Ch 1 terms

Misrepresentation

A false statement contained in the application

Estoppel

A legal doctrine that prevents the denial of a fact, if the fact was admitted to be true by a previous action.

Representations

An oral or written statement made at the time of application or before issuance of the policy that is believed to be true to the best of the knowledge of the applicant.

Utmost Good Faith

Both parties bargain in good faith in forming the contract. Applicants are required to make a full, fair, and honest disclosure.

Conditional Contract

Both parties must perform certain duties and follow rules of conduct to make the contract enforceable. The insurer must pay claims if the insured has complied with all the policy's terms and conditions.

Concealment

Failure to communicate known information.

Contract of Adhesion

One party (insurer) prepares the contract and presents it to the other party (applicant) on a "take-it-or-leave-it" basis, without negotiation.

Unilateral Contract

Only one party is legally bound to the contractual obligations after the premium is paid to the insurer. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract.

Aleatory Contract

The exchange of value is unequal. Insured's premium payment is less than the potential benefit to be received in the event of a loss

waiver

The voluntary abandonment of a known or legal right or advantage. When an insurer fails to enforce a provision of a contract

express warranty

a statement stipulated in the policy relating to the insured risk that is considered fact. Every express warranty made at or before the execution of a policy must be contained in the policy itself and signed by the insured.

Materiality

disclosure or lack of disclosure would change the insurer's decision to issue a policy for the same premium. NOT determined by the event but rather by the facts that a party failed to communicate

Personal Contract

follows the person who owns the contract, and may not be assigned to another owner without prior approval of the insurance company. Most insurance contracts are "personal". Life insurance is NOT a personal contract

Indemnity Contract

insurance will only restore the insured to the same financial condition that existed before the loss. The insured cannot profit from the loss.

Rescission

termination of the contract from the beginning (as if it never existed)

Material Misrepresentation

the insurer would not have issued coverage, or the policyowner would not have accepted the policy, if the correct information had been communicated.