Insurance Law One exam, open book Risks are everywhere All these things can result in economic

c ruin. Transfer the risk from the entity to the insurance company. Insurance is now more of a business. Insurance companies manage a risk by limiting their exposure. Both in limiting the amount of liability and deductibles. Pools of people share the risk. Risk allocation dictated by the premium. The riskier the object, the greater the premium. Premiums are largely market driven. Underwriting limits the risk. Insurance fraud - moral hazard buy insurance on something and have no desire to protect it. Insurance companies dont want to pay for those losses, they create incentives for you to not do that. Insurance companies will not engage in punitive damages there are exceptions, but if you are doing something morally reprehensible, insurance wont cover that. Warranties Guarantee from the policy holder to the company issuing the policy. Guarantee of your behavior. Blastiffs The debate arose over the 3rd floor of the building. In the policy she warranted that a janitor lived there. It was actually a massuse parlor and the janitor occupied the back part of it. Was it actually a warranty or was it just a representation. Warranties are presumed to be important they presume that whatever you are warranting is important to the risk. If you warrant that you have a certain amount of sailors on the boat, they presume that is essential to the risk. Janitor was living there. Basically the carriers were trying to find a loophole. Court didnt buy it. Neil

Met with an agent for nationwide to apply for homeowners insurance on a mobil home. Neil didnt understand the questions because he did have 3 previous fire losses. Neils home burnt down later, and Nationwide denied Neils claim. Did the policy owner have a duty to disclose this change from not high blood pressure to high blood pressure. High blood pressure is the kind of thing that people would understand that they are creating a greater risk if they dont disclose. Representation v. Warranty Doctrine of ambiguities if there is a question of whether or not the policy remains you have to plead that. Admissions are just as bad as lying during representation of the risk. The penalty for misrepresenting or breaching a warranty is that you lose your coverage. Do you have to actually read what you sign? Some cases say no, but its a good practice. Initially no one understood what the risks were organizations started tracking data largely due to insurance companies going belly up. For awhile beuros (ISO) would create a set price and this created a monopoly. Starr Tech/AIG Policy 3. Limits of Liability To suggest the policyholder has no control is not true because you can hire someone to write it for you and then search out a company who will issue it. Vargas v. Insurance Company of North America Family flying to Puerto Rico. Plane crashed, family died. Estate brought the action against the insurance company for the life insurance that they had. Company denied coverage pointing to specific language in the policy stating that the loss did not occur in the united States. Ambiguous provisions are construed most favorably towards the insured and not the insurer.

Should have covered them for any reasonable trip between the US and an outside vacation country Occurrence Means an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability during the policy period. Asbestos Port Authority Removing asbestos wanted someone to get rid of it wanted insurance to pay for it. The District Court held that unless asbestos in a building was of such quantity and condition as to make the structure unusable, the expense of correcting the situation was not within the scope of a first party insurance policy covering physical loss or damage. Insurance is not a warranty. Policyholder has the burden of proving that there is coverage. Hurricane case from lecture Francis hits a beach in FL on the Eastern/central part of the state. Lots of damage to high end unit condos. 5 of them side by side. Drove over to the carriers office to make the claim. Carrier doesnt even go out to the site on the 4th and 5th. Policy holders start cleaning up and 3 weeks later hurricane Gene comes through and hits the same place again before they even clean up the first time. They present another claim. They present a single claim for each building. Not occurrence based policies they only made one claim. Ended up settling. Seattle What policy to pay Dumping stuff in landfills contamination widespread. Contamination occurred from the beginning until it was beginning to be cleaned. How do you decide how much each policy should pay for the loss? PA law says if it says all physical loss you can go back to any year and get the coverage for that policy. Initial exposure Trigger in fact Manifestation trigger Duane Reade Inc v. St Paul Fire & Marine The interpretation of the clauses

