Chapter 6The acceptance & the issuance of the

policy of insurance

Complete Offer + Acceptance = Complete Insurance Contract.

•Insurance contract is one of the formal contracts , written in an instrument

called “Policy.”

The Policy

•The policy contains

Description of the risk subject to the insurance . Circumstances

affecting the risk.

All terms of Agreements.

The Policy•According to Art 750 of the

Egyptian civil code it is considered as void the following terms if provided in the insurance policy:

1 -All the printed conditions which are not prominently projected and which are related to one of the conditions leading to the annulment of right.

2 -An arbitration clause, if it is set in the policy as part of its printed general conditions, and not in the form of a special agreement independent from the general conditions.

3 -All other arbitrary conditions, the violation of which has had no effect on the occurrence of the insured accident.

The methods of Acceptance

The methods of Acceptance

Formal Acceptance

Issuance of insurance

policy

Receiving the

Premium

Conduct of the

insurer

The methods of Acceptance

Formal Acceptance

•It means that the parties intended to be bound prior to the time the policy is delivered, delivery is not essential.

•The contract of insurance takes effect without delivery ,it takes effect when the insurer declares to be bound either orally or in writing.

The methods of Acceptance

Issuance of insurance policy

•Issuance of insurance policy = Insurer has accepted the proposal form there is no need that the policy should be materially delivered.

•The difficulty arises if the contract is manually delivered or constructively delivered ( material delivery).

•The policy is considered as delivered & accepted regardless the type of the delivery once the delivery is valid.

The conditions of valid delivery are:

A- The intention of the parties executing the policy to give it legal effect as a complete legal instrument.

B- This intention must be evidenced by some words or acts indicating that the insurer has put the instrument beyond his legal control , not necessarily beyond his physical control .

C- The insured must be informed about this intention.

•Dr’s Point Of View: the conclusion of the contract in this case wouldn’t be affected if the insured didn’t treat the delivery as an acceptance, or he negotiated. But if the policy departs from the proposal by introducing a new term , it won’t be considered as an acceptance but a counter offer needs to be accepted by the other party.

The methods of Acceptance

Receiving the

premium

•In the case of the insurer has accepted to receive the premium and retained it –Although the policy hasn’t issued yet– this indicates implicit acceptance of the proposal form.

•In such case, the insurer isn’t entitled to refuse the issuance of the policy and he will be liable to pay damages at the happening

of the risk to the insured .

The methods of Acceptance

Conduct ofthe

insurer

•Sometimes, in spite of the absence of an issued policy and payment of the premium by the insured, the acceptance of the insurer can be concluded from the surrounding circumstances such as: 1- The mere demand for the premium by the insurer , 2- The nomination of an expert to evaluate the damages suffered by the insured.

The Effect Of Acceptance•Thus by the acceptance, the parties

become bound by the contract, and can’t withdraw from, except by mutual consent.

•The contract becomes binding from the date of the insurer acceptance. And the insured becomes obliged to pay the premium fixed by the terms of the contract.

•For the insurer it is his duty to issue the policy and to accept the premium when it is paid, and to pay damages suffered by the insured.

• Cover note is one of the

formal contracts.

-This statement is false, because, Issuing the cover note in a formal document is not necessary, it might be issued informally by sending a letter to the insured by the company head office.

•the insurer may intimate his rejection of the proposal form to the insured through phone.

-This statement is false, because the insurer is obliged to intimate his rejection of the proposal form to the insured in writing only not orally.

• In all cases, the cover note of a fixed period comes to an end by the expiration of this period.

-This statement is false, because it is not necessary that the cover note remain in force during its whole fixed period, since it may come to an end in an earlier time by the acceptance of the insurer (issuing the policy), or by the declaration of the rejection of the proposal form by the insurer to the insured in writing.

• Acceptance of the insurer is the only way to end the cover note.

-This statement is false, because the cover note comes to an end by three ways. The first one is the acceptance of the insurer (Represented in issuing the policy). The second one is the expiration of the period specified in the cover note without issuing the policy (implicit rejection). The third one is the declaration of the rejection of the proposal form by the insurer to the insured in writing.

• the cover note is one of the insurance contract components.

-This statement is false, because the cover note represents an insurance contract and determines the rights and duties of its parties in the event of loss or injuries, taking place during its validation. Therefore it is not one of the insurance contract components but it is a separated independent contract.