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Saturday, May 29, 2010
Friday, May 28, 2010
Evidentiary rules regarding liability insurance
In the United States, most states make only the carrying of auto insurance mandatory. Where the carrying of a policy is not mandatory and a third party makes a claim for injuries suffered, evidence that a party has liability insurance is generally inadmissible in a lawsuit on public policy grounds, because the courts do not want to discourage parties from carrying such insurance. There are two exceptions to this rule:
1. If the owner of the insurance policy disputes ownership or control of the property, evidence of liability insurance can be introduced to show that it is likely that the owner of the policy probably does own or control the property.
2. If a witness has an interest in the policy that gives the witness a motive or bias with respect to specific testimony, the existence of the policy can be introduced to show this motive or bias. Federal rules of civil procedure rule 26 was amended in 1993 to require that any insurance policy that may pay or may reimburse be made available for photocopying by the opposing litigants, although the policies are not normally information given to the jury. Federal Rules of Appellate Procedure rule 46 says that an appeal can be dismissed or affirmed if counsel does not update their notice of appearance to acknowledge insurance. The Cornell University Legal Institute web site includes congressional notes.
1. If the owner of the insurance policy disputes ownership or control of the property, evidence of liability insurance can be introduced to show that it is likely that the owner of the policy probably does own or control the property.
2. If a witness has an interest in the policy that gives the witness a motive or bias with respect to specific testimony, the existence of the policy can be introduced to show this motive or bias. Federal rules of civil procedure rule 26 was amended in 1993 to require that any insurance policy that may pay or may reimburse be made available for photocopying by the opposing litigants, although the policies are not normally information given to the jury. Federal Rules of Appellate Procedure rule 46 says that an appeal can be dismissed or affirmed if counsel does not update their notice of appearance to acknowledge insurance. The Cornell University Legal Institute web site includes congressional notes.
Insurable risks
Generally, liability insurance covers only the risk of being sued for negligence or strict liability torts, but not any tort or crime with a higher level of mens rea. This is usually mandated either by the policy language itself or case law or statutes in the jurisdiction where the insured resides or does business.
In other words, liability insurance does not protect against liability resulting from crimes or intentional torts committed by the insured. This is intended to prevent criminals, particularly organized crime, from obtaining liability insurance to cover the costs of defending themselves in criminal actions brought by the state or civil actions brought by their victims. A contrary rule would encourage the commission of crime, and allow insurance companies to indirectly profit from it, by allowing criminals to insure themselves from adverse consequences of their own actions.
It should be noted that crime is not uninsurable per se. In contrast to liability insurance, it is possible to obtain loss insurance to compensate one's losses as the victim of a crime
In other words, liability insurance does not protect against liability resulting from crimes or intentional torts committed by the insured. This is intended to prevent criminals, particularly organized crime, from obtaining liability insurance to cover the costs of defending themselves in criminal actions brought by the state or civil actions brought by their victims. A contrary rule would encourage the commission of crime, and allow insurance companies to indirectly profit from it, by allowing criminals to insure themselves from adverse consequences of their own actions.
It should be noted that crime is not uninsurable per se. In contrast to liability insurance, it is possible to obtain loss insurance to compensate one's losses as the victim of a crime
Employers of insurance
New policies have been developed to cover any liability that might be imposed on an employer if an employee is injured in the course of his or her employment. In many states, the insurers are prohibited from including conditions within their policies that seek to impose any unreasonable conditions precedent to liability, or require the insured either to take reasonable precautions or to comply with current legislation and regulations. In those countries where such insurance is not compulsory, smaller organizations are often driven into bankruptcy when faced by claims not covered by insurance.
Note that in the United Kingdom Employers Liability Insurance is compulsory, unless the only employee is the owner of the company (who holds at least 50% of the shares).
Workers' compensation in the United States in most states operates through administrative adjudication outside of the federal and state courts; in turn, workers' comp insurance is regulated and underwritten separately from liability insurance. That is, most businesses will go to a liability insurer for a Commercial General Liability policy, and to a specialized workers' comp insurer for a workers' comp policy (which is usually compulsory unless the employer can demonstrate the capability to self-insure for workers' comp).
Note that in the United Kingdom Employers Liability Insurance is compulsory, unless the only employee is the owner of the company (who holds at least 50% of the shares).
Workers' compensation in the United States in most states operates through administrative adjudication outside of the federal and state courts; in turn, workers' comp insurance is regulated and underwritten separately from liability insurance. That is, most businesses will go to a liability insurer for a Commercial General Liability policy, and to a specialized workers' comp insurer for a workers' comp policy (which is usually compulsory unless the employer can demonstrate the capability to self-insure for workers' comp).
