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This comprehensive overview of insurance contracts outlines the obligations between insured and insurer, emphasizing the importance of insurable interest and the role of insurance agents and brokers. Key concepts include different types of insurance (e.g., business liability, marine, fire, automobile, life) and statutory requirements governing insurance policies. The relationship between parties is rooted in general contract principles, addressing provisions like cancellation, burden of proof, and potential insurer bad faith. This analysis serves as a crucial guide for navigating the complexities of business law in the insurance sector.
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Twomey JenningsAnderson’s Business Law and the Legal Environment, Comprehensive 20eAnderson’s Business Law and the Legal Environment, Standard 20eBusiness Law: Principles for Today’s Commercial Environment 2e Chapter 36 Insurance
The Insurance Contract Duties of Parties The Application Statutory Provisions Insured and insurer owe each other obligations imposed by the contract and by statute Generally part of contract by express stipulation of the policy All provisions required by statute apply, even if not included in the contract The Insurance Contract
Parties • Insurance is a contract, called a policy. • Under an insurance policy, provision is made by the insurer, in consideration of premium payments, to pay the insured or beneficiary a sum of money if the insured sustains a specified loss or is subjected to a specified liability.
The Insurance Contract • Insurance contracts are made through an insurance agent or through an insurance broker. • An insurance agent is an agent for the insurance company, • An insurance broker is the agent of the insured when obtaining a policy for the latter.
Insurable Interest • The person purchasing an insurance contract must have an insurable interest in the insured life or property. • An insurable interest in property exists when the damage or destruction of the property will cause a direct monetary loss to the insured. • An insurable interest in the life of the insured exists if the purchaser would suffer a financial loss from the insured’s death.
The Insurance Contract • Governed by general contract principles. • Antilapse and Cancellation Provisions. • Interpretation of Contract. • Burden of Proof. • Insurer Bad Faith.
Subrogation of Insurer 1. A InsurancePolicy Premiums Original Claim B 2. C A Paymentfor Loss B C 3. A Subrogated Claim B C A = Insurer B = Insured C = Third Party Who Caused B to Sustain Loss
Kinds of Insurance • Business Liability Insurance. • Comprehensive (general liability). • Broad “all risk” to body and property. • ‘Key Man’ Insurance of directors/officers.
Marine Insurance • Ocean marine policies insure ships and their cargoes against the perils of the sea. • Inland marine policies insure goods being transported by land, by air, or on inland and coastal waterways.
Fire and Homeowner’s Insurance • In order for a fire loss to be covered by fire insurance, there must be an actual, hostile fire that is the immediate cause of the loss. • The insurer is liable for the actual amount of the loss sustained up to the maximum amount stated in the policy. • A homeowners insurance policy provides fire, theft, and liability protection in a single contract.
Automobile Insurance • Automobile insurance may provide protection for collision damage to the insured’s property and injury to persons. • It may also cover liability to third persons for injury and property damage, and loss by fire or theft.
Life Insurance • A life insurance policy requires the insurer to pay a stated sum of money to a named beneficiary upon the death of the insured. • It may be a term insurance policy, a whole life policy, or an endowment policy. • State law commonly requires the inclusion of an incontestability clause, whereby, at the conclusion of the contestability period, the insurer cannot contest the validity of the policy.
