CPCU 530 - Assignments 1 - 5

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Civil-law system a basic legal system that relies on scholarly interpretations of codes and constitutions rather than court interpretations of prior court decisions, as in common-law systems
Doctrine of stare decisis A method of case resolution in which courts follow earlier court decision when the same issues arise again in lawsuits
Equity Fairness, or a body of principles constituting what is fair and right
Classifications of U.S. Law 1. Classifications as either criminal or civil 2. Classification by subject matter 3. Classification as either substantive or procedural law
Criminal Law a classification of law that applies to acts that societ deems so harmful to teh public welfare that government is responsible for prosecuting and punishing the perpetrators
Civil law a classification of law that applies to legal matters not governed by criminal law and that protects rights and provides remedies for breaches of duties owed to others
Classification by Subject Matter group cases by type, defined by parties' rights and liabilities. In addition to criminal law, are contracts, torts, agency, and property law (civil law)
Substantive law creates, defines, and regulates parties' rights, duties, and powers
Procedural Law a classification of law that prescribes the steps, or processes, for enforcing the rights and duties defined by substantive law.
Jurisdiction the power of a court to decide cases of a certain type or within a specific territory
Five sources of Law 1. A constitution, which establishes fundamental rights and creates the other branches of government 2. The legislative branch - Congress and state legislatures, for example - which enact statutes 3. The judicial branch - courts - which decide cases 4. The executive branch - the president and state governors, for example - which enforces law 5. Administrative agencies - in reality, part of the executive branch - which make and enforce regulation
Commerce Clause The provision of the U.S. Constitution that give Congress the power to regulate commerce (trade) with foreign nations and among the states (interstate commerce)
Due Process Clause The Fifth Amendment to the U.S. Constitution, guaranteeing notice and a hearing before the federal government can deprive any person of life, liberty, or property; and teh Fourteenth Amendment's extension of these the same requirements to state government actions
Equal Protection Clause A part of the Fourteenth Amendment to the U.S. Constitution prohibiting state laws that discriminate unfairly or arbitrarily, and requiring equal treatment to all persons under like circumstances and conditions
Guest Statute A law requiring a passenger who has been injured in a vehicle accident and is seeking to recover damages to establish that the accident resulted form the driver's gross negligence.
National Association of Insurance Commissioners (NAIC) An organization established to promote uniformity in regulation among states, exchange regulatory information, and coordinate responses to changing conditions in the insurance marketplace
Original jurisdiction The power of a court in which cases are initiated to hear those cases
Appellate jurisdiction the power of a court to hear appeals from another court
General Jurisdiction the power of a court ot hear a variety of types of cases
Original jurisdiction also rests with federal courts in what kinds of cases? - cases involving admiralty and maritime law - lawsuits in which citizens of different states claim land under grants by different states - cases involving a legal minimum amount ni damages between citizens of different states or between citizens of one state and of a foreign state
Diversity jurisdiction the authority of federal district courts to hear cases involving parties from different states that involve amounts in controversy over a legal minimum
Appellate court an appeals court at any level of government
Writ of certiorari an appellate court's order directing a lower court to deliver its record in a case for appellate review
Conflicts of Law a body of law that resolves questions when states' laws conflict
Forum State the state in which a party sues
What do courts look at to determine which state will hear a case? - where the parties to the contract live - where the parties entered into the contract - where teh parties are to perform the contract
Administrative Law the body of law, including agency rules, regulations, and adjudicatory rules, created by government agencies
The legislative delegation of rulesmaking power to an administrative agency is constitutional as long as it meets teh following three conditions? 1. The legislation carefully defines the scope of the delegated power 2. The agency exercises its rulesmaking power within the defined scope 3. The rules are subject to court (judicial) review
Why not go to court? legal system encourage out-of-court settlements because litigation is extremely costly and time-consuming and often proceeds for several years.
