Contract vs. tort, and the four elements of a contract
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OCCL: Offer and acceptance, Consideration, Competent parties, Legal purpose.
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Applicant's consideration = premium + application statements; insurer's = promise to pay.
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Contract = duties the parties agreed to; tort = a civil wrong that breaches a duty set by law.
Five special features of an insurance contract
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AAPUC: Adhesion, Aleatory, Personal, Unilateral, Conditional.
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Adhesion: genuine ambiguities are read in favor of the insured.
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Unilateral: only the insurer is legally bound; aleatory: an unequal exchange that depends on chance.
Concealment, materiality and the right to rescind
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§331: concealment, intentional or not, lets the injured party rescind.
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§333: known, ought to know, waived, excluded by warranty, excepted: no duty to volunteer unless asked. §339: own judgment, never.
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§334: materiality = probable and reasonable influence on the other party, not the event.
Representations, warranties and misrepresentation
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Representation: may change before the insurance is effected, not after (§355); false = facts don't match (§358).
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A material false representation (§359) or a material warranty violation (§447) allows rescission.
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§354: a representation cannot qualify an express provision but may qualify an implied warranty. §783: up to 3-year suspension.
What a policy must state, and key policy terms
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§380: the policy is the written instrument that sets out the contract.
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§381: parties, subject insured, interest, risks, period, premium (or basis and rates); no financial rating required.
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Lapse = unpaid after the grace period; unearned premium = for coverage not yet provided.