c3. contractul de asigurare en

7/26/2019 C3. Contractul de Asigurare En

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Agenda for today:

1. General Definition2. Distinct Legal Characteristics of Insurance

Contracts

3. Legal Requirements of an Insurance Contract4. Fundamental Legal Principles5. Basic Parts of an Insurance Contract


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1. General Definition

Complex legal documents that reflects the

general rules of law

Legal act between Insurer & Insured

Insurer is offering protection and is coveringthe perils (risks), paying indemnity/certainamount of money

Insured is transferring the perils (risks) andis paying the premiums


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2. Distinct Legal Characteristics of Insurance

Contracts

To show how insurance contract differ

from other contracts

Characteristicsa. Aleatory

b. Unilateralc. Conditional

d. Personal

e. Of adhesion

f. With obligations for all parts

g. Consensual

h. Unique

i. With successive execution

j. Pecuniary


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a. Aleatory contract

The essence of an aleatory contract is

CHANCE or the occurrence of somefortuitous event

Rather aleatory than commutative

ALEATORYthe values exchanged are notequal, one party may receive value out of all

proportion to the value that is given

COMMUTATIVEthe values exchanged byboth parties are theoretically even


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b. Unilateral contract

Only one party makes a legally

enforceable promise

Insurer -> to pay a claim or provide

other services to the insured

In contrast, most of the commercial

contracts are bilateral in nature


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c. Conditional contract

The insurers obligation to pay a claim

depends on whether or not the insured orthe beneficiary has complied with all policyconditions

CONDITIONSprovisions inserted in thepolicy that enumerate the rights and dutiesof both parties

The insurer is not obligated to pay a claim ifthe policy conditions are not met


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d. Personal contract

The contract is between the insurer and the

insured

E.g.a property insurance contract does

not insure property, but the owner ofproperty against loss

The owner of the property is indemnified ifthe property is damaged/destroyed


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e. Contract of adhesion

The insured must accept the entire contract,

with all of its terms and conditions

There is no bargaining over terms ->normally possible under most commercialcontracts

The courts have ruled that any ambiguities

or uncertainties in the contract areconstrued against the insurer (Common LawSystem)


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3. Legal Requirements of an Insurance Contract

a. Offer and acceptance

b. Consideration

c. Competent parties (capacity ofcontracting)

d. Legal purpose


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a. Offer and acceptance

Must be an offer and an acceptance of

its termsfirst requirement of a

binding insurance contract

General rulethe applicant for

insurance makes the offer, and the

company accepts or rejects the offer


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b. Consideration

Refers to the value that each party gives to

the other

The insureds consideration payment ofthe first premium / or a promise to pay the

first premium & an agreement to abide bythe conditions specified in the policy

The insurers consideration promise to do

certain things as specified in the contract: Paying for a loss from an insured peril Providing certain services (e.g. loss prevention,

safety services, defending the insured in aliability lawsuit)


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c. Competent parties

Each part must be legally competent

The parties must have legal capacity to enterinto a binding contract

Most adults are legally competent to enterinto insurance contracts, but there are someexceptions: insane persons, intoxicated

persons, corporations that act outside thescope of their authorized authority, minorsetc.


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d. Legal purpose

The insurance contract that

encourages or promotes something

illegal or immoral is contrary to the

public interest and cannot be enforced


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4. Fundamental Legal Principles

A.Principle of IndemnityB.Principle of Insurable InterestC.Principle of Subrogation

D.Principle of Utmost Good FaithE. Causa proximaProximate causa


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A. Principle of Indemnity

The insured should not profit from a loss but

should be restored to approximately the

same position after the loss as existed

before the loss

Standard method of indemnifying theinsured in property insurancebased on

actual cash value

Actual cash value = Replacement cost

Depreciation

Exceptions: valued policies, replacement

cost insurance and life insurance


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B. Principle of Insurable Interest

