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Chapter 18 - Insurance.dIocx

4 Pages

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Charles Davidson

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Chapter 18 – Insurance and Guarantee Insurance and the management of Legal Risk - 2 main types of legal risk: o Property/assets destroyed due to accident or someone else’s fault o Held liable for some loss/injury caused to another person Insurance Terminology - Insurance policy = written evidence of the terms – insurer and insured - 4 basic aspects of insurance contract: o Nature of risk covered o Amount of insurance o Duration of protection o Amount of premium - Policy pays the claim to beneficiary, a rider is an additional provision attached to a standard policy of insurance  if they change terms in the contract, can do so without rewriting the whole thing by attaching an endorsement to the policy - Insurance agents work for insurance company - Insurance broker is an independent business generally acting for the insured rather than insurer o Distinction is often not clear - Insurance adjuster = expert in appraisal of property losses - 2 main classes of insurance: personal insurance & property insurance Regulation of Insurance Business - Federal Insurance Companies Act Types of Insurance Insurance against Loss or Damage - Insure against your own losses, and against liability to others - Insurer usually liable for repairing damaged property or for the value of the destroyed property - Often has a deductible – reduces moral hazard and makes insurance cheaper Insurance against Liability - Usually insure against: negligent acts and omissions, defective products, dangerous state of premises, breach of duty of care Comprehensive Insurance - Instead of having a variety of policies, can get comprehensive insurance - Broader scope – usually expensive Special Aspects of the Contract of Insurance Legality of Object – Wrongful Act of the Insured - Courts won’t enforce contract of insurance when claim arises out of criminal or deliberate wrongful act of the insured o Wrong to let the insured benefit from their own crime o Contrary to purpose of insurance to let insured recover for self-caused loss Insurable Interest - Is a genuine risk of loss that may be suffered from damage to the thing insured - Don’t have to be the owner, but have to have some form of interest in the property - Life insurance: person buying insurance must have written consent from insured, or have an insurable interest when contract is formed - Property insurance: must have insurable interest when contract is formed AND when loss is suffered Formation of the Contract - Offer to purchase insurance is made by the party seeking the insurance protection (prospective insured) by signing an application - Property is less formal than for life; agent has authority to sign and deliver policies binding to the company they work for Renewal - Property insurance written for limited period; usually want to renew - Insurance companies send renewal policy to insured before current policy expires - This is only an offer; unless insured communicates acceptance it’s not an agreement Terms of the Contract - Contracts are standard form (prepared unilaterally by the insurer) - To offset this advantage, contracts are subject to strict interpretation: any clause exempting an insurer must be stated in clear and unambiguous language Disclosure - If insured doesn’t exercise the utmost good faith in application (ie. full disclosure), insurer may void liability, even if the loss arose from unrelated causes - If it’s something general that insurer should’ve known, then it’s ok - Must inform the insurer promptly of any loss that occurs Subrogation - If someone’s negligence owns you, you recover from your insurance company without suing that fool… conversely, you can’t recover twice by suing them And claiming insurance - If you
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