Deck 28: Insurance

Question 1

An insured has noted on its insurance application that its restaurant has a wood fireplace, but it has omitted to comment that occasionally escaped sparks can cause a fire risk. Why would the insured be considered as having complied with its duty to disclose?

A) The insured has to be in a position to fully assess the risk.
B) The insurer has been candid and forthcoming.
C) The insurer is expected to be worldly wise.
D) The insured has to show personal judgement.

Answer 1

C

Question 2

When an insurer compensates an insured, it has the right to sue a wrongdoer to recover that compensation. What is the legal term for this right?

A) third-party rider
B) third-party endorsement
C) forfeiture
D) subrogation

Answer 2

D

Question 3

Allowing people to insure property that they have no real interest in may lead to the intentional destruction of the property. To which rule does this rationale apply?

A) life insurance rule
B) indemnity rule
C) coinsurance rule
D) insurable interest rule

Answer 3

D

Question 4

Which of the following has the main goal of protecting the public from unscrupulous, financially unstable, and otherwise problematic insurance companies?

A) the federal Department of Industry
B) the provincial insurance ombudsman
C) insurance industry legislation
D) consumer protection legislation

Question 5

Which of the following is provided for by statute with respect to life insurance?

A) The beneficiaries must contribute to the payment of the premium on a prorated basis.
B) Anyone can insure the life of a person who gives written consent to the contract.
C) It requires a coinsurance clause that prevents coverage for less than its value.
D) Life insurance contracts may require the payment of deductibles on loss.

Question 6

In what case was the Supreme Court of Canada presented with an argument by insured's counsel based on s. 171(b) of the Insurance Act providing in part that "Where a contract ... contains any stipulation, condition or warranty that is or may be material to the risk ... the exclusion, stipulation, condition or warranty shall not be binding on the insured if it is held to be unjust or unreasonable?"

A) Royal Bank of Canada v. State Farm Fire and Casualty Co. [2005] 1 S.C.R. 799
B) Triple Five Corp. v. Simcoe & Erie Group (1994), AFF'D [1997] 5 W.W.R. 1 (C.A.)
C) Lucena v. Caufurd (1806), 2 B. & P. (N.R.) 269 at 301
D) Marche v. Halifax Insurance Co. [2005] 1 S.C.R. 47

Question 7

Which of the following is a distinguishing characteristic of a duty to disclose?

A) It is applicable to the point in time the insurance application is made.
B) It is considered by law to be an insured's ongoing obligation.
C) It requires the prompt, oral communication of material changes to the insurer.
D) Compliance automatically adjusts the policy coverage.

Question 8

Which of the following can be attributed to the effect of adequate insurance coverage?

A) a cornerstone of an effective risk management program
B) exorbitant business expenses
C) an effective panacea for all legal risks
D) a loss of integrity among directors and officers of large corporate institutions

Question 9

What type of insurance would provide payment in circumstances where the insured is held legally responsible for causing the loss or damage to a third party?

A) business interruption insurance
B) property insurance
C) life and disability insurance
D) liability insurance

Question 10

Which of the following is a key consequence of the classification of an insurance contract as an instrument of utmost good faith?

A) retaining an insurable interest
B) a right to indemnification
C) a duty to bear a deductible cost
D) an insured's duty to disclose

Question 11

Which of the following must be present at the outset of an insurance policy in order to validate the addition or alteration to the standard coverage?

A) endorsement
B) rider
C) no-fault provision
D) exclusion clause

Question 12

Jasmine is discussing an alteration to her current business insurance coverage. Which of the following will her insurer most likely recommend to Jasmine for this purpose?

A) additional policy
B) rider
C) new policy
D) endorsement

Question 13

Upon which of the following qualifications being met on an ongoing basis is insurance protection dependent?

A) the worthiness of the insured
B) the financial health of the insurer
C) the insured's need for insurable protection
D) the payment of insurance premiums

Question 14

Why is an insured entitled to collect only the amount of the actual loss incurred from its insurance coverage?

A) Contracts of indemnity prevent profiting from an insured-against event.
B) A bank is entitled to an indemnity contribution on a prorated basis.
C) Insurance coverage typically covers a minimum portion of the value of property.
D) A bank may be entitled to an interest in the proceeds for a secured loss.

Question 15

Which of the following is a known result of the Enron and WorldCom scandals with respect to the ability to manage risk through insurance?

A) Directors and officers must now bear the brunt of high deductibles.
B) The insurance premiums for public companies have tripled.
C) The insurance premiums for public companies have doubled.
D) Directors' and officers' liability insurance is now unavailable.

Question 16

What type of insurance would provide coverage for the costs of a machine breakdown?