Reed argued that it was contemporaneous with the time it takes to rebuild the WTC. Restoration period end when the policy ends? Restoration period deals with the amount of time that it takes to restore the property that was damaged. Companies insure your business, however they dont insure against a loss of business. You have to look at the whole circumstance. If you recover quicker and make a lot of money because no one else recovered you cant look at that as a factor of how much you would have lost because the other companies are still down, shouldnt be taken into account. Finish chapter 4 1. establish market value 2. replacement cost minus depreciation 3. broad evidence rule options 1 or 2 plus bringing in appraisers to establish the values. Gaut v. John Hancock Mutual life insurance company Applicants who pay premiums and successfully pass other conditions are allowed immediate coverage. If the insurer didnt intend to provide coverage, why require a premium? Engeman v. Connecticut Engleman sent out a letter and had her attorney look into having the person who was the beneficiary of the policy changed. There was no evidence that she ever abandoned her attention. Someones inherent condition doesnt stop them from being covered. If they are sick and thats what killed them, thats one thing, however if the disease weakens them and that kills them everyone has a little something wrong with them, you cant lose life insurance coverage because of that. You can engage in suicidal behavior as long as it isnt with the intent of dying. AIDS guy Borralis knew he was HIV potitive and lied on his application sent someone else to take the exam guy didnt look anything like Moralis died 2 years later after paying all premiums.

Court discovered that AMEX could have found the fraud earlier, but they didnt. Insurer needs to investigate and act with reasonable promptness. Company tried to raise the imposter defence court says that it doesnt apply here. If premiums are paid for 2 years, cant really say that the named insurer wont recover. If you are going to defraud them, they have 2 years to discover it. Health insurance They can do less due diligence on you if you are employed some place because you are part of a group. Once youve had employment based insurance, that new company has to provide it to you HIPA says that. Lawson Mother bought insurance on Oct 7th Mother took her daughter to the hospital that day and she was diagnosed with respitory infection 2 weeks later when the policy became effective, she took her daughter back to the hospital where she was diagnosed with leukemia. Insurance said it was pre existing. Court said it wasnt because she wasnt being treated for it. Requires awareness that she is being treated for it. Not pre existing. Loss in progress If you are already sick you are already a loss in progress. Penalty for not getting health insurance most of these changes take place in 2014 pre existing condition clause is gone. Carriers cant resend their policies except for fraud. Also eliminated lifetime limits on policies. No copays or deductibles for preventative stuff. Disability Insurance Focused on white collar people cornered by white collar market People who dont need it are the ones who arent seeking it out. Contractors need disability insurance. You dont get paid your full benefits, you get a fraction of it to try to get you back on your feet. Mossa Mossa was a contractor fell 1 story and fractured both of his kneecaps. Submitted a claim for disability benefits which were paid for 2 years. He was advised after that, that it would end because he cant return to gameful employment. Insured under disability policy become uninsured for not getting any job? Heller Dr. Got carpal tunnel, wouldnt get surgery.

Court says that he doesnt have to get surgery because there was never a contract stating that he had to. Doesnt have to limit the extent of the disability if the insurer doesnt make him Under the care of physicians doesnt stretch as far as surgery Insurance company also cant dictate the amount or what type of care he should receive. E and O policies Auto insurance Home owners EIL Environmental Impairment Mcdonald Industries inc v. Insurance Co of North America Plaintiff was a brass valve manufacturer EPA ordered plaintiff to make sure the dumping of waste wouldnt harm the environment or the property. CERCLA F & H Construction co Caps did not meet strength requirements modded them and finished on time. Construction co seeks damages we will pay those sums that the insured becomes legally liable to pay and occurs during policy period Does welding inadequate caps constitute as property damage even though the caps were modded to work? You can have a loss of use of something and not replacing it doesnt mean you didnt lose the use of it. American Home products Manuscript Policy holder gets to construe the policy. Exposure theory should be triggered when the drug was taken The Insurance co was arguing manifestation. There is a damage process taking place before you can tell. Policy also didnt say it was manifestation. In this situation you have to have a MD come in and discuss how the injury occurred. 4 trigger theories 1. Exposure 2. Injury in fact 3. Manifestation

