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22 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Insurance policy has 5 elements that must present in a legal contract. |
Consideration Legal purpose Offer Acceptance Competent parties |
Acronym CLOAC |
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Consideration |
Money and statements made on application |
Money |
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Legal Purpose |
Risk transfer doesn't violate the law |
An agreement to purchase stolen goods would not be valid contract because it lacks legal purpose. |
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Offer |
Is a proposal made by one of the potential parties to the contract. |
An insured who submits a completed application to an insurer along with a payment for the first premium is making a offer to become insured by the insurer. |
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Acceptance |
Of an offer must be unconditional and unqualified. |
Which means the agreement has not been reached. |
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Counteroffer |
The insurance company has not accepted the insureds offer but has made a counteroffer to the insured. |
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Competent Parties |
Legal age (usually 18) Mentally sane Sober |
A baby wouldn't be competent |
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Adhesion |
Their provisions are only written by one party to the contract, and the other party is required to adhere to them. The insured has no input Of not clear, court will take the side of the insured. |
The insurer writes the contract
Stick like a glue |
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Aleatory |
The value received from the contract by each party is unequal. Pay small premium and have a large claim, or pay premiums for many years without claim. |
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Utmost Good Faith |
The insured and insurance company have a right to expect honesty from each other. |
"I promise" |
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Unilateral |
One-sided because only one party is legally bound to perform under the contract. The insurance makes the legal promise to pay for covered claim. Insured may cancel the cancel the contract anytime Insurer must pay covered losses. |
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Personal |
Contracts between the insurance company and the insured Cannot be changed to someone else. |
Non-transferable |
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Conditional |
Contracts that require certain conditions to be fulfilled in order for performance under the contract to be enforced. Insured must pay the premium for coverage and file a claim if a loss occurs. |
The insured may pay a premium for the policy to be in force, or the contract may require certain documents to be submitted to prove that a loss has occurred. |
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Indemnity |
Means that the company contract is intended to restore the insured to the financial state he or she enjoyed prior to the occurrence of a loss. |
No more! No less! |
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Representation |
Is a statement that the applicant believe to be true. |
Statement made on an application by the insured. |
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Misrepresentation |
Is representation that is actually false. |
Adam signs and insurance application as Adam L. Jones, even through his birth certificate shows no middle name because he thinks the L sounds good. Which means the L is a......... |
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Material Misrepresentation |
That is, the false information must have been a determining (or material) factor in the insurers decision to accept the risk. |
If the insurer would have charged a higher premium or rejected the application had the correct facts been known, the information is........ |
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Warranty |
Is a statement that is guaranteed to be true, and may be relied on by the other party. |
If the ..... is not kept, there is a breach of ....... that voids the contract. |
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Concealment |
Is the failure to disclose known facts. |
Hiding information |
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Fraud |
Is an intentional act designed to deceive and induce another party with something of value. |
Dishonesty |
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Waiver |
Is defined as intentional and voluntary giving up of a know right. |
If a policy is issued to insure a building without the company ever asking the age of the building , the insurance company has acted as if the age doesn't matter. |
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Estoppel |
Means that once a right has been waived, it cannot be reinserted and used against the insured. |
If the building the insurance company insured without asking the building's age burned down, and the insurance company tried to deny the claim by stating that they would not have insured the building if they had known it was built in 1864, they must still pay the claim because they created a waiver asking the building age. |