A) business interruption insurance
B) property insurance
C) casualty insurance
D) equipment life and disability insurance

Question 17

Which of the following would strongly support an insured's insurable interest?

A) The property has been given as security for commercial financing.
B) The insured's beneficial interest would be prejudiced by its destruction.
C) The validity of the special nature of the insurance contract has been determined.
D) The property is the subject of any form of financing security.

Question 18

Which of the following would strongly support a reduction of the amount of an insurance premium?

A) assuming responsibility to pay part of the loss through a deductible
B) regulating the insurance industry generally
C) actively monitoring the insurance industry
D) mandating the terms that must be found in various insurance contracts

Question 19

What is the name given to the rule that prevents an insured from collecting on insurance when the loss has resulted from the insured's willful misconduct?

A) third-party endorsement
B) forfeiture rule
C) subrogation
D) third-party rider

Question 20

Within what jurisdiction does the topic of insurance fall?

A) provincial jurisdiction
B) federal jurisdiction
C) executive jurisdiction
D) municipal jurisdiction

Question 21

What is the purpose of directors and officers liability insurance?

A) to extend coverage to include the corporation's liability against security claims
B) to provide coverage that includes a well-drafted severability clause
C) to reimburse the corporation for amounts paid to indemnify officers and directors
D) to provide protection over and above indemnification by the corporation

Question 22

Why would the owners of a successful business operation carry life insurance on the lives of its shareholders?

A) to ensure that the business doesn't suffer financial loss from business interruption
B) to offset any deficiency in the value demanded for the deceased's shares
C) to offset the challenging costs of buying out a deceased shareholder's shares
D) to comply with the law's mandatory life insurance pertaining to shareholders

Question 23

Which of the following would occupiers' liability insurance protection strongly support?

A) payment where the insured is held legally responsible for causing loss to a third party
B) payment in the event of loss to the insured caused by a fire that is unintentional
C) payment in the event of loss to the insured caused by a fire that is started intentionally
D) payment when the insured causes damage to the property of a third party

Question 24

What options must a business owner decide upon when considering property insurance?

A) getting coverage for replacement value or actual cash value
B) getting coverage for the various forms of perils that are insurable by law
C) negotiating a non-cancellation or severability clause
D) negotiating to remove the exclusion clauses that fall within the intent of the policy

Question 25

What insurance product would protect against loss for injury and property damage related to the operation of a business's vehicles?

A) a product that covers personal injury and negligent property damage
B) a product that covers loss of profit while the vehicle is being repaired
C) a product that offers replacement value
D) a product that covers personal injury

Question 26

Which of the following is required by provincial law to have insurance for liability arising from its ownership, use, and operation?

A) a laundromat
B) a car wash
C) an automobile owner
D) a product manufacturer

Question 27

Which of the following would most strongly support the decision to purchase key-person life insurance by a firm?

A) the age of each key-person involved in the ownership of the business
B) the extent of the ownership held by each key person
C) a means of financing the purchase of a deceased shareholder's interest
D) the financial ability of the business to pay the premiums

Question 28

What is the major distinction among the various provincial automobile insurance legislations?

A) the elimination of bodily injury or death tort actions in all provinces but Manitoba
B) the reliance on tort-based liability or no-fault systems for compensating injury or death
C) the elimination of bodily injury or death tort actions in each jurisdiction except Quebec
D) the reliance on tort-based compensation for pain and suffering is optional in Ontario

Question 29

Why is environmental impairment liability insurance expensive and difficult to obtain?

A) because of the lack of cap on punitive damages for environmental liability
B) because most environmental harm is intentionally caused
C) because of the extensive nature of environmental liability
D) because of the lack of environmental operational management policy

Question 30

What is the name often given to the type of insurance coverage that requires an insurer to compensate for the loss of profits?

A) an all-risk policy
B) comprehensive risk insurance
C) a casualty policy
D) environmental impairment insurance

Question 31

Which of the following would strongly support the rescission of coverage for directors and officers liability insurance?

A) the inclusion of a well-drafted severability clause
B) any misrepresentation made in the policy application
C) the lack of a non-cancellation clause
D) the imposition of liabilities imposed on the directors and officers

Question 32

What type of insurance product would a business that produces and sells pesticides most likely require?

A) injury and property damage insurance coverage
B) business interruption, environmental injury, and property insurance coverage
C) financial loss and personal injury insurance coverage
D) comprehensive, environmental, and personal injury insurance coverage

Question 33

What is the most likely result of malicious acts or acts of vandalism caused by an insured?

A) the denial of coverage by operation of a rider
B) the insured's right of subrogation
C) the insured's right to endorsement
D) the denial of coverage by operation of an exclusion clause

Question 34

Who would most likely provide advice and assistance in assessing risks from a review of a business's operations?

