Chapter (3)

Legal Aspects of InsuranceINSU 209 Chapter (5) Duties Of Insurer And Insured Muneera Salem Sahari

Outline Introduction Duties of the insured Duties of the insurer Examples Conclusion

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Duties Of The Insured

Obligation To Pay PremiumsRequirement Of Notice Of LossNotice Of Loss And Proof Of LossRequirement Of Cooperation By The InsuredMisstatements By The Insured Collusion Between The Insured And Claimant Keep Your Information Current

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Obligation To Pay Premiums The policyholder's obligation to pay policy premiums is fundamental to the contract of insurance. Courts generally recognize that payment of the premium is the essence of the insurance contract and thus is essential to the enforcement of the insurance agreement. The obligation to pay premiums, however, may itself be subject to certain terms and conditions. In particular, insurance may be procured on credit or procured with a promise to pay the premium. In such circumstances, coverage may exist even though actual payment has not been received.

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Requirement Of Notice Of Loss: The purpose of an insurance policy provision requiring a timely notice of loss is not merely to inform the insurer that the accident has in fact occurred. Rather, it also provides the insurer with an opportunity to investigate the claim and determine its rights and liabilities in the action. Policyholder must therefore give timely notice of a loss or claim by providing sufficient information to appraise the insurer of the nature of the loss or claim.

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Notice Of Loss And Proof Of Loss Written notice of injury or of sickness upon which claim may be based must be given to the company within twenty days after the occurrence or commencement of any loss for which benefit arising out of each such injury or sickness may be claimed, or as soon thereafter as is reasonably possible. Written proof of loss of time on account of disability or of hospital confinement for which claim is made must be furnished to the company within ninety days after the termination of the period for which claim is made. Written proof of any other loss on which claim may be based must be furnished to the company not later than ninety days after the date of such loss.

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Requirement Of Cooperation By The Insured Liability insurance policies generally contain clauses requiring the insured to cooperate with the insurer in the conduct of the action by assisting settlement efforts, attending hearings and trials, and securing and giving needed evidence. The purpose of these cooperation clauses is to protect the insurer in its defense of the insured by obligating the insured not to deliberately or intentionally take any action which would adversely affect the insurers settlement or other handling of the claim.

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Misstatements By The Insured (Application honesty) Misstatements or misrepresentation can void a policy, especially if company can show it would not have issued policy if it had known the facts.

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Keep down exposure to riskIf insurance companies discover youve been behaving recklessly, in a way that could increase your chances of a claim, theyll consider discontinuing your insurance coverage.

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Collusion between the insured and claimant Every insurer has at some point faced a situation in which it knows or suspects that its insured has collaborated with a third-party claimant in order to influence the availability of insurance coverage for the claims against it. While such conduct may seem wholly improper to the insurer, the reality is that the law tolerates a certain degree of collaboration, particularly in cases where the insurer has refused to defend

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Keep your information current If you move, change your beneficiaries, or you no longer own the property that you had insured, make sure you let your insurance provider know.

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Duties Of The Insurer

Duty to defend the insuredDuty to gain the insureds cooperationThe insurers duty of good faith and fair dealingThe duty to settle claims and the effect of failure to settlePrivacy Protection Pay BenefitsRisk AssessmentReserves for Policy

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Duty to defend the insured A term used to describe an insurer's obligation to provide an insured with defense to claims made under a liability insurance policy. Therefore, the duty to defend may exist even where coverage is in doubt and ultimately does not apply. Implicit in this rule is the principle that an insurer's duty to defend an insured is broader than its duty to indemnify. Moreover, an insurer may owe a duty to defend its insured against a claim in which ultimately no damages are awarded, and any doubt as to whether the facts support a duty to defend is usually resolved in the insured's favor.

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Duty to gain the insureds cooperation The issue of how much information can or should be shared among an insurer, its insured, the relationship between an insurance company and policyholder must be a partnership. Each party must be able to rely on one another and abide by the guidelines of their end of the agreement, regardless of whether they legally have to or not.

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The insurers duty of good faith and fair dealing Part and parcel of this obligation of good faith and fair dealing is the duty to act both promptly and fairly when investigating, assessing and negotiating the settlement of claims made by and against the insured. As outlined in the case law, during this process, insurers are bound to afford the insureds interests priority equal to their own. Generally, the insurer owes a duty to deal fairly and in good faith with its insureds; this duty emanates from the special relationship which exists between the parties, not necessarily from the terms of the contract.

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The Duty To Settle Claims And The Effect Of Failure To Settle insurers should be careful to make settlement offers based on a realistic evaluation of the covered exposure, no matter how the offer is packaged or described. Where the covered damages alone realistically could exceed policy limits, an insurer would be well-advised to settle the case, even if the settlement includes non-covered damages.

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Privacy Protection: In order to protect your privacy, insurance companies have to abide by privacy and HIPAA regulations. Therefore, they have to keep and give out your information in accordance with strict rules for your protection. In case you want someone else to have access to your information, that person may be required to have a power of attorney or written proof of authorization on file, according to whatevers dictated by the privacy guidelines.

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Pay Benefits: Once an insurable accident happens and the damages have been reviewed, if its found that the claim qualifies based on the benefits, time periods and exclusions given in your policy, your insurance provider has to pay you (beneficiaries too, if applicable) within the financial limitations of your policy. Remember that your insurer isnt liable for the deductible of your policy and that they have the option of paying only the replacement value or actual value, based on the type of coverage you have. Also if you have a life insurance policy with cash values, your benefits may decrease if you have any outstanding loans.

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Risk Assessment: Underwriters are hired by insurance companies to figure out the amount of risk that each potential insured person presents and to charge a premium in accordance to that. If they dont do this then they risk having more claims than premiums and not being able to hold up there end of the bargain for policy holders.

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Reserves for Policy: Insurance companies have to set aside a certain amount of their income for policy reserves. Policy reserves mirror the potential amount of claims theyll be required to pay. Because the money is in reserves, it ensures theyll be able to pay it out.

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Any question?!

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Thank you for your attention

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