Order of Pretrial Procedure Allegation Complaint Plaintiff Defendant Pleading Cause of Action Answer Counterclaim Motion Motion to dismisss Motionfor judgment on the pleadings, or motion for summary judgment Discovery Deposition Interrogatories Motion to produce
Allegation a claim that a party to a lawsuit asserts and expects to prove
Complaint allegations made by the party starting a lawsuit
Plaintiff The party who starts a lawsuit by filing a complaint
Defendant the part in a lawsuit against whom a compliant if filed
Pleading a formal written statement of a party's claims filed with a court as part of a lawsuit
Cause of Action a plaintiff's legal grounds to sue a defendant
Answer a document filed in court by a defendant responding to a plaintiff's complaint and explaining why the plaintiff should not win the case
Counterclaim a complaint filed by a defendant against a plaintiff in a lawsuit
Motion a party's formal request for a particular action from a court
Motion to Dismiss a defendant's formal request to a court admitting the truth of teh plaintiffs allegations but asking teh court to end a lawsuit because the allegations are not sufficient to justify legal action
Motion for Judgment on the Pleadings, or Motion for Summary Judgment a request made to a court before a lawsuit goes to trial in which one party accepts the other party's statement of facts but questions whether teh law provides a remedy; if request is granted, the lawsuit ends. "i admit all the facts, but the law is on my side"
Discovery the pretrial process by which each party elicits the other party's evidence
Deposition a pretrial discovery tool involving oral examination of a witness to produce a written verbatim record
Interrogatories a pretrial discovery tool consisting of written questions directed to the opposing party, requiring written answers
Motion to Produce a pretrial discovery tool requesting that a court order teh opposing party in a lawsuit to produce documents or physical evidence
Three Discovery Tools Depositions Interrogatories Motions to Produce
Trail Procedure Direct Examination Cross-examination Relevance Materiality Competence Hearsay Rule General Verdict Special Verdict Res Judicata Collateral Estoppel
Direct Examination questioning one's own witness during a legal proceeding
Cross- Examination questioning an opposing party during a legal proceeding to bring out information favorable to the questioner's own position or to challenge the witness's testimony
Relevance Referring to evidence, the quality of relating directly to the matter at issue in a case; required for evidence to be admissible in a court proceeding
Materiality referring to evidenc,e the quality of having significance and consequence in a case; required for evidence to be admissible in a court proceeding
Competance a qualify of evidence that suggests the source is reliable and teh evidence is adequate to justify admission in court
Hearsay Rule the rule of evidence that prevents the admission fo out-of-court statements not made under oath by a person who is unavailable to testify
Two Kinds of Verdicts: General verdict Special Verdict
At any time during a trial, teh judge can decide to take the case from the jury by any one of the following actions: - issuing a directed verdict telling the jury how to decide the case - declaring a mistrial because fo an egregious error, an extraordinary event, or the jury's inability to reach a decision. - declaring a nonsuit if the plaintiff has failed ot present a sufficient case or has not complied with a court order.
General Verdict a kind of verdict that entails a complete finding and a single conclusion by a jury on all issues presented
Special Verdict a kind of verdict reached by a jury that makes findings of fact by answering specific questions posed by the judge. Teh judge then applies the law to the facts as teh jury has found them
Two doctrines evolved in the common law to prevent parties from relitigation Res Judicata Collateral estoppel
Res Judicata a doctrine that bars parties to a lawsuit on which final judgment has been rendered from bringing a second lawsuit on teh same claim or on related transactions
Collateral Estoppel a doctrine that bars parties from relitigating an issue on which a court has already rules, even if teh second lawsuit differs significantly from the first
Appeal a request to a higher court for a review of a case
Appellant the losing party in a court case who appeals the case to a higher court
Appellee The winning (nonappealing) party in a court case, against whom the losing party appeals to a higher court
Alternative Dispute Resolution (ADR) procedures to help settle disputes without litigation, including arbitration, mediation, and negotiation
Arbitration an alternative dispute resolution (ADR) procedure that takes a dispute to an impartial third party (an arbitrator or arbitration panel) for a decision the parties agree will be final and binding.
Mediation an alternative dispute resolution procedure that uses an intermediary, usually selected by the parties, to assist them in reaching a decision
Negotiation ADR where parties to a dispute discuss all issues and determine a mutually satisfactory resolution
What are the types of rules an agency can promulgate? Legislative Interpretative Procedure
Legislative rules a types of substantive administrive agency rule that comes from a statutory delegation of authority and that has teh same force as a law enacted by Congress or a legislature
Interpretative rule a typesof administrative agency rules that interprets statutes, providing guidance for agency staff or regulated parties, but that lacks teh force and effect of law and therefore is not binding on individuals
Procedural Rules a type of administrative agency rule that prescribes procedures for agency operations, legislative rulemaking, and adjudication proceedings.
