CPCU 530 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Insurable interest

A legal or economic stake in the subject matter such that loss causes detriment; required at inception for life insurance and at time of loss for property insurance.

Utmost good faith

A heightened duty of honesty and disclosure on both insurer and insured; breach through material misrepresentation or concealment can allow rescission or denial of coverage.

Aleatory contract

A contract where the parties' performances are unequal and contingent on uncertain events, so premiums and potential claim payments need not be equivalent.

Contract of adhesion

A standardized contract drafted by one party and offered take-it-or-leave-it; ambiguity is generally construed against the drafter, the insurer.

Warranty

A policy condition the insured promises to fulfill; a material breach can defeat coverage, though many states require materiality or prejudice for rescission.

Representation

A statement of fact made by the applicant before contract formation; it must be substantially true and material to affect coverage.

Concealment

Intentional withholding of a material fact from the insurer; if proven, it can support rescission or a coverage defense.

Waiver

The voluntary relinquishment of a known right; an insurer that pays a claim despite a known defense may waive that defense going forward.

Estoppel

A bar preventing a party from asserting a right when its earlier conduct induced another's detrimental reliance, even absent a formal waiver.

Condition precedent

An event that must occur before the insurer's duty to pay arises, such as prompt notice, proof of loss, or cooperation with investigation.

Void versus voidable

A void contract is unenforceable from inception; a voidable contract remains valid until the injured party elects to rescind it.

Contra proferentem

The interpretive rule that ambiguous policy language is construed against the party who drafted it, typically the insurer, favoring coverage.

Reasonable expectations doctrine

A judicial approach allowing coverage where the insured's objectively reasonable expectations of coverage exist despite unambiguous policy language; adoption varies by state.

Indemnity principle

Recovery is limited to the actual loss suffered, preventing profit from insurance; valued policies and replacement cost coverage are recognized exceptions.

Subrogation

The insurer's right, after paying a claim, to pursue the responsible third party in the insured's name to recover the loss and avoid double recovery.

Contribution

The allocation of a loss among multiple insurers covering the same interest, governed by other insurance clauses such as pro rata, excess, or escape provisions.

Duty to defend

An insurer's obligation to provide a legal defense, broader than the duty to indemnify, triggered when any claim is potentially covered.

Reservation of rights

A letter preserving the insurer's coverage defenses while it defends under a reservation, avoiding waiver of those defenses.

Occurrence trigger

Coverage is triggered by injury or damage occurring during the policy period, regardless of when the claim is later reported.

Claims-made trigger

Coverage responds to claims first made and reported during the policy period, often with a retroactive date limiting prior acts.

Notice-prejudice rule

Many jurisdictions bar an insurer from denying coverage for late notice unless the delay materially prejudiced the insurer's investigation or defense.

Statute of limitations

A statutory deadline for filing suit, running from a defined event such as the loss or discovery of injury, after which the claim is barred.

Statute of repose

An outer time limit that bars claims after a fixed period regardless of when the injury was discovered, common in construction and product liability.

Respondeat superior

Vicarious liability making an employer responsible for torts committed by employees acting within the scope of employment.

Apparent authority

Authority arising when a principal's manifestations lead a third party to reasonably believe an agent has power to bind the principal.

Negligence elements

Duty, breach of that duty, actual cause, proximate cause, and damages; all must be proven for a liability claim to succeed.

Strict liability

Liability without proof of fault, applied to ultrahazardous activities and defective products, expanding potential liability exposure for insureds.

Punitive damages insurability

Punitive awards for an insured's own willful misconduct are generally uninsurable; vicarious punitive liability may be insurable in some states.

Ejusdem generis

A canon of construction limiting general words following an enumerated list to items of the same kind as those listed.

Expressio unius

The interpretive canon that expressly naming one item excludes others, supporting a narrow reading of enumerated exclusions or coverages.

Unfair claim practices

Statutorily prohibited claims conduct such as unreasonable delay, failure to investigate, or denial without a reasonable basis, enforceable by regulators and private actions.

Bad faith

An insurer's unreasonable denial or handling of a claim; remedies can include contract damages, consequential damages, and in some states punitive damages.