Chapter Four. Persons Insured 140 results (showing 5 best matches)
- Historically, the issue of tort immunity occupied a more important place in the determination of insurance issues. With the trend in the law toward limiting tort immunity for charitable institutions and other parties, the issue of tort immunity in insurance law has become less of a factor. However, where the tortfeasor is immune from suit, the issue as it relates to liability insurance is generally addressed in one of three ways.
- A similar decision on the divisibility of a policy occurred in a different context in the case of
- That being said, however, the court dealt separately with the issue of reimbursement of the co-insured law firm. The court stated, “It seems to us that the policy considerations which deny coverage to the individual offending lawyer do not apply with equal force to the law firm. While the law firm quite properly is held liable to the client for the misconduct of one of its partners or members, we see no reason why the law firm should not be free to acquire insurance, if it can, protecting itself from vicarious liability for the misconduct. The fee forfeiture is primarily to penalize the offending attorney, not the attorney’s colleagues who have not participated in the misconduct. It is interesting to note that some courts which prohibit insurance coverage for punitive damages as a matter of public policy make an exception and allow insurance coverage for an employer who is only vicariously liable for the wrongdoing of a servant or agent.”
- is the occasion for the payment of proceeds by the insurer. Typically, the insured may also be correctly referred to as the policyholder. He is not always, however, the person to whom the proceeds are paid. In the case of life insurance, for example, the person whose life is the subject of the policy is not the person who receives the proceeds in the event of death. In the case of property insurance, the person whose insurable interest is the subject of the insurance may assign the proceeds to another, as in the case of a mortgagor who assigns the benefits of his insurance on the mortgaged property to the mortgagee. And in the case of liability insurance, the injured third party may be permitted to bring a direct action against the insurer for the proceeds of the policy, even, on occasion, when the policyholder himself would be precluded from recovering the proceeds because of a defense available to the insurer. (
- As in the case of property insurance, where an assignee obtains assignment of a life insurance policy expressly or implicitly for the purpose of securing a debt, although the assignment is in form absolute, proceeds will be paid to the assignee only to the extent of the debt secured. Such an assignment may be referred to as a collateral or conditional assignment.
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Preface 5 results
- Insurance law ostensibly is a subset of contract law. Yet, contract law is only one of three factors that underlie insurance law. The second factor is “public policy.” Public policy weighs heavily in some areas of insurance law, particularly when it comes to compensating victims. When public policy interests are implicated, they can override the principles of contract law. The third factor, which manifests in the rules of policy interpretation such as and the “reasonable expectations” doctrine, is the often unstated intention of courts to protect unsophisticated or ill-informed consumers’ interests when facing powerful insurance companies that draft and sell complex, lengthy insurance policies.
- This book attempts to explain the various concepts, doctrines, and issues presented in insurance law in a clear way without burdening the reader with extensive citations to cases, statutes and other authorities. As such, it is intended for both practitioners and law students.
- Every chapter in the book has undergone a substantial revision since the last edition. In addition, numerous new sections have been added to the book. For example, sections have been added regarding the rules of insurance policy interpretation; lines of liability insurance other than Commercial General Liability Insurance (CGL) such as Directors and Officers Liability Insurance (D&O), Errors and Omissions Insurance (E&O or Professional Liability), Employers Liability Insurance (EPL), Environmental Impairment Insurance (EIL), Cyber Insurance, Terrorism Insurance and Flood Insurance; the key issues of “trigger,” “number of occurrences” and “allocation” in long-tail liability claims; “personal or advertising” liability coverage; “business risk” and “owned property” exclusions; the “duty of utmost good faith” and the “follow the fortunes” doctrine under reinsurance policies; and guaranty funds and “surplus line” insurers.
- Publication of the fifth edition of this book brings with it a major change: Christopher C. French, a Visiting Professor of Law at Penn State Law, has become a co-author of the book. Prior to becoming a full time law professor, Professor French was a partner at K&L Gates LLP where he litigated insurance coverage disputes for more than 20 years.
- Finally, I want to thank four great research assistants from Penn State Law who contributed to the fifth edition of this book: Andrew Carroll, Christina Gallagher, Neeraj Kumar, and Tracey Timlin.
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Copyright Page 4 results
- Nutshell Series, In a Nutshell
- The publisher is not engaged in rendering legal or other professional advice, and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional.
- © 2003 By West, a Thomson business © 2016 LEG, Inc. d/b/a West Academic
- Printed in the United States of America
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Chapter Ten. Subrogation 38 results (showing 5 best matches)
- Subrogated rights arise in the insurer by action of law, regardless of whether they are provided for in the insurance policy or in any transactions between the policyholder and a third party. They apply to all causes of action the policyholder may have against the third party in regard to the loss concerned, whether founded in tort or contract law. If at the time the insurance policy is taken out there is a contract whereby a third party has assumed the risk that is insured against—i.e., the third party is obligated to pay the policyholder a sum that will offset the loss insured against—the insurer is subrogated to the contractual cause of action of its policyholder. This occurs, for example, when an insurance policy covers a mortgagee’s interest. If the insurer pays proceeds because of damage to the mortgaged property, it is subrogated to that extent to the mortgagee’s rights in contract against the mortgagor.
