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CPCU 530 - Assignments 1 - 5
The Legal Environment of Insurance
202
Law
Graduate
03/21/2006

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Term
Civil-law system
Definition
a basic legal system that relies on scholarly interpretations of codes and constitutions rather than court interpretations of prior court decisions, as in common-law systems
Term
Doctrine of stare decisis
Definition
A method of case resolution in which courts follow earlier court decision when the same issues arise again in lawsuits
Term
Equity
Definition
Fairness, or a body of principles constituting what is fair and right
Term
Classifications of U.S. Law
Definition
1. Classifications as either criminal or civil
2. Classification by subject matter
3. Classification as either substantive or procedural law
Term
Criminal Law
Definition
a classification of law that applies to acts that societ deems so harmful to teh public welfare that government is responsible for prosecuting and punishing the perpetrators
Term
Civil law
Definition
a classification of law that applies to legal matters not governed by criminal law and that protects rights and provides remedies for breaches of duties owed to others
Term
Classification by Subject Matter
Definition
group cases by type, defined by parties' rights and liabilities. In addition to criminal law, are contracts, torts, agency, and property law (civil law)
Term
Substantive law
Definition
creates, defines, and regulates parties' rights, duties, and powers
Term
Procedural Law
Definition
a classification of law that prescribes the steps, or processes, for enforcing the rights and duties defined by substantive law.
Term
Jurisdiction
Definition
the power of a court to decide cases of a certain type or within a specific territory
Term
Five sources of Law
Definition
1. A constitution, which establishes fundamental rights and creates the other branches of government
2. The legislative branch - Congress and state legislatures, for example - which enact statutes
3. The judicial branch - courts - which decide cases
4. The executive branch - the president and state governors, for example - which enforces law
5. Administrative agencies - in reality, part of the executive branch - which make and enforce regulation
Term
Commerce Clause
Definition
The provision of the U.S. Constitution that give Congress the power to regulate commerce (trade) with foreign nations and among the states (interstate commerce)
Term
Due Process Clause
Definition
The Fifth Amendment to the U.S. Constitution, guaranteeing notice and a hearing before the federal government can deprive any person of life, liberty, or property; and teh Fourteenth Amendment's extension of these the same requirements to state government actions
Term
Equal Protection Clause
Definition
A part of the Fourteenth Amendment to the U.S. Constitution prohibiting state laws that discriminate unfairly or arbitrarily, and requiring equal treatment to all persons under like circumstances and conditions
Term
Guest Statute
Definition
A law requiring a passenger who has been injured in a vehicle accident and is seeking to recover damages to establish that the accident resulted form the driver's gross negligence.
Term
National Association of Insurance Commissioners (NAIC)
Definition
An organization established to promote uniformity in regulation among states, exchange regulatory information, and coordinate responses to changing conditions in the insurance marketplace
Term
Original jurisdiction
Definition
The power of a court in which cases are initiated to hear those cases
Term
Appellate jurisdiction
Definition
the power of a court to hear appeals from another court
Term
General Jurisdiction
Definition
the power of a court ot hear a variety of types of cases
Term
Original jurisdiction also rests with federal courts in what kinds of cases?
Definition
- cases involving admiralty and maritime law
- lawsuits in which citizens of different states claim land under grants by different states
- cases involving a legal minimum amount ni damages between citizens of different states or between citizens of one state and of a foreign state
Term
Diversity jurisdiction
Definition
the authority of federal district courts to hear cases involving parties from different states that involve amounts in controversy over a legal minimum
Term
Appellate court
Definition
an appeals court at any level of government
Term
Writ of certiorari
Definition
an appellate court's order directing a lower court to deliver its record in a case for appellate review
Term
Conflicts of Law
Definition
a body of law that resolves questions when states' laws conflict
Term
Forum State
Definition
the state in which a party sues
Term
What do courts look at to determine which state will hear a case?
Definition
- where the parties to the contract live
- where the parties entered into the contract
- where teh parties are to perform the contract
Term
Administrative Law
Definition
the body of law, including agency rules, regulations, and adjudicatory rules, created by government agencies
Term
The legislative delegation of rulesmaking power to an administrative agency is constitutional as long as it meets teh following three conditions?
Definition
1. The legislation carefully defines the scope of the delegated power
2. The agency exercises its rulesmaking power within the defined scope
3. The rules are subject to court (judicial) review
Term
Why not go to court?
