contract law / tort law

contract of adhesion - prepared by insurer and accepted or rejected by the insured. insurance contracts are offered on a take-it-or-leave-it basis by an insurer

conditional contract - requires certain conditions to be met in order for the contract to be executed.

aleatory - an exchange of unequal amounts or values. premium paid by insured is small in relation to the amount that will be paid by insurer in the event of loss.

unilateral - only one party to the contract is legally bound to do anything. insured makes no legally binding promises.

personal contract- between the insurance company and an individual. insured cannot be changed to someone else without written consent of the insurer, nor can the owner transfer the contract to another person without approval.

utmost good faith - each person in the contract must be able to rely on the other for valid critical information.

indemnity (reimbursement) - provision in a insurance policy that states that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the finanicla loss, and is not allowed to gain financially because of the existence of an insurance contract

insurance policy - written instrument

representations - statements are believed to be true to the best of one’s knowledge, but they aren’t guarenteed to be true.

material misrepresentation - statement that if discovered would alter the UW decision.

representations are statements believed to be true. insured’s statements on the application are representations.

representations can be changed or withdrawn prior to the effectuation of the policy, but not after.

• misdemeanor punishable by a max fine of $25k, 1 year imprisonment or both

if loss to victim exceeds $10,000 the fine should not exceed three times the amount of the loss.

warranty - statement considered to be guaranteed to be true and becomes part of the contract.

violation of a material warranty on either party entitiles the other to rescind the policy

materiality - idea that all parties to a contract are entitled to all information necessary to make an informed decision about the quality or nature of the contract

disadvantages are always material information

the materiality of a given concealment determines the importance of a misrepresentation

insureds are entitled to know: disadvantages of the contract, cash value surrender charges, principal exclusions(war, terrorism, aviation, suicide.) length of term, increase in premium at end of term, internal fees and expenses

waiver - voluntary act of relinquishing a legal right, claim or privilege.

estoppel - legal process that can be used to prevent a party to a contract from re-asserting a right or privilege after that right or privilege has been waived.

fraud - intentional misrepresentation or intentional concealment of a material fact used to induce another party to make or refrain from making a contract, or to deceive or cheat a party.

SIX REQUIREMENTS FOR POLICIES (CIS 381)

1. the parties to the contract

2. the persons or propety being insured;

3. a statement of the insurable interest tha texists if the insured is not the owner

4. the risks insured against

5. the time period during which the policy will be in force or continue

6. the stated annual, semi-annual, quarterly, or monthly premium or a statement of the manner in which a premium rate and total premium will later be calculated, if it can only be determined at the termination or expiration of the contract.

rescission - revocation of a contract

1. right of rescission

   An injured party is entitled to rescind the contract if any of the following happens:

   • a false material representation

   • concealment

   • violation of a material warranty or any other material provision of a policy

premium = rate x units of insurance

earned premium = portion of a premium that belongs to the insurance company for providing coverage for a specified period of time.

agreement = offer and acceptance

consideration = something of value that is transferred between the two parties to form a legal contract

competent parties: of legal age, sound mental capacity, and not under the influence of drugs or alcohol

legal purpose = not against public policy

adhesion = one party prepares the contract

ambiguities in the contract are always resolved in favor of the insured

the insured can reasonably expect coverage based on the agent’s words and actions

offer is usually made by the application in the form of the application, acceptance takes place when an insurer’s underwriter approves the application and issues a policy.

each contract must have 4 elements:

1. agreement (offer and acceptance)

2. legal purpose

3. competent parties

4. consideration

grace period = allows insured to pay premium after due date without penalty or lapse

TORT LAW

burden of proof - responsibility of a party to provide evidence for an allegation or defense

implied warranty = a legal term meaning that a product is suitable for its intended purpose and that it fits an ordinary buyer’s expectations

statute - a written law passed by a legislative body

tort - civil wrongdoing resulting in legal liability\

vicarious liability - when one is held responsible for the actions of someone else

Intentional Torts

intentional tort - deliberate act that causes harm to another person

1. libel - written or printed untrue statement that injures a person’s or company’s reputation

2. slander - oral or verbal untrue statement that injures a person’s or company’s reputation

3. false arrest - the unjustified physical restraint of another person’s freedom and the subsequent inconvenience such detention causes

Negligence

negligence - failure to use the care that a reasonable prudent person would have under the same or similar circumstances

Elements of negligence:

1. Legal duty

2. standard of care

3. unbroken chain of events (proximate cause)

4. actual loss or damage

it must be shown that a defendent had a legal duty to act or not

proximate cause - an act or event considered a natural and reasonably foreseeable cause of the damage or event that occurs and damages property or injures a plaintiff.

gross negligence - reckless behavior that shows disregard for the safety of others

assumption of risk - may bar recovery for injury caused by negligence

absolute liability - imposed upon a person or company engaged in hazardous or potentially dangerous business

vicarious liability - purpose of this doctrine is to transfer the liability from one person to another person who would probably have a greater ability to pay

Damages

the extent of property damage is measured by the actual monetary loss the injured party suffered, which is measured by the value of the property damaged or destroyed and the loss of use of that asset.

two classes of compensatory damages that may be awarded are special and general damages

special damegs are specific out of pocket expenses or for medical miscellaneous expenses and loss of wages

general damages compensate the injured person for pain and suffering mental anguish disfigurement and other similar losses

No Fault Insurance

• insurance for automobiles accidents

• payment of loss claims from insured’s insurer

• protects the insured and passengers

• designed to reduce judicial impact of lawsuits

any conduct that is inherently dangerous like explosives or wild animals imposes absolute liability

strict liability is commonly applied in product liability cases.

contributory negligence is a common law defense that denies recovery to an injured party who contributed to the loss by failing to meet standards required for self-protection