- Because property insurance is the clearest form of indemnity—payment measured and limited by the value of the thing lost—subrogation applies most universally to this line of insurance. A subrogation clause is commonly included in property insurance policies, but it seldom does more than state rights that exist under the common law already.
- Because many types of life insurance are viewed as a form of investment rather than indemnity, subrogation rights do not arise by action of law in this line of insurance. Under life insurance, the obligation of the insurer is to pay a sum of money that is fixed solely by the contract between the parties and is in no way measured or limited by any actual dollar value of the life that is lost. Indeed, although the tort system attempts to value the loss of life, because the loss of life is not really susceptible to economic valuation, the concern of a double recovery by the beneficiary is not implicated.
- A distinction can be drawn between the various forms of life insurance in that, while limited payment and endowment policies are clearly investments, it is equally clear that short term life insurance is a form of indemnity. Thus, although term life insurance is similar to some types of property insurance such as marine policies that, in the event of loss, call for the payment of a sum fixed by contract rather than a sum measured by the value of the property at the time of the loss, courts still have allowed subrogation rights for these other types of property insurance but denied them for life insurance regardless of the type of life insurance at issue.
- The term of art for a right of subrogation provided by contract between the insurer and policyholder (whether in the policy itself or in a separate agreement entered into at the time of payment of proceeds) is “conventional subrogation.” While in many instances the policy provision merely restates rights that already exist at law as a creation of equity, courts generally have permitted insurers to enlarge their subrogation rights. For example, legal subrogation is generally denied in the area of health insurance under the common law, but conventional subrogation provisions in policies (for example, in regard to medical payments coverage contained in automobile insurance policies) are fairly consistently enforced. In the case of referenced above, legal subrogation under a Blue Cross policy that contained no stipulation for subrogation was denied to the hospital service. In the companion case of ....2d 713 (Mich. 1954), a cause of action against the policyholder for failure to...
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Chapter One. Nature of Insurance 232 results (showing 5 best matches)
- Theoretically, it would be possible, if not practical, for an insurer to evaluate and insure against any risk associated with any lawful activity, as long as there is no violation of that more nebulous restraint—public policy. Historically, however, the specific types of insurance actually written in the United States can be classified in three primary categories according to the risks covered: life insurance, fire and casualty (property) insurance, and marine and inland marine insurance. These types of insurance cover “first party” losses (i.e., losses directly incurred by the policyholder). Originally, an insurance company was limited by statute to writing insurance in only one of these three categories. As restrictions were relaxed, some insurance companies began writing “multiple-line” insurance—that is, insurance in every line except life insurance. This is occasionally done through an affiliated group of insurance companies, each specializing in a particular line. The...insurance
- For purposes of isolating that type of contract to which insurance law applies, it is further necessary to distinguish certain contracts that have the common elements of distribution of risk among a sizeable group of participants, but that are generally not treated as insurance One example would be broad contracts of warranty on merchandise such as tires that often go beyond defects in workmanship or materials. Another would be pre-paid service contracts for television or appliance repair that cover any necessary repairs that might arise within the designated period. These contracts are generally not subject to the statutory and common law rules that relate specifically to insurance, and the distinguishing feature is the third element in this functional definition of insurance. Neither the tire manufacturer nor the television repairman is engaged primarily in the business of insurance. Risk distribution among a large number of individuals in these examples is merely incidental to...
- The most comprehensive statute of the modified type to be adopted was that of Michigan. It has also been the most successful in terms of meeting the twin goals of reduced automobile insurance premiums and full, accurate, and timely compensation of victims for automobile injuries. The sole secret to success in the no-fault approach is to provide adequate compensation for injury and to eliminate as far as practicable the ability of the injured person to resort to an action at law against the tortfeasor. The statute originally passed in Michigan provided for the elimination of the right to sue a tortfeasor for any losses covered by the first-party no-fault insurance or for pain and suffering except in the case of deliberate conduct or injuries resulting in death, loss of a limb, or permanent and serious disfigurement (the so-called “verbal restriction”). On the other hand, Michigan no-fault insurance provided for medical coverage, compensation for up to three years for lost wages, and...
- A major difference between insurance and a contract whereby one party simply assumes the liability of another for some consideration (e.g., a suretyship contract on a note) is the substantial number of members among whom the risk is distributed under a plan of insurance. In fixing premium rates to be paid by each member to cover all losses for the period as well as administrative and other costs, the insurer is required to predict the number and size of losses that are likely to occur during that period. Just as the number of heads and tails from a particular number of coin flips will be more even and predictable as the number of flips is increased, so too does the probable accuracy of the prediction of total losses increases as the number of insurance policies issued increases. This phenomenon—known as the “law of large numbers” in the world of insurance—is simply the law of averages at work. It is this predictability that permits an insurer to fix rates that are low enough to make...
- The traditional view of insurance is that an entity pays a relatively small amount for a certain loss (i.e., a premium) to transfer the risk of a much larger loss to another entity. Under this concept, insurance is a simple contract for the transfer of risk. That concept of insurance is too simplistic in today’s world. Today, public policy concerns weigh heavily in the balance and insurance is recognized as a form of a social safety net to protect people from financial devastation and the compensation of innocent victims plays a central role for some lines of insurance. Consequently, as a result of the considerable public policy implications, insurance cannot be viewed solely as a contractual transfer of the risk of loss. Although insurance is a complex blend of contractual and public policy concepts and concerns, this book will treat insurance as a type of contract characterized by three elements: (1) risk-distribution, (2) among a substantial number of members, (3) through an...
