Insurance Law and Practice
The Insurance Law and Practice domain tests the legal framework that turns an insurance bargain into enforceable rights and defences. I10-style questions are usually scenario-based: identify the legal issue, apply the correct rule, and state the remedy.
Formation and insurable interest
An insurance contract needs offer, acceptance, consideration (premium and promise to pay claims), intention to create legal relations and capacity. A cover note can be a temporary contract. For indemnity insurance the insured must have an insurable interest when the loss occurs; for life policies the Life Assurance Act 1774 requires interest at inception. Without interest, the contract is not enforceable as indemnity.
Fair presentation
Consumers are protected by CIDRA 2012: the insurer must ask clear questions and the remedy for a qualifying misrepresentation is proportionate. Commercial insureds owe the Insurance Act 2015 duty of fair presentation: disclose material circumstances, conduct a reasonable search, and present information clearly. Knowledge includes senior management and those arranging cover. Remedies depend on culpability: proportionate reduction or different terms if non-deliberate or reckless; avoidance and premium retention if deliberate or reckless.
Policy terms and causation
Warranties are promises; under IA 2015 s.10 breach suspends cover during breach rather than automatically discharging the insurer. Section 11 prevents reliance on a term irrelevant to the actual loss. Conditions precedent to liability must be met before a claim is payable. Proximate cause determines whether a loss falls within cover; intervening causes can break the chain.
Indemnity, subrogation and contribution
Indemnity restores the insured to the pre-loss financial position, subject to sums insured, excess and average. Subrogation lets the insurer pursue third parties after payment, but only up to the amount paid and without prejudicing the insured. Contribution is equitable recovery between insurers covering the same insured, interest and risk.
Worked example
A commercial insured fails to disclose a previous declined proposal. The insurer would have charged £15,000 premium instead of £10,000. The non-disclosure is material and breaches the duty of fair presentation. If the breach is not deliberate or reckless, the court may reduce the £100,000 claim proportionately: £100,000 × 10/15 = £66,667. If deliberate or reckless, the insurer may avoid the policy and retain the premium.
Traps that cost marks
Do not apply consumer CIDRA rules to a commercial risk. Do not say breach of warranty automatically avoids the policy after the 2015 Act. Do not treat subrogation as a source of extra damages beyond indemnity. Do not confuse contribution with subrogation. Always check whether a policy term is a condition precedent to liability.