Question 1

Homeowners policy typically will cover damage to real property and to personal property by a peril.

Accepted Answer

A homeowner's policy will typically cover damage both to the real property and to personal property.

Question 2

The term for the person who receives insurance proceeds paid to them is the beneficiary.

Accepted Answer

A beneficiary is an individual who receives proceeds under an insurance contract.

Question 3

Most property insurance policies are open policies that allow the insured to recover the fair market value of the property,subject to the limits in the policy.

Accepted Answer

Most property insurance policies are open policies.These allow the insured to recover the fair market value (actual cash value)of the property at the time it was destroyed,up to the limits stated in the policy.

Question 4

Generally in business liability policies,if the insured is liable on respondeat superior grounds,then he will be covered by the policy.

Accepted Answer

Business liability policies generally provide the insured coverage in instances where the insured would be liable for certain torts of his employees (normally under the respondeat superior doctrine).

Question 5

If the insured misrepresented material facts in the application for insurance,the insurance policy becomes void.

Accepted Answer

If the insured misrepresented material facts in the application for insurance,the insurance policy becomes voidable at the election of the insurer.

Question 6

The insured is not entitled to recover under a property insurance policy if she had an insurable interest at the time the policy was purchased but did not have an insurable interest the time the loss occurred.

Accepted Answer

If an insurable interest existed when the holder thereof purchased the property insurance but the interest was no longer present when the loss occurred,the policy owner is not entitled to payment for the loss.

Question 7

Punitive damages are allowed when the insurer's breach of contract consisted of a good faith but erroneous denial of the insured's claim.

Accepted Answer

Some states have statutes providing that insureds who successfully sue insurers are entitled to awards of attorney's fees.Punitive damages are not allowed,however,when the insurer's breach of contract consisted of a good faith (though erroneous)denial of the insured's claim.

Question 8

Consideration on an insurance contract is the premium paid by the individual being insured and the promise by the insurance for future coverage in the event of a peril.

Accepted Answer

The premium of an insurance contract is consideration for future coverage.

Question 9

When insurance policy provisions must be interpreted,a court will generally interpret them as they would be understood by an average person.

Accepted Answer

Modern courts realize that many persons who buy insurance do not have the training or background to fully understand the technical language often contained in insurance policies.As a result,courts interpret insurance policy provisions as they would be understood by an average person.

Question 10

Professional insurance is also called malpractice insurance.

Accepted Answer

Malpractice is professional insurance that protects professionals like lawyers and doctors.

Question 11

In all states,the insured's breach of warranty automatically relieves the insurer of the duty to perform,regardless of whether the breached warranty was actually material to the insurer's risk.

Accepted Answer

This was the traditional rule.In present times,some states have refused to allow insurers to escape liability on breach of warranty grounds unless the condition contemplated by the breached warranty was indeed material.

Question 12

As a general rule,liability insurance policies furnish the insured with coverage for his negligence and his intentional acts of a wrongful nature.

Accepted Answer

Liability policies commonly afford coverage against the insured's liability for negligence but not against the insured's liability stemming from deliberate wrongful acts (most intentional torts and most behavior constituting a crime).

Question 13

Guy takes out a property insurance policy on his home,buying the policy from Ace Insurance.Guy's home was damaged when a contractor,building an addition to his neighbor's home,negligently swung a crane through Guy's dining room wall.Ace Insurance may force Guy to seek compensation from the contractor.

Accepted Answer

Ace Insurance cannot force Guy to seek compensation but if it has the right of subrogation,then it may sue the contractor after it has paid Guy the insurance amount.

Question 14

If an insurance applicant sustains losses after submission of the application but before acceptance by the insurer,the rule in most states is that the insurer must nevertheless cover the losses.

Accepted Answer

If the insured sustains losses after the submission of the application (the making of the offer)but prior to acceptance by the insurer,those losses normally must be borne by the insured rather than the insurer.

Question 15

An insurance contract,though transferring existing risk,is legally permissible and valid contract.

Accepted Answer

According to the law,the transfer of an existing risk is a permissible and desirable economic activity.Hence,an insurance contract is legally permissible and valid.

Question 16

The insurance relationship is contractual.

Accepted Answer

Regardless of the type of insurance involved,the insurance relationship is contractual.It involves at least two-and frequently more than two-interested parties.

Question 17

Courts generally will not grant reformation of a written insurance policy in order to make it conform to the coverage assumptions of a unilaterally mistaken insured.

Accepted Answer

Although reformation is available in appropriate cases,courts normally presume that the written policy of insurance should be treated as the embodiment of the parties' actual agreement.Reformation is considered an extreme remedy.

Question 18

Property insurance policies are indemnity contracts.

Accepted Answer

Property insurance policies are indemnity contracts which means the insurance company must reimbursed the insured individual for actual harm.

Question 19

The damages recoverable by an insured for the insurer's breach of the insurance contract cannot exceed the dollar limits set forth in the insurance contract.

Accepted Answer

The breaching insurer's liability may exceed the dollar limits set forth in the policy contract despite the insurer's good faith (though incorrect)basis for denying the claim,because a good faith but erroneous refusal to pay is nonetheless a breach of contract.

Question 20

Under insurance policies (except life insurance),the insured and the beneficiary may be the same person.

Accepted Answer

Except in the case of life insurance,the insured and the beneficiary will often be the same person.

Quiz 27: Insurance Law