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Chapter Two. Insurable Interest 81 results (showing 5 best matches)
- As a functional definition, it might be said that “insurable interest” is the interest that the law requires a beneficiary of an insurance policy to have in the thing or person insured in order for the contract of insurance not to be held to be void either as a wager or as an inducement to bring about the event insured against. Focusing more directly on the nature of that interest, section 281 of the California Insurance Code defines it as “Every interest in property, or any relation thereto, or liability in respect thereof, of such a nature that a contemplated peril might directly damnify the insured, is an insurable interest.” This definition will suffice until the following discussion can highlight areas of contention that require further particularity for a working definition.
- While the amount of insurance obtainable on a spouse or relative is not limited by the dollar value of the insurable interest in situations where a showing of some pecuniary interest is required, in the case of an insurable interest based on commercial or contractual rights, the dollar value of the interest usually fixes a amount of life insurance that will be permitted. For example, the aunt who insured her niece on the basis of anticipated financial assistance in her old age in
- Insurers can, of course, take proactive measures to override the common law exceptions to the insurable interest requirement by including provisions in the insurance policy that require an assignee to have an insurable interest in the life of the insured individual. Such provisions typically are considered valid and will be upheld as long as they do not contradict a state statute that provides insurance policies may be assigned irrespective of whether an insurable interest is held by the assignee. An express insurable interest requirement contained in the insurance policy does not render an assignment void, but rather, renders the assignment voidable at the option of the insurer. Thus, an insurer can waive the prohibition by its conduct if it fails to take action to void the assignment or it pays the policy proceeds to the beneficiary or into a court.
- The insurable interest requirement for life insurance, as well as other forms of personal insurance, such as accident and health insurance, is controlled by statute in most states. Thirty-seven states have statutes requiring an insurable interest in order to take out a policy of personal insurance on someone other than the owner of the policy. Most of these state statutes require only that the insurable interest exist at the time of inception of the policy, as opposed to at the time of the loss. A few state statutes do not specify a point in time.
- To circumvent the insurable interest requirement, an entire industry of wagering contracts on the lives of strangers now exists. The insurance policies in this industry are known as Stranger Originated Life Insurance (STOLI) policies. STOLIs are life insurance schemes where an unknown speculator collaborates with an individual to obtain a life insurance policy in that individual’s name. The policyholder then almost immediately assigns the policy to the speculator who has no insurable interest in the insured but typically pays for any costs associated with the policy such as the premiums and often compensates the policyholder when the policy is issued. To maximize the return on STOLI policies, speculators ...or sick individuals to apply for such policies. To address the problems associated with STOLIs (e.g., the exploitation of the elderly and infirm), numerous states have recently passed legislation that bans them regardless of whether they already are banned under the common law...
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Chapter Six. Defenses of the Insurer 97 results (showing 5 best matches)
- Under English common law, a policyholder has an affirmative duty to disclose to the insurer all material facts—i.e., those that would influence the particular insurer in deciding whether to issue the policy of insurance at all, or whether to issue it only at a particular level of premium. Although the scope of the duty varies depending on the type of insurance applied for, the rationale for the disclosure obligation under the various lines of insurance is the same:
- A second test is based on the opinion of Justice Cardozo in , 169 N.E. 642 (N.Y. 1930), which was the basis for the New York statute defining the concept of warranty. (N.Y. Insurance Law § 150 (McKinney 1966)). By his definition, a clause is a warranty if it refers to a fact affects the risk, but which need not actually cause the loss in order to provide a defense for the insurer. For example, a provision that a life insurance policy will not cover the death of the insured if it occurs the insured is flying in a private plane would provide a defense to payment of a death benefits even if the insured died of a terminal disease, as long as it occurred while the insured was flying in a private plane. The flying merely increased the risk, but it need not have been the actual cause of death. Such a clause would be classified as a warranty. On the other hand, a provision that a life insurance policy will not cover death that results from (or is caused by) the insured’s flying in a...
- In some instances, the application for insurance may contain a provision that requires the policyholder to represent that it has disclosed all material information. Under the case law, applications with such a provision, as compared to applications without such a provision, do not enlarge the duty of the policyholder to disclose
- While this affirmative disclosure obligation is the rule in England for marine and other types of insurance, American courts only have applied the rule to marine insurance. With respect to other forms of insurance such as property insurance, for example, the subject matter of the insurance is generally available for inspection by the insurer so the insurer has an obligation to conduct its own assessment of the risk. Similarly, in the case of life insurance, the insurer can require that the insured submit to an examination by the insurer’s physician. Consequently, the policyholder’s disclosure obligation during the underwriting process is limited to answering the insurer’s underwriting questions, whether in an application or in person, truthfully. Courts will not void coverage on the basis of concealment when an insurer fails to ask a question which results in the non-disclosure of material information. Placing the burden of asking all pertinent questions during the application...
- Historically, the requirement of strict compliance with warranties was a tool used to protect and encourage “insurers” (who were not really insurers in the sense that we use the term today in that they were wealthier individuals not primarily in the business of insurance) to issue insurance policies. Specifically, with regard to marine insurance, insurers frequently were unable due to the practical limitations of the time to personally inspect the vessels that were the subject of the insurance policy, as previously discussed in the underlying justifications for the English rule of concealment.
