Question 1

The contract of insurance is

Accepted Answer

The contract of insurance is treated as a contract of utmost good faith, which means both parties (insured and insurer) are required to disclose all relevant information relating to the insurance policy. The contract of insurance is subject to the general laws of contract and the Common Law, and is not substantially the same as a wagering agreement. Therefore, options A, B, D, and E are incorrect.

Question 2

Henderson owned a concrete block building valued at $20,000.Because it was virtually fireproof,he insured it for only $10,000 under a policy of insurance which contained an 80% co-insurance clause.Some time later,the building was damaged by fire.Henderson's failure to disclose the true value of the property to the insurer is misrepresentation,and would allow the insurer to avoid paying anything to Henderson when the loss occurred.

Accepted Answer

The concept of misrepresentation involves providing false information about a material fact that would affect the insurance company's decision to issue a policy or set its terms. In this scenario, Henderson's failure to insure the building for its full value does not constitute misrepresentation regarding the property's value. The 80% co-insurance clause is designed to encourage policyholders to insure their property to a certain percentage of its value to receive full compensation for partial losses. Henderson's decision to insure the building for $10,000, even though it is valued at $20,000, does not involve misrepresenting the property's value to the insurer but rather results in a co-insurance penalty where Henderson would bear a larger portion of the loss.

Question 3

The insurance agent

Accepted Answer

C

Question 4

Is a disability insurance policy a contract?

Accepted Answer

A disability insurance policy is a contract between the insurer and the insured whereby the insurer agrees to pay benefits in the event of the insured's disability. Like any other contract, it requires mutual consideration and the capacity of the parties to enter into the agreement, both of which are present in this case.

Question 5

Franco loaned $1 million to Rocco.At the time the loan was made Franco purchased $1 million life insurance on Rocco's life.Rocco repaid the debt then died.Can Franco collect on the life insurance policy?

Accepted Answer

Franco had an insurable interest in Rocco's life at the time the policy was purchased because he loaned Rocco $1 million. If Rocco had died before repaying the debt, Franco would have suffered a financial loss. Therefore, Franco can collect on the life insurance policy as he had an insurable interest in Rocco's life at the time of the loan and policy purchase.

Question 6

Martin was injured in a fall while visiting Adam's home when Adam negligently failed to clear snow and ice from his walkway.Both Martin and Adam carry liability coverage.

Accepted Answer

Adam may claim under his liability policy to cover the amounts he will have to pay to compensate Martin for his injuries.

Question 7

In every insurance contract

Accepted Answer

An insurable interest must be present in every insurance contract to ensure that the insured has a legitimate stake in the risk being insured against. This is a fundamental principle of insurance law.

Question 8

Henderson owned a concrete block building valued at $20,000.Because it was virtually fireproof,he insured it for only $10,000 under a policy of insurance which contained an 80% co-insurance clause.Some time later,the building was damaged by fire.Assuming that the fire completely destroyed the building,Henderson would only be entitled to claim for $10,000 under his insurance policy.

Accepted Answer

The answer of Henderson owned a concrete block building valued...

Question 9

The doctrine of subrogation

Accepted Answer

The answer of The doctrine of subrogation
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Question 10

Eugene's car is rear-ended by Larissa's car.Eugene's car is totalled.Eugene's insurance company compensates him for all damages arising from the accident.What right does Eugene's insurance company have to his car?

Accepted Answer

The insurance company's right to Eugene's car is called salvage. This means that they have the right to take possession of the damaged car and sell it for scrap or parts in order to recoup some of the money they paid out for the damages.

Question 11

Henderson owned a concrete block building valued at $20,000.Because it was virtually fireproof,he insured it for only $10,000 under a policy of insurance which contained an 80% co-insurance clause.Some time later,the building was damaged by fire.If the fire damage was $8,000,the insurer would only be obliged to pay one half of the loss,because Henderson had insured the building for half of its value.

Accepted Answer

The co-insurance clause states that the insured must maintain insurance coverage equal to at least 80% of the property's actual value in order to receive full reimbursement in the event of a loss. In this case, Henderson's insurance coverage of $10,000 is equal to 50% of the building's value, falling short of the 80% requirement. Therefore, the insurer would apply the co-insurance formula to determine the amount payable, which would be $10,000 x ($8,000/$16,000) = $5,000. The insurer would be obligated to pay $5,000, not one half of the loss.

