Deck 12: Bailment and Insurance Law

Question 1

Barton boarded a large commercial aircraft at Kingston for a flight to Toronto.He placed his coat on the seat beside him,but was told by the flight attendant to place his coat on the shelf above his seat.He did so,but at the end of the flight,left the plane without taking his coat with him.He later realized that he did not have his coat,and went back to the aircraft to retrieve it.His coat was missing.
The airline is liable for the loss of Barton's coat,as it was in possession of the coat at the time it was taken.

Answer 1

False

Question 2

Henry parked his automobile in Allison's Car Park,and was requested by the attendant to leave the keys in the car and the car unlocked.Henry received a receipt for the parking that contained the following note on the reverse side of the ticket."Proprietor of lot will not be responsible for damage to car or contents." A similar sign was located at the entrance to the car parking area.When Henry returned to the lot he discovered that his car had a damaged front end.
The disclaimer of liability on the back of the receipt would not by itself allow the proprietor to avoid liability,unless the notice was brought to Henry's attention before he parked his car.

Answer 2

True

Question 3

Smith agreed to store Brown's canoe for the winter months in a garage that was attached to his house.The next June,Smith moved the canoe from the garage to a shed at the back of the house,"where it would be safer." The house and shed were later struck by lightning,and burned to the ground.Brown's canoe was destroyed in the fire.
Smith is not liable for the loss of the canoe,because it was destroyed by an act of God.

Answer 3

True

Question 4

Simon requested Simple Delivery Service to pick up a refrigerator at his home and deliver it to his cottage,some 100 miles away.Simple Delivery picked up the refrigerator,but through a mix- up in delivery bills,lost the refrigerator.
Simple Delivery Service would not be liable for the loss if it could prove that the refrigerator was destroyed as a result of an act of God.

Question 5

Henry parked his automobile in Allison's Car Park,and was requested by the attendant to leave the keys in the car and the car unlocked.Henry received a receipt for the parking that contained the following note on the reverse side of the ticket."Proprietor of lot will not be responsible for damage to car or contents." A similar sign was located at the entrance to the car parking area.When Henry returned to the lot he discovered that his car had a damaged front end.
Even if Henry was fully aware of the disclaimer of liability,Allison's Car Park would be liable for the damage to his car.

Question 6

Henry parked his automobile in Allison's Car Park,and was requested by the attendant to leave the keys in the car and the car unlocked.Henry received a receipt for the parking that contained the following note on the reverse side of the ticket."Proprietor of lot will not be responsible for damage to car or contents." A similar sign was located at the entrance to the car parking area.When Henry returned to the lot he discovered that his car had a damaged front end.
The parking of the unlocked automobile in the car park with the keys left in the car was a bailment or reward.

Question 7

Smith owned a concrete block building valued at $200,000.Because it was virtually fireproof,he insured it for only $100,000 under a policy of insurance,which contained an 80 percent co-insurance clause.Some time later,the building was damaged by fire.
If the fire damage was $80,000,the insurer would be obliged to pay only $5,000 of the claim.

Question 8

Simon requested Simple Delivery Service to pick up a refrigerator at his home and deliver it to his cottage,some 100 miles away.Simple Delivery picked up the refrigerator,but through a mix- up in delivery bills,lost the refrigerator.
Common carriers,such as Simple Delivery Service,are bailees for reward.

Question 9

Smith owned a concrete block building valued at $200,000.Because it was virtually fireproof,he insured it for only $100,000 under a policy of insurance,which contained an 80 percent co-insurance clause.Some time later,the building was damaged by fire.
If the fire damage was $80,000,the insurer would be obliged to pay only one-half of the loss,because Smith had insured the building for half of its value.

Question 10

Henry parked his automobile in Allison's Car Park,and was requested by the attendant to leave the keys in the car and the car unlocked.Henry received a receipt for the parking that contained the following note on the reverse side of the ticket."Proprietor of lot will not be responsible for damage to car or contents." A similar sign was located at the entrance to the car parking area.When Henry returned to the lot he discovered that his car had a damaged front end.
Because Henry did not give the keys to the attendant,there was no transfer of possession,and therefore,no bailment created.