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Chapter Eight. Measure of Recovery 52 results (showing 5 best matches)
- The courts are in disagreement as to whether an “other insurance” clause is to be interpreted to be applicable only if the other insurance is valid and enforceable. It is the general rule that if the other insurance policy is on its face, it is not within the contemplation of the “other insurance” clause. If, however, the second policy is merely because of a misrepresentation or breach of a condition or warranty, some courts hold that it is nevertheless sufficient to trigger the “other insurance” clause, particularly if it has not yet been voided. Other courts hold that an “other insurance” clause refers only to other enforceable and collectible insurance, and that a voidable policy or one that does not cover the loss for some other reason such as exhaustion, prior release or insolvency does not qualify. In an attempt to avoid this uncertainty and expand the application of “other insurance” clauses, some insurers may use policy language such as “other insurance, whether valid and...
- In the case of life insurance, the amount to be paid in the event of the insured’s death is specifically fixed by the contract. Similarly, in the case of accident insurance, the proceeds are measured by a specific amount agreed to be paid for loss of a particular limb or faculty, or, as in the case of health insurance, by the medical expenses actually incurred. The more difficult problems of determining the amount of proceeds to be paid in accordance with the principle of indemnity lie in the area of property insurance. Under most forms of property insurance, the contract provides for the payment in the event of loss of an amount up to the “actual cash value” of the property at the time of loss or, in some policies, its replacement cost.
- In order to reduce the potential of a policyholder recovering more than its loss by over insuring property through the purchase of multiple policies, thereby creating a moral hazard for the policyholder because the policyholder would profit from the property being destroyed, many lines of insurance contain “other insurance” clauses. Such clauses purport to eliminate, or at least reduce, the effective coverage of a policy if the policyholder has other insurance for the same loss. These clauses generally operate in one of three ways: 1) to coverage altogether in the event of other insurance (in some cases, even if the other insurance is found to be unenforceable or uncollectible), 2) to reduce the policy to one of over the other insurance, or 3) to limit the insurer’s liability to the payment of only the proportion of the loss that the face value of the policy bears to the total amount of insurance outstanding on the risk. The last type (pro rata) is the most common in use today,...in
- Insurance companies use arbitration and appraisal clauses in a variety of policies including homeowners, uninsured motorist coverage, and no-fault auto insurance. Homeowners policies, for example, generally include appraisal clauses which are triggered when the value of the property damaged is in dispute. Uninsured motorist coverage provisions in auto policies often include arbitration clauses requiring the parties to participate in arbitration where liability or damages are in dispute. Likewise, no-fault auto insurance policies often include arbitration clauses aimed at resolving disputes relating damages.
- In order to trigger an “other insurance” clause, the second insurance policy must benefit the same party insured, cover the same property interest in the property, and cover the same risk.
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Chapter Eleven. Bad Faith Causes of Action 73 results (showing 5 best matches)
- In addition to common law and statutory bad faith causes of action against insurers, most states also have adopted the model Unfair Insurance Practices Act, which prohibits unfair claim settlement practices if performed with such frequency as to indicate a business practice. Although the state insurance commissioner is the entity empowered to enforce the statute in most states, there are a few states that allow a private cause of action under the statute or have incorporated portions of the statute’s provisions into the common law bad faith claim.
- Early case law on this subject was consistent in supporting the insurer’s absolute right to make an unfettered decision on settlement. In 1923, for example, the highest court in New York looked solely to the wording of the policy to define the rights of the parties and found that “there is nothing in the policy by which the insurance company obligated itself to settle, if an opportunity presented itself.” , 140 N.E. 577 (N.Y. 1923). In 1931, the Massachusetts Supreme Judicial Court went even further in holding that “an insurance company, * * * has an absolute right to dispose of an action brought against its assured * * * in such way as may appear to it for its best interest.” , 178 N.E. 737 (Mass. 1931). It concluded that the insurer need not even consider the interests of the policyholder if the two are in conflict.
- It was again California courts that established the leading precedent for a cause of action in bad faith for failure to pay the claim of a policyholder. In , 510 P.2d 1032 (Cal. 1973), the policyholder brought action against his insurer for failing to pay a loss on his restaurant under a fire insurance policy. The restaurant had burned under suspicious circumstances, and allegedly, the insurer implied to the authorities that the policyholder had deliberately set the fire. The ...while criminal proceedings were pending, the policyholder refused to be interviewed by the insurer regarding the fire. The arson charges were ultimately dropped, but the insurer refused to pay under the policy, claiming that the policyholder had breached the examination under oath policy requirement when he refused to be interviewed by the insurer while the criminal charges were pending. The policyholder then brought suit alleging that the insurer had acted in bad faith by implying to the authorities... ...in...
