Creating Insurance Contracts

• Author: Denis Boivin
• Pages: 65-65

The subject of Part Two of this book is the creation of an enforceable

insurance contract. Each of the next four chapters examines a different

aspect of this topic: the need for an insurable interest (Chapter 4); the

need for adequate disclosure (Chapter 5); the impact of intermediaries

(Chapter 6); and the particularities of insurance contract formation

(Chapter 7). In essence, this part will outline the conditions under

which insurers are contractually bound to their policyholders. The

focus here is not on the extent of their contractual obligations (the sub-

ject matter of Part Three), but on the very existence of those obligations.

The cases reviewed in Chapters 4 through 7 have one common

thread. In each example, the insurance provider contests the validity of

the underlying contract. The arguments vary, but their impact on the

insured is invariably severe. When insurance contracts are declared

invalid, the “insureds” lose their status as consumers of insurance and

therefore also lose all rights and privileges under the contract. They are

entitled to no more than a refund of their premiums, and in the case of

an insured who entered into a contract fraudulently, these premiums

may also be lost. This holds true, even if the premiums were paid,

month after month, with the reasonable expectation that the contracts

were enforceable. Accordingly, it is imperative, from the insured’s per-

spective, that the prerequisites discussed in Part Two be part of the

insurance contract. Without them, the peace of mind provided by

insurance is an illusion.

65

CREATING INSURANCE

CONTRACTS

part two