Question 11

Barton boarded a large commercial aircraft at Kingston for a flight to Toronto.He placed his coat on the seat beside him,but was told by the flight attendant to place his coat on the shelf above his seat.He did so,but at the end of the flight,left the plane without taking his coat with him.He later realized that he did not have his coat,and went back to the aircraft to retrieve it.His coat was missing.
Only the flight attendant is liable for the loss,as he instructed Barton to place his coat on the shelf above his seat.

Question 12

Simon requested Simple Delivery Service to pick up a refrigerator at his home and deliver it to his cottage,some 100 miles away.Simple Delivery picked up the refrigerator,but through a mix- up in delivery bills,lost the refrigerator.
A common carrier,such as Simple Delivery Service,is virtually an insurer in the event of a loss of goods placed in its possession.

Question 13

Simon requested Simple Delivery Service to pick up a refrigerator at his home and deliver it to his cottage,some 100 miles away.Simple Delivery picked up the refrigerator,but through a mix- up in delivery bills,lost the refrigerator.
In this case,the pickup of the refrigerator by Simple Delivery Service created a bailment.

Question 14

Smith agreed to store Brown's canoe for the winter months in a garage that was attached to his house.The next June,Smith moved the canoe from the garage to a shed at the back of the house,"where it would be safer." The house and shed were later struck by lightning,and burned to the ground.Brown's canoe was destroyed in the fire.
Smith is liable for the loss of the canoe because he moved it from the garage.

Question 15

Smith owned a concrete block building valued at $200,000.Because it was virtually fireproof,he insured it for only $100,000 under a policy of insurance,which contained an 80 percent co-insurance clause.Some time later,the building was damaged by fire.
Under the co-insurance clause,the insurer would be required to pay only 80 percent of the face amount of the policy if the building was totally destroyed by fire.

Question 16

Smith agreed to store Brown's canoe for the winter months in a garage that was attached to his house.The next June,Smith moved the canoe from the garage to a shed at the back of the house,"where it would be safer." The house and shed were later struck by lightning,and burned to the ground.Brown's canoe was destroyed in the fire.
The storage of the canoe was a bailment for reward.

Question 17

Smith agreed to store Brown's canoe for the winter months in a garage that was attached to his house.The next June,Smith moved the canoe from the garage to a shed at the back of the house,"where it would be safer." The house and shed were later struck by lightning,and burned to the ground.Brown's canoe was destroyed in the fire.
Smith's only duty was to care for the canoe as if it were his own.

Question 18

Barton boarded a large commercial aircraft at Kingston for a flight to Toronto.He placed his coat on the seat beside him,but was told by the flight attendant to place his coat on the shelf above his seat.He did so,but at the end of the flight,left the plane without taking his coat with him.He later realized that he did not have his coat,and went back to the aircraft to retrieve it.His coat was missing.
The airline is not liable for Barton's loss,as it never received possession of the coat.

Question 19

Smith owned a concrete block building valued at $200,000.Because it was virtually fireproof,he insured it for only $100,000 under a policy of insurance,which contained an 80 percent co-insurance clause.Some time later,the building was damaged by fire.
Assuming that the fire completely destroyed the building,Smith would be entitled to claim for only $100,000 under his insurance policy.

Question 20

Barton boarded a large commercial aircraft at Kingston for a flight to Toronto.He placed his coat on the seat beside him,but was told by the flight attendant to place his coat on the shelf above his seat.He did so,but at the end of the flight,left the plane without taking his coat with him.He later realized that he did not have his coat,and went back to the aircraft to retrieve it.His coat was missing.
Barton has no rights against anyone because he failed to take his coat with him when he left the aircraft.