- The second major category of recovery is compensation for the emotional distress of the policyholder that results from the insurer’s bad faith failure to pay proceeds. The ordinary rule regarding emotional distress in other contexts is that recovery can only be had if the plaintiff proves that the distress was severe and accompanied by other provable harm. The first case in which the court suggested the possibility of such recovery absent proof of these additional items was has been followed with respect to emotional distress damages by some courts that choose to adopt the bad faith tort theory in first-party insurance cases. Other courts that view a bad faith action as a breach of contract suit, however, have allowed recovery of damages for emotional distress on the theory that peace of mind is part of what a policyholder purchases with an insurance policy. Some courts, however, do not allow emotional distress damages for a bad faith claim unless such damages otherwise would be...law
- One source of a bad faith cause of action is the implied obligation on both sides of every contract that each party will act in good faith and deal fairly to ensure that the other party to the contract is not hindered in its ability to reap the benefits of the contract. Although the implied covenant of good faith and fair dealing runs to both parties to any contract, in the context of insurance policies, courts almost universally have chosen to apply it solely against insurers as a source of a cause action by policyholders. The second source of a bad faith cause of action, the source cited by courts in many jurisdictions, is tort law. The primary theoretical justification for bad faith liability for insurers arises out of the fact that policyholders typically have no ability to obtain coverage from competing insurers once a loss has occurred; therefore, the insurer is left in total control of investigating and defending the claim against the policyholder or in denying coverage.
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Chapter Twelve. Reinsurance 14 results (showing 5 best matches)
- The laws governing reinsurance still follows many of the vestiges of the English common law regarding insurance. This is primarily due to the fact that insurers are viewed as sophisticated entities with respect to insurance matters, unlike non-insurer purchasers of insurance. In addition, reinsurance disputes are not litigated in courts as commonly as disputes between insurers and policyholders so there has not been as much opportunity for the law to develop. Indeed, most reinsurance disputes are arbitrated and the outcomes are confidential.
- There are various situations in which an insurer desires to reduce the amount of its exposure to liability for risks on outstanding policies. This can occur, for example, when business reversals or excessive losses make its current potential liability for losses under existing policies a threat to its solvency. In such situations, an insurer can reduce or eliminate the threat by taking out liability insurance with another insurance company (called a “reinsurer”) to indemnify itself against liability on its own policies. Such insurance is referred to as reinsurance. This is not to be confused with the scenario in which the original policyholder simply purchases multiple policies with two or more insurers that insure the same risk. Nor does it cover the scenario where an insurance agent cancels a policy with one insurer and substitutes a policy with another insurer. Reinsurance occurs only when an insurer becomes an insured (the reinsured) through a contract with another insurer (the...
- Another area of reinsurance law that is quite different than insurance law with respect to the relationship between insurers and policyholders is the doctrine of “follow the fortunes.” The follow the fortunes doctrine requires the reinsurer to pay the ceding insurer any time the ceding insurer pays an underlying claim in good faith. The reinsurer is not permitted to second-guess the ceding insurer’s reasonable liability determinations, decisions to waive possible defenses to coverage in the underlying actions, or the amounts it agrees to pay the underlying policyholders. The doctrine is justified under the theory that the ceding insurer’s ability to settle underlying claims would be substantially hindered if it could not do so without being second-guessed by the reinsurer.
- There are two types of reinsurance: 1) facultative and 2) treaty. Facultative reinsurance involves a reinsurance contract where the reinsurer agrees to indemnify the ceding insurer for all or part of the risk that the ceding insurer accepted under a single insurance policy. Treaty reinsurance involves a situation where the reinsurer agrees to reinsure the entire portfolio of a line of business of the ceding insurer such as property or commercial general liability insurance. Most reinsurance is treaty reinsurance.
- Although any insurer authorized to issue original insurance generally may also engage in reinsuring risks of the same nature and many do, some insurers specialize in selling reinsurance.
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Chapter Three. Insurable Risks 274 results (showing 5 best matches)
- Responsibility for deliberately causing a loss in the context of excluding coverage under an insurance policy does not exactly parallel responsibility for tort law purposes. For instance, where a policyholder intends to inflict a relatively minor injury, but the resultant harm is far out of proportion to the harm intended, the loss might be considered fortuitous for purposes of insurance coverage, but tort law would hold that the defendant takes the frail plaintiff as he finds him for purposes of liability.
- Attorney Perl and his law firm represented Mrs. Rice in a personal injury claim. Perl negotiated with the insurance adjuster for a settlement of $50,000. It was later discovered by Mrs. Rice that the insurance adjuster was employed as an investigator by Perl’s firm during the time of the negotiation of Mrs. Rice’s case. Mrs. Rice brought an action on numerous theories against Perl and his law firm. In view of Mrs. Rice’s inability to prove actual damages, all claims against Perl and the law firm were dismissed except for the claim based on breach of fiduciary duty. The court found that because the relationship with the adjuster had not been revealed to Mrs. Rice, there was a breach of the attorney’s fiduciary duty to the client. The court ordered the return of the $20,000 attorney’s fee paid by Mrs. Rice.
- The owner brought an action on the insurance policy, and the insurer defended in part on the basis of the “increase of hazard” clause, claiming that the increase of hazard resulted from an increase of moral hazard. The court quoted from
- Courts do not look to any particular key words in the policy to classify it as all-risk or specified risk, but rather make the determination on the basis of the conclusion that would be reached by a reasonable policyholder as to whether he was buying all-risk or specified risk insurance. In some instances, the historical development of the policy is pertinent. For example, jewelers’ block insurance developed as a new and distinct type of insurance to fill the peculiar needs of jewelers for coverage against loss whether caused by theft, fire, or unforeseeable cause. This type of insurance was deliberately created as all-risk insurance.
