Welcome to Assignment 5
Insurance contracts are NOT like regular business contracts. They have unique characteristics — they are contracts of adhesion, utmost good faith, and indemnity. This assignment covers how insurance contracts are special, how they form, the critical doctrines of insurable interest and subrogation, how representations and warranties work, and how insurers can lose their rights through waiver, estoppel, and election.
Exam Alert!
Key exam topics: adhesion = ambiguity favors insured, waiver vs. estoppel vs. election, representations vs. warranties, insurable interest timing (property = at loss, life = at inception), and reservation of rights letter vs. nonwaiver agreement.
What You Will Learn
1. The six special characteristics that make insurance contracts unique
2. How insurance contracts form — offer, acceptance, binders, and oral contracts
3. Insurable interest, indemnity principle, subrogation, and third-party interests
4. Representations vs. warranties and the incontestable clause
5. Waiver, estoppel, election — and how insurers protect themselves
6. Reservation of rights letters and nonwaiver agreements
Assignment Parts
Insurance Contract Characteristics & Formation
Conditional, fortuitous, utmost good faith, adhesion, indemnity, nontransferable. Plus contract formation: binders, oral contracts, and delivery.
Insurable Interest, Subrogation & Warranties
Insurable interest timing, indemnity principle, subrogation, third-party interests, representations vs. warranties, and the incontestable clause.
Waiver, Estoppel & Election
Waiver, estoppel, election, choosing the right doctrine, reservation of rights letters, nonwaiver agreements, and insurer protection tools.
Quick Reference Summary
Contract of Adhesion
Insurer writes it, insured takes it or leaves it. Ambiguity = insured wins.
Insurable Interest Timing
Property: at time of loss. Life: at time policy is taken out.
Subrogation
Insurer pays claim, then "steps into your shoes" to recover from the wrongdoer.
Representations vs. Warranties
Representations = substantial truth. Warranties = strict compliance. Huge exam topic.
Waiver vs. Estoppel
Waiver = intentional giving up of right. Estoppel = prevented from contradicting past conduct.
Reservation of Rights
Unilateral letter preserving insurer's right to deny coverage during investigation.