Question 21

Brown insured his automobile against theft under a policy of insurance.Shortly after he had insured the vehicle,he found himself short of cash,and offered to sell the vehicle to his friend for $500 if his friend would dismantle it for parts.Brown did not tell his friend that he intended to claim that the car had been stolen.His friend bought the car for $500,and dismantled it.
Brown's actions in this case would constitute a fraud on the insurer if he claimed that the automobile had been stolen.

Question 22

Where goods have been bailed for repair,and a dispute arises,the bailee will likely claim a right of lien while the bailor will claim conversion.

Question 23

Smith owned a concrete block building valued at $200,000.Because it was virtually fireproof,he insured it for only $100,000 under a policy of insurance,which contained an 80 percent 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.

Question 24

Smith owned a concrete block building valued at $200,000.Because it was virtually fireproof,he insured it for only $100,000 under a policy of insurance,which contained an 80 percent co-insurance clause.Some time later,the building was damaged by fire.
A fire insurance policy is a contract of utmost good faith.

Question 25

A lease of goods is not a bailment of goods.

Question 26

Brown insured his automobile against theft under a policy of insurance.Shortly after he had insured the vehicle,he found himself short of cash,and offered to sell the vehicle to his friend for $500 if his friend would dismantle it for parts.Brown did not tell his friend that he intended to claim that the car had been stolen.His friend bought the car for $500,and dismantled it.
If the insurer,unaware of the fraud,paid Brown for the claimed loss of his automobile,the insurer is entitled to a transfer of the title to the vehicle.

Question 27

Anisa,Kim,and Natasha carried on business together in partnership.Arrangements were made whereby each partner held a policy of life insurance on the other partners,and were the beneficiaries named in the policies.Several years later,Anisa murdered Kim.
Neither Anisa nor Natasha may recover the proceeds of the insurance policies they carried on
Kim,because as partners,Natasha would also be liable for the act of Anisa.

Question 28

Anisa,Kim,and Natasha carried on business together in partnership.Arrangements were made whereby each partner held a policy of life insurance on the other partners,and were the beneficiaries named in the policies.Several years later,Anisa murdered Kim.
Neither Anisa nor Natasha had an insurable interest in Kim's life.

Question 29

A bailment without monetary reward,even if a benefit exists for both parties,is gratuitous.

Question 30

Chris stops at a motel and leaves his bags in the room.As the nearest restaurant is some distance away,he is occupied for some time.Upon his return he finds his valuables gone and sues the owner.The owner may be somewhat protected by statute law.

Question 31

Anisa,Kim,and Natasha carried on business together in partnership.Arrangements were made whereby each partner held a policy of life insurance on the other partners,and were the beneficiaries named in the policies.Several years later,Anisa murdered Kim.
Natasha may collect the proceeds of the insurance policy she held on Kim's life,because she was the named beneficiary.

Question 32

Brown insured his automobile against theft under a policy of insurance.Shortly after he had insured the vehicle,he found himself short of cash,and offered to sell the vehicle to his friend for $500 if his friend would dismantle it for parts.Brown did not tell his friend that he intended to claim that the car had been stolen.His friend bought the car for $500,and dismantled it.
The insurer may claim the parts of Brown's automobile if it later discovers that the parts are in the possession of Brown's friend.

Question 33

Under no circumstance may a valid sub-bailment be made without the consent of the original bailor.

Question 34

Once a plaintiff shows that bailed goods have not been returned to him,he may rely on the principle of res ipsa loquitur.

Question 35

To be a common carrier is to be a virtual insurer of the goods carried.

Question 36

Brown insured his automobile against theft under a policy of insurance.Shortly after he had insured the vehicle,he found himself short of cash,and offered to sell the vehicle to his friend for $500 if his friend would dismantle it for parts.Brown did not tell his friend that he intended to claim that the car had been stolen.His friend bought the car for $500,and dismantled it.
If the loss is paid by the insurer,and the insurer later becomes aware of the fraud,the insurer may recover the money paid to Brown.

Question 37

Anisa,Kim,and Natasha carried on business together in partnership.Arrangements were made whereby each partner held a policy of life insurance on the other partners,and were the beneficiaries named in the policies.Several years later,Anisa murdered Kim.
Anisa cannot collect the proceeds of the insurance policy on Kim's life,because Anisa was responsible for Kim's death.

