MCS3040 CH28.docx

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Marketing and Consumer Studies
MCS 3040
Joseph Radocchia

Duty to Disclose - Key consequence: insured has a duty to disclose to the insurer all information relevant to the risk; if she fails that duty the insurer may choose not to honour the policy - Can deny coverage for nondisclosure even if the loss has nothing to do with the matter that was left undisclosed - Law places this duty for the reason: o Insurer has to be in a position to full assess the risk against which the insured wants protection - Duty exists at the time of applying for the insurance and throughout the duration of the contract - Insurer must be notified about any change material to the risk Insurable Interest - Special nature of the insurance contract also means that its validity is contingent on the insured having an insurable interest in the thing insured - The test for whether the insured has an insurable interest is whether he benefits from its existence and would be prejudiced from its destruction - Rationale behind this is that allowing people to insure property they have no real interest in may for example lead them to intentionally destroy the property in order to make an insurance claim Indemnity - Insurance contracts are contracts of indemnity (exception life insurance) o The obligation on the insurer to make good the loss - This means the insured is not supposed to profit from the happening of the insured against event but at most will come out even - Some policies such as fire insurance require the insured to have coverage for a specified minimum portion of the value of the property in order to full recover from the insurer in the event of a fire - This requirement is in the form of a co insurance clause o Intended to discourage the insured from insuring the property for less than its value on the gamble that any loss is likely to be less than total If this clause is in place, the insured carries less insurance then the amount specified in the clause, the insurer will pay only a specified portion of the loss, and the insured must absorb the remainder Subrogation - Insurer has what is called a right of subrogation o The right of the insurer to recover the amount paid on a claim from a third part that caused the loss - This right permits the insurer to step into the shoes of the insured and sue the wrongdoer The Policy - Insurance contracts are technical - Content is settled to some extent by legislation which requires standard form policies for some types of insurance - Changes in standard policy terms take the form of riders and endorsements o Rider: adds to or alters the standard coverage and is part of the policy from the outset o Endorsement: an alteration to the coverage at some point during the time in which the policy is in force - Policies generally contain a number of exclusion clauses that exclude coverage for certain situations, occurrences, or persons for which there would otherwise be protection Insurance Products - Divisible into 3 categories: Life, property and liabilitiy - In order to secure optimal coverage a businessperson should assess the business operation and identify the kinds of legal risks it may enounter - Possible areas: (***would be very helpful to read case from ch 28 to fully understand each type) o Injury/property damage o Personal injury o Financial loss and injury o Injury and property damage o Loss of profit o Environmental damage o Death Auto Insurance - Common scheme to ensure that owners are financially responsible for the liabilities that arise through use of their vehicles - Insurance provides the funds to fulfill that
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