What is the procedure of administrative agency rulemaking? 1. Publish notice of intent to adopt a regulation 2. Provide opportunity for public comment 3. Publish the final regulation
What can an agency do after reviewing all comments in regards to a proposed rule? * adopt the originally proposed rule * make minimal or extensive changes * nullify the proposed rule
In addition to rulemaking, agencies have an adjudicatory function (similiar to court cases). Appropriate notice is essential to due process, and improper notice can result in nullification of an entire proceeding. Appropriate notice requires what? * statement of the hearing time, place, and nature * statement of the hearing's legal authority and jurisdiction * reference to the particular statute or rule involved * a short, clear statement of the matters at issue *
Subpoena a legal order to a witness to appear at a certain place and time to testify or to produce documents
What to limitations does the U.S. Constitution place on agency investigations * Fourth Amendment protection against unreasonable searches and seizures * Fifth Amendment protection against self-incrimination
Standing to Sue a party's righ tot sue, as one who has suffered or will suffer a legal wrong or an adverse effect from an action
What two requirements must be met for judicial review? 1. the agency has issued a final order in the case 2. doctrine called exhaustion of administrative remedies must be applied.
Final Order an administrative agency's final conclusion or disposition of any material private right of a party, terminating an agency proceeding
Exhaustion of Administrative Remedies the completion of all possible administrative procedures and appeals in a case; required before a party can appeal an agency action
On what grounds can a court set aside agency action? * action was arbitrary and capricious, an abuse of discretion, or otherwise unlawful * action was unconstitutional * action violated statutory authority * action violated agency procedural rules or was teh result of illegal procedures * action is unsupportable by substantial evidence in the record.
Privacy Act of 1974 responded to a growing concern over the increasing potential for the invasion of individual privacy in the name of information collection
Freedom of Information Act of 1966 first established a statutory right of access to agency information. Its goals were to ensure an informed citizenry, to prevent criminal misuse of information, and to hold government accountable to the governed
The FOIA prohibits what? * properly classified security information * law enforcement investigation records * confidential commercial or financial information * records of financial institutions
McCarran-Ferguson Act states that the business of insurance is subject to the laws of teh states relating to the regulation and taxation of the insurance business. Federal laws have governed insurance only when one of the following applies: * a federal law applies only to teh business of insurance. * a federal law affects insurers' activity that falls outside the business of insurance * the state has no law that regulates an aspect of the business of insurance covered by a federal law
Proponents of federal regulation * federal regulation would provide regulatory uniformity across the states * federal regulation would be more efficient * federal regulation would attract higher-quality personnel
Opponents of federal regulation * state regulation is more responsive to local needs * uniformity of state laws can be attained through the NAIC * Greater opportunities for innovation are possible with state regulation * state regulation already exists * state regulation results in a desirable decentralization of political power
DOI commissioner's responsibilities * licensing insurers * monitoring insurer solvency * reviewing insurer investments * approving policy forms * setting or approving rates * regulating insurer marketing * acting as liquidator and operating guaranty funds * operating government-mandated programs * reviewing insurers' annual reports * promulgating regulations and proposing legislation
National Association of Insurance Commissioners (NAIC) * produces and adopts uniform reporting requirements, standardized procedures for financial examinations, and uniform regulatory procedures, facilitating the regulation of insurers operating in more than one state * use model laws and uniform laws - competitve rating, reinsurance credit, unfair trade practices, unfair claim settlement, producer licensing, holding companies, insurance fraud, insurer rehabilitation and liquidation, asset valuation, redomestication
Zone Examination a state insurance department's financial audit of an insurer on behalf of all states in a zone in which the insurer holds licenses
Managing General Agent (MGAs) an independent business organizaiton that functions almost as a branch office for one or more insurers and that appoints and supervises independent agents and brokers for insurers using the independent agency and brokerage system
What are the duties imposed upon MGA's by the insurer? * to have on file an independent financial exam of each MGA with which the insurer does business * To obtain an annual actuarial opinion of teh adequacy of any loss reserves established by the MGA * to conduct periodic on-site reviews of the MGA's underwriting and claim-processing operations
Surplus Lines Brokers used to place any contract of insurance through a nonadmitted insurer
What four elemnets must be present for a legally enforceable contract? 1. Agreement 2. Capacity to contract 3. Consideration 4. Legal purpose
Contract a legally enforceable promise
Promisor the part to a contract making a promise
Promisee the part to a contract to whom a promise is made
Third-part beneficiary a person who is not a part to a contract but who benefits from it and has a legal right to enforce the contract if it is breached by either of the contracting parties
