Insurance Contracts, Policy Provisions & Legal Principles

Contract of Adhesion

A contract drafted by one party and accepted by the other, generally without negotiation.

Aleatory Contract

A contract in which the exchange of value depends on an uncertain event

Unilateral Contract

A contract in which only one party makes a legally enforceable promise

Conditional Contract

A contract requiring certain conditions to be satisfied for obligations to apply

Utmost Good Faith

The principal that insurance parties should act honestly and disclose material information as required.

Representation

A statement made by an applicant that the insurer relies on when evaluating coverage.

Misrepresentation

A false statement of fact that may affect an insurer’s decision or obligations

Concealment

Failure to disclose material information when disclosure is legally required

Material Fact

Information significant enough to influence an insurer’s decision about risk or coverage.

Waiver

Voluntary relinquishment of a known right

Estoppel

A legal principle preventing a party from contradicting a position another reasonably relied upon to their detriment.

Binder

Temporary evidence of insurance coverage before the formal policy is issued

Declarations Page

Policy section identifying the insured, covered property or risks, limits, deductibles, and policy period.

Insuring Agreement

The policy section describing the insurer’s basic promise of coverage.

Conditions

Policy requirements governing the rights and responsibilities of the insured and insurer.

Definitions

Policy provisions explaining the meaning of specific terms used in the contract.

Named Perils Policy

Covers losses caused by perils specifically listed in the policy

Open Perils Policy

Covers direct physical loss unless excluded or otherwise limited by the policy

Cancellation

Termination of insurance coverage before the policy’s expiration date.

Non renewal

Decision not to continue insurance coverage when the current policy expires

Proof of Loss

A formal statement documenting the facts and amount of a claimed loss, as required by the policy.

Appraisal Clause

A policy provision providing a process for resolving certain disputes over the amount of a loss.

Other Insurance Clause

A provision explaining how coverage applies when multiple policies insure the same loss.

Coinsurance

A provision requiring insurance equal to a specified percentage of property value to avoid a reduced loss payment,

Duties After Loss

Policy requirements following a loss, such as providing notice, protecting property, and cooperating with an investigation.