- As discussed in Chapter Two, any policy of insurance that is issued to someone without the required insurable interest in the subject of the insurance is unenforceable. Similarly, contracts of insurance that violate statutes or provide less coverage than statutorily mandated are also unenforceable. For example, a life insurance policy is generally assignable to one without an insurable interest in the life of the the assignment is obtained for purely wagering purposes or the original purchase of the insurance was with the intent to immediately assign it to a party without an insurable interest. Businesses that developed for the purpose of buying up industrial life insurance policies from their impoverished holders were found to be “vocational wagering,” generally rendering the assignment invalid so that the policy could not be enforced by the assignee. Another classic example is the tontine and its multiple variations, whereby a number of individuals take out insurance on themselves...
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Chapter Thirteen. Insurance-Like Bonds 73 results (showing 5 best matches)
- A fidelity bond is construed under general principles of insurance law. Thus, ambiguities in the bond will be construed against the surety, Further, clauses in the bond are to be given a reasonable meaning so as to further the intentions of the parties.
- A suretyship relationship may arise in numerous non-commercial or non-insurance situations. For instance, it is possible that one may become a surety by operation of law even where the principal objective of the contract is something other than to create a suretyship relationship. In this case, the surety is said to be involuntary. Alternatively, one may deliberately undertake a suretyship, but do so only as a matter of accommodating the principal. Insurance companies, however, often undertake to act as a compensated surety in their regular course of business. As voluntary sureties, they typically use an instrument known as a ) where the chief objective of the contract is to become a surety.
- Whereas ordinary insurance requires the insurance company to establish a likelihood of loss and base premiums on an expected amount of loss, the surety has the ability to recover money paid to the obligee from the principal. There also is no benefit to the public or need for the surety to spread the risk of loss as is the case with insurance. In theory, therefore, the surety could collect premiums and recover all of the proceeds it pays to the obligee from the principal. In reality, however, an element of risk exists because often times the reason the surety has had to pay or perform is that the principal is simply unable to pay or perform for the obligee or surety.
- Although they share many of the attributes of insurance policies, surety and fidelity bonds technically are not insurance policies. This chapter is dedicated to a discussion of surety and fidelity bonds, however, because insurers often sell them and they serve a function that is similar to insurance policies.
- As is the case with insurance policies, claims on a fidelity bond can be subject to the defenses of misrepresentation and breach of condition by the bondholder. In addition, the surety may assert a variety of defenses including acquiescence of, or participation by, the bond holder in the acts of the bonded employee, unauthorized release by the bond holder of the bonded employee which would defeat rights of subrogation in the surety, or change in duties or employment of the bonded employee.
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Chapter Fourteen. Regulation of Insurance 49 results (showing 5 best matches)
- Although the insurance industry is regulated in some respects by federal statutes such as the Affordable Care Act and ERISA, regulation of the insurance industry primarily emanates from three sources—the courts, the various state legislatures, and the state regulatory agencies created by statute in each of the states. Perhaps the front line of regulation is that manned by the courts in devising and applying the rules of policy interpretation and the various common law doctrines in individual cases for the protection of policyholders, and in occasionally simply deciding that the insurance policy should be deemed to provide the coverage a reasonable policyholder would expect it to provide. This form of regulation by the courts is the subject of several other chapters of this book. This chapter will, therefore, focus on the history and current state of regulation at the hands of the various state legislatures and the agencies they have created.
- In addition to admitted insurers, there are “non-admitted” insurers known as “surplus line” insurers that are not licensed in the state. Surplus line insurers are permitted to do business in the state only when a prospective purchaser of insurance is unable to obtain coverage from an insurer in the admitted market. A purchaser of insurance from a surplus line insurer does not receive the same kind of protections that are available when the insurance is purchased from a licensed insurer. For example, the premium rates charged by surplus line insurers are unregulated, the policy provisions are not reviewed and approved by state regulators, insolvency assurances are not provided, and guaranty fund protections are unavailable.
- Prior to 1944, the insurance industry enjoyed relative freedom from interference by the federal government. The consistent, if somewhat fictional, party line of the courts was capsulized by the United States Supreme Court in the leading case of statement that the “issuing [of] a policy of insurance is not a transaction of commerce.” The purpose in creating and fostering this fiction seemed to be to preserve the only existing body of regulatory and tax law imposed on the insurance industry—that of the states. The primary advantage of this ruling to insurance companies was that it left them free to cooperate with each other in gathering and processing claims data to predict the probability of losses for the various risks assumed, and to use rating bureaus to help in the actual determination of appropriate premium rates. They were also able to cooperate in the fixing of specific categories of coverage and the development of standard policy forms. The early “no commerce” decisions were...
- “(b) No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance….”
- With the enactment of the McCarran-Ferguson Act, which placed the power of insurance regulation clearly in the hands of the “several States,” the insurance industry became acutely aware of the need for uniform, rather than fragmented, legislation to facilitate the ability of insurers to do business across state lines. At this point, the National Association of Insurance Commissioners (NAIC), and an organization created at the behest of NAIC by representatives of all parts of the insurance field, called the All-Industry Committee, formulated model statutes in each of the appropriate areas of insurance regulation. These statutes have been widely adopted by the states, particularly in the area of rate regulation, and will be discussed below.
