Ch. 30: Insurance – No. 1
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Insurance Policy: A contract in which, for a stipulated
consideration, one party (the insurer, or underwriter) agrees
assigns, for a particular, stated loss.
afford the coverage offered.
Insurable Interest: An interest either in a person’s life or
well-being or in property that is sufficiently substantial that
Property: An insurable interest in property must exist at
FORMING THE INSURANCE CONTRACT
Application: The insurance application is generally made a
part of the contract if and when a policy issues; therefore, the
application date until the date the policy issues or is denied.
It is important to distinguish between an insurer’s
authorized agent, who has the authority to bind the
insurer, and a third-party broker, who does not.
applicant sought, the applicant has a claim against
the broker, not the insurer.
Agreed Delayed Effective Date: If the parties agree
that the insurance will be issued at some later date, any
Ch. 30: Insurance – No. 3
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
INSURANCE COVERAGE
The heart of an insurance policy is the coverage it affords, as
limited by various exclusions and exceptions in the policy.
Incontestability Clause: After a life or health policy
will cover any property loss up to the policy limit.
Appraisal/Arbitration Clause: Provides a means of
resolving disputes between the insured and the insurer
over the value of the property damaged.
Interpreting Policy Terms: Courts generally interpret and
construe against the insurer (and in favor of the insured or
third party) any policy provision whose meaning or effect is
unclear.
Ch. 30: Insurance – No. 4
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
INSURED’S RIGHTS, DUTIES & DEFENSES
Cancellation: The insured may cancel a policy at will.
Applicant’s Duty to Disclose: An applicant must disclose
any fact material to an insurer’s decisions to issue a policy,
what to cover, or what premium to charge.
premium, or the applicability of an exclusion.
Insured’s (Other) Continuing Duties: Once covered, an
insured must
(1) pay premiums on or before their due date,
Ch. 30: Insurance – No. 5
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
INSURER’S RIGHTS, DUTIES & DEFENSES
issued a policy and assumed the covered risks, it must:
upon being notified of a claim, investigate and ascertain
whether the insured has suffered a covered loss; and
An insurer who refuses to pay, settle, or defend a
covered loss may be liable for more than the policy limit.
Defenses: An insurer may avoid liability for failing to pay a
LIFE INSURANCE – PT. I
There are several common varieties of life insurance:
premiums for a set number of years, after which the
policy is fully paid;
Term, which provides coverage for a term of years in
exchange for premiums paid during the term;
life.
Covered Risks: Most life insurance policies exclude
coverage for, e.g., suicide, war, the insured’s involvement in
or conviction for a crime punishable by death. In the absence
of an explicit exclusion, courts generally find the life insurer
liable regardless of the cause of the insured’s death.
FORMING THE INSURANCE CONTRACT
Application: The insurance application is generally made a
part of the contract if and when a policy issues; therefore, the
application date until the date the policy issues or is denied.
It is important to distinguish between an insurer’s
authorized agent, who has the authority to bind the
insurer, and a third-party broker, who does not.
applicant sought, the applicant has a claim against
the broker, not the insurer.
Agreed Delayed Effective Date: If the parties agree
that the insurance will be issued at some later date, any
Ch. 30: Insurance – No. 3
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
INSURANCE COVERAGE
The heart of an insurance policy is the coverage it affords, as
limited by various exclusions and exceptions in the policy.
Incontestability Clause: After a life or health policy
will cover any property loss up to the policy limit.
Appraisal/Arbitration Clause: Provides a means of
resolving disputes between the insured and the insurer
over the value of the property damaged.
Interpreting Policy Terms: Courts generally interpret and
construe against the insurer (and in favor of the insured or
third party) any policy provision whose meaning or effect is
unclear.
Ch. 30: Insurance – No. 4
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
INSURED’S RIGHTS, DUTIES & DEFENSES
Cancellation: The insured may cancel a policy at will.
Applicant’s Duty to Disclose: An applicant must disclose
any fact material to an insurer’s decisions to issue a policy,
what to cover, or what premium to charge.
premium, or the applicability of an exclusion.
Insured’s (Other) Continuing Duties: Once covered, an
insured must
(1) pay premiums on or before their due date,
Ch. 30: Insurance – No. 5
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
INSURER’S RIGHTS, DUTIES & DEFENSES
issued a policy and assumed the covered risks, it must:
upon being notified of a claim, investigate and ascertain
whether the insured has suffered a covered loss; and
An insurer who refuses to pay, settle, or defend a
covered loss may be liable for more than the policy limit.
Defenses: An insurer may avoid liability for failing to pay a
LIFE INSURANCE – PT. I
There are several common varieties of life insurance:
premiums for a set number of years, after which the
policy is fully paid;
Term, which provides coverage for a term of years in
exchange for premiums paid during the term;
life.
Covered Risks: Most life insurance policies exclude
coverage for, e.g., suicide, war, the insured’s involvement in
or conviction for a crime punishable by death. In the absence
of an explicit exclusion, courts generally find the life insurer
liable regardless of the cause of the insured’s death.