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
