Tell a friend:
 

13th Feburary 2010
Legal definitions of Insurance Law

Insurance law cannot be easily defined; it involves the study of laws related to insurance as well as the statutory requirements of insurance companies. An insurance contract is just like any basic contract, requiring all the elements of a contract to make it a legally binding agreement. There must be an offer, acceptance, consideration, capacity and intention to create legal relations.
According to the Insurance Act Cap 12.08 of the Revised Laws of Saint Lucia, 2001, Part 1 (4) any insurance company operating in St. Lucia must adhere to the local laws, whether or not their head office is based in this jurisdiction. In this article, we will briefly identify some of the common terms and phrases used in insurance law.
(1) Insurer: this is the insurance company selling the insurance. Insurers have various forms of insurance including life insurance, car insurance and home insurance. Some forms of insurance are compulsory such as car insurance, whereas others are not such as life insurance.
(2) Insured: the individual or company purchasing the insurance from the insurance company is called the insured.
(3) Premiums: the monthly or annual payments agreed by the parties to be paid towards the insurance policy, which are made by or on behalf of the policyholder(s).
(4) Subrogation: the insurance company of A, steps into their shoes and covers their loss suffered by B. In other words, the insurance company ensures that the rights and remedies of their insured are protected against any third party.
(5) Indemnity: the insurance company will compensate any loss suffered under their insurance policy that the insured suffered during the performance of the contract.
(6) The principle of utmost good faith: each party to the insurance contract are legally obligated to reveal all material facts and information which are relevant to their decision as to whether or not to enter this legally binding contract. For example, if an individual is about to purchase car insurance, he or she must indicate how many accidents, if any, he or she has been involved in, with details of the accident(s) to the insurance company.
 
 
(7) Cover note: before issuing the insurance policy in writing, the insurer may issue a cover note which is a temporary contract between the parties.
(8) Insurable interest: interest financial or otherwise in the subject matter of the contract, which provides the insured with the right to enforce the contract.
(9) Third party insurance: this is a common term used in car insurance which means that coverage is extended to an individual other than the proposed insured.
(10) Insurance policy: the agreement between the two parties (the insured and the insurer) issued by the insurer which sets out the terms and conditions of the contract between the parties.
Insurance is a form of risk management. The insurance companies are offering protection against potential loss. Like most relationships, entering such a contractual agreement should be based on mutual respect and trust. The insurance companies have certain expectations of their insured; for example, they expect their policyholders to be truthful in the information that they supplied and similarly the insured expect that if anything goes wrong that the insurance company will be able to assist with some immediacy. Therefore, if the insured have not been truthful, it means that the insurance contract cannot be enforced later on.
It is important for consumers to read the insurance policy carefully and query clauses in the policy that they do not understand, or need clarified.
Ms. Trudy O. Glasgow is a practising attorney at the law firm Gordon, Gordon & Co., (and has also taught law at University level in the UK)*.
This column is for general use only, for advice specifically for your case, please see your lawyer.

Next week: The role of insurance

Discuss Story
 
Top Stories  
 
 
   
Developed