Today’s Lecture

• Types of Insurance

• Fundamental Doctrines

Agency Law

Contract Requirements

Distinguishing Characteristics

of Insurance Contracts

Agency Law

Three Parties

Principal

Agent

Third Party

Agent’s authority can be actual or apparent

Agent has binding authority

Agency Law - Example

Which party in an insurance contract does the insurance company represent?

A Principal

B Agent

C Third Party

Agency Law (Cont.)

Waiver - intentional relinquishment of a known right

Estoppel - cannot claim a right previously waived

Agency by estoppel is created if someone acts as an agent with the consent of the insurer

Requirements of a Contract

Offer and Acceptance

Consideration

Competent Parties

Legal Purpose

Legal Form

Requirements of a Contract - Example

Fred Guppy

Contract Requirements - Example

Which of the requirements of a contract was missing in the Fred Guppy case?

A Offer and Acceptance

B Consideration

C Competent Parties

D Legal Purpose or Legal Form

E None of the above

Distinguishing Characteristics of Insurance Contracts

• Based on Utmost Good Faith– Representations– Concealment

• Contracts of Adhesion– Ambiguity is decided in favor of the insured

Distinguishing Characteristics of Insurance Contracts (Cont.)

• Indemnity Concept– Insurable Interest

• Life - at inception of contract

• Property - at time of loss

– Subrogation• Insurer obtains right of recovery against other parties

– Actual Cash Value– Other Insurance Provisions

Distinguishing Characteristics of Insurance Contracts (Cont.)

• Personal– Property-liability policies cannot be assigned– Life policies are assignable

Distinguishing Characteristics - Example

An applicant for life insurance indicates on the application that he does not smoke, although he is a heavy smoker. The insurance company, when it learns about this, may be able to void the policy due to:

A Misrepresentation

B Concealment

C Adhesion

D Lack of insurable interest

E None of the above