4. Continuous trigger covered from initial exposure throughout the time the disease is manifesting, until it shows up. Refusing to defend waives your rights as an insurance carrier. Allocations Pro Rata Spread out the coverage over the different carriers. By years the year it was manifested, thats who has to pay. Metropolitan life Asbestos case metropolitan tried to argue that there was only 1 occurrence so that they wouldnt be responsible for the full amount. In the policies there was a batch clause or continuous exposure clause. Total liability of the company shall not exceed the limit of liability. Was each claimants exposure a separate claim or was it one big one. Court determined that each claimants exposure was an occurrence. interpreted under NY and Connecticut law. The last link was the actual exposure to the asbestos the failure to warn happened early on, wasnt what led to the claimants problems. Should have told them about the dangers of asbestos, or they misrepresented the dangers. They failed to do something and what they did do was misleading. You look at the cause or causes to look at how many claims you have. Cause of liability wasnt the exposure of the asbestos, it was the failure to warn. Policy provides all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence 1. Unfortunate events test NY rule, not the majority rule. Says you look to the events/number of injuries to determine how many claims. Stonewall Insurance. Shifting the burden of proof. It makes a bigger difference if the burden of proof is on the other party. On exclusions the burden of proof is on the insurer. If the insurer had the burden of proof, why did the policy holder have to provide any evidence? You cant let the insurance company put on evidence that you dont respond

to. Even if you dont have the burden of proof, you cant just sit back and hope the other side loses, you have to respond. Expected or intended injury bodily injury or property damage expected or intended from the standpoint of the insured. The other thing you do is you put on people who talk about what you knew back in the 50s or whatever problem is some of those guys are on the verge of senility. If you intended the act you are barred because you intended the act this is not the majority rule the majority rule is if you intended the harm or thought it would cause injury Hakim No matter what, when property is contaminated, there will be future problems if you dont deal with it at the source. 1. Basically if Hakim didnt clean it up it would eventually contaminate ground water etc Needs to be covered. 2. If it goes back on remand who has the burden of proving that its just on your own property? Its an exclusion should be the insurred court doesnt agree. 3 scenarios 1 offsite contamination, no on site no problem 2 on and off no problem either 3 if there is no offsite contamination at all, a lot of courts are going to say there is no coverage. Insurance doesnt apply under business risk exclusions Toyota recalls insurance not paying for that. Late Notice Duties in the event of Occurrence Offense, Claim or Suit You must see to it that we are notified as soon as practicable of an occurrence or an offense which may result in a claim West Bay Exploration v. AIG Specialty Agencies Is a late notice relieved the insurer of liability when the insurer can prove they are prejudiced by the delay? Yes, the burden of proof is with the insurer. It would have been easy to prove if they had filed a claim right away, since they didnt, the prejudice arises by delay and under MI law, the insurer is not liable.

Policy Language In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also resasonably obtainable information with respect to the time, place and circumstance thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable. Carrier has to defend in order to try and deny coverage. Carrier, but not defending, ensured that they were not winning this case. Look at the complaint and the policy to figure out if there is a duty to defend. Crisci v. Security Insurance Co. If the insurance company decides they can do better at trial and decides not to settle within the policy limits, they are the ones who are responsible if the trial court awards outside of the policy limits. Klinger v. State Farm Carriers defense counsel botched the job. Carrier got the info and they didnt do anything. Carrier had the chance to settle, they didnt. Lawyers also give rise to bad faith claims. ODonnell v. Allstate Ins. Co. Unfair insurance Practices act A way to define bad faith. Opens a wall to drive your truck through if you are policy holder counsel. Certain things that carriers cant comply with. Clear and convincing evidence standard. Higher burden of proof to be able to give punitive damages in bad faith cases. If the insurer takes part in bad faith the court can: 1. Award interest on the amount of the claim 2. Award punitive damages 3. Assess court costs and attorney fees against the insurer. Plaintiff owned a dry cleaning business attached to a laundry mat. He was the super for his building to take care of his rent. Saw smoke behind a laundry machine, stood on top of it, glass lid, broke, foot came off.

