Policy Provisions and Contract Law
What part of the contract sets up conduct, duties and obligations?
The CONDITIONS.
How soon is the Secretary of the Treasury required to notify Congress of an act of terrorism for which the secretary estimates losses above $100 billion?
15 days
Additional Insured
A person who is not named as an insured on the dec page of a policy but is protected by the policy. Usually added by endorsement.
What is a binder?
A temporary agreement issued, usually in writing, but may be oral, by a producer providing temporary coverage until a policy is issued.
Which of the following is NOT part of consideration for insured? A: Representations on the application B: Submitting a Statement of Good Health C: Premium payment D: Promise to submit timely claims
D: Promise to submit timely claims The binding force in any contract is consideration.
What is anyone covered under an insurance policy, whether named or not, known as
The insureds.
Fair Credit Reporting Act
The purpose is to protect the consumer's right to privacy by making certain that underwriting data is confidential, accurate, relevant and properly used.
When is a misrepresentation considered fraud?
If it is intentional and material. Fraud is grounds for voiding the contract.
What is usually required before an insurer will pay any loss?
Proof of Loss form.
All of the following are essential parts of the insurance contract EXCEPT A: Provisions B: Exclusions C: Insurance clause D: Conditions
A: Provisions is a broad term used to refer to the sections or clauses of an insurance policy that communicates the policy's benefits, conditions, etc. The essential party are declarations, insurance clause, conditions and exclusions.
An insurance contract must contain all of the following to be considered legally binding EXCEPT: A: Consideration B: Competent Parties C: Beneficiary's Consent D: Offer and Acceptance
C: The four essential elements of all legal contracts are offer and acceptance, consideration, competent parties and legal purpose
Duties of the insurer found in a property policy conditions include all of the following EXCEPT: A: Provide advance notice of cancellation B: return any premiums to the insured C: Notify the insured in the event of financial difficulty D: Pay covered losses
C: The insurance company monitors the financial conditions of insurers. The insurers report to the state, not to policyholders.
What are the 4 Essential elements of all legal contracts?
Offer and acceptance Consideration Competent Parties Legal Purpose
What is a warranty?
A statement guaranteed to be true, and if untrue may breach the contract. Representations are statements that are true to the best of the applicants knowledge.
Assignment
The transfer of a legal right or interest in an insurance policy. Usually valid only with written consent.
When does ACCEPTANCE usually occur?
When an insurer approves a prepaid application. The OFFER is the application. ACCEPTANCE is when underwriting approves and app and issues a policy.
What is the Gramm-Leach-Bliley Act?
Passed to protect private customer information that is filed with a financial institution. Customers must be given two disclosure notices (one at the onset of business and one before information is disclosed) as well as a yearly updated disclosure notice.
All of the following conditions are commonly found in the insurance policy EXCEPT: A: Subrogation B: Appraisal C: Insurance Agreement D: Cancellation and Non-Renewal
C: Insuring agreement. This provides info on the policy's coverages. Conditions state the legal obligations and duties of the parties to the contract.
What term is the act of withholding material information crucial to underwriting? A: Concealment B: Witholding C: Leading D: Breach of Warranty
A: Concealment occurswhen a persona withholds a material fact that is crucial to making a decision.
Which is a mandatory part of an insurance policy that varies with each individual policy?
Declarations- They tell who, what, when and where. This is different in each contract.
ABC Corp has $100,000 coverage on through Company A and $50,000 coverage through Company B. They suffer a $24,000 loss. How much will each insurer pay?
Company A: $16,000 Company B: $8,000 They pay PRO RATA based upon each policy's share of the total amount of coverage.
Pro Rata Liability
If more than one policy is in force on the same property at the same time covering the same perils, this is concurrent coverage. The intent of insurance is that after a loss, the insured is restored to the condition he or she was in before the loss. Pro Rata protects against INDEMNITY.