Fin 138 ch. 9

Early one morning, a car crashed through the plate glass window of Monique's ice cream shop, causing substantial damage. Fortunately no one was in the shop at that hour. Monique's commercial property insurer, AllCo paid her claim promptly, allowing Monique to repair the damage. Subsequently, AllCo pursued a claim against driver who caused the accident, through his auto insurer. The auto insurer eventually paid AllCo the full amount they had provided to Monique. This situation is an example of what concept?

- Subrogation

Insurance contracts have several characteristics that differentiate them from most other contracts. Select those attributes from the choices below.

- They are contracts of adhesion - They are based on utmost good faith - An insurable interest is required - They are are contracts of indemnity

Insurance contracts are considered contracts of ____ ,because buyer's usually have no influence over the content or form of insurance policies. Consequently, when a dispute arises over a policy, the courts will read insurance policies as they would expect the insured to do so. This is called the ____.

- adhesion -expectations principle .

-In an agency, the first party, known as the _____ creates an agency relationship with a second party by authorizing him or her to make contracts with third parties on his/her/their (the first party's) behalf. -The second party to this relationship, the _____ is authorized to make contracts with third parties on the first party's behalf.

-Principal -agent

-Intentional relinquishment of a known right. -The price each party demands for agreeing to carry out his or her part of the contract. -Situation when the insurer or its agent leads an insured to believe coverage exists, and thus the insurer cannot later claim that no coverage existed. -Situation in which insureds have no input in the design of a policy's terms. -Agreement that exists before a contract is issued.

-Waiver -Consideration -Estoppel -Adhesion -Binder

- Insurance contracts are contracts of ____, meaning the insurer will pay no more or no less than the actual loss incurred); Underpinning this concept are the following elements: -____: the insured must have a financial interest in life or property that is subject to loss. -____: the insurer has the right to whatever claim against third parties the insured may have as a result of the loss for which the insurer paid. -___: the replacement cost at the time of the loss, less physical depreciation including obsolescence. -____: clauses in insurance contracts that prevent insureds from making a profit by collecting from more than one insurance policy for the same loss.

-indemnity - insured interest - subrogation - actual cash value - other insurance provisions

Identify all of the accurate statements about the law of agency. response - correct A. The law of agency is significant because the only direct interaction most buyers of insurance have with the insurance company is through an agent or a broker. B. The law of agency makes agents liable for misrepresentations on the part of the insurer(s) they represent C. The law of agency refers to the legal consequences of people acting on behalf of other people or organizations. D. The law of agency makes agents liable for misrepresentations on the part of the insured. E. The law of agency involves a principle-agent relationship.

A, C, E

Identify the misrepresentation under which an insurance contract would be voidable. A. By mistake, you stated in an application for life insurance that you were born in Indianapolis, when you were actually born in Bloomington, Indiana. B.You apply for life insurance and state that you are in good health, even though you've just been diagnosed with a severe heart ailment. C. You stated in an application for life insurance that you were born on April 16 when in fact you were born on April 18. D. You apply for life insurance and state that you are in good health, when in fact, you have a sore throat. E. In your application for life insurance you state that your annual income as $100,000, when it is actually $85,000.

B

_________ enables an agent to secures immediate coverage for an insured without any additional input from the insurer.

Binding Authority

How does insurable Interest in life insurance differ from that in property/casualty insurance?

In life insurance, insurable interest occurs at inception of the policy. In property/casualty insurance, it occurs at the time of loss

The principle of ____ discourages insureds from causing intentional losses to gain from insurance contracts.

Indemnity

Select the answer that correctly explains what it means that Insurance contracts are personal.

Insurance contracts insure people, not property, against loss. When property is transferred, the coverage must be transferred (assigned) to the new owner as well.

What type of insurance contracts pay a stated sum when a loss occurs, rather than only paying the amount of loss actually sustained.

Valued policies

The Jameson family buys both their homeowners and auto insurance through the same agency. They've done business with their agent, Melissa McConnell for over decade. When Faith Jameson calls Melissa to let her known that their new au pair, Marta will be driving the family minivan, Melissa says "oh, don't worry, she's covered under your existing policy". A month later Marta backs the minivan into the garage door, damaging the car and the door. It turns out, however, that the Jameson's policy did not cover additional drivers. Moreover, the insurer would not have added a non-family member to their personal auto policy. Is the auto insurance company obligated to pay the claim? Why or why not?

Yes, because both waiver and estoppel

Kayla returns home after work to find her basement full of dirty water—the result of a sewer backup. She calls the agent who represents her homeowner's insurance company and asks if she can add a water backup coverage endorsement to her homeowners' policy, effective immediately. She answers all the questions the agent asks, but neglects to mention the dirty water in her basement. The insurer has the right to void this contract because Kayla is guilty of:

a. concealment

In a contract, the price each party demands for agreeing to carry out his or her part of the contract is known as: - Consideration - Value -Subrogation -representation -premium

consideration

Property insurance is often written on a(n) ____ basis, which means that there is no deduction for depreciation of the property.

replacement cost

Fill in the blank my selecting the correct answer from the drop down menu. When Jaime tells his insurance agent his home has an alarm system, he is making a ______ about his home's exposure to burglary.

representation

If an insurer wants to void a contract it has issued to a person, based upon the information she provided, it must prove that what she misrepresented was "material." That is, the insurer must prove that:

the information was so important that if the truth had been known, the underwriter would not have made the contract.