Foot gets put back on claim gets submitted promptly, but because he was serving as an employee, there was some kind of exception stating that he may be able to receive some kind of workers compensation. Defendant breaches the covenant of bad faith. Failed to make payments under the policy and were liable for the mental and physical distress that occurred because of it. Insurer has a duty to accept a reasonable settlement. Should have put a lien on the workers comp money and got a refund. Delay Unreasonable Settlements Refusal to defend Unreasonable settlements Why would you add a bad faith claim? You would do it to give yourself a chance at punitive damages. Punitive damages are virtually uncapped. They give you a lot more chances in settlement and will give you more in discovery. Gets you more in reserves that the carrier puts aside. If you can say that they put more in their reserves its good evidence. 2 kinds Tort based Punitive damages attorneys fees and interests. Contract based compensatory claims. Post litigation content just because you sued them doesnt mean you should put down their claims. Dont send the letters to the carriers, have your client send them. Standard of proof whether or not the carrier acted unreasonably. Silberg v. California St. Paul Fire & Marine Ins. Co. v. Smith People being in the car business cant drive your car. If the insurance policy represented by the insurance card does not cover any driver operating the motor vehicle with the owners permission, or the owner when operating a motor vehicle other than the vehicle for which the policy is issued, the insurance card shall contain a warning of such limitations in the coverage provided by the policy. Can the insurance companies exclude people?

There has to be insurance coverage for your stupid activities doesnt that distance people from being a safe driver? Isnt that contrary for the whole safe driver concept. They strike these exclusions down in most states. In PA named driver exclusions are enforceable. Curtis v. State Farm Mutual Automobile Insurance Co. Kids were driving the car they got in an accident one girl gets hurt real bad state farm denied coverage because the kid driving wasnt covered by the policy. Cant transfer ridiculously as in this case just, no. Insured includes The named insured Residents of the household Those given permission Any other person while using the owned motor vehicle provided the operation and the actual use of such vehicle are with the permission of the named insured or such spouse and are within the scope of such permission. Any other person or organization but only with respect to his or its liability for the use of such owned motor vehicle by an insured as defined in the four subsections above. Deviating from the authority given to you can make you not allowed to drive the vehicle anymore. Farm Bureau Mutual Insurance Company v. Evans Has to be a connection between the use of the vehicle and the injury M-80 is not proximate cause of using the vehicle. Has to be within the use of the vehicle. Breach to cooperate If the policy holder breaches the duty to cooperate, they could lose coverage if the carrier can show that its prejudiced by that breach. In PA its substantial impact. Another big point to take away is that the burden of proof is a big thing. The carrier had the burden of proof facts here are pretty extreme.

Miller v. Shugart Miller injured by car driven by Shugart. Miller was a passenger shugart drove a car into a tree Insurance company provided insurance The insured shall cooperate with the company and, upon the companys request, assistin making settlements the insured shall not, except at his own cos, voluntarily make any paymen, assume any obligation or incur any expense other than for first aid for others at the time of the accident. Agreement will be enforceable as long as theres no fraud. Claimant cant collect from the carrier unless it is a reasonable settlement. No action clause says you cant come after us to collect until the amount has been determined. The carrier has to consent to the settlement. Carriers Insurance Co v. American Policy Holders Customers bought insurance Employee driving neglegantly killed someone. Settled wrongful death claim for $200k and for prop damage for 8k American refused to pay Carriers Lower court found for Carriers for $104k Carriers is the excess policy Americans says they are the same thing. American wants its policy to be the #1 court says no. Rule: It depends on the language of the policy. Premium amounts are not based for what premiums you pay. They each payed half, but what is fair? PA pro rata laws. Pro Rata % for occupants. Straight pro rata for non occupants Roth v. Amica Mutual

