2. Legal concepts of the Insurance contract

Unilateral Contract

1 sided agreement where only insurer is legally bound.

Subrogation

The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.

Fiduciary Responsibility

agent handles money commingling-stealing money etc

health insurance

agrees to pay a percentage of the insureds medical bills in exchange for consideration (premiums)

Conditional Contract

certain conditions must be met by all parties benefits depend on the occurrence of an event covered by the contract

life insurance

company agrees to pay predetermined amount-face amount or benefit in exchange for the insured consideration (premium)

reasonable expectation

concept states that insured is entitled to coverage under a policy that is sensible

Elements of a Contract

consideration legal purpose offer and acceptance competent parties

Contract of adhesion

contract has 1 author terms must be accepted or rejected in full

Legal Purpose

contract must be legal and not in opposition of public policy has insurable interest insured has provided written consent it has legal purpose

types of agent authority

express-written implied-unwritten apparent

Warranties

guaranteed to be true

Utmost Good Faith

honesty

Brokers

ind agent may represent companies under separate contracts

Aleatory Contract

insurance contracts are this unequal exchange outcome depends on chance or uncertain events legal lbet is considered aleatory contract

Estoppel

legal process of preventing one party from reclaiming a right that was waived

Valued vs. Indemnity

life insurance-valued Health insurance-indemnity

Competent Parties

must be of legal competence, mentally capable of understanding terms, not influenced by drugs/alcohol

personal contract

not transferable to another person without insurers consent may transfer by notifying insurance company

Offer and Acceptance

offer is made when the applicant submits and application and initial premium offer is accepted after its approved by insurance companys underwriter and policy is issued if no money is given applicant is making an invitation

Parol Evidence Rule

prevents parties in a contract from changing the meaning of a written contract by introducing oral or written evidence made prior to the formation of the contract

Professional Liability Insurance

producers can be sued for mistakes

Stranger-Originated Life Insurance (STOLI)

purchase consumers policy and receive proceeds as profit upon consumers death typically illegal s they violate insurable interest requirements

Consideration

something of value that each interested party gives to each other.with payment of premium

Representations

statements made by applicant believed to be true

Void/Voidable Contract

void contrat that does not have legal effect voidable contract is legal

Waiver

voluntarily giving up of a known right

Concealment

withholding information

Insurable Interest

without insurable interest, an insurance contract is not legally enforceable and would be considered wagering contract only needs to exist at the time of the application of the contract

endorsement

written from attached to an insurance policy that alters the policy's coverage,terms, or conditions