Chapter 5 & 6LO5

Question 1

Parties must agree on

Answer 1

1. Nature / Subject matter
2. Duration
3. Amount of premium

Question 2

Renewal notice = offer

Answer 2

Insured can accept by payment of premium, provided no changes to risk

Question 3

Unilateral offer

Answer 3

Offeror promises to do something if another party does the act (e.g reward for finding a pet)

Question 4

A promise to pay =

Answer 4

Consideration

Question 5

Total failure of consideration

Answer 5

insured recover premium if insurer has not been on risk at all

Question 6

Cancellation clauses & premium
If insurer cancels how much RP and vice versa

Answer 6

Partial return of premium if policy cancelled mid-term
Insurer cancel = pro rata return
Insured cancel = less than pro rata

Question 7

Insurance contracts which must be in wriitng

Answer 7

Marine insurance policies under the (marine insurance act 1906)
- Name of insured / agent
- Signed by or on behalf of the insurer
- specify subject matter with reasonable certainty

Motor policies require certificate on insurance

Question 8

Life insurance contract rules

Answer 8

Policy shall contain name of person interested
Other legislation require insurers to send insured a statutory notice advising their right to cancel policy within cooling off periodS

Question 9

Statutes covering insurance companies

Answer 9

Financial Services and Markets Act 2000 and Financial Services Act 2012

Question 10

Insurable interest

Answer 10

• Subject matter of insurance
• policyholder must have financial or economic interest
• must be of current interest
• must be of legal interest

Question 11

Why is insurable interest required

Answer 11

• Reduced moral hazard
• discourage wagering

Question 12

Insurable interest in Marine Insurance

Answer 12

Marine Insurance Act 1906 - policies void in absence of insurable interest

Insured must have interest in subject matter at time of loss

No need for insurable interest when contract is made

Question 13

Life Assurance Act 1774

Answer 13

• Person benefitting from insurance must have insurable interest in the life - No II = void contract
• Name of beneficiary must appear in policy
• Insured can recover no more than the value at interest
• Insurable interest required only at inception

Question 14

Gambling Act 2005

Answer 14

Contract that relates to gambling shall not prevent its enforcement - bypass the need to prove insurable interest on goods

Question 15

Property contracts are

Answer 15

Contracts of indemnity

Question 16

Premiums under a void conract

Answer 16

Typically premium is recoverable

Policies under life assurance act 1774 void = illegal therefore premiums are not recoverable

Question 17

Insurable interest bill Nov 2022

Answer 17

• Only applies to life / life-related policies
• Life insurance is void unless at the time the insured enters the contract

Question 18

Limited interest in property

Answer 18

Can insure the property for it’s full value

Question 19

Insurable Interest on life policies

Answer 19

• Own life
• Spouse
• Business relationships:
  1. Partners - insurable interest up to amount of any loss / expense from death

2. Employer and employee
   - Employee can insure the life of their employer limited to salary
   - Employer has insurable interest in employee limited to value of work
3. Credit and debtor

Question 20

Insurable interest at common law

Answer 20

interest is automatically assumed (each person presumed to have unlimited interest in their own life)

Question 21

Insurable interest through contract

Answer 21

agree to accept responsibility for something which they would not ordinarily be liable for

Question 22

Misrepresentation: False statement must be

Answer 22

1. One of fact
2. Made by party to the contract
3. Material
4. Induce the contract
5. Cause loss or disadvantage to who relied on it

Question 23

Material Fact

Answer 23

Prudent insurer would deem material rather than opinion

Question 24

Innocent or fraudulent misrepresentation

Answer 24

Non - Consumer contract: Insurer may seek remedy regardless

Consumer: Insurer can seek remedy if negligent or fraudulent

Question 25

Caveat Emptor

Answer 25

Let buyer be aware

Question 26

Positive duty of disclosure

Answer 26

Going beyond duty not to misrepresent (Business insurance)

Question 27

Agent breaches duty

Answer 27

Business contracts insurer can seek remedy if agent misrepresent

Question 28

Material facts

Answer 28

Business insurance: Disclose all facts / circumstances material to the risk

Question 29

Actual inducement test

Answer 29

Statutory test for a remedy for breach of duty of fair presentation

Question 30

IA 2015 remedy available for breach of duty of fair presentation if

Answer 30

- Not entered contract at all - Would have entered contract on different terms

Question 31

Material Circumstances

Answer 31

1. Special or unusual facts about risk 2. Particular concerns which led insured to seek cover

Question 32

Common law matters requiring disclosure can be divided into

Answer 32

Physical hazard Moral hazard

Question 33

Matters which NOT need to be disclosed

Answer 33

- Matters of law - Lessen the risk - Facts known by insurers - Facts which the insurers ought to know - Info that is waived by insurers - Facts outside scope - Facts which inspection should have revealed - Convictions that are spent

Question 34

Duration of duty

Answer 34

CIDRA & IA: begins at commencement of negotiations and ends when contract is formed

Question 35

Positions at renewal

Answer 35

Duty of disclosure is revived at renewal Long-term contract: No duty of disclosure at renewal

Question 36

Fraudulent claims

Answer 36

IA: forfeit any claims, repudiate contract, burden of proof of fraud sts with insurer

Question 37

Remedies for fraudulent claims

Answer 37

- not liable to pay claims - recover any sums paid iro to claim - treat contract as terminated

Question 38

Qualifying breach of duty of fair presentation of risk (business)

Answer 38

- Insurer would not have entered the contract - Or would have done so on different terms

Question 39

Contracting out

Answer 39

If there is a disadvantageous term

Question 40

CIDRA and Deliberate / reckless Misrepresentation

Answer 40

Avoid contract and keep premiums paid unless it would be unfair to keep

Question 41

CIDRA and careless misrepresentation

Answer 41

- Avoid policy, refuse claims, return premium - Treat contract with new terms or reduce claims paid if they'd charge higher premium

Question 42

Marine contract and utmost good faith

Answer 42

If utmost good faith not done by either party, contract can be avoided by other party - MARINE Insurers can lose the right to avoid policy if lack of utmost good faith

Question 43

ICOBS rules

Answer 43

Insurer must not unreasonably reject a claim Unreasonable: Non-disclosure could not reasonably be expected to have disclosed material fact Non-negligent misrepresentation of material fact

Question 44

Non consumer breach remedies

Answer 44

Deliberate = avoid contract and keep premiums paid innoccent = avoid contract and return premiums

Question 45

Consumer breach remedies

Answer 45

Deliberate = avoid the contract Inoccent = keep policy in place but the terms they would have had it if there was no breach. if they wouldn't write it then avoid contract and refuse all claims