Definition
legal system encourage out-of-court settlements because litigation is extremely costly and time-consuming and often proceeds for several years.
Term
Order of Pretrial Procedure
Definition
Allegation
Complaint
Plaintiff
Defendant
Pleading
Cause of Action
Answer
Counterclaim
Motion
Motion to dismisss
Motionfor judgment on the pleadings, or motion for summary judgment
Discovery
Deposition
Interrogatories
Motion to produce
Term
Allegation
Definition
a claim that a party to a lawsuit asserts and expects to prove
Term
Complaint
Definition
allegations made by the party starting a lawsuit
Term
Plaintiff
Definition
The party who starts a lawsuit by filing a complaint
Term
Defendant
Definition
the part in a lawsuit against whom a compliant if filed
Term
Pleading
Definition
a formal written statement of a party's claims filed with a court as part of a lawsuit
Term
Cause of Action
Definition
a plaintiff's legal grounds to sue a defendant
Term
Answer
Definition
a document filed in court by a defendant responding to a plaintiff's complaint and explaining why the plaintiff should not win the case
Term
Counterclaim
Definition
a complaint filed by a defendant against a plaintiff in a lawsuit
Term
Motion
Definition
a party's formal request for a particular action from a court
Term
Motion to Dismiss
Definition
a defendant's formal request to a court admitting the truth of teh plaintiffs allegations but asking teh court to end a lawsuit because the allegations are not sufficient to justify legal action
Term
Motion for Judgment on the Pleadings, or Motion for Summary Judgment
Definition
a request made to a court before a lawsuit goes to trial in which one party accepts the other party's statement of facts but questions whether teh law provides a remedy; if request is granted, the lawsuit ends. "i admit all the facts, but the law is on my side"
Term
Discovery
Definition
the pretrial process by which each party elicits the other party's evidence
Term
Deposition
Definition
a pretrial discovery tool involving oral examination of a witness to produce a written verbatim record
Term
Interrogatories
Definition
a pretrial discovery tool consisting of written questions directed to the opposing party, requiring written answers
Term
Motion to Produce
Definition
a pretrial discovery tool requesting that a court order teh opposing party in a lawsuit to produce documents or physical evidence
Term
Three Discovery Tools
Definition
Depositions
Interrogatories
Motions to Produce
Term
Trail Procedure
Definition
Direct Examination
Cross-examination
Relevance
Materiality
Competence
Hearsay Rule
General Verdict
Special Verdict
Res Judicata
Collateral Estoppel
Term
Direct Examination
Definition
questioning one's own witness during a legal proceeding
Term
Cross- Examination
Definition
questioning an opposing party during a legal proceeding to bring out information favorable to the questioner's own position or to challenge the witness's testimony
Term
Relevance
Definition
Referring to evidence, the quality of relating directly to the matter at issue in a case; required for evidence to be admissible in a court proceeding
Term
Materiality
Definition
referring to evidenc,e the quality of having significance and consequence in a case; required for evidence to be admissible in a court proceeding
Term
Competance
Definition
a qualify of evidence that suggests the source is reliable and teh evidence is adequate to justify admission in court
Term
Hearsay Rule
Definition
the rule of evidence that prevents the admission fo out-of-court statements not made under oath by a person who is unavailable to testify
Term
Two Kinds of Verdicts:
Definition
General verdict
Special Verdict
Term
At any time during a trial, teh judge can decide to take the case from the jury by any one of the following actions:
Definition
- issuing a directed verdict telling the jury how to decide the case
- declaring a mistrial because fo an egregious error, an extraordinary event, or the jury's inability to reach a decision.
- declaring a nonsuit if the plaintiff has failed ot present a sufficient case or has not complied with a court order.
Term
General Verdict
Definition
a kind of verdict that entails a complete finding and a single conclusion by a jury on all issues presented
Term
Special Verdict
Definition
a kind of verdict reached by a jury that makes findings of fact by answering specific questions posed by the judge. Teh judge then applies the law to the facts as teh jury has found them
Term
Two doctrines evolved in the common law to prevent parties from relitigation
Definition
Res Judicata
Collateral estoppel
Term
Res Judicata
Definition
a doctrine that bars parties to a lawsuit on which final judgment has been rendered from bringing a second lawsuit on teh same claim or on related transactions
Term
Collateral Estoppel
Definition
a doctrine that bars parties from relitigating an issue on which a court has already rules, even if teh second lawsuit differs significantly from the first
Term
Appeal
Definition
a request to a higher court for a review of a case
Term
Appellant
Definition
the losing party in a court case who appeals the case to a higher court
Term
Appellee
Definition
The winning (nonappealing) party in a court case, against whom the losing party appeals to a higher court
Term
Alternative Dispute Resolution (ADR)
Definition
procedures to help settle disputes without litigation, including arbitration, mediation, and negotiation
Term
Arbitration
Definition
an alternative dispute resolution (ADR) procedure that takes a dispute to an impartial third party (an arbitrator or arbitration panel) for a decision the parties agree will be final and binding.
