Fundamental Legal Principles

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Fundamental Legal Principles

• Introduction to Risk Management

Chapter 5 Fundamental Legal Principles
University of Texas at Austin Patricia M.
Arnold, CPCU, ALCM
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Principles

• Indemnity (link)
• Insurable Interest (link1) (link2)
• Subrogation (link1) (link2)
• Utmost Good Faith (link)

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Indemnity

• Replacement Cost (link)
• Actual Cash Value (link)
• Fair Market Value
• Functional Replacement cost (link)
• Common construction (link)
• No longer used for intended purpose?
• Antiques? Rare?
• Property of someone else in your care?
• Valued policy and valued policy laws?

Broad evidence rule
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Valuation of loss

• Valued Policy
• Agreed Value
• Coinsurance

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Insurable Interest

• Property insurance
• Buildings
• Contents
• Shipments/cargo
• Creditors

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Subrogation

• Insurers viewpoint
• Customers viewpoint
• Third Persons viewpoint

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Utmost Good Faith

• Representations
• and reasonable detrimental reliance
• Concealment
• Warranties (sprinkler, alarm, notice)

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What is bad faith

• Generally implies actual or constructive fraud or
  a design to mislead or deceive another, or a
  neglect or refusal to fulfill some duty or
  contractual obligation, not prompted by an honest
  mistake as to ones rights or duties, but
  prompted by some interested or sinister motive.

Blacks Law Dictionary, 5th edition
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Requirements of Insurance Contract

• Offer Acceptance
• Consideration
• Competent Parties
• Legal Purpose

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Unique Legal Characteristics of the Insurance
contract

• Aleatory (not an even exchange)
• Unilateral (one makes legally enforceable
  promise)
• Conditional (Promise to paycompliance?)
• Personal (insurer insured, for owner/user)
• Contract of Adhesion (accept all)

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Law and The Insurance Agent

• General Rules of Agency
• Authority to bind principal
• Principal responsible for agents acts/omissions
• Waiver (voluntary relinquishment of known right)
• Estoppel (detrimental reliance)