Question 12

Eugene's car is rear-ended by Larissa's car.Eugene's car is totalled.Eugene's insurance company compensates him for all damages arising from the accident.What right does Eugene's insurance company have to sue Larissa for negligence?

Accepted Answer

Subrogation allows Eugene's insurance company to step into Eugene's shoes and sue Larissa for negligence in order to recover the damages they paid to Eugene.

Question 13

Henderson owned a concrete block building valued at $20,000.Because it was virtually fireproof,he insured it for only $10,000 under a policy of insurance which contained an 80% coinsurance clause.Some time later,the building was damaged by fire.Under the co-insurance clause,the insurer would only be required to pay 80% of the face amount of the policy if the building was totally destroyed by fire.

Accepted Answer

The co-insurance clause requires the policyholder to carry insurance equal to a specified percentage (in this case, 80%) of the value of the property to receive full compensation for a loss. If the property is underinsured at the time of the loss, the claim payment is reduced. The explanation given misinterprets the function of the co-insurance clause; it does not mean the insurer pays 80% of the policy face amount for total destruction but rather that the claim payment is reduced if the insured amount is less than 80% of the property's value at the time of loss.

Question 14

An insurable interest

Accepted Answer

All of the responses are correct. An insurable interest must exist both at the time the contract of insurance is made and when the event resulting in a loss occurs. It may be shown by a creditor, and it is anything that benefits the insured by its continued existence, which, if changed, would represent a loss. An insurable interest may also arise from a security interest in property.

Question 15

Henderson owned a concrete block building valued at $20,000.Because it was virtually fireproof,he insured it for only $10,000 under a policy of insurance which contained an 80% co-insurance clause.Some time later,the building was damaged by fire.If the fire damage was $8,000,the insurer would only be obliged to pay $5,000 of the claim.

Accepted Answer

According to the 80% co-insurance clause, the insured is required to carry insurance equal to at least 80% of the total value of the property. In this case, 80% of $20,000 is $16,000. Since the insured only carried $10,000 in insurance, they are considered to be underinsured. Therefore, the insurer is only required to pay a portion of the claim based on the ratio of the amount of insurance carried to the required amount of insurance, which is ($10,000/$16,000) x $8,000 = $5,000.

Question 16

Henderson owned a concrete block building valued at $20,000.Because it was virtually fireproof,he insured it for only $10,000 under a policy of insurance which contained an 80% co-insurance clause.Some time later,the building was damaged by fire.Under a co-insurance clause,the insured becomes a partial insurer if he fails to maintain the required amount of insurance on the insured property.

Accepted Answer

Under an 80% co-insurance clause, the insured must maintain insurance coverage equal to at least 80% of the property's actual cash value. In this case, Henderson only insured the building for 50% of its value, making him a partial insurer in the event of a loss.

Question 17

Monique,a sculptor,insured one of her pieces she was displaying at an art show.On the first day of the show she sold the piece for $1,000 cash to Brown,who agreed to leave it on display until the show's completion in five days.That night the piece was stolen.

Accepted Answer

The answer of Monique,a sculptor,insured one of her pieces she...

Question 18

What is the legal test for determining whether an insured had an obligation to disclosure a particular fact to the insurer?

Accepted Answer

The answer of What is the legal test for determining...

Question 19

Where two or more insurers properly pay out funds against a loss to an insured,it is as result of

Accepted Answer

When two or more insurers properly pay out funds against a loss to an insured, it is known as contribution. This occurs when multiple insurance policies cover the same loss, and each insurer pays a portion of the claim according to their policy limits. The purpose of contribution is to ensure that the insured is not overcompensated for the loss, and to distribute the cost of the claim among the insurers involved.

Question 20

Giant Motor Car Co.is in the business of automobile manufacturing and parts assembly.It uses a Just-In-Time inventory system,which greatly reduces inventory costs.The only difficulty,however,is that it leaves Giant somewhat vulnerable to supply stoppages.Giant has only 48 hours of raw materials inventory at any given time.

Accepted Answer

A) Giant has an insurable interest in maintaining inventory supply because disruptions can lead to significant financial losses. B) Insurance against a strike at a parts supplier's plant is feasible because it directly affects Giant's operations. C) Obtaining life insurance for key employees, such as the inventory scheduler, is a common practice to mitigate the risk associated with the potential loss of crucial personnel.

Quiz 31: Insurance Law