Principles of Risk Management and Insurance, 13th Edition

CHAPTER 9 Fundamental Legal Principles

“It is unfair to believe everything we hear about lawyers—some of it may not be true.”

Gerald F. Lieberman

Learning Objectives

After studying this chapter, you should be able to

• Explain the fundamental legal principles that are reflected in insurance contracts, including:

  • – Principle of indemnity

  • – Principle of insurable interest

  • – Principle of subrogation

  • – Principle of utmost good faith

• Explain how the legal concepts of representations, concealment, and warranty support the principle of utmost good faith.

• Describe the basic requirements for the formation of a valid insurance contract.

• Show how the nature of insurance contracts differs from that of other contracts.

• Explain the law of agency and how it ...