Product of insurance
Product liability insurance is not a compulsory class of insurance in all countries, but legislation such as the UK Consumer Protection Act 1987 and the EC Directive on Product Liability (25/7/85) require those manufacturing or supplying goods to carry some form of product liability insurance, usually as part of a combined liability policy. The scale of potential liability is illustrated by cases such as those involving Mercedes-Benz for unstable vehicles and Perrier for benzene contamination, but the full list covers pharmaceuticals and medical devices, asbestos, tobacco, recreational equipment, mechanical and electrical products, chemicals and pesticides, agricultural products and equipment, food contamination, and all other major product classes.
Manuscript policies
For the vast majority of insurance policies, the only page that is heavily custom-written to the insured's needs is the declarations page. All other pages are standard forms that refer back to terms defined in the declarations as needed.
However, certain types of insurance, such as media insurance, are written as manuscript policies, which are either custom-drafted from scratch or written from a mix of standard and nonstandard forms.
However, certain types of insurance, such as media insurance, are written as manuscript policies, which are either custom-drafted from scratch or written from a mix of standard and nonstandard forms.
Life insurance specific features
Incontestability - in the United States, life insurance contracts may not be contested by the insurer at any point after the contract has been in force for two years. The insurer has the burden to investigate fully anything they wish to make sure the insured is an acceptable risk within those two years. Any material misstatements on the insurance application (which generally forms a part of the contract) cannot be used as a reason for the insurer not to pay the death benefit, as long as it does not constitute fraud on the part of the insured. The insurer's only recourse if there is no fraud is to adjust the death benefit to correct for the insured's age or sex if they different from what was stated on the application.
Parts of an insurance contract
Declarations - identifies who is an insured, the insured's address, the insuring company, what risks or property are covered, the policy limits (amount of insurance), any applicable deductibles, the policy period and premium amount. These are usually provided on a form that is filled out by the insurer based on the insured's application and attached on top of or inserted within the first few pages of the standard policy form.
Definitions - define important terms used in the policy language.
Insuring agreement - describes the covered perils, or risks assumed, or nature of coverage, or makes some reference to the contractual agreement between insurer and insured. It summarizes the major promises of the insurance company, as well as stating what is covered.
Exclusions - take coverage away from the Insuring Agreement by describing property, perils, hazards or losses arising from specific causes which are not covered by the policy.
Conditions - provisions, rules of conduct, duties and obligations required for coverage. If policy conditions are not met, the insurer can deny the claim.
Endorsements - additional forms attached to the policy form that modify it in some way, either unconditionally or upon the existence of some condition. Instead of allowing nonlawyer underwriters to directly customize core policy language with word processors, insurers usually direct underwriters to modify standard forms by attaching endorsements preapproved by counsel for various common modifications.
Definitions - define important terms used in the policy language.
Insuring agreement - describes the covered perils, or risks assumed, or nature of coverage, or makes some reference to the contractual agreement between insurer and insured. It summarizes the major promises of the insurance company, as well as stating what is covered.
Exclusions - take coverage away from the Insuring Agreement by describing property, perils, hazards or losses arising from specific causes which are not covered by the policy.
Conditions - provisions, rules of conduct, duties and obligations required for coverage. If policy conditions are not met, the insurer can deny the claim.
Endorsements - additional forms attached to the policy form that modify it in some way, either unconditionally or upon the existence of some condition. Instead of allowing nonlawyer underwriters to directly customize core policy language with word processors, insurers usually direct underwriters to modify standard forms by attaching endorsements preapproved by counsel for various common modifications.
Insurance of policy
In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for payment, known as the premium, the insurer pays for damages to the insured which are caused by covered perils under the policy language. Insurance contracts are designed to meet specific needs and thus have many features not found in many other types of contracts. Since insurance policies are standard forms, they feature boilerplate language which is similar across a wide variety of different types of insurance policies. The insurance policy is generally an integrated contract, meaning that it includes all forms associated with the agreement between the insured and insurer.10 In some cases, however, supplementary writings such as letters sent after the final agreement can make the insurance policy a non-integrated contract.11 One insurance textbook states that "courts consider all prior negotiations or agreements ... every contractual term in the policy at the time of delivery, as well as those written afterwards as policy riders and endorsements ... with both parties' consent, are part of written policy".The textbook also states that the policy must refer to all papers which are part of the policy.Oral agreements are subject to the parol evidence rule, and may not be considered part of the policy. Advertising materials and circulars are typically not part of a policy. Oral contracts pending the issuance of a written policy can occur.
Insurance of policy
In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for payment, known as the premium, the insurer pays for damages to the insured which are caused by covered perils under the policy language. Insurance contracts are designed to meet specific needs and thus have many features not found in many other types of contracts. Since insurance policies are standard forms, they feature boilerplate language which is similar across a wide variety of different types of insurance policies.
