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Intentional, unintentional negligence, strict/absolute liability (inherent risk, i.e. owning rattlesnake) Elements of a Contract: Offer and acceptance (mutual consent) Competent parties (legal capacity) capable, willing Legal purpose activity cant be illegal Consideration what each party considers valuable Insurance Contract: Contract of adhesion not drawn up by negotiation, insured little to say about policys provisions; take-it-or-leave-it Aleatory performance depends on an uncertain future event (claim); unequal exchange; one party will receive much more in value Unilateral contains the exchange of premium for a promise Conditional - company pays only on condition of loss, does not return premiums Personal insured cant transfer contracts (other than life+marine) w/o written consent; individual Utmost good faith both parties reasonable expectation rely on representations/statements made Indemnity compensate and restore to same position o Prevent insured from profiting from loss o Reduce moral hazards Policy written instrument setting forth of insurance Bad of Contract: Fraud (false info), Concealment (does not say what needs to be said) materiality Warranty (pledge) 6 policy specifications: parties involved, risk to be insured, interest in the property, risk insured against, policy period, premium Rescission = voiding = requires material concealment, misrepresentation, or breach of warranty C. Insurance Marketplace a. Distribution Systems Independent agency systems ownership of agency expiration list, cannot legally sell client list, Exclusive agency self-employed agent of company Direct writing system licensed person is simply an employee of insurance company Direct mail company sends out ads b. Producers Agent and Principle Principle gives agent: Express authority specific (in contract) Implied authority not in writing; i.e. collect premiums on companys behalf Apparent authority c. Insurers
d. Market Regulation McCarran-Ferguson Act of 1945 exempted insurance industry from federal regulations for most interstate commerce industries; antitrust laws to insurance business by federal gov e. Excess and Surplus Lines II. Property and Casualty Insurance A. Legal Concepts: Tort Law B. Basics Insurance Services Office (ISO) is the advisory organization that develops forms for the standard market C. Policies III. Personal Lines Insurance IV. Homeowners Insurance Valuations (2%)