Unit 2 Property Contract Law

CLOAC (Elements of a Valid Contract)

Consideration, Legal Purpose, Offer, Acceptance, Competent Parties

Value exchanged between insured and insurer

Consideration

Contract must be lawful

Legal Purpose

Applicant submits an application and premium

Offer

Insurer approves the application or issues a policy

Acceptance

Both parties must be legally capable of entering a contract

Competent Parties

Contract drafted by the insurer and interpreted in favor of the insured if ambiguous

Contract of Adhesion

Premiums paid and benefits received may be unequal

Aleatory Contract

Both parties must honestly disclose material facts

Utmost Good Faith

Only the insurer makes a legally enforceable promise

Unilateral Contract

Coverage applies to the insured's financial interest and cannot usually be transferred

Personal Contract

Coverage depends on policy conditions being met

Conditional Contract

Restoring the insured to the approximate financial position before a loss

Indemnification

Statement believed to be true by the applicant

Representation

False statement on an insurance application

Misrepresentation

False statement that affects underwriting decisions

Material Misrepresentation

Statement guaranteed to be true

Warranty

Failure to disclose a material fact

Concealment

Intentional deception for financial gain

Fraud

Voluntary surrender of a known right

Waiver

Prevents a party from taking back a waiver after another party relied on it

Estoppel