Insurance policies

1. Policy
Conditions,Endorsement,
Warranties and Clauses
uses in Miscellaneous
Insurance Policy
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2. POLICIES
 a policy issued to clear the agreement between
insured and insurer
 Policy contains all details of cover, period of
cover, exceptions, conditions, the premium and
other relevant information
 It is evidence of contract.

3.  The Cover Note is a binding contract of insurance
 Purpose is to provide immediate insurance cover
 Cover usually for 30 days
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4.  Document spell out the period of cover, property
covered, type of risk insured against and the
agreed premium
 Subject to company’s usual terms and conditions
 The same principles of insurance applies for the
interim cover
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5.  Where insurance is compulsory by law, the
certificate is issued to prove that a policy is in
force
 E.g motor insurance

6.  There are two parts to the policy :
- policy jacket
- policy schedule
 Policies will often comprise of :
- definitions
- conditions
- clauses/warranties
- exclusions/exceptions
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7. ◦ Words used in the policy have to be defined
at the beginning of the policy and are
considered to have the same meaning
throughout the policy document
◦ List of typical words/phrases defined eg
 you/your/policyholder
 Excess
 We/us/our
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8.  As a general rule, the basic structure of all general
insurance policies is the same, incorporating the
following:
◦ Heading
◦ Recital clause
◦ Signature
◦ Operative clauses
◦ Exceptions
◦ Conditions
◦ Policy schedule
◦ Information and facilities.

9.  Heading
◦ each policy has a heading which includes the name of
the insurer and, in some cases, the address and
company logo
• Recital clause
- sets the scene for what follows in the policy by
referring to the two parties, insured and insurer, coming
together to form the contract by which the insurer, in
return for the premium, undertakes to indemnify the
policyholder in accordance with the cover detailed in the
policy.

10.  Signature
- under the recital clause, will be the signature of
an official from the insurer. Naturally the
signature is pre printed on the document
 Operative Clause
◦ Describe the scope of cover in detail. They are the heart
of the policy, specifying what is covered by the policy.
◦ They may be just one clause outlining cover or more
commonly, a number of such clauses, each dealing with
a different aspect of the insurance and often containing
exceptions that are specific to each individual operative
clause

11.  Exceptions
- Insurance policies of all kinds contain a
number of general exclusions, or exceptions,
which apply to the entire contract and therefore
to all sections of the policy in addition to those
specifically stated in the operative clauses.
 Conditions
- conditions are essentially of two types.
i. implied condition
ii. Express conditions

12.  Conditions
i. implied condition
- the insured must act as if uninsured and not use the
insurance as an alternative to acting prudently
- the insured may be required to advise the appropriated
authorities, depending upon the circumstances
- the insured must take reasonable action (eg. Attempt to
extinguish a fire) but not if this endangers the insured
- the insured must not hinder the insurers in their
investigation of a claim
Implied conditions exist whether or not they appear in
the policy. In practice, many are stated in order to clarify
matters for the insured

13.  Conditions
ii. Express conditions
- Those stated in the policy
 Policy Schedule
This is the place where the policy is made personal and
specific to the insured.
Within the schedule are the variable details of the
policy:
- insured’s name; insured’s address; policy period;
premium ; details of the subject matter; sum insured or
limit of liability; territorial limits; policy number; reference
to special exclusions, conditions or aspects of cover and
operative sections of the policy.

14.  Information and facilities
increasingly common for policies to provide
information on a number of topics, particularly
where booklet policies have been developed. They
may include some or all of the following :
i. Customer service standards statement
- the details what the insured may expect in respect of the
service provided, perhaps in terms of courtesy and response
times.
ii. Complaints procedures
- reference to internal procedures by encouraging
policyholders to write to a nominated person within the
insurer’s organization in the first instance. If matters are still
unresolved to the satisfaction of the insured, reference can be
made to Insurance Ombudsman
i.

15. iii. Claims information
- Common to have a section advising the policyholder that
to do in the event of claim. Usually also include a claims
help- line number.