Term
Mediation
Definition
an alternative dispute resolution procedure that uses an intermediary, usually selected by the parties, to assist them in reaching a decision
Term
Negotiation
Definition
ADR where parties to a dispute discuss all issues and determine a mutually satisfactory resolution
Term
What are the types of rules an agency can promulgate?
Definition
Legislative
Interpretative
Procedure
Term
Legislative rules
Definition
a types of substantive administrive agency rule that comes from a statutory delegation of authority and that has teh same force as a law enacted by Congress or a legislature
Term
Interpretative rule
Definition
a typesof administrative agency rules that interprets statutes, providing guidance for agency staff or regulated parties, but that lacks teh force and effect of law and therefore is not binding on individuals
Term
Procedural Rules
Definition
a type of administrative agency rule that prescribes procedures for agency operations, legislative rulemaking, and adjudication proceedings.
Term
What is the procedure of administrative agency rulemaking?
Definition
1. Publish notice of intent to adopt a regulation
2. Provide opportunity for public comment
3. Publish the final regulation
Term
What can an agency do after reviewing all comments in regards to a proposed rule?
Definition
* adopt the originally proposed rule
* make minimal or extensive changes
* nullify the proposed rule
Term
In addition to rulemaking, agencies have an adjudicatory function (similiar to court cases). Appropriate notice is essential to due process, and improper notice can result in nullification of an entire proceeding. Appropriate notice requires what?
Definition
* statement of the hearing time, place, and nature
* statement of the hearing's legal authority and jurisdiction
* reference to the particular statute or rule involved
* a short, clear statement of the matters at issue
*
Term
Subpoena
Definition
a legal order to a witness to appear at a certain place and time to testify or to produce documents
Term
What to limitations does the U.S. Constitution place on agency investigations
Definition
* Fourth Amendment protection against unreasonable searches and seizures
* Fifth Amendment protection against self-incrimination
Term
Standing to Sue
Definition
a party's righ tot sue, as one who has suffered or will suffer a legal wrong or an adverse effect from an action
Term
What two requirements must be met for judicial review?
Definition
1. the agency has issued a final order in the case
2. doctrine called exhaustion of administrative remedies must be applied.
Term
Final Order
Definition
an administrative agency's final conclusion or disposition of any material private right of a party, terminating an agency proceeding
Term
Exhaustion of Administrative Remedies
Definition
the completion of all possible administrative procedures and appeals in a case; required before a party can appeal an agency action
Term
On what grounds can a court set aside agency action?
Definition
* action was arbitrary and capricious, an abuse of discretion, or otherwise unlawful
* action was unconstitutional
* action violated statutory authority
* action violated agency procedural rules or was teh result of illegal procedures
* action is unsupportable by substantial evidence in the record.
Term
Privacy Act of 1974
Definition
responded to a growing concern over the increasing potential for the invasion of individual privacy in the name of information collection
Term
Freedom of Information Act of 1966
Definition
first established a statutory right of access to agency information. Its goals were to ensure an informed citizenry, to prevent criminal misuse of information, and to hold government accountable to the governed
Term
The FOIA prohibits what?
Definition
* properly classified security information
* law enforcement investigation records
* confidential commercial or financial information
* records of financial institutions
Term
McCarran-Ferguson Act
Definition
states that the business of insurance is subject to the laws of teh states relating to the regulation and taxation of the insurance business. Federal laws have governed insurance only when one of the following applies:
* a federal law applies only to teh business of insurance.