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Chapter Seven. Waiver and Estoppel 44 results (showing 5 best matches)
- Although it generally has been held that the Parol Evidence Rule precludes the introduction of evidence regarding a waiver that arises out of actions by the parties that occurred prior to or contemporaneous with the execution of the policy, relatively few cases have addressed the issue regarding whether estoppel operates as an exception to the Parol Evidence Rule, and the courts that have ruled on the issue are split. Some courts have held that promissory estoppel does not provide an exception where there is a written, integrated policy. On the other hand, other courts have held that both forms of estoppel do serve as exceptions to the Parol Evidence Rule and they treat oral agreements as separate, enforceable agreements that do not affect the terms of the policy. For example, the Eleventh Circuit, applying Florida law, applied promissory estoppel to enforce an insurance agent’s promise that a life insurance policy would not have a war exclusion where the policy did in fact have a...in
- While the parties to an insurance contract have the ability to waive rights and privileges under the contract, a number of courts have taken the position that they cannot, by agreement, change existing facts. For example, in , 62 N.E. 763 (N.Y. 1902), the application for life insurance contained a clause that purported to be an agreement that the doctor who performed the medical examination on behalf of the insurer should be considered to be solely the agent of the policyholder. The purpose of the clause was to have the policyholder, by waiving the actual agency relationship between the doctor and the insurer, assume full responsibility for any misrepresentations made by the doctor in his medical report. The court held the clause void as contrary to public policy, stating that the parties “cannot by agreement change the laws of nature or of logic, or create relations, physical, legal, or moral, which cannot be created.”
- 1. In situations in which the insurer delivers a policy to the policyholder while the insurer, through its representative, is aware of a misstatement in the application or an existing breach of a condition or warranty in the policy that would make the policy voidable from its inception, the grounds for voidance being unknown to the policyholder, courts most frequently hold that the insurer has impliedly misrepresented to the policyholder that the policy is enforceable. In view of the reliance of the policyholder in paying the premiums and in not making other arrangements for insurance, the insurer is held estopped from denying that the contract is enforceable.
- Estoppel is generally held to apply to an insurance policy in the circumstance in which an insurer is, or ought to be, aware of its right to defend or rescind on the basis of a misrepresentation, breach of warranty or condition or an exclusion, and expressly or implicitly represents to the policyholder, who is unaware of the grounds for the defense or rescission, that coverage is provided, and the policyholder relies upon the representation of the insurer to his or her detriment. Estoppel thus acts to preclude the insurer from asserting a right or defense where the insurer’s actions caused the policyholder to reasonably rely on the insurer to his detriment. To successfully assert an estoppel claim, the policyholder has the burden of demonstrating a prejudicial change of position because of his reliance. Without such proof, the defense fails. A policyholder is considered to have relied to his detriment if, for example, he has paid subsequent premiums or even failed to acquire other
- 3. In cases in which the agent for the insurer deliberately falsifies the answers of the policyholder on the application the knowledge of the policyholder, either to assist the policyholder in getting the insurance or to obtain a commission on the sale of the policy for himself, it is generally held that the knowledge of the agent is attributed to the insurer, and the insurer is estopped from denying that the policy is enforceable.
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Chapter Nine. Insurer’s Duty to Defend 72 results (showing 5 best matches)
- decision, some courts concluded that a conflict arose the insurer reserved rights to disclaim coverage. The statute follows a more restrictive holding in stating that an impermissible conflict arises only in cases where the outcome of an issue relevant to both the underlying lawsuit and the issue of coverage could be controlled by the defense counsel provided for the policyholder by the insurer. Furthermore, it clarifies that no conflict shall be considered to arise “as to allegations of punitive damages” or “solely because an insured is sued for an amount in excess of the insurance policy limits.” Cal. Civ. Code § 2860(b). As noted in the subsequent case of 20 Cal. App. 4th 1372 (1993), the duty to provide independent counsel is based not on insurance law, but rather on the ethical requirement that an attorney avoid representing conflicting interests.
- The insurer’s obligation to pay attorney’s fees is limited to the amount the insurer would pay an attorney retained in the ordinary course of business to defend a similar case in the jurisdiction where the third party insurance action is being litigated.
- When a third party claimant asserts multiple causes of action against the policyholder and at least one of them could potentially fall within coverage, the insurer remains obligated to provide a defense. In fact, under many lines of liability insurance such as CGL and homeowners policies, the insurer has an obligation to defend the entire action so long as a single claim is potentially covered. Under other types of liability insurance such as D&O policies, the insurer generally only has an obligation to reimburse the policyholder for the defense costs the policyholder incurs defending claims that are actually covered by the policy. In such circumstances, an allocation between covered and non-covered claims occurs.
- and the subsequent codification of its holding, the case has had a widespread impact on the insurance industry. Today, insurers are often forced to expend substantial sums in order to finance the services of outside counsel, while also retaining their own counsel to represent the interests of the insurer, thereby increasing the overall costs of liability insurance. In addition, what was formerly a simplified system involving one counsel appointed by the insurer to control the litigation has become considerably more complex. Under the new sensitization to the conflict of interest, while it is to be presumed that independent counsel will manage the defense, the relative roles of the insurer’s counsel and independent counsel in that litigation in terms of reaching the ultimate decisions on tactics, witnesses, settlement, etc., remain unclear.