Question 38

Sandra leaves her car in a commercial parking lot and pockets the keys.She sees a sign that reads "Use of space only-not responsible for loss or damage however caused." Her car is damaged by persons unknown and she sues the operator.The operator relies on his warning.He will likely succeed.

Question 39

A bailee for storage faces the same standard of care of a skilled shopkeeper (i.e. ,absolute liability for all foreseeable risks).

Question 40

Smith owned a concrete block building valued at $200,000.Because it was virtually fireproof,he insured it for only $100,000 under a policy of insurance,which contained an 80 percent co-insurance clause.Some time later,the building was damaged by fire.
Smith'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 Smith when the loss occurred.

Question 41

Jane shipped a parcel with a passenger bus company acting as a private carrier.The parcel contained semi-breakable gifts for her parents in another city.When the parcel arrived,Jane's parents notified her of damage to the parcel's contents.Jane visited the bus station to complain.An employee of the bus company who dealt with her complaint told her she should have used a courier and,as a private carrier,the company had no obligation to exhibit reasonable care of shipped goods.

Question 42

A way to avoid liability is for all bailees to say "I will treat these goods as prudently as I would treat my own in similar circumstances."

Question 43

A building worth $200,000 sustains $10,000 in damage.It was covered by a $120,000 policy with an 80 percent co-insurance clause.The indemnity paid by the insurer will be $7,500.

Question 44

Perishable goods were carried by a common carrier.The goods arrived in an unsaleable condition because a bridge washed out by flooding.The occurrence was in no way foreseeable or avoidable by the bailor.The bailee will be required to

A)pay nothing because the event was unforeseeable.
B)compensate for the value of the goods because it was a bailee for reward.
C)compensate for the value of the goods because it is,in fact,an insurer.
D)None of these.
E)All of these.

Question 45

Private carriers face a higher standard of care as bailees than do common carriers.

Question 46

George,a former intravenous drug user,was worried about his future health.To him it was easier to live in doubt as to whether he had contracted the AIDS virus than face the fact if the test was positive,so he never obtained a blood test.He applied for life insurance and answered the general questions truthfully,adding the phrase "as far as I know." Should his past later come to light,the insurance company could refuse to honour the policy.

Question 47

Henry and Oliver left their car at a parking lot and deposited their keys with the attendant.They then left the lot and carried on with their day's business.On return to the lot,the pair realized that their car was not there.They approached the attendant and brought the situation to his attention.Fearing reprisal for the theft from his lot,the attendant flipped Henry's pay stub over and showed him the limitation of liability printed on the back.This warning is sufficient to protect the parking lot from any liability under the law of bailment.

Question 48

One of the principal functions of a bill of lading is to act as evidence of title to the goods being carried.This allows for considerable ease in transferring ownership of the goods during transit.

Question 49

The sub-bailor may enter into a sub-bailment agreement which is inconsistent with the original bailment agreement without any legal repercussions.

Question 50

Liability insurance is designed to compensate for losses experienced by an individual through the negligence of another.

Question 51

The following are types of bailments for which a bailee is required to protect the goods from foreseeable harm:

A)gratuitous bailment.
B)bailment for reward.
C)bailment for the benefit of the bailee and the bailor.
D)b and c only.
E)All of these.

Question 52

Since there is no Common Law right for a warehouse operator to hold goods until storage charges are paid,the operator must rely on either express provisions in the storage contract,or statutory provisions for lien.

Question 53

Unless it is the custom of the trade,a sub-bailment agreement between the bailee and the sub-bailee requires the authorization of the original bailor.

Question 54

If a building insured against fire burns to a source of fire totally unforeseen by the insured and the insurer,no obligation to indemnify rests upon the insurer.

Question 55

The chief difference in law between insurance contracts and wagering is that one cannot make a profit from having insurance.