* a federal law affects insurers' activity that falls outside the business of insurance
* the state has no law that regulates an aspect of the business of insurance covered by a federal law
Term
Proponents of federal regulation
Definition
* federal regulation would provide regulatory uniformity across the states
* federal regulation would be more efficient
* federal regulation would attract higher-quality personnel
Term
Opponents of federal regulation
Definition
* state regulation is more responsive to local needs
* uniformity of state laws can be attained through the NAIC
* Greater opportunities for innovation are possible with state regulation
* state regulation already exists
* state regulation results in a desirable decentralization of political power
Term
DOI commissioner's responsibilities
Definition
* licensing insurers
* monitoring insurer solvency
* reviewing insurer investments
* approving policy forms
* setting or approving rates
* regulating insurer marketing
* acting as liquidator and operating guaranty funds
* operating government-mandated programs
* reviewing insurers' annual reports
* promulgating regulations and proposing legislation
Term
National Association of Insurance Commissioners (NAIC)
Definition
* produces and adopts uniform reporting requirements, standardized procedures for financial examinations, and uniform regulatory procedures, facilitating the regulation of insurers operating in more than one state
* use model laws and uniform laws - competitve rating, reinsurance credit, unfair trade practices, unfair claim settlement, producer licensing, holding companies, insurance fraud, insurer rehabilitation and liquidation, asset valuation, redomestication
Term
Zone Examination
Definition
a state insurance department's financial audit of an insurer on behalf of all states in a zone in which the insurer holds licenses
Term
Managing General Agent (MGAs)
Definition
an independent business organizaiton that functions almost as a branch office for one or more insurers and that appoints and supervises independent agents and brokers for insurers using the independent agency and brokerage system
Term
What are the duties imposed upon MGA's by the insurer?
Definition
* to have on file an independent financial exam of each MGA with which the insurer does business
* To obtain an annual actuarial opinion of teh adequacy of any loss reserves established by the MGA
* to conduct periodic on-site reviews of the MGA's underwriting and claim-processing operations
Term
Surplus Lines Brokers
Definition
used to place any contract of insurance through a nonadmitted insurer
Term
What four elemnets must be present for a legally enforceable contract?
Definition
1. Agreement
2. Capacity to contract
3. Consideration
4. Legal purpose
Term
Contract
Definition
a legally enforceable promise
Term
Promisor
Definition
the part to a contract making a promise
Term
Promisee
Definition
the part to a contract to whom a promise is made
Term
Third-part beneficiary
Definition
a person who is not a part to a contract but who benefits from it and has a legal right to enforce the contract if it is breached by either of the contracting parties
Term
Breach of contract
Definition
the failure of a part to contract, without legal excuse, to perform all or part of the contract
Term
Privity of Contract
Definition
the connections or relationship between parties to a contract because they have mutual interests
Term
Agreement
Definition
one party's offer and another party's acceptance of that offer
Term
Capacity to Contract
Definition
a legal qualification that determines one's ability to enter into an enforceable contract
Term
Consideration
Definition
Something of value or bargained for and exchanged by teh parties to a contract
Term
Categorizing of Contracts
Definition
* bilateral or unilateral
* executed or executory
* express or implied
* voidable contracts or void contracts
Term
Bilateral Contract
Definition
a contract in which each party promises a performance
Term
Unilateral contract
Definition
a contract in which only one party makes a promise for or undertakes the requested performance
(example: Jay promises to pay $500 when Tony has completed painting the garage. The performance of an act, painting, is required in exchange for teh promise, payment. tony does not breach a contract by failing to paint the garage)
Term
Executed contract
Definition
a contract taht has been completely performed by both parties
Term
Executory contract
Definition
a contract that has not been completely performed by one or both of the parties
Term
Express Contract
Definition
a contract that contains both the terms and the parties' intentions, either in writing or orally
Term
Implied-in-fact contract
Definition
a contract that is not express but tha th parties presumably intended,either by tacit understanding or by the assumption that it existed
Term
Implied-in-law Contract
Definition
an obligation that is not an actual contract but that is imposed by law because of the parties' conduct or some special relationship between them or because one of them would otherwise be unjustly enriched
Term
Voidable contract
Definition
a contract that one of the parties can reject (avoid) based on some circumstance surrounding its execution
Term
Void Contract
Definition
an agreement that, despite the parties' intentions, never reaches contract status and is therefore not legally enforceable or binding
Term
An agreement requires the following steps:
Definition
1. the presentation of an offer
2. an acceptance of that offer
Term
Offer
Definition
A promise that requires some action by the intended recipient to make an agreement
To be valid, require:
1. intent to contract
2. definite terms
3. communication to offeree
Term
Example of not being an intent to contract:
Definition
1. social invitations
2. predictions
3. offers made in excitement or jest
Term
Definite Terms
Definition
must be stated with at least a reasonable degree of certainty (contracting parties, the contract's subject matter, the price, adn teh time of performance)
For UCC sales of goods only, allows parties to agree, in a binding contract, to set terms in teh future, including the price of the goods.
