Chapter 5 - Regulation of Insurance Contracts

Removal Clause Exception

Property policies insuring against fire are extended to have a removal clause

Three conditions apply

1. Proof that the property was moved due to danger of loss at original location

2. Amount of insurance for item at new location is reduced by amount used to pay for loss at original location

3. Insurer’s obligation to insure moved property expires after 7 days

Limit of liability clause

A provision in insurance contracts that states that the policy contains a clause that may limit the amount payable

Right of subrogation

Protects indemnity

Allows insurer to sue an at fault third party for the amount paid to the insured for their loss

3 basic coverages in property policies insuring against fire

Fire - friendly and hostile

Lightning

Explosion of natural gas, coal, or manufactured gas

5 Standard Exclusions in all policies

1. Application of heat: t-shirt that’s ironed

2. Lightning damage to electrical devices or appliances

3. Electrical currents: electrical surges

4. Contamination by radioactive materials

5. War

SC - Misrepresentation

Insurance application must be completely honest

Misrep through false description - deliberate or not

Misrep of material fact - details about previous claims, etc.

Fradulent omission of material fact

SC - Property of others

Property of others is not generally covered, but there may be T&C that allow coverage for certain situations where the insured has insurable interest in someone else’s property (dry cleaners, mechanics)

SC - Change of Interest

Generally, only the parties to the contract may benefit, but this condition permits the follow people to receive coverage

• Authorized assignment under bankruptcy or insolvency

• Authorized assignment when insured is mentally unfit

• Authorized assignment when insured dies

SC - Material Change

Insurers must be notified of any material change and may choose to retain, cancel

Non-material change - do not increase the risk

Material change - increases the risk

For a claim to be denied on the basis of material change, the insurer must prove that the change in operation was both: substantial and continuing

SC - Termination

Termination by insurer - 15 days written notice, 5 days if personally delivered, refunds on pro-rata basis, minus retained premium

Termination by insured - short rate cancellation, refund is premium payment minus admin costs

SC - Requirements after loss

Insured must provide inventories, loss details, amount of other insurances, proving insurable interest, etc.

SC - Fraud

It is the insurer’s duty to prove any speculations of fraudulent claimsby providing evidence of intent to deceive.

SC - Who may give notice and proof

Insured may have a representative provide proof of loss if the insured is unable (being away, hospital)

SC - Salvage

The insured must take reasonable action to ensure that loss is prevented from doing more harm (removing items where safe)

SC - Entry, control, abandonment

The insurer has immediate access to the premises of the loss in order to determine loss

SC - Appraisal

When there is a disagreement about the value of loss, an appraiser third party will determine the value

SC - When loss is payable

Within 60 days of proof of loss

SC - Replacement

Insurer’s usually have preferred contractors to make repairs but insured can opt to collect cash and make repairs themself

SC - Action

Insured may sue the insurer within 1 year of the loss

SC - Notice

If insured deals directly with the insurer (no broker) they must send all mail to the head office of the province

If insured fails to update address and mailed notice to them is not received, it is their fault for not updating and notice will have been served

Insurance rate

Cost of insurance per unit of exposure

Premium = Insurance rate x total units of exposure