Legal Concepts Flashcards

Legal Concepts in Insurance Contracts

• The Consideration clause outlines the schedule and amount of premium payments in an insurance contract.
• Life and health insurance policies operate as unilateral contracts, where only the insurer makes enforceable promises.
• In a unilateral policy, the insurance company is responsible for making legally enforceable promises.
• Insurance policies are classified as Contracts of Adhesion because they are presented on a "take it or leave it" basis.
• Modifications to a policy of adhesion can only be made by the insurance company.
• A life insurance policy without insurable interest is classified as a wagering contract.
• Investor-Originated Life Insurance (IOLI) circumvents insurable interest statutes by having investors persuade individuals to take out life insurance for sale purposes.
• A warranty in insurance refers to statements guaranteed to be true in every respect, and these become part of the contract.
• STOLI (Stranger-Originated Life Insurance) arrangements violate the principle of legal purpose within contracts.
• An insurance contract requires an offer, acceptance, and consideration from both parties.
• Insurable interest must be established at the inception of the contract for it to be valid.
• In cases of confusion in a contract of adhesion, interpretation favors the insured.
• Competent parties (with exclusions for minors, the mentally impaired, or those under substance influence) are required for enforceability of a contract.
• Insurance contracts are considered aleatory, meaning the exchange of value is unequal and involves an element of chance.
• Utmost good faith requires both insurer and applicant to disclose all material facts honestly.
• A distinction exists between void (non-legal agreements) and voidable contracts (which can be set aside by one party).
• Waiver is the voluntary relinquishing of a legal right; failure to enforce conditions means the insurer cannot later deny a claim based on those conditions.
• Concealment is the failure to disclose significant facts during an insurance application.
• Insurable interest ensures that the applicant has a legitimate stake in the insured party to satisfy legal purposes of the contract.
• Express authority refers to the explicitly granted powers to an agent, while implied authority relates to powers assumed necessary for conducting business.
• Apparent authority is based on the principal's actions leading others to believe the agent has authority.
• The parol evidence rule prevents altering a written contract's meaning with prior oral statements.
• A representation is an applicant's statement believed to be true to the best of their knowledge, influencing the insurer's decision to issue a policy.