the insurance code.ppt

The Insurance Code

Title 3 – Insurable Interest

• Life and health of:– a person, spouse and children– any person on whom he depends wholly or in part for

education or support, or in whom he has a pecuniary interest

– any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent the performance

– any person upon whose life any estate or interest vested in him depends

Title 3 – Insurable Interest

• Every interest in real and personal property or any related interest or liability that might directly damnify the insured

• An insurable interest in property may consist in– Existing interest– Inchoate (undeveloped) interest founded on existing

interest– An expectancy interest arising from existing interest

• A carrier or a depository of any kind has an insurable interest in the thing held by him to the extent of his liability NOT exceeding the amount of the liability

Title 3 – Insurable Interest

• Not insurable – a mere contingent or expectant interest in a thing NOT founded on an actual right to the thing nor upon any valid contract

Title 3 – Insurable Interest

• Measure of insurable interest – extent by which the insured might be damnified by loss of or injury to the property

Title 3 – Insurable Interest

• Suspension of insurance – when a change in interest in any part of the thing insured is unaccompanied by a corresponding change of interest in the insurance until the interest in the thing and the interest in the insurance is with the same person

Title 3 – Insurable Interest

• Exception to suspension of insurance– Life, accident and health insurance– A change of interest in a thing insured, after

the occurrence of an injury which results in a loss

– Insurance continues for other things despite a change of interest in one or more of several distinct things, separately insured by one policy.

Title 3 – Insurable Interest

• Exception to suspension of insurance– A change of interest, by will or succession, on the

death of the insured, does not avoid an insurance; and his interest in the insurance passes to the person taking his interest in the thing insured.

– A transfer of interest by one of several partners, joint owners, or owners in common, who are jointly insured, to the others, does not avoid an insurance, even though it has been agreed that the insurance shall cease upon an alienation of the thing insured.

Title 3 – Insurable Interest

• Right to change the beneficiary unless such right is expressly waived in the policy

• Interest of a beneficiary in a life insurance policy forfeited if the beneficiary willfully caused the death of the insured as principal, accomplice or accessory

Title 3 – Insurable Interest

• Invalid acts– Every stipulation for the payment of loss (with

exceptions in Section 166)– Every stipulation that the policy should be

received as proof of interest on the subject matter of the insurance

– Every policy executed by way of gaming or wagering

Questions

1. Why is the life and health of a person legally accountable for money or services to another considered to be insurable interest?

2. What are 3 categories that constitute an insurable interest in property?

3. What is the extent of insurable interest of a carrier or depository of a thing? How does this apply to savings in a bank?

Questions

4. What is NOT insurable?

5. What is the measure of insurable interest?

6. Until when can suspension of insurance happens?

7. What is the interest of a beneficiary in a life insurance policy? When is this interest forfeited?

Title 4 – Concealment & Representations

• Concealment – a neglect to communicate what one party in a contract knows and ought to communicate

• Intentional or unintentional concealment entitles the injured party to rescind an insurance contract.

Title 4 – Concealment & Representations

• Each party to a contract of insurance must communicate to the other, in good faith, all facts within his knowledge which are material to the contract, and which the other has not the means of ascertaining, and as to which he makes no warranty.

Title 4 – Concealment & Representations

• Materiality – to be determined solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries

Title 4 – Concealment & Representations

• An intentional and fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty, entitles the insurer to rescind.

Title 4 – Concealment & Representations

• Representation– may be oral or written– may be made at the same time with issuing

the policy, or before it– to be interpreted by the same rules as the

language of contracts in general– may qualify an implied warranty but cannot be

allowed to qualify a provision in a contract of insurance

Title 4 – Concealment & Representations

• Representation– may be altered or withdrawn before the

insurance is effected, but not afterwards– to be deemed false when the facts fail to

correspond with its assertions or stipulations (the injured party is entitled to rescind the contract from the time when the representation becomes false)

Questions

8. What is concealment? How is the injured party protected by the insurance code in case of concealment?

9. What is the obligation related to information of each party to an insurance contract?

10.When can an insurer withdraw from an insurance contract?

Questions

11.When can representation be made?

12.What can a representation NOT restrict or modify?

