An insurancecontract entered into in violation of this chapter is unenforceable by, but enforceable against, the insurer. In an action against the insurer on the contract, the insured is bound by the terms of the contract as affected by this title and rules adopted under this title.
Terms Used In Utah Code 31A-15-105
Contract: A legal written agreement that becomes binding when signed.
Insurance: includes :
(i)
a risk distributing arrangement providing for compensation or replacement for damages or loss through the provision of a service or a benefit in kind;
(ii)
a contract of guaranty or suretyship entered into by the guarantor or surety as a business and not as merely incidental to a business transaction; and
(iii)
a plan in which the risk does not rest upon the person who makes an arrangement, but with a class of persons who have agreed to share the risk. See Utah Code 31A-1-301
Insured: means a person to whom or for whose benefit an insurer makes a promise in an insurance policy and includes:
Policyholder: means a person who controls a policy, binder, or oral contract by ownership, premium payment, or otherwise. See Utah Code 31A-1-301
Proceeding: includes an action or special statutory proceeding. See Utah Code 31A-1-301
(2)
An insurance policy entered into in violation of this chapter is voidable by the policyholder who entered into the transaction without knowing it was illegal. The policyholder may avoid the contract by notice to the insurer, if no insured has enforced the contract by an action under Subsection (1), and may recover any consideration paid under the contract.
(3)
Any person who assisted in the procurement of an illegal contract under this chapter, and who knew or should have known the transaction was illegal, is liable to the insured for the full amount of a claim or loss payable under the contract, if the insurer does not pay it. The receiver appointed under Chapter 27a, Insurer Receivership Act, may assert the claims of insureds if the insurer is the subject of a proceeding under Chapter 27a, Insurer Receivership Act.
