Cpcu 530 Chap 3

Front 1

conditional contract

Back 1

contract that one or more parties must perform only under certain conditions

Front 2

utmost good faith

Back 2

obligation to act in complete honesty and to disclose all material fact

Front 3

misrepresentation

Back 3

false statement of a material fact on which a party relies

Front 4

incontestable clause

Back 4

clause that states that the insurer cannot contest the policy after it has been in force for a specified period, such as 2 years,

Front 5

contestable period

Back 5

period during which an insurer can challenge the validity of life insurance policy

Front 6

contract of adhension

Back 6

any contract in which one party must accept agreement as written by the other party or reject it

Front 7

contract of indemnity

Back 7

contract in which the insurer agrees to pay an amount directly related to the amount of the loss

Front 8

principle of indemnity

Back 8

principle that insurance policies should provide benefit no greater than the loss insured suffered

Front 9

valued policy

Back 9

policy in which insurer pays stated amount in event of specified loss regardless of actual value of loss

Front 10

why insurance contracts considered to involve an exchange of unequal amounts

Back 10

often there are few or no losses and premium paid by insured for particular policy is more than the losses paid

Front 11

2 things courts have held that insurers must prove to establish concealment of material fact

Back 11

* failure to disclose information was intentional

* information withheld was material fact

Front 12

how "misrepresentation" is normally used with how term is used with reference to insurance contract

Back 12

false statement that insurer relies on

Front 13

why insurance policies are nontransferable contracts

Back 13

because identities of person are relevant to the insurer

Front 14

binder

Back 14

temporary written or oral agreement to provide insurance coverage until a formal written policy is issued

Front 15

offer and acceptance components of insurance contract

Back 15

offer is when insured completes application. acceptance is when policy is issued by insurer

Front 16

why courts ruled that insurer can be liable under contract if delays action on an application beyond reasonable time

Back 16

because applicants usually pay premiums in advance. insurer must promptly act in accepting or rejecting offer

Front 17

facts court consider when determining whether insurer's response to insurance application was unreasonably delayed

Back 17

* distance insurer's office is from agent's office

* special difficulties in underwriting the risk

* insurer's seasonal or other workload problems

* type of coverage involved

Front 18

why written insurance policies are preferable to oral insurance contracts

Back 18

oral agreement gives rise to lawsuits. insured who does not have written policy may not be able to recall oral conversation

Front 19

why delivery of contract is rarely in dispute in property casualty insurance

Back 19

because of wide use of preliminary oral agreement and written binders

Front 20

direct action statute

Back 20

law that permits negligence victim to sue an insurer directly or to sue both the insurer and wrongdoer jointly

Front 21

why claimants under liability policies are not considered 3rd party beneficiaries in states that have not adopted direct action statutes

Back 21

purpose of liability insurance is to indemnify only insured for losses in paying their victims. 3rd party cannot sue unless insurer denies claim payment after judgment

Front 22

why buyer of real estate under incomplete agreement of sale requires insurance on property being sold

Back 22

because of equitable interest.

Front 23

situation that occur when mortgage does not specify who will obtain insurance on policy

Back 23

* mortgagor can obtain separate insurance for their benefit

* mortgagee can obtain separate insurance on the property

* mortgagor can obtain insurance for mortgagee

Front 24

insurance protection available to cover lessee's liability for causing fire damage to lessor's property

Back 24

* insurer waives subrogation rights

* lease provision placing "all risks" loss on lessor

* lessee purchase insurance policy protecting against liability

* lessee purchase separate fire policy covering leased premises

Front 25

effect of policyholder's false representation or misrepresentation of facts on an insurance application

Back 25

can make the contract voidable

Front 26

elements required for plaintiff insurer to establish false representation

Back 26

* statement is made that is false

* statement relates to material fact

* insurer relies on false statement in issuing policy

Front 27

why contribute to loss statutes create more difficult standard for an insurer to show materiality sufficient to avoid contract

Back 27

regardless of materiality, misrepresentation does not allow insurer to avoid the contract if it could not contribute to the loss

Front 28

2 requirements that must be present for promise to be warrant

Back 28

* parties must have clearly and unmistakably intended it to be a warranty

* statement must form a part of the contract

Front 29

affirmative warranty

Back 29

states specific facts exist at time of contract form

Front 30

effect on coverage when courts interpret policies are severable

Back 30

if one policy provision is invalid, it need not to invalidate entire policy but can be severed or separated from other provisions

Front 31

continuing (promissory) warranty

Back 31

states that parties will do certain things

Front 32

waiver

Back 32

intentional relinquishment of known right

Front 33

estoppel

Back 33

legal principle that prohibits party from asserting a claim or right that is inconsistent with that party's past statement

Front 34

election

Back 34

voluntary act of choosing between 2 alternative rights

Front 35

condition required for waiver of provisions under insurance contract

Back 35

for waiver to occur, insurance policy must exist. statement made before insurance contract comes into existence is not a waiver but an attempted waiver of future rights

Front 36

why waivers are subject to the parol evidence rule

Back 36

parol evidence rule prohibits the introduction into evidence at trial of any oral ageement

Front 37

sequence of events leading to estoppel in insurance law

Back 37

* false representation of material fact

* reasonable reliance on representation

* resulting injury

Front 38

waiver vs estoppel

Back 38

* waiver is contractual. Estoppel is equitable and arises from false representation

* waiver gives effect to waiving party's intention. estoppel defeats the inequitable intent to party

* parol evidence rule applies to waiver but not estoppel

Front 39

nonwaiver agreement

Back 39

signed agreement indicating that during course of investigation neither the insurer nor the insured waives rights under the policy

Front 40

reservation of rights letter

Back 40

insurer's letter that specifies coverage issues and informs the insured that the insurer is handling claim with understanding that insurer may later deny coverage

Front 41

difficulties that may arise in securing an insured's consent and signature on nonwaiver agreement

Back 41

* insured might refuse to sign

* insured could challenge nonwaiver if not explained fully by claim represntative

Front 42

contrast reservation of rights with nonwaiver agreement

Back 42

reservation of rights is same as nonwaiver in letter form. it is unilateral