Contract Law and Policy Structure
Formation
A contract needs offer, acceptance, consideration, legal purpose and competent parties. In insurance, the application is usually the offer, the policy the acceptance, and consideration runs both ways - premium for the insurer's promise to pay. A binder is a temporary contract that provides coverage pending policy issuance.
How insurance contracts differ
They are aleatory (unequal exchange), unilateral (only the insurer makes an enforceable promise; the insured's duties are conditions), conditional (benefits depend on compliance with conditions), personal (it follows the insured, not the property) and contracts of adhesion (drafted by the insurer, so ambiguity is construed against the drafter - contra proferentem).
Structure and interpretation
Order of reading: declarations, insuring agreement, conditions, exclusions, definitions, endorsements. Endorsements amend the base form; handwritten terms beat typed, typed beat preprinted. Waiver is the voluntary surrender of a known right; estoppel prevents a party from asserting a right after another has relied to their detriment - but only acts of someone with actual or apparent authority bind the insurer. Agency authority may be express, implied or apparent.
Traps
- Confusing a representation (a statement believed true) with a warranty (a promise that must be literally true).
- Assuming a misrepresentation must be intentional to void coverage - materiality controls, not intent.
- Ignoring that notice and proof-of-loss requirements are conditions precedent to recovery.
Rule of thumb: ambiguity is resolved against the insurer, but plain language controls even when it produces a harsh result. Coverage is not created by an agent's unauthorized promise.