7 Elements of Insurance Contract
A valid insurance contract requires both an offer and an
acceptance. A blank application provided to the potential insured is typically
not considered an offer; but once the application is completed and returned to
the insurer, it becomes an offer for an insurance contract.
In order to have a valid oral contract of insurance, all
requirements of an ordinary contract must be met, although some of those
requirements may be implied. Those requirements include competent contracting
parties, consideration, the existence of a subject matter, and an agreement on
all essential elements of the contract. 1A COUCH ON INSURANCE §13:18 (3d ed
1995 & Supp 2011).
Essential elements of the contract are as follows:
(1) Identity of insured;
(2) Identity of insurer;
(3) Subject matter to be insured;
(4) Risk insured against;
(5) The commencement and period of risk;
(6) Amount of insurance; and
(7) Amount of premium and time in which it is to be
paid.
Cody v. Insurance Co. of Oregon, 253 Or 587, 591–592, 454
P2d 859 (1969) (evidence existed of all essential elements of oral contract of
insurance); Bird v. Central Mfrs. Mut. Ins. Co., 168 Or 1, 7–8, 120 P2d 753
(1942) (meeting of minds occurred between parties on all essential elements of
oral contract despite fact that written policy, delivered after plaintiff‘s
loss, contained terms not agreed to by plaintiff); Cleveland Oil & Paint
Mfg. Co. v. Norwich Union Fire Ins. Soc., 34 Or 228, 233, 55 P 435 (1898) (no
contract existed when evidence failed to show duration of insurance issued by
insurer on similar risks); Rodgers Ins. Agency, Inc. v. Andersen Machinery, 211
Or 459, 316 P2d 497 (1957) (agent was not liable for failing to procure insurance
when testimony did not establish agreement on amount of the indemnity, duration
of risk, or premium to be paid).
Some terms of an oral contract of insurance may be supplied
by implication as long as those terms are readily inferable from a prior course
of dealing or from established insurance business standards. The court presumes
that the parties contemplated such terms, conditions, and limitations found in
policies issued to cover similar risks or in policies used by the parties in
their past dealings.
Cleveland Oil & Paint Mfg. Co., 34 Or at 236; Sproul v.
Western Assurance Co., 33 Or 98, 103, 54 P 180 (1898). Likewise, when the oral
agreement to insure does not specify the premium to be paid and the rates are
standard in the community, it may be assumed that the contract is to insure at
customary rates. Cleveland Oil & Paint Mfg. Co, 34 Or at 236 (customary rates);
Hamacher v. Tumy, 222 Or 341, 352, 352 P2d 493 (1960) (rate
established in same manner as in previous dealings); see also 1A COUCH
A potential insured does not have to prove all the essential
elements of a contract when only claiming that an oral contract to procure
insurance existed, as opposed to an actual oral contract of insurance.
Hamacher, 222 Or at 348–349; see also Harris v. Albrecht, 86 P3d 728 (Utah
2004) (detailed discussion of Hamacher distinction).