Term
Communication to Offeree
Definition
an offeree cannot accept a proposal before knowing about it
- an offer can be valid though if the offeree has begun performance before learning of the offer (as long as knew of the offer upon completing the performance)
Term
Duration and Termination
Definition
* key to determining whether an offer is binding
- Lapse of time
- operation of law
- offeree's rejection
- counteroffers
- offeror's revocation
Term
Lapse of time
Definition
offers do not remain open indefinitely. an offer ceases to be binding when the time of the offer specifies expires or, absent no specific time, when a reasonable amount of time passes
Term
Operation of Law
Definition
any one of several events occurring before acceptance can terminate an outstanding offer by operation of law
- means that rules of law apply automatically to a situation without any act by the parties (example if it becomes illegal, declared insane, or dies)
Term
Offeree's rejection
Definition
the offeree's rejection of the offer terminates it. counteroffer is a form of rejection
Term
Counteroffer
Definition
* a proposal an offeree makes to an offeror that varies in some material way form the original offer, resulting in rejection of the original offer, resulting in rejection of the original offer and constituting a new offer
Term
Offeror's Revocation
Definition
- an offeror can revoke, or withdraw, an offer any time before acceptance.
Term
Option Contract
Definition
an agreement to keep an offer open for a specified period of time, and teh person making the offer receives payment of consideration, consequently, the offer cannot be revoked
Term
Acceptance
Definition
creates an enforceable contract when an offeree agrees to the offer unconditionally and unequivocally, and teh offeree communicates teh acceptance to teh offeror by appropriate word or act
Term
Forbearance
Definition
giving up a legal right or agreeing to do so
Term
Substantial performance
Definition
is a partial performance of obligations under a contract. For a unilateral contract, teh substantial performance is sufficient to suspend teh offeror's right to withdraw the offer
Term
Competent part
Definition
satisfies the minimum level of undersatnding and ability required to enter into a binding contract. persons are not competent parties if tehy are minors, insane, or intoxicated. entities may not be competent for some contracts
Term
Restitution
Definition
returning something of value obtained from anotehr person or making na injured party whole. it is also a remedy for breach of contract where adefendant must pay the equivalent value of the benefits received from teh plaintiff under the contract.
Term
Valuable consideration
Definition
something exchanged that has inherent value and is what is necessary and sufficient to support a contract. valuable consideratino is distinguished from good consideration
Term
Good consideration
Definition
has no inherent value and is comprised of such things as natural love, affection, or a sense of moral duty. thus, a promise given in exchange for another person's love or affection is not binding
Term
Promissory estoppel
Definition
an exception to teh unenforceability of gratuitous promises, and permits teh enforcement of a promise if a party acts of forbears in reliance on teh promise. the reliance must be justifiable andn enforcement of the promise must be necessary to achieve justice.
Term
Accord and Satisfaction
Definition
a substituition of a new performance for what was perviously expected. Often, it is a settlement of an unliquidated debt, usually with payment of a compromise amount. The settlemtn precludes the creditor from suing to recover the rest of the debt
Term
Usury
Definition
lending money at an excessive rate of interest. A usury statute limits the interest that can be charged on some loan transactions. an interst rate that exceeds teh allowable rate under the usury law is unenforceable.