Roth had her car worked on. Her car gets in an accident the insurance co doesnt want to pay out as much because she got junky parts when she had it repaired that added the damage. She sued. Class action law suit. Roth is not entitled to complete coverage Amicas refusal is not a violation. Non OEM fender was used and Amica specified that they had to use an OEM fender. Only the replacement part from the original manufacturer will suffice to restore the vehicle to its proper functioning condition. Allison v. Iowa Plaintiff owned a dump truck liability policy. Tried to cover the full amount of damages when a bridge collapsed. Insurance only paid to repair the windshield. Judge made a decision for $8,500 Came down to whether or not it was covered because there wasnt collision - typically collision is a vehicle running into something else, not falling off a breaking bridge. Is it a collision? Uninsured Motorists coverage Auto mechanic gets injured by a vehicle that another mechanic was driving. Xeroxs car they cant be responsible because it was in the auto shop. Sears is out because of workers comp. Guy driving doesnt have coverage because hes working in the profession. Plaintiff tries to get coverage under his own policy. All carriers deny coverage seems like his policy should cover it. If you dont have a claim against the uninsured motorist, you cant be covered by UM coverage. PA courts will have you arbitrate the issue of the value of your uninsured motorist claim. Arbitrators will often split the baby they try to find some sort of mutually satisfactory claim. PA allows hit and runs with no accident, so long as you actually file a police report within 30 days.

No fault or limited tort option lower premium in exchange for waiving your tort rights you dont get pain and suffering unless you have a serious injury (death, disfigurement, imparement of bodily function) Not a no fault state unless you take the limited tort option. Last Class The secondary market Assigned risk plans they cover the gap for when the insured dont want to insure you. Sort of like safe auto. Sets up to handle the people that no one wants to insure any more. Very expensive secondary insurance. Biggest problem is that they cant properly value the risk. They cant collect enough in premiums to collect on the risk that is being insured. They underwrite bad risks. If no one wants to insure homes on the coast, no one can build homes on the coast. Reinsurance insurance that covers and insurance company. When you have an insurance company that has a portfolio of risks, they buy insurance on that to cover the risks that they lend on. Typically its issued by international companies. The market is dominated by European companies and Bermuda. Allendale Mutual Insurance Co Reassured has to disclose all material facts regarding the original risk of loss and failure to do so renders the agreement voidable. This was not an admission of immateriality. To make it a cost effective policy, the insurance company being insured has to do it right. Duty of good faith from the insurer to reinsurer Disclose material facts voidable otherwise No duty of inquiry on the reinsurer Negligence doesnt matter Whether or not the reinsurer would have charged a higher premium or not insured entirely. Follow the fortunes clause Travelers v. Lloyd

Trvelers contended that it properly aggregated losses from environmental claims. Waste disposal sites. Travelers provided an excess in umbrella to coppers co a chemical manufacturer Travelers purchased reinsurance for these policies, particularly ones for 50% of its limits for coppers in addition it secured excess of loss from other reinsurance companies. The reinsurance treaties had to pay for each loss incurred by travelers. Travelers secured 3 excess of loss treaties to cover a disaster or anything in excess of $10mil definitions were needed and follow the fortunes clause. Treaties defined losses as arising out of any one disaster. Coppers and Dupont got insurance money from Coppers and DuPont. Common origins and traceable to Travelers sued the reinsurers and the reinsurers asserted a counter claim to dismiss the complaint and a declaration that they had no further obligation. Trial court ruled for reinsurers highest court granted review. Does a reinsurance treaty that calls disaster all loss No, treaty that defines itself that way does not encompass a reinsureds single allocation. The plain language of the treaties require the widest possible search for a unified factor amongst the claims. Does a follows the fortunes clause override the other limitations?
"Follow-the-fortunes" is a fundamental doctrine of reinsurance which provides generally that a reinsurer must follow the underwriting fortunes of its cedant (reinsured) and is thus bound by the claims-handling decisions of its reinsured, provided there is no evidence of fraud, collusion with the insured, or bad faith. It is a burden-shifting doctrine which allows the cedant (reinsured) the freedom of making good-faith claims decisions without the fear of having to relitigate those decisions with its reinsurer. This term is used inter-changeably with "follow-the settlements". The reinsured is going to be stuck with what the insurance company does in respect to settlements.

