Law Summary
Definition of Insurance
- Insurance is a contract where one party indemnifies another against loss, damage, or liability from unknown or contingent events.
What May Be Insured
- Any contingent or unknown event damaging a person with insurable interest may be insured.
- Insurance on lottery tickets or chances in lotteries is prohibited.
- All types of insurance are subject to this Act unless otherwise specified.
Parties to the Contract
- The insurer is the party that indemnifies; the insured is the indemnified.
- Entities with a certificate of authority from the Insurance Commissioner may operate as insurers.
- Any person except a public enemy may be insured.
- Insurance by mortgagors payable to mortgagees is upon mortgagor's interest unless a new contract is made with the mortgagee.
Insurable Interest
- Defined broadly covering life, health, property interests, and legal obligations.
- Must exist at insurance inception and at loss occurrence.
- Expectant or contingent interests without valid contractual rights are not insurable.
- Sole object of insurance is indemnity; contracts without insurable interest are void.
Concealment and Representations
- Concealment is the failure to communicate material facts.
- Either party may rescind the contract for concealment or false representation.
- Duty to communicate material facts unless known to the other party or waived.
- Representations can be oral or written and interpreted like contractual terms.
- False material representations entitle rescission.
Insurance Policy
- Must be in writing, specifying parties, amount, premium, subject, interest, risks, and period.
- Insurance applies to the insured's proper interest.
- Policies can be open, valued, or running.
- Premium payment acknowledgement in policy is conclusive evidence of payment.
- Agreements not to transfer claims post-loss are void.
Warranties
- Warranties can be express or implied relating to past, present or future.
- Express warranties must be part of the policy or a referenced document.
- Breach of material warranty entitles rescission.
- Breach without fraud exonerates insurer from liability from the time of breach.
Premium
- Premium payable as soon as insured object is exposed to peril.
- Refund of premium allowed if no exposure or on surrender of policy for unexpired time.
- No premium return if peril insured has existed and insurer was liable.
- Overinsurance results in a ratable premium return.
Loss and Liability
- Insurer liable if peril insured was proximate cause.
- Not liable if loss caused by insured willful act.
- Insurer exonerated for losses after improper deviation in marine insurance.
Notice of Loss and Proof
- Prompt notice required; defects in notice waived if insurer does not object timely.
- Preliminary proof sufficient if best evidence available is given.
Double Insurance
- Exists when several insurers cover the same subject and interest.
- Insured may claim from insurers in chosen order up to their respective liabilities.
- Credit for sums received and principles of contribution among insurers apply.
Reinsurance
- Contract where insurer insures against loss with a third party.
- All knowledge of original insured must be communicated to reinsurer.
- No interest for original insured in reinsurance contract.
Marine Insurance
- Insurance against navigation-related risks of ship, cargo, freightage, or profits.
- Owner, charterer, and carrier have insurable interests subject to specific rules.
- Implied warranty of seaworthiness: ship must be fit for the intended voyage.
- Proper deviation defined; improper deviation relieves insurer of liability.
- Loss defined as total or partial; abandonment allowed under specified conditions.
- Measure of indemnity based on valuation or actual value less depreciation.
Fire Insurance
- Change in insured property increasing risk without insurer consent allows rescission.
- Indemnity based on replacement cost unless policy states valuation.
- Valuation requires building examination and affects payment amount.
Life and Health Insurance
- Payable on death, survival period, or other contingencies.
- Policies may transfer by will or succession without insurable interest by transferee.
- Indemnity measured by sum fixed in policy.
- Policy provisions require grace period, incontestability clause, entire contract provision, misstatement of age adjustment, participation in surplus, loan options, and reinstatement rights.
Insurance Companies
- Insular Treasurer designated Insurance Commissioner ex officio.
- Insurance companies must have certificates of authority, subject to supervision.
- Annual financial examinations and filings required.
- Suspensions or revocations possible for unsound conditions or law violations.
- Foreign companies must file power of attorney and security deposits.
- Capital and reserve requirements set for both domestic and foreign companies.
- Annual statement and valuation filings required; publication of financial synopsis mandated.
Conduct by Non-Incorporated Persons
- Must have capital equivalent to corporations and obtain certificate of authority.
- Subject to same laws and supervision as corporations.
Agents
- Agents must secure certificate of authority prior to commission payments.
- Violations subject to fines and revocation of certificates.
- Rebate and commission splitting prohibitions.
Miscellaneous Provisions
- Unauthorized insurance activities punishable by fines and imprisonment.
- Insurance corporations governed by Corporation Law provisions unless inconsistent with this Act.
- Capitalization, investment, loan, and dividend restrictions imposed on domestic insurance corporations.
Final Provisions
- Repeals conflicting laws.
- Effectivity from July 1, 1915.