Breach of contract the failure of a part to contract, without legal excuse, to perform all or part of the contract
Privity of Contract the connections or relationship between parties to a contract because they have mutual interests
Agreement one party's offer and another party's acceptance of that offer
Capacity to Contract a legal qualification that determines one's ability to enter into an enforceable contract
Consideration Something of value or bargained for and exchanged by teh parties to a contract
Categorizing of Contracts * bilateral or unilateral * executed or executory * express or implied * voidable contracts or void contracts
Bilateral Contract a contract in which each party promises a performance
Unilateral contract a contract in which only one party makes a promise for or undertakes the requested performance (example: Jay promises to pay $500 when Tony has completed painting the garage. The performance of an act, painting, is required in exchange for teh promise, payment. tony does not breach a contract by failing to paint the garage)
Executed contract a contract taht has been completely performed by both parties
Executory contract a contract that has not been completely performed by one or both of the parties
Express Contract a contract that contains both the terms and the parties' intentions, either in writing or orally
Implied-in-fact contract a contract that is not express but tha th parties presumably intended,either by tacit understanding or by the assumption that it existed
Implied-in-law Contract an obligation that is not an actual contract but that is imposed by law because of the parties' conduct or some special relationship between them or because one of them would otherwise be unjustly enriched
Voidable contract a contract that one of the parties can reject (avoid) based on some circumstance surrounding its execution
Void Contract an agreement that, despite the parties' intentions, never reaches contract status and is therefore not legally enforceable or binding
An agreement requires the following steps: 1. the presentation of an offer 2. an acceptance of that offer
Offer A promise that requires some action by the intended recipient to make an agreement To be valid, require: 1. intent to contract 2. definite terms 3. communication to offeree
Example of not being an intent to contract: 1. social invitations 2. predictions 3. offers made in excitement or jest
Definite Terms must be stated with at least a reasonable degree of certainty (contracting parties, the contract's subject matter, the price, adn teh time of performance) For UCC sales of goods only, allows parties to agree, in a binding contract, to set terms in teh future, including the price of the goods.
Communication to Offeree an offeree cannot accept a proposal before knowing about it - an offer can be valid though if the offeree has begun performance before learning of the offer (as long as knew of the offer upon completing the performance)
Duration and Termination * key to determining whether an offer is binding - Lapse of time - operation of law - offeree's rejection - counteroffers - offeror's revocation
Lapse of time offers do not remain open indefinitely. an offer ceases to be binding when the time of the offer specifies expires or, absent no specific time, when a reasonable amount of time passes
Operation of Law any one of several events occurring before acceptance can terminate an outstanding offer by operation of law - means that rules of law apply automatically to a situation without any act by the parties (example if it becomes illegal, declared insane, or dies)
Offeree's rejection the offeree's rejection of the offer terminates it. counteroffer is a form of rejection
Counteroffer * a proposal an offeree makes to an offeror that varies in some material way form the original offer, resulting in rejection of the original offer, resulting in rejection of the original offer and constituting a new offer
Offeror's Revocation - an offeror can revoke, or withdraw, an offer any time before acceptance.
Option Contract an agreement to keep an offer open for a specified period of time, and teh person making the offer receives payment of consideration, consequently, the offer cannot be revoked
Acceptance creates an enforceable contract when an offeree agrees to the offer unconditionally and unequivocally, and teh offeree communicates teh acceptance to teh offeror by appropriate word or act
Forbearance giving up a legal right or agreeing to do so
Substantial performance is a partial performance of obligations under a contract. For a unilateral contract, teh substantial performance is sufficient to suspend teh offeror's right to withdraw the offer
Competent part satisfies the minimum level of undersatnding and ability required to enter into a binding contract. persons are not competent parties if tehy are minors, insane, or intoxicated. entities may not be competent for some contracts
Restitution returning something of value obtained from anotehr person or making na injured party whole. it is also a remedy for breach of contract where adefendant must pay the equivalent value of the benefits received from teh plaintiff under the contract.
Valuable consideration something exchanged that has inherent value and is what is necessary and sufficient to support a contract. valuable consideratino is distinguished from good consideration
Good consideration has no inherent value and is comprised of such things as natural love, affection, or a sense of moral duty. thus, a promise given in exchange for another person's love or affection is not binding
Promissory estoppel an exception to teh unenforceability of gratuitous promises, and permits teh enforcement of a promise if a party acts of forbears in reliance on teh promise. the reliance must be justifiable andn enforcement of the promise must be necessary to achieve justice.