As long as the settlement is in good faith, you arent going to have a relitigation whether or not the policy is going to cover it. The follow the fortune doctrine says the reinsurer is going to have to pay. You have to stick with the limits, but yeah. Travelers treated each site as one big occurrence insurers wanted to lump them all together to either get out of the primary policies or to cover the deductible. Number of occurrances Carrier made its own allocation out of the policies.

If they dont try to treat it differently, its generally OK. How do they apply the Follow the fortunes doctrine to the allocation? As long as it meets the standard follow the fortune requirements lots of arguments you could make that lots of occurrances happened ended up using the same methodology. Bad Faith Challenge To avoid the follow the fortunes, the claim of bad faith, the reinsurer must make a showing of disingenuous or dishonest conduct. They werent doing anything that went outside of the policy limits. The consistency of which the carriers allocation scheme within paying out to the insured as opposed to getting money from the reinsurer. Insured v. Reinsured dispute trouble shows up with a surprise to the reinsurer. Either on the u/w stage where you might be duping them or in the trial stage if you lie and say you are winning when you are getting your ass kicked. Summary of the rules Chapter one The nature and functions of insurance Breach of Warranty. A warranty in a policy of property insurance that a certain are is occupied by a certain person will not void the policy if the occupancy is not exclusive. Misrepresentation and Concealment. Insurers cannot avoid liability on an insurance policy on the basis of facts that were known to it at the time of the policy went into effect. Misrepresentation and Concealment. To rescind an insurance policy for fraudulent misrepresentation there must be a knowingly untrue statement of fact made with the intent to deceive or with reckless disregard for the truth. Misrepresentation and Concealment. In order to prevent recovery on an insurance policy, material representations made by the insured must either be sufficiently material to the risk or fraudulently made. Chapter two Contract formation and Meaning Construing Ambiguities Against the Insurer. An ambiguous adhesion contract must be construed against the drafter of the contract. Construing Ambiguities Against the Insurer. An ambiguous provision in an insurance policy is construed most favorably to the insured and strictly against the insurer.

Honoring the Reasonable Expectations of the Insured. The objectively reasonable expectations of the insured will be honored even though the technical provisions of the insurance policy would have negated those expectations. Honoring the Reasonable Expectations of the Insured. Ambiguity in an insurance policy is not required for application of the reasonable expectations doctrine. Authority of the Agent. An insurance agent acting with apparent authority can bind coverage although there were private, undisclosed limitations on the authority. Waiver and Estoppel. Estoppel for a misrepresentation by an insurer after the inception of the policy is not available to bring within coverage those risks not covered by the policy. The role of intermediaries. Employers can be considered agents of the insurer. Restrictions on Contract Terms. Providing insurance coverage of punitive damages is not contrary to public policy. Restrictions on Contract Terms. An insurance limitation requiring the insured to choose between continued treatment of an injury and eligibility for coverage may be unreasonable and void as against public policy. Insurance agencies must make specific findings of fact with regard to evidence submitted supporting rate increases. Chapter 3 Insurance Regulation Rate regulation Insurance rate laws are valid unless they are so restrictive that their terms cannot avoid confiscatory results Unfairly Discriminatory Rate. Sex based discrimination in insurance ratges is unfairly discriminatory and invalid. Residual Federal Regulation. Section 2 of the McCarran Ferguson act Expressly exempts from the effects of the antitrust law those practices that constitute the business of insurance where the practice has the effect of transferring or spreading a policyholders risk, is an integral part of the relationship between the insurer and the insured and is limited to entities within the insurance industry. Residual Federal Regulation The Sherman Act prohibits insurers from agreeing together to stop selling insurance to particular customers Residual Federal Regulation Illegal boycotts do not include all concerted refusals to deal.

