Insurance Law
What the exam tests
Insurance Law tests contract formation, agency, misrepresentation and non-disclosure, breach, and the legal remedies that decide whether a policy responds.
Core rules
- Contract elements: offer, acceptance, consideration, capacity, legality, and intention to create legal relations.
- Agency: an agent can bind the principal within actual authority; apparent authority may bind where the principal represents authority; ratification can adopt an unauthorised act.
- Disclosure and misrepresentation: the insurer may avoid a policy for material non-disclosure or misrepresentation that induced the contract. Materiality is objective; inducement is causal.
- Void vs voidable: a void contract never existed; a voidable contract can be rescinded by the innocent party.
- Waiver and estoppel: an insurer that knowingly accepts late premiums may lose the right to deny cover.
Worked example
An applicant omits a previous cancer diagnosis on a life proposal. The insurer issues the policy at standard rates. Two years later the insured dies. If the insurer can show the diagnosis was material and that it would have declined or rated the policy, it may avoid the contract, subject to any incontestability clause. If the clause makes the policy incontestable after two years, the insurer must pay. The reasoning moves from materiality to inducement to the policy's incontestability provision.
Traps
- Calling every breach a repudiation.
- Assuming an agent's knowledge is always imputed to the insurer.
- Confusing rescission with damages.