A) insurance advisor
B) insurance broker
C) insurance agent
D) insurance adjuster

Question 35

Which of the following liability risks would be adequately managed by errors and omissions insurance?

A) liabilities arising from the performance of obligations of corporate directors and officers
B) liabilities arising from negligence in the provision of professional services
C) the insured's portion of the loss that is insured against out of his or her own assets
D) the cost of the environmental cleanup of the insured's property arising from business activities

Question 36

Which of the following is a problem that may be addressed by directors and officers obtaining separate coverage or a further layer of insurance coverage independently from the corporation?

A) the rescission of D&O liability coverage
B) the cancellation of D&O liability coverage
C) exhausting D&O coverage
D) exclusions in D&O coverage

Question 37

What three general categories do insurance policies fall into?

A) auto, life, and property
B) liability, property, and disability
C) all risks, commercial, property
D) fire, life, auto

Question 38

Which of the following is protected by collision coverage?

A) loss or damage to the insured's vehicle itself
B) loss or injury to third parties
C) coverage against injury or death of a third party
D) loss or injury to the insured and to third parties

Question 39

Which of the following is a distinguishing characteristic of comprehensive general liability insurance?

A) It compensates for liability for damage to the property of third parties.
B) It compensates for liability for personal injuries suffered by a third party.
C) It compensates for a third party's property damage and personal injuries.
D) It compensates for losses sustained directly by the insured itself.

Question 40

What is the legal effect of an insurer's decision to subrogate against a third party wrongdoer?

A) the insurer is required to defend the insured
B) the insurer denies coverage to the insured
C) the insurer steps into the shoes of the insured
D) the insurer must indemnify the insured

Question 41

An endorsement is a clause altering or adding coverage to a standard insurance policy.

Question 42

An insurable interest is typically described as being the insured's financial stake in what is being insured.

Question 43

A company that sells insurance coverage in the form of contracts of insurance known as policies is legally described as an indemnity agency.

Question 44

A rider is written evidence of a change in an existing policy of insurance.

Question 45

An insurance contract is classified as a contract of indemnity because the insured is not supposed to profit from an insured loss; rather, the insured is meant to come out even.

Question 46

All types of insurance policies are typically written so that the insured is responsible for the first part of the loss, which is paid in the form of a deductible.

Question 47

Each province in Canada has an automobile insurance scheme that is based on either a tort-based liability system or a no-fault liability system for compensating claims for bodily injury or death.

Question 48

Injury and property damage and financial loss and injury caused by an employee's negligent advice are examples of two types of insurance legal risks that a business may encounter.

Question 49

An insurer, the party that purchases the policy of insurance, is required to pay a price for the insurance coverage known as a premium.

Question 50

The subrogation rule provides that a criminal should not be permitted to profit from a crime.

Question 51

Comprehensive general liability insurance coverage generally extends only to unintentional torts, rather than intentional torts.

Question 52

A business typically shifts the legal risk of injury suffered by people on its premises through occupiers' liability insurance.

Question 53

An insurance agent is one who provides advice and assistance to the insured in acquiring insurance.

Question 54

One of the cornerstones of an effective risk management program for either an individual or a business is insurance coverage.

Question 55

An insurance adjuster investigates and evaluates insurance claims on behalf of the insurer.

Question 56

The purpose of comprehensive general liability insurance (also known as CGL insurance) is to compensate business enterprises in a comprehensive way for any liabilities they incur outside the course of their normal business operations.

Question 57

Because financing a buyout on the death of one of the shareholders of a company is challenging, that legal risk is typically reduced by shareholder life insurance policies that will provide all or a portion of the financing needed to complete the buyout.

Question 58

The forfeiture rule provides the right of the insurer to recover the amount paid on a claim from a third party that caused the loss.

Question 59

A key consequence of the designation of insurance contracts as contracts of the utmost good faith is the imposition on the insured of a duty to disclose.

Question 60

An insurance broker is one who acts for an insurance company in selling insurance.

Question 61

Describe the three types of directors and officers insurance (D&O insurance) coverage that are currently available.

Question 62

Identify and briefly describe the basic kinds of insurance.

Question 63

Briefly discuss the nature and the content of insurance policies.

Question 64

List the possible kinds of liabilities and losses that a business typically seeks to insure against.

Question 65

Briefly explain why the law places the duty of disclosure on the insured.

Question 66

Describe the major distinguishing feature among automobile insurance systems from province to province, and explain the major difference between the insurance systems.

Question 67

Identify the test for whether the insured has an insurable interest in the thing being insured, and briefly explain the rationale behind this rule.

Question 68

Explain the nature and purpose of business interruption loss insurance.

Question 69

Discuss subrogation.

Question 70

Explain the extent of coverage provided by errors and omissions insurance and how that coverage may be compromised.