Chapter 4 Fire and Property Insurance Requirement of an Insurable Interest. A party must have an ownership interest in property in order to collect insurance benefits on its loss. Subrogation. A release of all claims for damages against a potential wrongdoer does not preclude recovery under a policy even though it defeats the insurers subrogation rights. Mortgages. A party compelled to pay anothers debt is entitled to exercise all the remedies that the creditor possessed. Leaseholds. If a landlord covenants to maintain fire insurance and the lease does not establish the tenants liability for loss due to its negligence, the tenant is a co-insured for purposes of defeating the insurers subrogation claim. Leaseholds. A property vendor who collects the full purchase price despite fire damage has suffered no legal loss that requires insurance recovery. Limited Interest. Life tenants who insure property in their own name are not precluded from recovering the full amount of the policy proceeds. Limited Interest. Insurance covers property in the bailees possession rather than only the bailees legal liability to respond in damages. Exclusions and Exceptions. An exclusion of coverage is enforceable even if a concurrent cause of the event is covered under the policy. The Problem of Increased Risk. Only the actions of a general agent can be imputed to an insured for purposes of showing knowledge and control of a hazard. The Problem of Increased Risk. Temporary vacancies due to change in tenants do not give rise to the exclusion of insurance coverage because a building is unoccupied (Smith) The Measure of Recovery. Depreciation must be considered in assessing the actual cash value of property for purposes of insurance loss claims. Business Interruption Insurance. A resumption of business clause in a business interruption insurance policy only applies to business at the insured location. Chapter 5 Life Health and Disability insurance. Life Insurance. Applicants for insurance who pay premiums and successfully pass other conditions precedent are entitled to immediate coverage despite the lack of final approval of the risk.

Life insurance. Only insurers have standing to object to a beneficiarys lace of insurable interest. Change of beneficiary and Assignment. Life insurance policyholders effectively change their beneficiaries when they clearly intend a change, designate a new beneficiary and take a substantial affirmative action to effectuate the change. Change of beneficiary and assignment. The holder of a life insurance policy may validly assign his interest therein to a third party. Limitations on recovery by beneficiaries. A life insurance policy is void if it was procured with the intention to murder the insured and the insureds estate is not entitled to recover on the policy. Limitations on recovery by beneficiaries. A beneficiarys conviction for murder is not required to preclude the beneficiary from recoverying the proceeds of a life insurance policy; thus, acquittal does not automatically entitle the beneficiary to the proceeds. Incontestability. The incontestability clause bars an insurer from claiming fraud more than two years after the issuance of the policy unless the policy was void ab initio. Limitations of Risk. Coverage of an accidental injury or death is not excluded for a medical condition if the conditions natural and probable development into a disease is remote and even if the accident would not have injured or killed a healthy normal person. Limitations of Risk. An exclusion of coverage for suicide by a same or insane insured is unambiguous and effective as long as death was the direct result of the insureds actions. Negligence Actions Against the Insurer. Insurers are liable for negligent delay in issuing a policy if it causes exclusion of coverage. Access to Care. Insurers cannot expect or require applicants to disclose health information that has not been provided to the applicants by their doctors. Health Insurance. ERISA does not mandate that employers provide any particular benefits and does not prohibit discrimination against identifiable groups of employees. Cost containment. Insurers may exclude coverage for traeatment that has uncertain medical efficacy and is subject to ongoing research. Chapter 6 Liability Insurance