Term
Exclupatory clause
Definition
a provision of an agreement, relieving one party of liability for its negligence. For example, a landlord may place a provision in a lease, excusing the landlord from liability in teh event the tenant's property is damaged as a result of teh landlord's negligence. such provisions are strictly construed by eth courts, meaning that the courts will endeavor not to enforce such provisions
Term
In pari delicto agreement
Definition
means both parties are at fault in entering into an illegal transaction, so the contract cannot be enfoced by either party
Term
Severabel contract
Definition
contains two or more promises which can be enforced separately. if one provision is breached or becomes illegal, the other provisions will still be valid and enforceable
Term
Genuine Assent
Definition
mean the parties actually intended the offer and acceptance to form a contract. genuine assent may be lacking due to fraud, mistake, duress, undue influence, or innocent misrepresentation
Term
Fraud
Definition
any device, trick, untruth, or concealment of truth that deceives another, to his or her injury. fraud by intentional misrepresentation requires a false statement of a material fact made knowingly and with intent to deceive, and teh other party relied on teh statement to his or her harm
Term
Rescission
Definition
a legal remedy for undoing a contract formed through fraud, mistake, duress, misrepresentation, or undue influence by a party. this rememdy attempts to put teh parties in teh position they would have been if had tehy never entered into the contract
Term
Collusion
Definition
an agreement for fraudulent purposes
Term
Concealment
Definition
withholding information to deceive someone. in insurance, silence can be a misrepresetnation when there is a duty to speak, and this deception is concealment
Term
Mistake
Definition
occurs when teh true facts are not the facts that the parties believed to exist at the time the parties entered into the contract
Term
Unilateral Mistake
Definition
occurs when only one party to teh contract is mistaken as to teh existence of a fact. a unilateral mistake generally will not render teh contract unenforceable unless the other party to teh contract knew of the mistake
Term
Bilateral mistake
Definition
a contrac tthat both parties entered into based on incorect information. contract are voidable taht are entered on teh basis of bilateral mistake
Term
Reformation
Definition
an equitable remedy sometimes imposed by a court to change teh provisions of a contract (if there is a mutual mistake) to reflect the true intent of teh parties to teh contract.
Term
Duress
Definition
concept that a contract is void or unenfoceable b/c one party used force or other threats illegally to cause teh other party to enter into the contract; thus, no true assent was achieved.
Term
Undue influence
Definition
generally arises in a confidential relationship, where one party exercises such control or domination over another party that genuine assent could not occur. a contract that is teh product of undue influence is unenforceable.
Term
Statute of Frauds
Definition
requires a writing to evidence teh following promises and agreements: agreement for teh sale of realty, agreement which cannot be performed in one year, promises to pay anotehr's debt, sales of personal property in excess of $500, marriage contract, and an executor's personal promise to pay an estate's debt
Term
Executor
Definition
the person named in a will to amange teh assets for a deceased's estate
Term
Administrator
Definition
a person appointed by a court to mange teh assets for a deceased's estates when there is not a valid will naming an executor
Term
Parol Evidence Rule
Definition
prohibits the admission of evidence fo prior negotiations to vary teh terms of a final written agreement. the rule assumes that all prior negotiations, conversations, and agreemetns were merged into the final written contract, adn teh final written contract is teh complete statement of what was agreeed. Terms of eth final agreement may not be varied by prior or contemporaneous oral, or written agreements
Term
Assignment
Definition
a contract occurs when one party transfers its right to a third party
Term
Assignor
Definition
the party making the assignment of contractual rights
Term
Assignee
Definition
the party to whom the rights under a contract are assigned
Term
Third-party Beneficiary contract
Definition
a contract that benefits a third party who is not a party to the contract
Term
Creditor Beneficiary
Definition
contracts may be made between parties to benefit a third-party creditor. for instance, "a" owes "c" $1000. "a" sells "b" goods in return for his or her promise to pay $1000 to "c" in discharge of "a's" debt. "c" is the third-party creditor who is benefited by the contract between "a" and "b"
Term
Donee Beneficiary
Definition
a third-party beneficiary under a contract and receives teh contract's benefit as a gift. For example, if 'a' does repairs to 'b's' house on teh promise that 'b' will pay 'c' the sum of $100, 'c' is a donee beneficiary
Term
Incidental Beneficiary
Definition
on who has only an indirect interest in teh performance of a contract and has no enforceable rights under teh contract. if contracting parties did not intend to confer a benefit on a party, the person is an incidental beneficiary
Term
Intended beneficiaries
Definition
today, courts are blurring teh distinction b/t "creditor" and "donee" beneficiaries by treating them as a single class - intended beneficiaries. the issue is what rights the parties to teh contract intended to confer on the beneficiary, rather than the particular status of teh beneficiary
Term
tender
Definition
an offer to perform contractual duties. the offer may be to perform an act or to pay money
Term
novation
Definition
an agreement replacing an old contract with a new one or the substitution of one debtor for another
Term
Condition Precedent
Definition
an event that must occur or an act that must be performed before a duty of performance by teh other party to teh contract arises
Term
Condition Concurrent
Definition
an event that must exist or occur at teh time the parties to a contract are to perform. if delivery and payment are to be accomplished simultaneously, these events are concurrent conditions
Term
Condition Subsequent
Definition
a future contingent event that may or may not occur after teh contract becomes legally enforceable, which will terminate rights under the contract. failure to pay a future premium installment when due is a conditino subsequent taht will end the contract.