16. ◦ A Warranty is defined as an undertaking
by the insured that a certain state of
affairs will or will not be continued during
the duration of the policy
◦ Non-compliance of these warranties that
increase the damage allows an insurer
to avoid a claim.
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17. De Hahn v Hartley (1786) 1 Term Rep 343
at pp 345 and 346), Lord Mansfield described a
warranty as :
“A warranty in a policy of insurance is a condition
or a contingency and unless that can be
performed, there is no contract. It is perfectly
immaterial for what purpose a warranty is
introduced, but, being inserted, the contract does not
exist unless it be literally complied with.
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18.  Breach of Warranty
 non compliance with a warranty constitutes breach of
warranty and the insurer is discharged from liability under
the policies as from the date of the breach.
 the contract is voidable at the option of the insurer from the
date of the breach.
 the insurer is still liable for insured losses occurring before
the breach.
 Repair of the breach does not reinstate the liability of the
insurer
 If the warranty relates to past or present facts, rather than
performance, the insurer is able to repudiate to contract ab
initio (from the beginning) since the breach exists from the
start of the contract
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19.  Express warranties
 Specified in the policy
 Always express warranties in general insurance.
 Eg. Of such warranties:
Fire insurance warranties: that all oily rags are placed in metal
receptacles and remove, daily, from the building; that not more than
a specified amount of paraffin is kept on the insured’s premises at
any one time
Theft insurance warranties: that premises are not left unoccupied at
night; that certain types of approved locks are fitted.
 non compliance with the express warranties may be
excused by insurers if they have prior notification and if
required, an additional premium is paid.
However, insurers will have the right to avoid the whole
contract from the date of breach.
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20.  Implied warranties
 Warranty which does not appear in the policy but which is
understood by both parties to be automatically applicable
to the contract of insurance.
 Implied warranties are only found in marine insurance e.g
of such warranty is that the vessel insured is seaworthy
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21.  Example of warranties
◦ The intruder alarm system has a
maintenance agreement in force
◦ For flood risk, it could be a warranty that
stocks of goods are kept above a certain
height off the floor
◦ Premium warranty that requires the
premium to be paid within a certain time
frame
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22. ◦ These are risks which the insurers do
not wish to insure
◦ Usually TWO types of Exclusions
General or Specific
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23.  General exclusions
◦ Claims arising out of nuclear and
radioactive contamination
◦ Political risks
◦ War risks
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24.  These are risks that should be insured
under the more specific policies
eg the burglary policy will not pick up
losses arising from theft committed by
own employees
 There are risks that insurer is prepared
to insure at an additional premium eg
providing full theft cover in a burglary
policy
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25.  Some risks that the insurer is not willing to insure
at all eg any claims against public policies like
fines and penalties
 Insurers will not allow backdating of cover and will
exclude any losses prior to commencement of risk
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26.  Conditions that are printed on the policy are
known as expressed conditions while those not
printed are known as implied conditions.
 They may be divided into:
 Conditions precedent to contract
 Conditions precedent to liability
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27.  Conditions precedent to contract
◦ These condition must be fulfilled PRIOR to the formation
of the contract itself.
◦ They may also be ongoing conditions
◦ The implied condition (insurable interest, UGF) are the
conditions precedent to the contract.
◦ If such conditions are not complied with, there is doubt
as to the validity of the entire contract.
◦ E.g if there is no insurable interest there can be no
effective insurance contract. Means that it is void.

28.  Conditions precedent to contract
◦ Difference between void and voidable?
 Voidable – a breach of condition will render the policy be voidable
at the option of insurer.
 void – no insurable interest, a fundamental mistake or an illegal
contract
• Conditions precedent to liability
- Must be complied with if there is to be a valid claim.
- Generally these are the conditions often listed in a policy
as the “claim conditions”.
- If the condition is not observed, insurer may avoid liability
for a particular loss, but they may not repudiate the
contract as a whole.
- If a subsequent loss occur, the insurers must pay, provided
that the insured complies with th condition in this instance

29. In common law, the Insured has a duty to
read the policy. However, in Gaunt v John
Hancock Mutual Life Ins Co:
‘ A man must indeed read what he has
signed and he is charged if he does not,
but insurers who seek to impose upon
words of common speech an esoteric
significance intelligible only to their craft,
must bear the burden of any resulting
confusion’
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30. Application of Contra Proferentem Rules
 Contract wordings – drafted by Insurer
 Policyholders – no control/do not draft nor
negotiate the policy provisions
 In practice, the Insured only receives policy
document after risk has been accepted
 Any ambiguity will be construed against the
Insurer
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