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15 Cards in this Set
- Front
- Back
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What is a recital clause? |
- The recital clause, or preamble, sets the scene for what follows in the policy by referring to the two parties, insured and insurer (but not by name), coming together to form the contract by which the insurer, in return for the premium, undertakes to indemnify the policyholder (insured) in accordance with the cover detailed in the policy. - The clause will often set out the constituent elements that together make up the contract. - The insured is also reminded to check the accuracy of the contents of the proposal confirmation, as failure to provide the correct information may result in the policy being invalidated; a claim being rejected or; a claim not being paid in full. This has the effect of making the proposal form part of the contract even though it is not actually reproduced and printed within the policy. |
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What is an Operative Clause? |
- The operative clauses describe the scope of the cover in detail. They are the heart of the policy, specifying what is covered by the policy. - Each operative clause within the policy begins with words such as 'The company will....' |
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What are the two types of Conditions in a policy? |
1) Implied Conditions - Those that are implied are that the insured: * Must act as if uninsured and not use the insurance as an alternative to acting prudently * May be required to advise the appropriate authorities * Must take reasonable action (e.g. attempt to extinguish a fire) but not if this endangers them * Must not hinder the insurers in their investigation of a claim. Implied conditions exist whether or not they appear in the policy. In practice, many are stated in order to clarify matters for the insured. 2) Express Conditions - These are conditions stated in the policy. |
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What is the policy schedule? |
- This contains all the variable information concerning the insured and the risk insured and usually signified which sections of the policy are operative. - In addition, the choice of law applicable to the policy is often found in the schedule, though it may appear elsewhere in the policy. |
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What are specific exclusions, general exclusions and market exclusions? |
Specific exclusions: apply to particular parts of the policy. Such exclusions are specific to that type of insurance and will not necessarily apply to other forms of insurance. General exclusions: these apply to the entire contract. The operation of these will, usually, enable the insurer to repudiate all liability under the policy, irrespective of the section of the policy concerned. Market exclusions: are common to all general insurance policies. |
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List and explain common Market Exclusions |
War and related perils - This exclusion is standard in most general insurance policies. - It is considered to be a fundamental risk, applying to the community at large and therefore uninsurable. - It is generally regarded as being the responsibility of the state rather than the insurer. - Marine and aviation policies, however, may be extended to include war risks. Riot and civil commotion - Standard in most general insurance property and motor policies. - It is not found in liability policies. - In the case of property cover in Great Britain, insurers will cover the peril at varying rates depending on the area involved. - However, insurers will not cover damage caused by riot in Northern Ireland. Radioactive contamination and explosive nuclear assemblies - This is standard in general insurance policies. - Cover is instead provided by a system of 'market pools' in which insurers and reinsurers accept a share of the risk suited to their underwriting capacity. Terrorism - This exclusion is now standard in all property insurance policies (though some cover may be included under the terms of a special provision). - Such policies exclude loss, destruction or damage: * In Northern Ireland, due to civil commotion or terrorism (compensation is provided by the government) and * In England, Wales and Scotland fur to terrorism, although certain cover may be provided by insurers as described below: - Following a joint Government/ industry initiative there are now arrangements for insuring against acts of terrorism in GB. This is backed by a specialist reinsurer (Pool Re) and the Government. Pollution and/ or contamination - This exclusion is standard in all property and liability insurance policies. - However, for property insurances, cover is provided for pollution that causes an insured peril or which itself is caused by an insured peril. Marine Policies - Standard in all property insurance policies. - Excludes material damage cover for property that is also covered by a marine policy. If the sum available under the marine policy is sufficient to cover the loss, the property policy will respond but only for the excess amount. Contractual liability - Standard in all motor and liability policies. - States that the insurer will not cover claims that are only payable as a result of an agreement that had been entered into by the insured and which extends their responsibilities beyond the position that would arise under common law. Sonic bangs - This exclusion is standard in all property insurance policies. Pressure waves from aircraft or other aerial devices travelling at sonic or supersonic speeds are excluded. |
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What is an Alteration condition? |
- This condition is found in most property insurance policies. - It extends the duty of fair presentation to a continuing one by requiring the insured to notify the insurer of any changes that increase the risk. |
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What is an Arbitration condition? |
This clause is intended to deal with any disputes that arise as to the amount to be paid in settlement of a claim under a policy. Not all policies contain this condition. |
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Describe cancellation conditions |
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What is a Franchise? |
A franchise is a fixed amount of period that acts as a threshold to determine whether claims are payable. Once the amount of period has been exceeded, the claim is payable in full. |
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What is a warranty? |
A warranty is essentially a promise made by the insured relating to facts or performance concerning the risk.
Traditionally, a breach of any warranty in an insurance contract resulted in the automatic discharge of the insurer's liability. Following the introduction of the Insurance Act 2015, the FCA rule that an insurer will not repudiate liability for a loss infer a consumer contract for a breach of warranty where the breach is unrelated to the loss, now applies to all policyholders.
Liability will be restored once the breach is remedied.
Also under the Insurance Act 2015, representations cannot now be converted into warranties by any provisions of a non consumer contract. An express warranty is specified in the policy. All warranties are express warranties; implied warranties are only found in marine insurance. |
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What changes did the Insurance Act 2015 make regarding warranties? |
- Basis of contract clauses are prohibited, so any warranty in a policy must be expressly agreed between the insurer and the insured. - An insurer's breach of warranty merely suspends, and no longer necessarily discharges, the insurer's liability under the policy. - An insurer may not rely on a breach of warranty where the warranty relates to a risk that is irrelevant to the type of loss which actually occurred - Warranties are written into the policy (except some marine warranties) |
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What are conditions precedent to the contract? |
These are conditions that must be fulfilled prior to the formation of the contract itself. They may also be ongoing conditions. The implied conditions, e.g. insurable interest, are conditions precedent to the contract. If such conditions are not complied with, there is doubt as to the validity of the entire contract. |
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What are conditions precedent to liability? |
- These are conditions that must be complied with if there is to be a valid claim. - If a condition precedent to liability (or to recovery) is not observed, insurers may avoid liability for a particular loss, but they may not repudiate the contract as a whole. |
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Compare warranties, conditions, exclusions and representations |
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