Understanding Insurance Contracts & Adhesion

Play an AI-generated podcast conversation about this lesson

Which party has more power when creating a contract of adhesion?

The party drafting the terms (correct)

The other party

Both parties have equal power

It depends on the specific contract

What happens if there are ambiguities in a contract of adhesion?

The contract is considered invalid

The contract is void

The parties can negotiate the ambiguities

The courts will construe the ambiguities against the drafter of the contract (correct)

What type of events trigger an aleatory contract?

Events that are specified in the contract

Events that can be controlled by either party

Events that are uncertain (correct)

Events that are not covered by insurance

Which one of the following is true about insurance contracts?

They are legally binding agreements between the insured and the insurer. Signup and view all the answers

What is a unilateral contract in the context of insurance?

A contract that can be enforced before work has begun. Signup and view all the answers

What is a conditional insurance contract?

An agreement between an insurance company and a policyholder where the insurer agrees to provide coverage for a specific event or loss, provided that certain conditions are met. Signup and view all the answers

What is the reasonable expectations doctrine in insurance law?

It states that when there is ambiguity in an insurance policy, the policy should be interpreted in favor of the insured's reasonable expectations. Signup and view all the answers

Which of the following is an example of insurance fraud?

Exaggerating or making false claims Signup and view all the answers

Who can commit insurance fraud?

All of the above Signup and view all the answers

What can void an insurance contract?

A material misrepresentation Signup and view all the answers

What is the difference between a representation and a warranty in insurance?

A representation is a statement made by the insured, while a warranty is a promise made by the insurer Signup and view all the answers

Match the following types of contracts with their definitions:

Contract of adhesion = A contract offered intact to one party by another with the stipulation that the second party accept or reject the contract in total without the opportunity to bargain over the wording Aleatory contract = A type of insurance policy where the parties involved do not have to perform a particular action until a specific, triggering event occurs Personal insurance contract = An insurance policy that insures a person, rather than their property Signup and view all the answers

Match the following contract terms with their characteristics:

Contract of adhesion = The terms are drafted by one party without input from the other party Aleatory contract = The insurer and the insured agree to transfer, for a premium, some uncertainty about future events Personal insurance contract = Insures a person, rather than their property Signup and view all the answers

Match the following insurance contract types with their characteristics:

Contract of adhesion = Insurance policies are contracts of adhesion and are therefore construed strictly against insurers Aleatory contract = An insured can pay premiums for many years without sustaining a covered loss Personal insurance contract = Insureds sometimes pay relatively small premiums for a short period and then receive coverage for a substantial loss Signup and view all the answers

Match the following terms to their definitions in the context of insurance fraud:

Concealment = The failure to disclose material information Misrepresentation = False statements made by the insured on the insurance application Affirmative Warranty = A statement of fact attested by the insurance applicant Promissory Warranty = A promise by the insurance applicant to do certain things or satisfy certain requirements Signup and view all the answers

Match the following groups to their potential roles in insurance fraud:

Applicants = Can commit fraud during the process of applying for insurance Insurance company employees = Can commit fraud during the process of underwriting insurance Third-party claimants = Can commit fraud by exaggerating or making false claims Policyholders = Can commit fraud by deliberately causing accidents or damage Signup and view all the answers

Match the following effects of insurance fraud:

$40 billion a year = Costs to insurance companies due to non-healthcare insurance fraud $400-$700 yearly = Increase in premiums for the average American family due to insurance fraud Adverse selection = Common result of misrepresentations and concealments by people with higher risks Higher premiums for everyone = Result of adverse selection by insurance companies Signup and view all the answers

Match the following actions with their potential consequences in an insurance contract:

Misrepresentation of a material fact = Can void an insurance contract Breach of a warranty = Can lead to denial of payment of a claim Concealment of material information = Can lead to denial of payment for a claim Filing a claim for more than the actual worth of lost property = Can void an insurance contract Signup and view all the answers

Match the following insurance terms with their definitions:

Indemnity Insurance = An insurance policy that compensates an insured party for unexpected damages or losses Unilateral Contract = A legally binding agreement where one party makes a promise to another party. The other party doesn't have the same legal restrictions under the contract Conditional Insurance Contract = An agreement where the insurer agrees to provide coverage for a specific event or loss, provided that certain conditions are met Doctrine of Utmost Good Faith = A principle in insurance contracts that requires all parties to act honestly and not mislead or withhold critical information from one another Signup and view all the answers

Match the following insurance principles with their descriptions:

Good Faith = The duty of insurance companies to treat their policyholders fairly and reasonably Reasonable Expectations Doctrine = A legal principle stating that when there is ambiguity in an insurance policy, the policy should be interpreted in favor of the insured's reasonable expectations Indemnity = Compensation to a party for a loss or damage that has already occurred or to guarantee through a contractual clause to repay another party for loss or damage that might occur in the future Insurance is Personal = Insurance contracts insure against loss to a person, not to the person's property Signup and view all the answers

Match the following insurance-related statements with their meanings:

Insurance is not transferable = Insurance cannot be transferred to another person without the consent of the insurer Insurance policies are unilateral contracts = In an insurance contract, the insurance company promises to pay the insured individual a specific amount of money if a certain event happens Insurance contracts are personal = Insurance contracts insure against loss to a person, not to the person's property Insurance contracts are legally binding = Agreements between the insurance company (the insurer) and the person(s), business, or entity being insured (the insured) Signup and view all the answers

Match the following terms with their definitions:

Insurer = The insurance company in an insurance contract Insured = The person(s), business, or entity being covered in an insurance contract Indemnity = Compensation for a loss or damage that has already occurred or guarantee to repay another party for future loss or damage Unilateral Contract = A legally binding agreement where one party makes a promise to another party without the same legal restrictions Signup and view all the answers