Question 56

Where an insured places coverage with three different brokers,each broker will have to contribute to a loss,but the total paid to the insured may not exceed the loss itself.

Question 57

A bailee for reward

A)has a duty to protect the goods from theft.
B)has a duty to use all reasonable care in respect of the goods while in its possession.
C)will not be found liable where the goods are damaged or lost without evidence of fault on behalf of the bailee.
D)a and b only.
E)All of these.

Question 58

A pecuniary interest in property of another is insufficient to create an insurable interest in that property.

Question 59

Where an insurer pays indemnity to an insured,the insurer could have a right of salvage and will have a right of subrogation if a third party caused the damage.

Question 60

Through the principle of co-insurance,the insured may in fact become his or her own insurer.

Question 61

When a bailor's goods are not returned or are returned in a damaged condition

A)the bailor must satisfy the court that the standard of care fixed for the bailment was not maintained.
B)the bailor must prove that a bailment existed and show his loss.
C)the bailee's liability will be limited by the existence of an exemption clause that is brought to the bailor's attention before the bailment is completed.
D)a bailee will not be liable if it was a gratuitous bailment as there was no consideration in the arrangement.
E)b and c.

Question 62

The insurance agent

A)acts for the insured.
B)is responsible to ensure that the insurer meets its obligations under the insurance contract.
C)may be liable where an insured suffers a loss due to insurance coverage.
D)All of these.
E)None of these.

Question 63

An insurer's liability is limited by

A)the doctrine of subrogation.
B)contribution.
C)the doctrine of utmost good faith.
D)b and c.
E)All of these.

Question 64

An insurable interest

A)generally must exist both at the time the contract of insurance is made and when the event occurs that results in a loss.
B)may be shown by a creditor.
C)is anything that benefits the insured by its continued existence and that,if changed,would represent a loss.
D)may arise from a security interest in property.
E)All of these.

Question 65

Bailments can arise in a wide variety of situations and may provide vastly different benefits for the contracting parties.Discuss the differing standards of care associated with bailments and explain the rationale for each.

Question 66

The contract of insurance is

A)not subject to the general laws of contract and the Common Law.
B)substantially the same as a wagering agreement.
C)treated as a contract of utmost good faith.
D)a and b.
E)b and c.

Question 67

The doctrine of subrogation

A)protects the insured against double recovery.
B)entitles the insured to sue third parties.
C)arises where loss is caused to the insured by a third person.
D)All of these.
E)None of these.

Question 68

Mary takes her engagement ring to Sparkles Jewellers for cleaning and appraisal.She is to pay for the work when she picks up the ring.While the jeweller's back is turned,someone slips behind the counter and steals a number of the boxes containing repaired jewellery,including Mary's ring.

A)Since this is a bailment for reward and the jeweller was negligent,Mary can sue the jeweller successfully.
B)Since Mary has not yet paid the jeweller,this is a gratuitous bailment and he would be liable only if he were grossly negligent.
C)Since the bailment was for Mary's benefit,she cannot sue the jeweller.
D)Since the bailment is not complete until the possession of the ring is returned to Mary,bailment law is not applicable here.
E)If Mary's ring were insured,the insurer would be the only party with any liability to compensate for the loss of the ring.

Question 69

The liability of innkeepers has a long history evolving out of necessity.Briefly explain the development of this form of liability and discuss its context in modern society.

Question 70

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.

A)Monique may claim her loss from the insurance company.
B)Brown may claim the loss under the insurance policy.
C)Monique may claim the loss under the insurance policy on Brown's behalf.
D)Neither Monique nor Brown may recover under the insurance policy.
E)a and c.

Question 71

Smith agreed to store Brown's canoe for the winter months in a garage that was attached to his house.The next June,Smith moved the canoe from the garage to a shed at the back of the house,"where it would be safer." The house and shed were later struck by lightning and burned to the ground.Brown's canoe was destroyed in the fire.