The insured must stand to lose financially if

a loss occurs, or must incur some other kindof harm if the loss take place

All insurance contracts must be supported

by an insurable interest to be legallyenforceable

3 purposes of the insurable risk

requirement: To prevent gambling

To reduce moral hazard

To measure the amount of loss


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C. Principle of Subrogation

Strongly supports the principle of

indemnity

Substitution of insurer in place of the

insured for the purpose of claiming

indemnity from a third person for the

loss covered by insurance;

The insurer is entitled to recover from a

negligent third party any losspayments made to the insured;


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Purposes of Subrogation

To prevent the insured from collecting

twice for the same loss

To hold the negligent person

responsible for the loss


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Importance of Subrogation

The insurer can retain any amounts recovered

through subrogation only after the insured is fullyindemnified;

The insured cannot impair the insurers subrogationrights;

The insurer can waive its subrogation rights in thecontract;

Subrogation does not apply to life insurance and to

most individual health insurance contracts;

The insurer cannot subrogate against its owninsurers.


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D. Principle of Utmost Good Faith

A higher degree of honesty is

imposed on both parties to an

insurance contract than is imposed

on parties to other contracts;

The principle is supported by three

important legal doctrines:a. Representations;

b. Concealment;

c. Warranty


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a. Representations

Statements made by the applicant for insurance;

The insurer can avoid the policy if therepresentation is both (1) materialand (2) false

materialif the insurer knew the true facts, the policywould not have been issued, or would have been issued on

different terms

If the applicant for insurance states an opinion ofbelief that later turns out to be wrong -> the insurer

must prove that the applicant spoke fraudulentlyand intended to deceive the company before it canavoid the policy (e.g. case of Mc-Dowell vs. Fraser in1779)


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b. Concealment

Failure of the applicant for insurance to reveal a

material fact to the insurer;

Nondisclosurethe applicant for insurance is silent& deliberately withholds material information fromthe insurer;

The legal effectthe contract is avoidable at theinsurers opinion;

The applicant for insurance is required to disclosematerial information to the insurer even though thedisclosure may result in denial of the insurance, orrequire the payment of higher premiums


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c. Warranty

The clause in an insurance contract that prescribes,

as a condition of the insurers liability, the existenceof a fact affecting the risk (e.g. the existence of anoperational alarm system);

The clause describing the warranty becomes part of

the contract

Any breach of the warranty, even minor or notmaterial, allows the insurer to avoid the policy;

The harsh common law doctrine of warranty hasbeen modified and softened by court decisions andstatues.


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Law and the insurance agent

An insurance contract normally is sold by an

agent who represents the principal

There are three general rules of agency thatgovern the actions of agents and theirrelationship to insured:

There is no presumption of an agency relationship

An agent must have the authority to bind the principal

A principal is responsible for the actions of the agents

An agent can bind the principal based onexpressed powers or implied powers


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E. Causa proxima Proximate cause

Active and effective cause determining

a loss without the intervention of

another independent force, determined

by a new source

it is not the 1st or the last, but the

dominant, effective and active

Direct linkcause & effect


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F. Contribution

Co-participation of many insurers to

the same loss

If the insured is coved more than once

for the same risk


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5. Basic Parts of an Insurance Contract

5.1 Main clauses

5.2 Contractual parts

5.3 Specific compulsory elements

5.4 Phases of contracting5.5 Effects of the contract

5.5 The end of the contract


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5.1 Main clauses (I)

Insurance contracts generally can be

divided into the following parts: Declarations

Definitions

Insuring agreement Exclusions

Miscellaneous provisions


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5.1 Main clauses (II)

Declarationsare statements concerning the

property or activity to be insured

The definitionspage or section defines thekey words or phrases so that the coverage

under the policy can be determined moreeasily;

The insured agreementsummarizes thepromises of the insurer. There are two basictypes of insuring agreements:

Named-perils coverage

All-risks coverage


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5.1 Main clauses (III)

All policies contain one or more exclusions.

