Legal principles and terms

Define an insurance contract

an agreement enforceable by law  between an insured and an insurer

What are the two essentials of a valid contract?

offer and acceptance

consideration

define consensus ad idem

do both parties know what they are agreeing too

Define good faith

not leading another on 

When does a contract come into existence? 

After an offer has been made and it has been accepted unconditionally

Define conditional acceptance

a new offer/counter offer

Define Postal acceptance

both parties have agreed to use post to communicate

When is an offer accepted through post?

as soon as the letter has been posted

Define goodfaith

being open and transparent with consumers

What Act says insurers must act in good faith?

Consumer Insurer act 2012 (Previously Marine 1906

if there is Honest and reasonable misrepresentation what may an insurer do?

Insurer may have to pay the claim

If there is a careless misrepresentation what may the insurer do?

Insurer will have a compensatory remedy based on what they would of done 

If there is Reckless misrepresentation what may the insurer do?

Insurer may treat the policy as if it never existed

What does the ICOBS say?

Insurers must not reject reasonable claim unless its fraud

What does the Insurance act 2015 say?

fair presentation of the risk- must disclose all material risk or disclosure 

What information does a client not have to disclose?

• Which lessens the risk

• Insurer knows it

• Insurer ought to know it

• Insurer is presumed to know It

• Waives information

Define Presumed to know

common knowledge or common knowledge with

What Act does the remedies for breach of fair presentation come under?

Insurance Act 2015

Why may an insurer want to contract out the 2015 Act?

Marine Act 1906 is harsher

What must an insurer do if they want to cancel a policy?

Give 14 days notice

What is an insured entitled to if their policy is cancelled?

have their Premium proratered

If an insured cancels the policy what can the insurer do?

Charge an Admin fee

What is the most common way that a policy is cancelled?

It is fulfilled 

Define Indemnity

Financial compensation to place the insured in the same place as they were in before the loss

What is a benefit policy used for?

accident and sickness

How is Indemnity measured in property?

Value is measured at date of loss and place of loss

Then Betterment will be used

How is indemnity measured in Equipment?

cost of repair or replacement without wear and tear

How is indemnity measured in stock?

the cost of replacing wholesale

How is indemnity measured with household insurance?

Cost of replacing at time of loss with reduction of wear and tear, replaced with something new to old

How is indemnity measured with Farm stock?

cost relates to local market price, replacement is the same as what it costs to buy 

How is Indemnity measured based on liability?

On court awards

When is a first loss policy used?

when a total loss is rare but the first event of a loss is insured

How is Indemnity modified in property?

Sum Insured

How is indemnity modified in Liability?

Limits of liability- if the cost exceeds liability then the insured will have to pay

what is the equation for an average claim payment?

(Sum Insured/Value of goods at risk) X Loss

What is a deductible?

a large excess in commercial risks

Define Franchise

if a risk falls under the limit insured you have to pay the full thing, if it exceeds the limit insurers have to pay

Define Contribution

the right of an insurer to call upon others similarly but not equally liable to the same insured to share the cost of an indemnity payment

Define Dual insurance?

Two policies which can provide cover for the same risk

Contribution to arise what conditions must be looked at?

• Two or more policies exist

• A common subject matter

• A common peril

• Common interest

• Each policy liable for loss

• A non-contribution clause- if one has it, other is liable, if both has it, they cancel each other out

What are the two ways of calculating contribution?

Sum insured

Independent liability 

What is Sum insured?

Loss is shared by insurers in proportion to the maximum amount available under the limits of each policy 

What is the equation for Sum Insured?

(Policy Limit/ the total of policies together) X the Loss

What does the sum insured equation show?

Which policy takes what amount of loss

What is independent liability?

where inner limits are involved or loss exceeds limit under one of the polices 

What is the Independent Liability equation?

(Policy limit/ What is available to pay for the claim under both policies) X the loss

What does Independent Liability equation show?

What policy is Liable to pay

Define Subrogation

The right of an insurer to follow payment of a claim to take over the insured rights to recover payment from the third party responsible for the loss

Where does Subrogation rise under?

Tort

Statute 

What does the Riot Compensation Act 2016 say?

Property damage can be recovered from the policing body if the did not do enough to protect the property in question

How can subrogation be modified?

market agreements where insurers give up their rights to recover from third party if it is likely to be ‘pound swapping’

True Or False, Benefit polices are subject to subrogation?

False

Define ‘Hold-harmless agreement’

restricts the right and insurers right to recover from a contracting party

True Or false, Insurers can pursue recovery rights against negligent workers?

False- they only can in extreme circumstances, Lister V Romford Ice Cold storage