The insurance policy is generally an integrated contract, meaning that it includes all forms associated with the agreement between the insured and insurer.[1]:10 In some cases, however, supplementary writings such as letters sent after the final agreement can make the insurance policy a non-integrated contract.[1]:11 One insurance textbook states that "courts consider all prior negotiations or agreements ... every contractual term in the policy at the time of delivery, as well as those written afterwards as policy riders and endorsements ... with both parties' consent, are part of written policy".[2] The textbook also states that the policy must refer to all papers which are part of the policy.[2] Oral agreements are subject to the parol evidence rule, and may not be considered part of the policy. Advertising materials and circulars are typically not part of a policy.[2] Oral contracts pending the issuance of a written policy can occur.
The insurance policy is generally an integrated contract, meaning that it includes all forms associated with the agreement between the insured and insurer.[1]:10 In some cases, however, supplementary writings such as letters sent after the final agreement can make the insurance policy a non-integrated contract.[1]:11 One insurance textbook states that "courts consider all prior negotiations or agreements ... every contractual term in the policy at the time of delivery, as well as those written afterwards as policy riders and endorsements ... with both parties' consent, are part of written policy".[2] The textbook also states that the policy must refer to all papers which are part of the policy.[2] Oral agreements are subject to the parol evidence rule, and may not be considered part of the policy. Advertising materials and circulars are typically not part of a policy.[2] Oral contracts pending the issuance of a written policy can occur.
Liability insurance
Liability insurance is a part of the general insurance system of risk financing to protect the purchaser (the "insured") from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy. Originally, individuals or companies that faced a common peril, formed a group and created a self-help fund out of which to pay compensation should any member incur loss (in other words, a mutual insurance arrangement). The modern system relies on dedicated carriers, usually for-profit, to offer protection against specified perils in consideration of a premium. Liability insurance is designed to offer specific protection against third party claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract. In general, damage caused intentionally as well as contractual liability are not covered under liability insurance policies. When a claim is made, the insurance carrier has the duty (and right) to defend the insured. The legal costs of a defense normally do not affect policy limits unless the policy expressly states otherwise; this default rule is useful because defense costs tend to soar when cases go to trial.
Historical background of insurance
The basic principle of insurance is to protect against loss rather than create an opportunity for speculative gain. Early use of insurance as a form of gambling (life insurance on the lives of kings, for example) led to the banning of life insurance in France, Holland and Sweden during the 16th and 17th centuries.
A notorious abuse of insurance occurred in Pennsylvania in the late 1800s. Six men obtained an insurance policy on an elderly man, who continued to live longer than expected. Understandably, the premiums on an old man were high. Frustrated by the high costs and impatient for the payoff, the men murdered the old man, a crime for which they were hanged.The ability of a person to buy insurance on the life of a stranger would create a moral hazard wherein the person owning the insurance policy stands to profit from the death of the insured.
Establishing the principle of insurable interest as a requirement for purchasing insurance distanced the insurance from gambling, thereby leading to better reputation and greater acceptance of the insurance industry. The United Kingdom provided leadership by passing legislation that prohibited insurance contracts if no insurable interest could be proven, notably the Life Assurance Act 1774 which renders such contracts illegal, and the Marine Insurance Act 1906, s.4 which renders such contracts void.
A notorious abuse of insurance occurred in Pennsylvania in the late 1800s. Six men obtained an insurance policy on an elderly man, who continued to live longer than expected. Understandably, the premiums on an old man were high. Frustrated by the high costs and impatient for the payoff, the men murdered the old man, a crime for which they were hanged.The ability of a person to buy insurance on the life of a stranger would create a moral hazard wherein the person owning the insurance policy stands to profit from the death of the insured.
Establishing the principle of insurable interest as a requirement for purchasing insurance distanced the insurance from gambling, thereby leading to better reputation and greater acceptance of the insurance industry. The United Kingdom provided leadership by passing legislation that prohibited insurance contracts if no insurable interest could be proven, notably the Life Assurance Act 1774 which renders such contracts illegal, and the Marine Insurance Act 1906, s.4 which renders such contracts void.
interest of Insurable
Insurable interest exists when an insured person derives a financial or other kind of benefit from the continuous existence of the insured object. A person has an insurable interest in something when loss-of or damage-to that thing would cause the person to suffer a financial loss or other kind of loss.