The insuring agreement. Response or cleanup costs are compensatory damages for injury to property and are covered by the property damage clause of the standard CGL policy. The trigger and allocation of Coverage. Occurrence based liability coverage is triggered not by exposure or manifestation, but when a person suffers an injury-in-fact. The trigger and Allocation of Coverage. Damages under the actual injury trigger theory may be allocated pro rata by each insurers time on the risk. The Number of Occurrences. The number of occurrences under a CGL policy is determined by the cause of the damage rather than the number of injuries or claims. Exclusions and conditions. The excluded act of one insured does not bar coverage for additional insureds who have not engaged in the excluded conduct. The owned property exclusion. The costs of remedial efforts to prevent further contamination of property are not excluded from coverage by the owned property clause if there was contamination of adjacent property. The business risk exclusions. The insured products, work performed and business risk exclusions are valid to exclude coverage for the insureds faulty work that does not cause other property damage. The pollution Exclusion. The absolute pollution exclusion applies only to those injuries and damages caused by traditional environmental pollution. Notice Condition. The timeliness of notice of a claim to the insurer depends on the facts and circumstances of the particular case. Professional Liability Insurance. The notice period for a claims made policy will not be extended because the claim was not discovered during the policy period. Directors & Officers Liability Insurance. The regulatory Exclusion to the directors and officers liability coverage does not violate public policy. Capter 7 Liability Insurance: Defense and Settlement The scope of the duty. If an insurer assumes the insureds defense without reserving its right to deny coverage, it is precluded from later denying coverage. Conflicts of inerest and the defense of Mixed Claims. Insurers have a duty to defend a suit which potentially seeks damages within the coverage of the policy. Conflicts of interest and the defense of Mixed Claims. When an attorney who is the agent of an insurance company uses the confidential attorney client relationship to obtain

information so as to deny the insured coverage under the policy in a garnishment proceeding, such conduct constitutes a waiver of any defense and the insurance company is estopped from disclaiming liability under an exclusionary clause in the liability policy. Settlement. An insurer who fails to settle within policy limits will be liable to the insured for any judgement in excess of the policy limits. The Duty to Settle. The insured has no implied duty to accept a settlement offer which would avoid exposing the excess insurer to liability. Drop-Down Liability. An ecess insurer does not agree to drop down and assume the primary coverage obligationswhen the primary insurer is insolvent unless the policy expressly assumes the responsibility for losses that are uncollectible or unrecoverable Chapter 8 Automobile Insurance Compulsitory Insurance Requirements. Auto insurance covers damages if there is a nexus between the automobile and the injury. The Omnibus Clause. The implied permission to use an insured vehicle is dependent on relationship of the parties and their course of conduct. Use of the vehicle. Auto insurance covers damages if there is a nexus between the automobile and the injury. Notice and Cooperation Conditions. An insurer is not liable where the insureds willful failure to cooperate deprives the insurer with evidence that would have mad ejury issue of the insureds liability. Liability Insurance. Where two policies covering a risk have other insurance clauses, both insurers must share the loss by prorating the loss up to the limits of the lower policy. Collision and Comprehensive Coverage. Contact with the road itself does not constitute a collision within the meaning of the term used in a collision insurance policy. Collision and Comprehensive Coverage. The term colliding with animals in a policy should be read as to require the actual striking of the vehicle and the animal. Uninsured Motorists Coverage. A vehicle may be considered uninsured even when it is covered for particular occurrences, but the insurer retains the tortfeasors substanative defenses to liability. Uninsured Motorists Coverage. A hit and run provision of uninsured motorist coverage that requires actual physical contact is void and unenforceable.

Uninsured Motorists Coverage. An insured who has paid separate premiums providing two vehicles with uninsured motorist coverage is entitled to stack the coverage and recover up to the aggregate sum of the two vehicles coverages. Chapter 9 The Secondary Market Reinsurance. A reassured owes to its reinsurer a duty to disclose all material facts regarding the original risk of loss and failure to do so renders the agreement voidable. Follow the fortunes clauses. A follow the fortunes clause binds the reinsurer only when the reinsured settles a claim that is covered by the underlying policy. Insolvency Clauses. Reinsurers may not discharge their ability to the insurer by settling directly with the insured, even if the insurer is insolvent. Set offs in Insolvency. Set off may be asserted in bankruptcy proceedings even though at the time of filing a debt is owing but not presently due, or where a definite liability has accrued but is as not yet unliquidated.