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Question 1
What is the principle of indemnity in insurance?
Answer: The principle of indemnity states that insurance should restore the insured to the same financial position they were in before the loss, but no better. It prevents the insured from profiting from a loss.
Question 2
What is insurable interest, and when must it exist for property insurance?
Answer: Insurable interest means the policyholder would suffer a direct financial loss if the insured property were damaged or destroyed. For property insurance, insurable interest must exist at the time of loss.
Question 3
What is the doctrine of subrogation?
Answer: Subrogation allows the insurer, after paying a claim, to step into the insured's shoes and pursue legal action against the negligent third party responsible for the loss. This prevents the insured from collecting twice for the same loss.
Question 4
What does the principle of utmost good faith (uberrimae fidei) require of the insured?
Answer: The principle of utmost good faith requires the insured to honestly and completely disclose all material facts relevant to the risk when applying for insurance. Concealment or misrepresentation can void the policy.
Question 5
What is the concept of adhesion in insurance contracts?
Answer: A contract of adhesion is one drafted entirely by one party (the insurer) and accepted or rejected as-is by the other party (the insured). Because of this, any ambiguities in the policy are interpreted in favor of the insured.