Chapter 9 The Legal Framework

Requirements for a Contract zOffer and acceptance zConsideration zLegal object zLegal form zCompetent parties

Parts of a Policy zDeclarations yWho is and what is insured zInsuring agreement yPerils covered zExclusions zConditions

Void and Voidable zVoidable means one of the parties to the contract can void it yIf the insured does not fulfill certain conditions, the insurer can choose to void the contract zVoid: unenforceable

Principle of indemnity zInsured cannot benefit from loss event zInsurable interest zActual cash value zOther insurance provision zSubrogation yRight to collect from negligent third parties yDoes not apply to life/health

Other Insurance Provisions zPrimary and excess zPro-rata zExculpatory

Exceptions to Indemnity zValued Policies yOcean marine, fine art zValued Policy Laws yTotal loss for certain perils zCash Payment Policies yLife, disability

Nature of Insurance Contract zPersonal contract zUnilateral contract zConditional contract zContract of adhesion yNo negotiations zAleatory contract yal atoire = uncertain

Nature of Insurance Contract zContract of utmost good faith yMisrepresentation yConcealment yWarranties (promises by the insured) yWaiver and Estoppel xRelinquish a known right zParol evidence rule yWritten contract cannot be modified through oral statements

Dispute resolution zAmbiguities resolved in favor of insureds yReasonable expecations yComplexity of contracts (to avoid ambiguities) zPast decisions by courts to interpret contracts yPolicy design influenced by court decisions

Authority of the Agent zAgent can “bind” the company (Property/Liability) yExpress authority yImplied/incidental authority xAuthority needed to execute express authority yApparent/ostensible authority xInsured cannot determine if authority exists