- Some courts take the position that an unnecessary allegation that would defeat the duty to defend should be disregarded in determining the insurer’s duty to defend in order to prevent upsetting the reasonable expectations of the policyholder under the policy if the policyholder challenges the allegation. Similarly, some courts take the position that an unnecessary allegation which would dictate an affirmative duty to defend that is challenged by the insurer should be disregarded because of the high possibility that the claimant introduced the false allegation fraudulently or in collusion with the policyholder purely for the purpose of creating insurance coverage. Other courts take the opposite point of view, crediting even unnecessary allegations of the underlying claimant in determining whether there is a duty to defend, particularly in the latter instance favoring a duty to defend.
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Chapter Five. Procedure for Filing Claims 34 results (showing 5 best matches)
- Insurance policies generally require that the policyholder give notice to the insurer or an authorized agent of the insurer as soon as “reasonably practicable” after an occurrence or a loss. Oral notice is sufficient unless the policy specifies that notice must be in writing. In the liability insurance context, the policyholder often learns of a loss or potential loss by receiving a demand letter, summons, or complaint. The policyholder typically is required to send such documents to the insurer. In the property insurance context, the policyholder typically is required to give notice once a loss is discovered. To determine when a policyholder’s notice obligation is triggered, courts typically consider when a reasonable policyholder would believe a loss has occurred.
- Another purpose of a no-action clause is to prevent the jury from becoming aware of the availability of insurance to cover the loss that would occur if the insurer is named as a defendant in the case. There is a perception that a jury would be more inclined to find negligence and be more generous in awarding damages if it were certain that an insurer would be paying the judgment instead of the policyholder. This concern is shared by many courts and legislatures as well, as evidenced by the fact that many jurisdictions have adopted rules that preclude the admission of evidence in trials regarding the availability of insurance to cover the alleged losses.
- In some jurisdictions, the insurer’s misrepresentation defense is limited to misstatements contained in the proof of loss that are to the risk insured. In other jurisdictions, misrepresentations made by the policyholder post loss are not even a basis for voiding coverage or denying the entire claim because the misrepresentation defense is limited to misrepresentations made by the policyholder during the underwriting stage such as when applying for insurance.
- Liability insurance policies consistently require as a condition precedent to the payment of proceeds that the policyholder cooperate and assist in the investigation and defense of any action against the policyholder for which there is coverage under the policy. In policies that do not contain an express cooperation provision, courts often will imply such an obligation. The duty to cooperate is important in liability policies because the insurer often has a duty to defend the policyholder under such policies and the defense is often significantly based on the evidence the policyholder can provide.
- Flood insurance policies purchased through the National Flood Insurance Program (NFIP) are a noticeable exception to the general rule that the insurer must demonstrate prejudice in order to successfully deny coverage on the basis that the policyholder’s submission of the proof of loss was late. Policyholders who fail to submit a proof of loss within the 60-day time period required under the NFIP generally are barred from obtaining coverage under their flood policies.
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Title Page 4 results
Outline 112 results (showing 5 best matches)
- 2. Fire and Casualty Insurance (Property Insurance)
- 3. Insurer Primarily in the Business of Insurance
- E. Insurable Interest in Relation to Property Insurance
- F. Insurable Interest in Relation to Life Insurance
- c. Areas in Which Public Policy Has Affected Insurance Policy Interpretation or Application
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Advisory Board 11 results (showing 5 best matches)
- Distinguished University Professor, Frank R. Strong Chair in LawMichael E. Moritz College of Law, The Ohio State University
- Robert A. Sullivan Professor of Law Emeritus,
- Professor of Law Emeritus, University of San Diego Professor of Law Emeritus, University of Michigan
- Professor of Law, Chancellor and Dean Emeritus, Hastings College of the Law
- Professor of Law, Yale Law School
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Table of Cases 61 results (showing 5 best matches)
- Aetna Casualty & Surety Co. v. State Farm Mutual Automobile Insurance Co. .......................................... 349
- American Economy Insurance Company v. Liggett ..... 283, 294
- Aqua Craft I, Inc. v. Boston Old Colony Insurance Company ...................................................................... 186
- Arnold v. Indemnity Fire Insurance Company of New York ..................................................................... 191, 192
- Asermely v. Allstate Insurance Co. ................................ 445
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- Publication Date: December 15th, 2015
- ISBN: 9781634599191
- Subject: Insurance Law
- Series: Nutshells
- Type: Overviews
- Description: Insurance Law in a Nutshell is a clear, concise and comprehensive discussion of the fundamentals of insurance law. It covers various lines of insurance such as Auto, Commercial General Liability, Health, Life, and Property. It also covers topics such as bad faith, claims submission/handling, duty to defend and settle, insurable interest, insurer defenses, loss valuation, regulation of insurers, reinsurance, risk transfer, subrogation, surety bonds, and waiver and estoppel. This new edition also has new sections that cover the rules of insurance policy interpretation; other lines of liability insurance such Cyber, Directors and Officers Liability (D&O), Errors and Omissions (E&O or Professional Liability), Employers Liability (EPL), Environmental Impairment (EIL), Flood, and Terrorism; the key issues of “trigger,” “number of occurrences” and “allocation” in long-tail liability claims; “personal or advertising” liability coverage; the “business risk” and “owned property” exclusions; the “duty of utmost good faith” and the “follow the fortunes” doctrine under reinsurance treaties; guaranty funds; and “surplus line” insurers.