Accord and Satisfaction a substituition of a new performance for what was perviously expected. Often, it is a settlement of an unliquidated debt, usually with payment of a compromise amount. The settlemtn precludes the creditor from suing to recover the rest of the debt
Usury lending money at an excessive rate of interest. A usury statute limits the interest that can be charged on some loan transactions. an interst rate that exceeds teh allowable rate under the usury law is unenforceable.
Exclupatory clause a provision of an agreement, relieving one party of liability for its negligence. For example, a landlord may place a provision in a lease, excusing the landlord from liability in teh event the tenant's property is damaged as a result of teh landlord's negligence. such provisions are strictly construed by eth courts, meaning that the courts will endeavor not to enforce such provisions
In pari delicto agreement means both parties are at fault in entering into an illegal transaction, so the contract cannot be enfoced by either party
Severabel contract contains two or more promises which can be enforced separately. if one provision is breached or becomes illegal, the other provisions will still be valid and enforceable
Genuine Assent mean the parties actually intended the offer and acceptance to form a contract. genuine assent may be lacking due to fraud, mistake, duress, undue influence, or innocent misrepresentation
Fraud any device, trick, untruth, or concealment of truth that deceives another, to his or her injury. fraud by intentional misrepresentation requires a false statement of a material fact made knowingly and with intent to deceive, and teh other party relied on teh statement to his or her harm
Rescission a legal remedy for undoing a contract formed through fraud, mistake, duress, misrepresentation, or undue influence by a party. this rememdy attempts to put teh parties in teh position they would have been if had tehy never entered into the contract
Collusion an agreement for fraudulent purposes
Concealment withholding information to deceive someone. in insurance, silence can be a misrepresetnation when there is a duty to speak, and this deception is concealment
Mistake occurs when teh true facts are not the facts that the parties believed to exist at the time the parties entered into the contract
Unilateral Mistake occurs when only one party to teh contract is mistaken as to teh existence of a fact. a unilateral mistake generally will not render teh contract unenforceable unless the other party to teh contract knew of the mistake
Bilateral mistake a contrac tthat both parties entered into based on incorect information. contract are voidable taht are entered on teh basis of bilateral mistake
Reformation an equitable remedy sometimes imposed by a court to change teh provisions of a contract (if there is a mutual mistake) to reflect the true intent of teh parties to teh contract.
Duress concept that a contract is void or unenfoceable b/c one party used force or other threats illegally to cause teh other party to enter into the contract; thus, no true assent was achieved.
Undue influence generally arises in a confidential relationship, where one party exercises such control or domination over another party that genuine assent could not occur. a contract that is teh product of undue influence is unenforceable.
Statute of Frauds requires a writing to evidence teh following promises and agreements: agreement for teh sale of realty, agreement which cannot be performed in one year, promises to pay anotehr's debt, sales of personal property in excess of $500, marriage contract, and an executor's personal promise to pay an estate's debt
Executor the person named in a will to amange teh assets for a deceased's estate
Administrator a person appointed by a court to mange teh assets for a deceased's estates when there is not a valid will naming an executor
Parol Evidence Rule prohibits the admission of evidence fo prior negotiations to vary teh terms of a final written agreement. the rule assumes that all prior negotiations, conversations, and agreemetns were merged into the final written contract, adn teh final written contract is teh complete statement of what was agreeed. Terms of eth final agreement may not be varied by prior or contemporaneous oral, or written agreements
Assignment a contract occurs when one party transfers its right to a third party
Assignor the party making the assignment of contractual rights
Assignee the party to whom the rights under a contract are assigned
Third-party Beneficiary contract a contract that benefits a third party who is not a party to the contract
Creditor Beneficiary contracts may be made between parties to benefit a third-party creditor. for instance, "a" owes "c" $1000. "a" sells "b" goods in return for his or her promise to pay $1000 to "c" in discharge of "a's" debt. "c" is the third-party creditor who is benefited by the contract between "a" and "b"
Donee Beneficiary a third-party beneficiary under a contract and receives teh contract's benefit as a gift. For example, if 'a' does repairs to 'b's' house on teh promise that 'b' will pay 'c' the sum of $100, 'c' is a donee beneficiary
Incidental Beneficiary on who has only an indirect interest in teh performance of a contract and has no enforceable rights under teh contract. if contracting parties did not intend to confer a benefit on a party, the person is an incidental beneficiary
Intended beneficiaries today, courts are blurring teh distinction b/t "creditor" and "donee" beneficiaries by treating them as a single class - intended beneficiaries. the issue is what rights the parties to teh contract intended to confer on the beneficiary, rather than the particular status of teh beneficiary
tender an offer to perform contractual duties. the offer may be to perform an act or to pay money
novation an agreement replacing an old contract with a new one or the substitution of one debtor for another
Condition Precedent an event that must occur or an act that must be performed before a duty of performance by teh other party to teh contract arises
Condition Concurrent an event that must exist or occur at teh time the parties to a contract are to perform. if delivery and payment are to be accomplished simultaneously, these events are concurrent conditions
Condition Subsequent a future contingent event that may or may not occur after teh contract becomes legally enforceable, which will terminate rights under the contract. failure to pay a future premium installment when due is a conditino subsequent taht will end the contract.