For example, if the house you own is damaged by fire, the value of your house has been reduced, and whether you pay to have the house rebuilt or sell it at a reduced price, you have suffered a financial loss resulting from the fire. By contrast, if your neighbor's house, which you do not own, is damaged by fire, you may feel sympathy for your neighbor and you may be emotionally upset, but you have not suffered a financial loss from the fire. You have an insurable interest in your own house, but in this example you do not have an insurable interest in your neighbor's house.I
For example, if the house you own is damaged by fire, the value of your house has been reduced, and whether you pay to have the house rebuilt or sell it at a reduced price, you have suffered a financial loss resulting from the fire. By contrast, if your neighbor's house, which you do not own, is damaged by fire, you may feel sympathy for your neighbor and you may be emotionally upset, but you have not suffered a financial loss from the fire. You have an insurable interest in your own house, but in this example you do not have an insurable interest in your neighbor's house.I
Parties to contract
There is a difference between the insured and the policy owner (policy holder), although the owner and the insured are often the same person. For example, if Joe buys a policy on his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joe's life, she is the owner and he is the insured. The policy owner is the guarantee and he or she will be the person who will pay for the policy. The insured is a participant in the contract, but not necessarily a party to it.
The beneficiary receives policy proceeds upon the insured's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or cash value borrowing.
In cases where the policy owner is not the insured (also referred to as the celui qui vit or CQV), insurance companies have sought to limit policy purchases to those with an "insurable interest" in the CQV. For life insurance policies, close family members and business partners will usually be found to have an insurable interest. The "insurable interest" requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company which sold a policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable in court for contributing to the wrongful death of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).
The beneficiary receives policy proceeds upon the insured's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or cash value borrowing.
In cases where the policy owner is not the insured (also referred to as the celui qui vit or CQV), insurance companies have sought to limit policy purchases to those with an "insurable interest" in the CQV. For life insurance policies, close family members and business partners will usually be found to have an insurable interest. The "insurable interest" requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company which sold a policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable in court for contributing to the wrongful death of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).
Life insurance
Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount at regular intervals or in lump sums. There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. In the United States, the predominant form simply specifies a lump sum to be paid on the insured's demise.
As with most insurance policies, life insurance is a contract between the insurer and the policy owner whereby a benefit is paid to the designated beneficiaries if an insured event occurs which is covered by the policy.
The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.
To be a life policy the insured event must be based upon the lives of the people named in the policy.
Insured events that may be covered include:
Serious illness
Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.
Life-based contracts tend to fall into two major categories:
Protection policies - designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
Investment policies - where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US anyway) are whole life, universal life and variable life policies.
As with most insurance policies, life insurance is a contract between the insurer and the policy owner whereby a benefit is paid to the designated beneficiaries if an insured event occurs which is covered by the policy.
The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.
To be a life policy the insured event must be based upon the lives of the people named in the policy.
Insured events that may be covered include:
Serious illness
Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.
Life-based contracts tend to fall into two major categories:
Protection policies - designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
Investment policies - where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US anyway) are whole life, universal life and variable life policies.
Type of insurance
There are several types of whole life insurance policies. defines six traditional forms: non-participating (aka "non par"), participating, indeterminate premium, economic, limited pay, and single premium.A newer type is known generally as interest sensitive whole life. Other jurisdictions may classify them differently, and not all companies offer all types. It should be noted that there are as many types of insurance policies as can be written in their contracts while staying within the law's guidelines.
History of insurance
All life insurance was originally term insurance. However, because term life insurance only pays a claim upon death within the stated term, a number of term insurance policy holders became upset over the idea that they could be paying premiums for 20 or 30 years and then wind up with nothing to show for it.citation needed
In response to market pressures, actuaries conceived of an insurance policy with level premium payments that were higher than traditional term insurance contracts. These contracts would offer a "cash value", which was designed to be a cash reserve that would build up against the known claim - the death benefit. These policies would also credit interest to the cash value account and upon maturity of the contract (usually at age 95 or 100), the cash value would equal the death benefit.
This produced a benefit to both the policy owner and the insurance company. By guaranteeing the death benefit, the policy owner was assured that insurance coverage would be in force when the insured died. The insurance company benefited because with every premium payment made, 30% is overcharge and pure profit, and thus the cost of insurance, is able to increase, while premiums remain the same.
In response to market pressures, actuaries conceived of an insurance policy with level premium payments that were higher than traditional term insurance contracts. These contracts would offer a "cash value", which was designed to be a cash reserve that would build up against the known claim - the death benefit. These policies would also credit interest to the cash value account and upon maturity of the contract (usually at age 95 or 100), the cash value would equal the death benefit.
This produced a benefit to both the policy owner and the insurance company. By guaranteeing the death benefit, the policy owner was assured that insurance coverage would be in force when the insured died. The insurance company benefited because with every premium payment made, 30% is overcharge and pure profit, and thus the cost of insurance, is able to increase, while premiums remain the same.
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