Question

Distinct legal characteristics of an insurance contract make them different from other legal contracts. For each of the following statements, tell which distinctive contract characteristic applies and explain how you know.

a) Betsy can stop paying premiums during the policy period so that her insurance coverage doesn’t continue, but the insurer must keep providing coverage if premiums are paid.

b) There was confusion and uncertainty about whether Ben’s insurance policy would cover a loss. The court decided in favor of the insured.

c) An insurance policy doesn’t require both parties, the insurer and the insured, to pay equally to participate in the contract. An insured may pay a relatively small premium and receive payment for a very large loss.

d) Damon failed for months to report a break-in at his home and theft of his television and computer. By the time he got around to letting the insurer know what had happened, they denied the claim.

Answer 1

Part a)UNILATERAL------The promise of one party is exchanged for a specific act of the other party. Once the insured has paid the policy premium, nothing else is required on his/her part, no other promises of performance were made. Only the insurer can be held liable for the breach of contract.

Part b) ADHESION------As in case of ambiguity, when legal determinations are made, court will render its interpretation against the party who wrote the contract. Here, judgment was against Insurer, as court decided in favour of insured.

Part c) Aleatory-------If any party of the contract might receive considerably more in value than he or she gives up under the terms of agreement.

Part d) Utmost Good Faith------Each party has a duty to reveal all material informations and if any such data is not disclosed , the other party will have the right to void the agreement. Here Damon failed to report theft for months, Insurer denied the claim