A)The storage of the canoe was a bailment for reward.
B)Smith's duty was to take special care of the canoe as he is liable for any damage while it is in his possession.
C)Smith is liable for the loss of the canoe because he moved it from the garage.
D)Smith is not liable for the loss of the canoe,because it was destroyed by an act of God.
E)b and c.

Question 72

Giant Motor Car Co.is in the business of automobile manufacturing and parts assembly.It uses a just-in-time inventory system that 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.

A)Giant has an insurable interest in maintaining inventory supply.
B)Giant could obtain insurance against a strike at the plant of a parts supplier.
C)Giant could recover costs and consequential damages such as downtime and lost profits resulting from employee pilfering under its business insurance contract.
D)Giant could obtain life insurance for its inventory scheduler.
E)a,b,and d.

Question 73

The Auto Garage advertised automobile repairs by "licensed mechanics." Tony,a car owner,took his automobile to Auto for repairs.The garage owner,Xavier,examined the car and indicated that expensive repairs were required.Tony left his car with Xavier who sent the car to Better Engines Ltd.for specific work.There the repairs were carried out by another licensed mechanic,Rick,an employee of Better.Tony paid $1,500 for the repairs,but on his way home discovered that the repairs had been negligently made,and had ruined the engine.

A)Tony may only sue Rick,the mechanic who negligently performed the service.
B)Auto is liable to Tony under the vicarious performance rule for Rick's negligence.
C)Money damages awarded by the court would attempt to put Tony in the same position that he would have been in had the contract been properly performed.
D)Tony was entitled to expect that the car would be repaired by Auto.
E)c and d.

Question 74

For a bailment to be found,the following must be established:

A)the bailor has delivered goods to the bailee,the bailee has accepted the goods and the bailee has returned goods to the bailor or passed them on.
B)the bailor has delivered the goods to the bailee and the bailee has possession of goods.
C)the bailor has delivered the goods to bailee and the bailee has returned the goods or has passed on the goods.
D)the bailee has received delivery of goods and the bailee has possessed and returned or passed on the goods.
E)None of these.

Question 75

In every insurance contract

A)there is an endorsement.
B)an insurable interest must be present.
C)the insured pays the premiums.
D)a and b.
E)All of these.

Question 76

Compare and contrast the nature of bailments for warehouse storage and common carriage of goods.

Question 77

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

A)subrogation.
B)contribution.
C)co-insurance.
D)endorsements.
E)None of these.

Question 78

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.

A)Adam may claim under his policy for amounts he will have to pay to Martin to compensate for his injuries.
B)Martin may claim indemnity for loss due to his injuries under his own policy of insurance.
C)Martin's insurer may take legal action against Adam for damages on Martin's behalf.
D)Martin's insurance premiums are likely to rise.
E)b and c.

Question 79

The parking garage in Bob's office building offers a valet parking service at no extra charge for customers in a hurry.The customer leaves the car with the keys in it just outside the attendant's booth.The attendant then parks the car somewhere in the garage and retains the keys until the customer returns.If a car is damaged after it is parked by the valet attendant

A)there is no liability because the valet service is a mere adjunct of the garage's principal business of renting parking spaces to patrons,and most park their own cars.
B)there is no liability because the free valet service is a gratuitous bailment and the garage operator would be liable for only gross negligence.
C)the garage operator is liable because a true bailment exists.
D)the garage operator's liability would be limited to the cost of the parking if a large red sign explaining the limitation is posted at the payment booth.
E)a and b.

Question 80

Oded,the owner of a vehicle with a leaky gas tank,takes his vehicle to Boucher Auto Repair Shop (Boucher)to be repaired.Boucher is not qualified to weld gas tanks,so while the vehicle is under its control,Boucher delivers the vehicle to Welding Unlimited Limited,which repairs the tank and returns the vehicle to Boucher.

A)Welding is the bailor of the vehicle.
B)Boucher is both the sub-bailee and the sub-bailor of the vehicle.
C)Oded is the bailee of the vehicle.
D)Boucher is the sub-bailee of the vehicle.
E)Boucher is both the bailee and the sub-bailor of the vehicle.