CPCU 530 Ch. 3 Special Characteristics of Insurance

An Insurance company may deny a claim if the insured has misrepresented or concealed:

A material fact

Can reservation of rights letters be as effective as signed non-waiver agreement in protecting the insurers rights to policy defenses?

A reservation of rights letter can be as effective if the insurer has drafted the letter carefully and can show that the insured received it

With a contract of indemnity, the insurer agrees in the event of a covered loss, to pay:

An amount directly related to the amount of the loss NOT: the full amount necessary to restore insured to financial position prior to loss

An insurers actions during a loss investigation may effect the insurers rights under the policy. when an insurer knows of grounds for forfeiture or non-coverage and subsequently decides to manage the defense of a lawsuit against it's insured, the insurer:

Cannot refuse coverage on those grounds, unless the insurer gave the timely notice of its reservation of rights.

After a windstorm which opened a hole in the roof, an insured was required to place a tarp over the hole. This requirement is an example of an insurance policy being a:

Conditional Contract

When loss investigation reveals the possibility that the insurer might deny coverage under the policy, the insurer has a dilemma. What is the primary risk an insurer faces by continuing to investigate the loss on its merits without determining if it can legitimately deny coverage?

Continuing the investigation, without more, can raise issues of waiver, estoppel, or election that could negate the insurers lack of coverage defenses

When the insurance policy wording is ambiguous, a court generally applies the interpretation in favor of the insured. This is because and insurance policy is a:

Contract of Adhesion (1 author. applicant must accept or reject as written)

An insurer charged an annual premium for homeowners insurance policy each year. The insured suffered no losses for 5 years. this is an example of?

Contract of unequal amounts

Contracts for sales of goods can contain statutory warranties, as well as the sellers warranties, which can be express of implied. A sellers overt words or actions can:

Create an express warranty

Insurers post-loss alternative when coverage is questionable

Defend under an effective reservation of rights notice or non waiver agreement

Legal doctrine that would provide a defense against a party who asserts a legal remedy when that party had previously chosen another, inconsistent, legal remedy?

Election

Legal principle that prohibits a party from asserting a claim or right that is inconsistent with that party's past statement or conduct on which another party has detrimentally relied:

Estoppel

Distinction between waiver and estoppel

Estoppel requires resulting injury or detriment by the party asserting it

An insurer determines inaccurate information has been provided by an applicant. What determines is the contract is voidable?

If the Information was false and a material fact that the insurer relied upon, the contract is Voidable

For a reservation of rights letter or a non-waiver agreement to be effective...

Insurer must communicate the notice by letter to the insured in a timely manner

waiver

Intentional relinquishment of a known right

what is the most appropriate alternative for an insurer whose insured has been sued by a 3rd party and a question of coverage has arisen under the insureds policy

Investigate or defend under a reservation of rights or a non-waiver agreement

What correctly describes the effect of an agents oral promise -- made before or during the finalizing of a policy -- to waive an insureds future breach of any policy condition?

It is ineffective due to the parole evidence rule

If a producer tells an insured that their policy covers something that it really doesn't, the producer might be liable for:

Misrepresentation

For an insurer to waive the insured's breach of condition under the insurer's policy, the insurer:

Must know of the breach of condition

Common provision in state statutes relating to the effect of an insureds breach of warranty:

Only substantial compliance with a warranty is neccesary

Why must non-waiver agreements and reservation of rights letters typically be in writing?

Oral notice is too difficult to prove

Something courts would allow an insurer to properly waive

Policy notice of loss requirements

2 central elements that can give rise to estoppel

Reliance and Detriment

State laws usually require that an insureds life insurance statements be considered:

Representations

Notice sent by an insurer advising the insured that they will continue with a claim investigation but that the insurer retains the right to deny coverage later?

Reservation of rights letter

Difference between non-waiver agreement and reservation of rights letter

Reservation of rights letter provides unilateral notice to the insured

estoppel arises from the following sequence of events: -False representation of a material fact -reasonable reliance on that representation - AND...

Resulting injury or detriment to the insured

What is the next step for an insurer that has identified a coverage coverage question under the insureds policy and requested the insured to sign a non-waiver agreement, but the insured refused to sign the agreement?

Send a Reservation of Rights letter to the insured

Noncompliance with a warranty concerning one type of covered property will not defeat coverage for another type to which the warranty does not relate because courts generally interpret insurance policies as:

Severable

Effect of consideration on whether waivers are binding under insurance law

Some waivers are binding without consideration

What reinforces the principle of indemnity?

Subrogation

The premium for any particular insurance policy should reflect:

The Insured's share of estimated losses that the insurer must pay

Result of an insurers waiver, estoppel, or election

The Insurer cannot revive a defense they previously forfeited

Element that must be present for a reservation of rights notice to be effective

The Notice must inform the insured fairly of the insurers position

If an insurer discovers a question of coverage under an insureds policy but elects to defend the insured without issuing a reservation of rights letter or executing a non-waiver agreement, a court would likely hold that:

The insurer has waived any coverage defenses

Unless state law provides otherwise, what determines whether a policy statement is a warranty or representation?

The parties intention

An insurer should attempt to enter into a non-waiver agreement with the insured as soon as:

The potential coverage question arises

How do courts treat insurance policy provisions that require all waivers to be in writing?

They generally do not enforce them

Best explanation for why an insurer would ask an insured to sign a non-waiver agreement

To prevent subsequent claims of waiver, estoppel, and election

A special characteristic of an insurance contract is that it is a non-transferable contract. This means that insureds may not transfer or assign their insurance policies...

Unless the insurer agrees to the assignment

Which type of insurance policy pays a stated amount, regardless of the actual value of the loss?

Valued Policy

Distinguish estoppel from waiver

Waiver is contractual in nature and rests upon agreements between parties

The standard fire insurance policy prohibits the insureds from assigning it to new owners of the insured property...

Without the Insurers Consent

The insured must fulfill certain duties before a claim s paid under an insurance policy because:

insurance policies are conditional contracts