There are three major types of exclusions: Excluded perils

Excluded losses

Excluded property

Exclusions are necessary for severalreasons:

The peril may be considered uninsurable by privateinsurers;

Extraordinary hazards may be present;

Coverage is provided by other contracts; Moral hazard is present to a high degree;

The coverage is not needed by the typical insured


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5.1 Main clauses (IV)

Conditionsare provisions that qualify or

place limitations on the insurers promise toperform. The conditions section imposescertain duties on the insured if he or shewishes to collect for a loss

Miscellaneousprovisionsin property andliability insurance include cancellation,subrogation, requirements if a loss occurs,assignment of the policy, and other

insurance provisions.


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5.2 Contractual parts

Insurer and insured

Within contract , may be interested:

Contracted of the insurancewhen the

contract is done for a 3rd party) Insured

Beneficiary

The person mentioned within contract(the case of the 3rd part liabilitycontracts)


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5.3 Specific compulsory elements

A. Risk

B. Sum Insured

C. Premium


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A. Risk

Uncertain, possible and future event

Goods, patrimony, life, helth andphisical integrit of a person may beexposed to the risks

Insured riskconditions: Possibility to be produced

To be aleatory

The event must be produced independently of

the wish of insured or insurance beneficiary To be moral (some risks cant be insured

because they are incompatible with & society)


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B. Sum Insured

Maxim amount of claims paid by insurer,

following the producing of risk

Contribute to the calculation of premiums

Differences Non l i fe vs . Li fe:

For non life insurance the good is evaluated

For life insurance is settled


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C. Premium

Received by insurer

Paid by insured, transferring risks, in exchange ofprotection promised in the case of loss (if theagreed risks are produced)

There are many factors that may influence the levelof the premium

Gross Premium = Net Premium + Premium adaosulde prim

Types of premium:

Effective (current) Fixed

Premium tariffs

Premium discounts


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Equitable Premiums

Claims

The contributions of the many to meet the losses of the few

POOL

The insurers

benefit

from the law of

large numbers

What is Insurance?


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Calculation of Premiums

Premium =Sum InsuredX Rate

Value of

Propertyat risk

Reflects theDegree of

Hazard

% or 0/00 %


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Calculation of Premium

The rate per cent is set by the leading underwriter,

based on the likelihood of having to pay a claim.

The greater the risk (chance of loss) the higher therate charged

E.g. A rate of 1.5% meansthat 1.50 is charged

for every 100 of risk

insured.

Per mille, pounds

per thousand

insured


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Premium Calculations

Losses(actual claims made)

Values at risk(total possible claims)

X100 = Rate%

E.g. 450m worth of property insured gives rise to 9m claims:

9,000,000

450,000,000X 100 =

9

450= 2%


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ClaimsPrem.

and the premium must

also cover

expenses and overheads!

Premium Calculations

The premium must be, at the very

least, sufficient to meet all

expected claims!


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The insurance cycle and financial performance

higher profits

higher capacity for that class

lower prices

Lower profits

Capacity withdrawn

Higher prices


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5.4 Phases of contracting

Request (declaration) of insurance

Request (declaration) of insurance

analysis

Insurer -> obliges contracting risks

The moment when contract is signed

The implementation of contract -> time


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5.5 Effects of the contract

The rights and obligations of insured till the insured risk is produced

after the insured risk is produced

The rights and obligations of insurer till the insured risk is produced

after the insured risk is produced

5 5 Th d f th t t


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5.5 The end of the contract

Usual ways:

To get to the end

The insured risk is produced

Unusual ways:

Denunciation, resolution and annulations

of the contract


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Legislatie

Cod Civil

Cod Comercial

Legea privind asigurarile si reasigurarile in Romania, nr.

136 / 29.12.1995

Legea 32/2000 privind societatile de asigurare


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Thank you for your

time &

consideration

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