Insurance Contract Law and Policy Provisions
Contract Basics
An insurance policy is a contract requiring offer, acceptance, consideration, and legal purpose. It has special legal characteristics: it is a contract of adhesion (written by the insurer, interpreted against the drafter), a contract of utmost good faith, and generally aleatory (values exchanged are unequal and depend on chance).
Key Doctrines
Representations are statements believed true to the best of the applicant's knowledge; misrepresentations void a contract only if material. Concealment is intentional silence about a material fact. Warranties are promises that must be literally true; conditions are duties that must be met for coverage to apply. Know the difference between a condition precedent (must occur before coverage) and a condition subsequent.
Policy Structure
Understand the declarations page, insuring agreement, conditions, exclusions, and definitions. Know endorsements (modify coverage) versus riders (usually add benefits in life/health). Recognize named insured, additional insured, and loss payee.
Traps
Questions often confuse waiver (voluntary surrender of a known right) with estoppel (prevention of asserting a right because another relied on conduct). Also watch for the entire contract clause and the incontestability clause timelines (commonly two years for life). Do not confuse subrogation with salvage.
Rule of Thumb
When policy language is ambiguous, courts generally rule in favor of the insured (contra proferentem), but exclusions are typically read narrowly against the insured only when clearly drafted.