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<<consumer advice section
Utmost Good
Faith
Is the duty to
disclose all material facts relating to
the risk to be covered. A material fact
is a fact which would influence the mind
of a prudent underwriter in deciding
whether to accept a risk for insurance
and on what terms.
Examples:
Motor: Age of drivers, licence
status, details of any accidents, claims
or convictions, exact model of vehicle
etc.
Household: Construction of house,
location of house ie. close to river,
any previous claims etc.
Duty of Disclosure
applies to both the Proposer and the
Insurer. Duty of disclosure operates at
:
-
inception -
until the date cover is confirmed by
the Insurers
-
renewal - up
to the renewal date
-
mid term
alterations - until the Insurers
confirm cover in respect of the
alterations
<<consumer advice section
Indemnity
Is the placing of
the insured in the same financial
position after a loss as he/she was
immediatley before the loss.
In the event of a
claim the Insured must:
-
prove that
he/she has sustained a monetary loss
-
prove the
extent and value of his/her loss
-
transfer any
rights which he/she may have for
recovery from another source to the
Insurer, if he/she has been fully
indemnified.
The settlement of
the loss will be subject to the
following limitations:
-
Sum Insured
-
Average
-
Excess /
deductible
<<consumer advice section
Subrogation
Is the right of
an insurance company who has paid a
claim to its client to persue another
party who may have caused the incident
resulting in the claim.
Notes:
-
The
Insurer must exercise the right of
recovery in the name of the Insured
(prevents the Insured from obtaining
more than one indemnity)
-
Subrogation rights only apply where
there is a legal liability under the
policy i.e. where policy cover
existed.
Example:
A client makes
a claim under his/her own comprehensive
policy for damage done to his vehicle by
another person. His/her insurance
company pay the claim but persue the
negligent third party for the cost of
the claim they have paid.
<<consumer advice section
Contribution
Although the
Insured may effect more than one policy
to cover the same property or interest,
he/she cannot recover in total more than
a full indemnity.
Note:
Cover can only arise when the policies:
Example:
An insured loses his/her watch whilst on
holidays. He/she has holiday insurance
which covers the loss. But he/she also
has the watch covered under his/her
house policy. The cost of the claim
should be shared by both policies ie.
the insured cannot claim twice.
<<consumer advice section
Proximate
Cause
The efficient
cause which brings about a loss with no
other intervening cause which breaks the
chain of events.
Example:
Firemen remove undamaged stock from a
burning building to avoid its
involvement in the fire. It is stacked
in the open yard and subsequently
damaged by rain. Was the proximate cause
of the damage the fire or the rain ?
If the rain
damage occurred before the Insured had
an opportunity to protect it then the
proximate cause of the damage would be
the fire and fire is covered under a
fire policy. However, if the stock was
left unprotected for an unreasonably
long period, the rain would be a new and
independent cause of damage and damage
caused by rain may not be covered under
a policy.
<<consumer advice section
Insurable
Interest
To insure
anything the Insured must have an
insurable interest in the subject matter
of insurance, i.e. he/she must benefit
by its safety or be prejudiced by its
loss.
Notes:
Insurable Interest may be created either
by:
- Obligation to Insure
- Statute
- Contract
- Custom
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Option to Insure: |
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-
Owners
-
Mortgagors
-
Lessors
-
Trustees
-
Tenants |
Examples:
Everybody would have an insurable
interest in their own personal
possessions e.g. house, car, or watch
but your next door neighbour would not
normally have an insurable interest in
your house.
<< consumer advice section
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