Term
Repudiation
Definition
rejection or refusal of a contract and its obligations
Term
Anticipatory Breach
Definition
an act or clear statement by a party, indicating that the party will not perform its contractual obligations. if there is an anticipatory breach, teh aggrieved party may sue immediately, even though performance is not yet due
Term
Compensatory damages
Definition
an amount of money that will compensate a plaintiff fo rthe harm suffered as a result of a breach of contract. in contract cases, compensatory damages are the amount required to restore the benefit that would have been received if teh contract had been performed.
Term
Consequential damages
Definition
damages taht arise indirectly from teh breach of contract and were foreseeable at teh time the contract was formed. teh defendant must have been aware tah tthe damages would probably occur from his or her breach, and teh damages must be a result of the defendant's breach.
Term
Punitive (exemplary) Damages
Definition
awarded when the defendant engages in outrageous conduct which is evidenced by an actual intent to cause an injury, or when the defendant acts oppressively, maliciously, or fraudulently. many courts will also accept recless disregard for teh rights or interests of the plaintiff instead of proof of actual intent to cause harm. the factors taht the court considers in assessing punitive damages are teh nature of the defendant's actions, the size of teh defendant's assets, and teh purpose of awarding teh punitive damages. Punitive damages are seldom awarded in a breach of contract cases.
Term
Mitigation of damages
Definition
a duty the injured party has to make reasonable efforts to minimize the amount of a loss after a breach of contract has occurred. in other words, the injured party cannot allow the damages to accumulate just b/c there has been a breach
Term
Liquidated damages
Definition
an amount of damages that the parties agree in advance will be paid in teh event of a breach. Courts will enforce good faith attempts to estimate what actual damages will be as a result of a breach.
Term
Specific Performance
Definition
an equitable remedy through which a court orders a breaching party to perform teh acts required under the contract. this remedy will be enforced only when money damages are inadequate
Term
Injuction
Definition
a court order prohibiting a party from performing some acts or engaging in some course of action. a court will enter an injunction only where money damages are inadequate as a rememdy. an agreement not to compete can be enforced by injunction, where teh seller of a business agrees not to compete with the buyer.
Term
Reformation
Definition
an equitable remedy sometimes imposed by teh court to change a contract's provision (in case of mutual mistake) to reflect teh true intent of the contracting parties
Term
Insurance Policy
Definition
a formal contract b/t an insurer and an insured. in teh written policy (or contract), the insurance company promises to indemnify (or pay) the insured for losses from accidental events or occurrences
Term
Conditional Contract
Definition
an insurance policy is a conditional contract b/c the insurer only has to pay for loss IF certain conditions have occurred, such as if a covered loss happens w/i the policy period. the insured also has to fulfill teh required conditions of teh contract, such as reporting teh loss in a timely manner. only when all the conditions are met will teh insurer have the duty to pay or perform its part of the contract
Term
Utmost good faith
Definition
or complete honest is required by both parties of an insurance contract in order for teh contract to be enforceable. any concealment or misrepresentation of relevant or pertinent (material) facts by teh insured will render teh contract null and void. LIkewise, the insurer must act in good faith by not denying coverage for a claim that is clearly covered by teh policy.
Term
Material Fact
Definition
crucial information that an insurer must have in order to decide to write an insurance contract or to pay a covered claim. an intentional failure by the insured to disclose all pertinent facts related to teh insurance coverage releases teh insurance company from its duty
Term
Misrepresentation
Definition
a false statement made by teh insured regarding a material fact on which the insurer relied when deciding to enter into the insurance contract. the insurer may choose to void the insurance contract if teh insured misrepresented and/or concealed material facts.
Term
Contract of Adhesion
Definition
drawn up by one party (the insurer) and offered to another party (the insured) on a take-it-or-leave-it basis. The second party must accept and adhere to teh contract under teh terms of the offer.
