Material fact:
Life Insurance: that a person has a heart condition ( or other serious illness)
Fire Insurance: that a building stores hazardous substances
Burglary Insurance: that the premises has been broken into several times before
Motor Insurance: that a standard model car had been modified
The failure to disclose a material fact, either by accident or because the face was not considered important
Non-Disclosure
Breaches of Utmost Good Faith
Non-disclosure, Concealment, Fraudulent misrepresentation and Innocent Misrepresentation
Breach of Utmost good faith by Willful non-disclosure of a material fact
Concealment
Breach of Utmost good faith by deliberately or intentionally providing misleading information on a material fact
Fraudulent misrepresentation
Breach of Utmost good faith that occurs when incorrect information is given about a material fact, but where the error is unintentional
Innocent Misrepresentation
Effects of a breach of utmost good faith have the options:
a. To consider the contract void
b. To sue for damages
c. To waive the breach
Specifics of Contract Void
The insurer is always the aggrieved party. The insured/offending party is notified that the insurer is ‘coming off’ the risk
If the policy has matured (in life insurance) then no payment will be made
Specifics of Suing for damages
The insured would be guilty of ‘tort of deceit’. The insured would then give rise to action but this is ‘virtually unknown’ since the expense is not worthwhile.
This action would be additional to Voiding the contract
Specifics of waiving the breach
The insurer overlooks the breach which would make it as if the breach didn’t even occur.
It is the assumed course of action if the insurer takes no action in a reasonable amount of time.
Special Provision in motor insurance for breaches
This is an act enforced by the Regional Transportation Authority (RTA). It ensures that the victim of a car accident where the offender has a ‘breached’ policy is paid for the damages caused.
A statement of promise made by the insured that some particular thing will or will not be done and is incorporated in the policy as an essential part of the contract
A Warranty - There are 2 types in insurance:
Express and Implied
Express Warranty
Expressed in the policy document, specifically or by reference
Eg - Burglary Insurance: Warranted certain types of lick fitted to building
Implied Warranty
Not expressed in the policy document but are applicable
Eg - Marine Insurance: warranted that the vessel is seaworthy
A written or oral statement made during negotiations for a contract, some of which are about material facts.
Representation
The Fundamental Principles of Insurance
Underwear In Inter School Pushed Agendas
- Utmost good faith
- Insurable Interest
- Indemnity
- Subrogation
- Contribution
- Proximate Cause
- Average Clause