Repudiation rejection or refusal of a contract and its obligations
Anticipatory Breach an act or clear statement by a party, indicating that the party will not perform its contractual obligations. if there is an anticipatory breach, teh aggrieved party may sue immediately, even though performance is not yet due
Compensatory damages an amount of money that will compensate a plaintiff fo rthe harm suffered as a result of a breach of contract. in contract cases, compensatory damages are the amount required to restore the benefit that would have been received if teh contract had been performed.
Consequential damages damages taht arise indirectly from teh breach of contract and were foreseeable at teh time the contract was formed. teh defendant must have been aware tah tthe damages would probably occur from his or her breach, and teh damages must be a result of the defendant's breach.
Punitive (exemplary) Damages awarded when the defendant engages in outrageous conduct which is evidenced by an actual intent to cause an injury, or when the defendant acts oppressively, maliciously, or fraudulently. many courts will also accept recless disregard for teh rights or interests of the plaintiff instead of proof of actual intent to cause harm. the factors taht the court considers in assessing punitive damages are teh nature of the defendant's actions, the size of teh defendant's assets, and teh purpose of awarding teh punitive damages. Punitive damages are seldom awarded in a breach of contract cases.
Mitigation of damages a duty the injured party has to make reasonable efforts to minimize the amount of a loss after a breach of contract has occurred. in other words, the injured party cannot allow the damages to accumulate just b/c there has been a breach
Liquidated damages an amount of damages that the parties agree in advance will be paid in teh event of a breach. Courts will enforce good faith attempts to estimate what actual damages will be as a result of a breach.
Specific Performance an equitable remedy through which a court orders a breaching party to perform teh acts required under the contract. this remedy will be enforced only when money damages are inadequate
Injuction a court order prohibiting a party from performing some acts or engaging in some course of action. a court will enter an injunction only where money damages are inadequate as a rememdy. an agreement not to compete can be enforced by injunction, where teh seller of a business agrees not to compete with the buyer.
Reformation an equitable remedy sometimes imposed by teh court to change a contract's provision (in case of mutual mistake) to reflect teh true intent of the contracting parties
Insurance Policy a formal contract b/t an insurer and an insured. in teh written policy (or contract), the insurance company promises to indemnify (or pay) the insured for losses from accidental events or occurrences
Conditional Contract an insurance policy is a conditional contract b/c the insurer only has to pay for loss IF certain conditions have occurred, such as if a covered loss happens w/i the policy period. the insured also has to fulfill teh required conditions of teh contract, such as reporting teh loss in a timely manner. only when all the conditions are met will teh insurer have the duty to pay or perform its part of the contract
Utmost good faith or complete honest is required by both parties of an insurance contract in order for teh contract to be enforceable. any concealment or misrepresentation of relevant or pertinent (material) facts by teh insured will render teh contract null and void. LIkewise, the insurer must act in good faith by not denying coverage for a claim that is clearly covered by teh policy.
Material Fact crucial information that an insurer must have in order to decide to write an insurance contract or to pay a covered claim. an intentional failure by the insured to disclose all pertinent facts related to teh insurance coverage releases teh insurance company from its duty
Misrepresentation a false statement made by teh insured regarding a material fact on which the insurer relied when deciding to enter into the insurance contract. the insurer may choose to void the insurance contract if teh insured misrepresented and/or concealed material facts.