Term
Contract of Indemnity
Definition
provides for reimbursing the insured for actual losses. a contract of indemnity is limited ot paying no more than the actual loss sustained
Term
Principle of Indemnity
Definition
a standard, which regulates the amount of recovery an insured will receive after suffering an accidental loss. it provides that the insurance should not compensate teh insured for more than teh actual value of teh loss. insurance should not leave teh insured in a better financial position after the loss than before.
Term
Valued Policies
Definition
require teh insurer to pay a fixed, stated amount when teh property is destroyed (total loss), regardless of teh property's actual value. normally, the insurer and the insured agree on teh stated value amount when the policy is written. that agreed amount approximates teh current market value of the insured property.
Term
Binder
Definition
an informal oral or written contract summarizing the basic coverages and terms of teh insurance agreement. it provides temporary insurance coverage until a formal written policy is issued.
Term
Conditional Receipts
Definition
unlike binders, do not provide immediate insurance coverage, but they may provide coverage retroactive to the date of receipt of the premium under certain conditions. these types of receipts are used by life, health, and accident insurers b/c of the need for highly specialized underwriting, in order to see if teh insurance applicant is insurable under their guidelines.
Term
Binding receipt
Definition
life insuracne conditional receipts have three major forms: a binding receipt, an approval receipt, and an insurability receipt. a binding receipt provides coverage on teh date of receiving the premium until a specified time; if teh life insurer decides to reject the applicant, coverage would cancel at that time.
Term
Approval Receipt
Definition
unlike the binding receipt, the approval receipt mirros teh insurer's intention to provide coverage only when it actually give approval. when teh approval or determinatio fo insurability of the applicant is made, teh coverage begins.
Term
Insurability receipt
Definition
specifies that insurance is effective on the date of the receipt of the premium or on the date of teh medical examination, provided that the applicant is deemed insurable on that date; obviously teh applicant must be insurable in order fo rht insurance to become effective. this type of receipt is normally used by life, accident, and health
Term
Direct-action statute
Definition
adopted by some states - a victim can sue both the insurer and teh wrongdoer jointly under one suit or sue the insurer directly. however, most states only allow this action against teh insurance company if the insurer denies payment of a claim once a court has ordered a judgment against the insured-wrongdoer
Term
Incontestable Cluse
Definition
wall states require to be include din life, accident/health, an dgroup life insurance policies, states taht the insurance company cannot contest or challenge teh enforceability or validity of teh policy once it has been in effect for a specified period of time.
Term
Contestable clause
Definition
allows a period of time in which the insurer can challenge teh validity of a life insurance policy. this period of time gives teh insurance company ample time to investigate teh insured's statements and insurability. however, once this period is over, policyholders are assured that their beneficiaries will receive payment, as teh insurance company can no longer claim fraud, misrepresentation, or concealment of facts by a policyholder in order to void the policy.
Term
Warranties
Definition
oral or written statements in teh insurance contract, guaranteeing that certain facts are true. warranties can be affirmative, continuing or implied
Term
Affirmative warranty
Definition
states that certain facts are true at teh time that the insurance contract is being formed
Term
Continuing, or promissory, Warranty
Definition
states taht the parties to teh contract will do certain states actions or things, or that certain specified conditions will continue to exist during teh term of the insurance contract
Term
Implied Warranty
Definition
refers to a warranty created by operation of law rather than teh seller's written or oral statements. teh UCC imposes two types of implied warranties: implied warranty of merchantability and implied warranty of fitness for a particular purpose.
Term
Waiver
Definition
voluntary relinquishment of a known right. the right must be known, and there must be knowledge of teh facts of teh transaction before a party can voluntarily give up a right
Term
Estoppel
Definition
a legal principle that prohibits a party to a contract from asserting a claim or right that is inconsistent with a past statement or conduct on which the other party to teh contract has detrimentally relied. estoppel arises in insurnace law from false representation of a material fact by teh insurer, reasonable reliance on that representation by the insured, and resulting injury or detriment to the insured.
Term
Election
Definition
the deliberate, voluntary act of choosing b/t two alternative rights or privileges. a choice of one right may imply a relinquishment of teh other option right or privilege. "you can't ahve your cake adn eat it too"
Term
Nonwaiver Agreement
Definition
both parties to teh contract agree that neither of them will waive any rights under teh policy as a result of the investigation of the claim or defense of a lawsuit against the insured.
Term
Reservation of Rights Letter
Definition
a one-sided or unilateral notice sent to the insured, stating that the insurance company will proceed with investigating the claim against the insured, but it retains the right to deny coverage later for that claim.
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