BCP Ch 4

A collection of flashcards covering key legal principles and concepts related to insurance as discussed in the lecture notes.

What is the legal doctrine of insurable interest?

It refers to the legal right to insure, meaning the person taking out the insurance has a legally recognized relationship to the subject matter of insurance.

What are the six essential principles of insurance?

Insurable Interest, Utmost Good Faith, Indemnity, Subrogation, Contribution, Proximate Cause.

What does the principle of utmost good faith require of parties in an insurance contract?

Both parties must deal honestly and openly, disclosing all material information.

What does the principle of indemnity imply about compensation in insurance?

It ensures that the insured is fully compensated for their loss but not over-compensated, so they do not profit from an insurance claim.

In insurance, what role does subrogation play?

It allows an insurer who has paid a claim to step into the shoes of the insured and pursue recovery from the party responsible for the loss.

What is the purpose of the principle of contribution in insurance?

It prevents the insured from profiting from a loss by ensuring that multiple insurers share the payment of a claim equitably.

What is the definition of proximate cause in insurance?

It is the dominant or primary cause of a loss, directly linked to the occurrence of the loss.

What must be present for an insurable interest to exist in life insurance?

Insurable interest must be present at the time the insurance is taken out.

What is the effect of failing to disclose a material fact in an insurance contract?

It can make the insurance contract voidable.

What types of insurance policies require insurable interest at the time of loss?

Marine insurance policies require it at the time of the loss, while life and property insurance policies require it at the time of issue and at the time of loss respectively.