13.What action can an injured party take in the event of false representations?

Title 5 – The Policy

• The written instrument of the insurance contract that specifies:1. The parties between whom the contract is made 2. The amount to be insured except in the cases of

open or running policies3. The rate of premium 4. The property or life insured 5. The interest of the insured in property insured, if he

is not the absolute owner thereof6. The risks insured against 7. The period during which the insurance is to continue

Title 5 – The Policy

• Policy types– Open - one in which the value of the thing insured is

not agreed upon, but is left to be ascertained in case of loss

– Valued - one which expresses an agreement that the thing insured shall be valued at a specified sum

– Running - one which contemplates successive insurances, and which provides that the object of the policy may be from time to time defined, especially as to the subjects of insurance, by additional statements or endorsements

Title 5 – The Policy

• Joint ownership and transfers– The terms of the policy should be such as

are applicable to the joint or common interest.

– When the description of the insured in a policy is so general to cover any person or any class of persons, he can claim the benefit of the policy if it can be shown that it was intended to include him.

Title 5 – The Policy

• Joint ownership and transfers– The mere transfer of a thing insured does not

transfer the policy, but suspends it until the same person becomes the owner of both the policy and the thing insured.

Title 6 – Warranties

• Warranty - either expressed or implied that may relate to the past, the present, the future, or to any or all of these

• Every express warranty, made at or before the execution of a policy, must be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy, as making a part of it.

Title 6 – Warranties

• A statement in a policy, of a matter relating to the person or thing insured, or to the risk, as a fact, is an express warranty thereof.

• A statement in a policy that says it will do or will not do a thing which materially affects the risk, is a warranty that such act or omission shall take place.

Title 6 – Warranties

• When, before the time arrives for the performance of a warranty relating to the future, a loss insured against happens, or performance becomes unlawful at the place of the contract, or impossible, the omission to fulfill the warranty does not avoid the policy.

• The violation of a material warranty, or other material provision of a policy, on the part of either party thereto, entitles the other to rescind.

Title 6 – Warranties

• A policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy.

Title 6 – Premium

• An insurer is entitled to an immediate payment of premium because the thing insured is exposed to the peril against which it is insured.

Title 6 – Premium

• A person insured is entitled to a return of premium.– Whole premium if no part of the thing insured

has been exposed to the peril against which the thing is insured

– Portion of the unexpired time of a policy made for a definite period (prorated) if insured surrenders the policy, after deducting from the whole premium any previous claim for loss or damage

Title 6 – Premium

• Exception to return of portion of premium– Holder of a life insurance policy without

sufficient cause as otherwise provided by law

Title 6 – Premium

• Return of premium– When the contract is invalid because of fraud

or misrepresentation of the insurer or of his agent

– Due to facts unknown to the insured that is not his fault

– The insurer never incurred any liability under the policy even if the insured committed default other than actual fraud

Title 6 – Loss

• Insurer is liable for loss of which a peril insured against was the proximate cause.

• An insurer is liable where the thing insured is rescued from an insured risk if in the course of such rescue the thing is exposed to a peril that permanently deprives the insured of its possession, in whole or in part; or where a loss is caused by efforts to rescue the thing insured.

Title 6 – Loss

• Where a peril is specially excepted in a contract of insurance, a loss, which would not have occurred but for such peril, is thereby excepted though the immediate cause of the loss was a peril which was not excepted.

• An insurer is not liable for a loss caused by the willful act or through the connivance of the insured.

Title 6 – Notice of Loss

• An insurer is cleared if no notice of loss is given by the person insured or entitled to the benefit.

• It is sufficient for the insured to give the best evidence which he has at the time of claim.

Title 6 – Notice of Loss

• If a policy requires as a preliminary proof of loss, the certificate or testimony of a person other than the insured, it is sufficient for the insured to use a reasonable diligence to procure it, and in case of the refusal of such person to give it, then furnish reasonable evidence to the insurer that such refusal was not induced by any just grounds of disbelief in the facts necessary to be certified.

Questions

14.What is a policy?

15.What is a running policy?

16.When can a person whose description in the insurance contract is NOT clear claim for benefits?

17.When can a warranty be void?

18.What does the law say on return of premium to a person with default?