An insurance contract differs from most other contracts in that it requires the payment of premiums. The amount of the premium is determined by the nature and character of the risk and by how likely the risk is to occur. The premium increases as the chance of loss increases.
When the insured stops paying premiums, an insurance contract is said to lapse. This does not mean, however, that the contract will terminate automatically on the date that the last premium is paid. It will also not lapse automatically if the insured makes a delayed payment. Most contracts allow for a grace period of 30 or 31 days in which the insured may make payments to keep the policy in force. Beyond this period, however, the insurance contract will lapse and the policy will terminate.
Under certain conditions, the insurer is given a legal right to forfeit, or cancel, an insurance policy. Proof of a forfeiture permits cancellation either before a loss or at the time the claim is made on a policy. Among grounds permitting forfeiture are the breach of warranty and the concealment or misrepresentation of a material fact by the insured. Neither the insured nor the insurer may deny statements or acts previously made or committed that might affect the validity of the policy.
A warranty is an insured's promise to abide by restrictions, especially those written into a policy. An insurance company has the burden of proof in establishing that a warranty has been breached (broken) by the insured. If this is proved, the insurer may cancel the contract or refuse payment of loss to the insured or to a beneficiary.
Fraudulent concealment is any intentional withholding of a fact that would be of material importance to the insurer's decision to issue a policy. The applicant need only give answers to questions asked. However, the insured may not conceal facts that would be material in acceptance of a risk.
If an insured party gives false answers, or misrepresentations, to questions in an insurance application that materially affect the risk undertaken by the insurer, the contract is voidable by the insurer.
An insurer may not deny acts, statements, or promises that are relevant and material to the validity of an insurance contract. This bar to denial is called an estoppel. When an insurer has given up the right to cancel a policy under certain circumstances by granting the insured a special dispensation, the insurer cannot deny that dispensation when the chance to cancel or deny liability arises.
When the insurance company gives up one of its rights in order to help the insured, the company has made a waiver. A waiver, which is actually a form of estoppel, can be implied from the conduct of the insurance company. For example, when an insurance company cashes the check of a lapsed policy, it has, in effect, given up or waived its right to cancel that policy. Once a right has been waived, the insurer may not later deny its waiver.
Exercise 1. Comprehension questions:
1. What are the functions of insurance?
2. Identify the parties to insurance.
3. What is necessary to have mutual assent of the parties?
4. What are the types of insurance?
5. Explain what an insurable interest means.
6. In what case may the insurer cancel the contract or refuse payment of loss?
7. How can misrepresentation or false answers affect the contract?
8. When does an insurance contract lapse?
9. What does the amount of the premium depend on?
Exercise 2. Find in the text English equivalents to the following:
Сокрытие; временный страховой документ; страхование нескольких видов (например, имущества) по одному договору; лишение права возражения; гарантировать возмещение вреда; страховой интерес; страховая премия; застрахованный; страховщик; введение в заблуждение; страхование от вреда, наступающего без вины страхователя; страховая премия; поручитель-гарант; страховщик; освобождение от обязательств; освобождение от уплаты страховых взносов; поручительство.
Exercise 3. Consult recommended dictionaries and give words or phrases to the following definitions:
Страхование имущества; страхование ответственности за причиненный вред; страхование ответственности по договору; страхование предпринимательского риска; договор личного страхования; договор имущественного страхования; генеральный полис; правила страхования; страховая сумма; страховая стоимость имущества; страховой риск; страховая премия; страховые взносы; замена выгодоприобретателя.
Exercise 4. Be ready to talk on one of the following topics:
1. Identify the contractual elements that are necessary to make an insurance agreement binding.
2. Contrast the requirements for an insurable interest for life insurance with that for property insurance.
3. Determine whether a beneficiary may or may not receive benefits under a life insurance policy involving exemptions from risks.
4. List the steps to be followed in applying for, obtaining, and maintaining an insurance policy.
5. Judge whether an insurance policy can be canceled in given situations.
Exercise 5. Make up your own dialog on the case: In Home Insurance Co. v. Bishop, the court concluded that the insurance company was "substituted for the mortgagee and in legal effect has purchased its rights." After the debtor destroyed the insured automobile, the court authorized the insurance company of the creditor to be subrogated to the creditor-insured's rights on the buyer's note.
Unit 16
Security Devices
Способы обеспечения обязательств
Исполнение обязательств (глава 23 ГК РФ) может обеспечиваться неустойкой, залогом, удержанием имущества должника, поручительством, банковской гарантией, задатком и другими способами, предусмотренными законом или договором.
List of key terms and word combinations:
– acceleration – сокращение срока платежа для приобретения права (как санкция за неуплату в срок процента или части долга)
– assume the mortgage – принимать на себя залог
– attachment – скрепление (печатью, подписью); наступление (ответственности, риска, обязанности и т. д.); судебный приказ о наложении ареста на имущество
– balloon-payment mortgage – большой одноразовый платеж в погашение долга
– collateral – обеспечение; залог; дополнительное обеспечение
– conventional mortgage – обычная ипотека (не гарантированная государством)
– deed of trust – документ об учреждении доверительной собственности
– flexible-rate mortgage – ипотека с плавающей процентной ставкой
– foreclosure – лишение права выкупа заложенного имущества, переход заложенной недвижимости в собственность залогодержателя
– graduated-payment mortgage – закладная с возрастающей суммой выплат в счет погашения (первые взносы невелики и возрастают по согласованной схеме)
– mortgage – ипотечный залог mortgagee – кредитор по закладной (получающий права на заложенное имущество)
– mortgagor – должник по ипотечному залогу, залогодатель
– perfected – законченный, завершенный, окончательный, оформленный
– purchase money security interest – обеспечительный интерес при покупке в рассрочку
– secured loan – обеспеченная ссуда
– secured party – обеспеченная; гарантированная сторона
– security agreement – соглашение о предоставлении обеспечения
– security interest – обеспечительный интерес; право кредитора вступить во владение собственностью, предложенной в качестве обеспечения; проценты, обеспеченные товарными документами
– subject to the mortgage – являющийся предметом залога
– unsecured loan – необеспеченный заем
– variable-rate mortgage – закладная с изменяющейся ставкой процента
Security is the assurance that a creditor will be paid back for any money loaned or for credit extended to a debtor. Debts are said to be secured when creditors know that somehow they will be able to recover their money. Lenders of money and people who extend credit often require a security device to protect their financial interests. A security device is a way for creditors to get their money back in case the borrower or debtor does not pay. A secured loan is one in which creditors have something of value, usually called collateral, from which they can be paid if the debtor does not pay. In general, if creditors aren't paid the debt owed to them, they can legally gain possession of the collateral. The collateral is then sold, and the money is used to pay the debt. The right to use the collateral to recover a debt is called the creditor's security interest. If creditors lend money but do not require collateral, they have made an unsecured loan. An unsecured loan is one in which creditors have nothing of value that they can repossess and sell to recover the money owed to them by the debtor. Both real property and personal property can be used to secure a debt.