Unit 1

Contract Law

Determines whether a contract has the four required elements to be deemed a valid contract.

Tort Law

Involved with obligations imposed on people by common law (case law). It deals with compensating people for losses/injuries cause by the negligent or wrongful acts of others.

Four Elements of a Contract

-Agreement (offer and acceptance) -Competent parties -Valuable considerations -Legal purpose/Be consistent with public policy

Benefits of Insurance

-Making loss payments to those who sustain injury/damage -Requiring loss control measures -Making credit available -Fostering peace of mind

Four Types of Hazards

-Physical Hazards -Morale Hazards -Moral Hazards -Legal Hazards

Drawbacks of Insurance

-Premium payments -Increase in morale hazard -Increase in moral hazard -Expenditure of financial and human resources to administer the insurance mechanism

Peril

A cause of loss

Legal Hazard

Arise from court decisions which can result in very large awards to plaintiffs.

Morale Hazard

Arise from human carelessness or indifference to a potential loss. Ex: forgetting to set the burglar alarm is a morale hazard.

Moral Hazard

Arise from the insured's dishonesty.

Physical Hazards

Arise from the structural, material, or operational characteristics of a risk. Ex: living in a brush area or next to a nuclear plant could increase the physical hazard