Contract of Adhesion drawn up by one party (the insurer) and offered to another party (the insured) on a take-it-or-leave-it basis. The second party must accept and adhere to teh contract under teh terms of the offer.
Contract of Indemnity provides for reimbursing the insured for actual losses. a contract of indemnity is limited ot paying no more than the actual loss sustained
Principle of Indemnity a standard, which regulates the amount of recovery an insured will receive after suffering an accidental loss. it provides that the insurance should not compensate teh insured for more than teh actual value of teh loss. insurance should not leave teh insured in a better financial position after the loss than before.
Valued Policies require teh insurer to pay a fixed, stated amount when teh property is destroyed (total loss), regardless of teh property's actual value. normally, the insurer and the insured agree on teh stated value amount when the policy is written. that agreed amount approximates teh current market value of the insured property.
Binder an informal oral or written contract summarizing the basic coverages and terms of teh insurance agreement. it provides temporary insurance coverage until a formal written policy is issued.
Conditional Receipts unlike binders, do not provide immediate insurance coverage, but they may provide coverage retroactive to the date of receipt of the premium under certain conditions. these types of receipts are used by life, health, and accident insurers b/c of the need for highly specialized underwriting, in order to see if teh insurance applicant is insurable under their guidelines.
Binding receipt life insuracne conditional receipts have three major forms: a binding receipt, an approval receipt, and an insurability receipt. a binding receipt provides coverage on teh date of receiving the premium until a specified time; if teh life insurer decides to reject the applicant, coverage would cancel at that time.
Approval Receipt unlike the binding receipt, the approval receipt mirros teh insurer's intention to provide coverage only when it actually give approval. when teh approval or determinatio fo insurability of the applicant is made, teh coverage begins.
Insurability receipt specifies that insurance is effective on the date of the receipt of the premium or on the date of teh medical examination, provided that the applicant is deemed insurable on that date; obviously teh applicant must be insurable in order fo rht insurance to become effective. this type of receipt is normally used by life, accident, and health
Direct-action statute adopted by some states - a victim can sue both the insurer and teh wrongdoer jointly under one suit or sue the insurer directly. however, most states only allow this action against teh insurance company if the insurer denies payment of a claim once a court has ordered a judgment against the insured-wrongdoer
Incontestable Cluse wall states require to be include din life, accident/health, an dgroup life insurance policies, states taht the insurance company cannot contest or challenge teh enforceability or validity of teh policy once it has been in effect for a specified period of time.
Contestable clause allows a period of time in which the insurer can challenge teh validity of a life insurance policy. this period of time gives teh insurance company ample time to investigate teh insured's statements and insurability. however, once this period is over, policyholders are assured that their beneficiaries will receive payment, as teh insurance company can no longer claim fraud, misrepresentation, or concealment of facts by a policyholder in order to void the policy.
Warranties oral or written statements in teh insurance contract, guaranteeing that certain facts are true. warranties can be affirmative, continuing or implied
Affirmative warranty states that certain facts are true at teh time that the insurance contract is being formed
Continuing, or promissory, Warranty states taht the parties to teh contract will do certain states actions or things, or that certain specified conditions will continue to exist during teh term of the insurance contract
Implied Warranty refers to a warranty created by operation of law rather than teh seller's written or oral statements. teh UCC imposes two types of implied warranties: implied warranty of merchantability and implied warranty of fitness for a particular purpose.
Waiver voluntary relinquishment of a known right. the right must be known, and there must be knowledge of teh facts of teh transaction before a party can voluntarily give up a right
Estoppel a legal principle that prohibits a party to a contract from asserting a claim or right that is inconsistent with a past statement or conduct on which the other party to teh contract has detrimentally relied. estoppel arises in insurnace law from false representation of a material fact by teh insurer, reasonable reliance on that representation by the insured, and resulting injury or detriment to the insured.
Election the deliberate, voluntary act of choosing b/t two alternative rights or privileges. a choice of one right may imply a relinquishment of teh other option right or privilege. "you can't ahve your cake adn eat it too"
Nonwaiver Agreement both parties to teh contract agree that neither of them will waive any rights under teh policy as a result of the investigation of the claim or defense of a lawsuit against the insured.
Reservation of Rights Letter a one-sided or unilateral notice sent to the insured, stating that the insurance company will proceed with investigating the claim against the insured, but it retains the right to deny coverage later for that claim.