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Exam 51: Insurance Law

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Question 31

Multiple Choice

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Which of the following types of insurance protects a garage owner from liability to persons who are injured by the operation of the garage?

A) Transportation liability
B) Employee liability
C) Garage liability
D) Vehicle liability
E) Peril

F) B) and D)
G) All of the above

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Question 32

Multiple Choice

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"Teenage Driver." Sally bought a new car, a yellow convertible. She also had a teenage son at home, Bobby, but she did not plan to let him drive the car. She was annoyed because Bobby had run her last car into the lake. Sally decided to change insurers because she thought her previous insurance agent was annoyed over Bobby's antics. She went to ABC Insurance to apply. She got an application from Mark. Sally was a little nervous because the application asked about other drivers in the home. It also asked if there were any teenagers in the home. Sally answered "no" on both counts because she had no plans to let Bobby drive. Sally got full coverage on the car, and the policy was issued shortly after she completed the application. She renewed the policy without revising any of the information she provided. Thirteen months later, Sally really needed some gas in the car for the next day. Under the belief that he had sufficiently matured, Sally sent Bobby to get some gas at the station just down the street. Unfortunately, a drunk driver who had no insurance hit the car and totaled it. Sally immediately called Mark. When Mark reviewed the police report, however, he told Sally that there would be no coverage on the car because Bobby was driving. Sally said that was completely unfair and that she would appeal to the jury. Sally told Mark that ABC issued the policy and that she was relying on the incontestability clause. Mark told Sally that she was wrong and that based on how disputes were handled under the policy, she would not even see a jury. -Which of the following is true regarding Mark's statement that Sally would never see a jury?

A) He is correct based on provisions in most policies denying the insured the right to contest policy provisions.
B) He is incorrect, and insurers may not require as a condition of a policy that an insured give up the right to a trial by jury.
C) He is correct based on provisions in most policies providing that the insurance company has the final word regarding coverage.
D) He is likely referencing a provision requiring arbitration contained in some policies.
E) He is likely referencing a provision requiring that any dispute be settled by the Insurance Adjustors of America contained in some policies.

F) A) and E)
G) A) and B)

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Question 33

Multiple Choice

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A[n] ______ clause states that the insured has a grace period in which to make an overdue payment during which time the insurance is effective.

Which of the following refers to the potential for loss in an insurance agreement?

"Teenage Driver." Sally bought a new car, a yellow convertible. She also had a teenage son at home, Bobby, but she did not plan to let him drive the car. She was annoyed because Bobby had run her last car into the lake. Sally decided to change insurers because she thought her previous insurance agent was annoyed over Bobby's antics. She went to ABC Insurance to apply. She got an application from Mark. Sally was a little nervous because the application asked about other drivers in the home. It also asked if there were any teenagers in the home. Sally answered "no" on both counts because she had no plans to let Bobby drive. Sally got full coverage on the car, and the policy was issued shortly after she completed the application. She renewed the policy without revising any of the information she provided. Thirteen months later, Sally really needed some gas in the car for the next day. Under the belief that he had sufficiently matured, Sally sent Bobby to get some gas at the station just down the street. Unfortunately, a drunk driver who had no insurance hit the car and totaled it. Sally immediately called Mark. When Mark reviewed the police report, however, he told Sally that there would be no coverage on the car because Bobby was driving. Sally said that was completely unfair and that she would appeal to the jury. Sally told Mark that ABC issued the policy and that she was relying on the incontestability clause. Mark told Sally that she was wrong and that based on how disputes were handled under the policy, she would not even see a jury. -Which of the following is most likely true regarding Sally's reliance on an incontestability clause if typical state laws are in effect?

A[n] ______ clause states that after an insurance policy has existed for a specified period of time, the insurance company cannot contest any statements made in the insurance application.

What is usually the effect if a person who is in good health lies about their age on an application for life insurance and the misrepresentation is discovered at the time of the person's death?

Which of the following was the result in Royal Capital Development LLC v. Maryland Casualty Company, the case in the text involving whether on a policy of insurance covering "direct physical loss of or damage to" a building that allows the insurer the option of paying either "the cost of repairing the building" or "the loss of value," the insurer must also compensate the insured for the diminution in value of the building if the insured elects to repair the building?

A policy of fidelity insurance is an example of which of the following types of insurance?

"Wild Things." Image Company, a company specializing in photography of exotic and wild animals, took out a life insurance policy through ABC Insurance on its president Bruno and also on a company-owned jeep that he drove. Bruno got a better offer from Wild Things Company, another company specializing in the photography of exotic animals, and went to work for them. He parted on good terms with Image Company and taking the jeep with him under the mistaken idea that the jeep was part of his severance benefits. Neither of the insurance policies was cancelled by Image. Unfortunately, while photographing a lion for Wild Things Company, Bruno was attacked and eaten. His jeep was then stolen by an unknown bystander who apparently saw the attack and took the opportunity to take the jeep. Image Company had been in the process of contacting Bruno in an attempt to obtain possession of the jeep but had not reacquired it at the time of his death. Image Company had renewed the policy on the jeep reaffirming to the insurer that its purpose was for use by Image employees because Image planned to have possession of the vehicle shortly. Image Company filed a claim to collect on the life insurance policy and also on the vehicle policy. ABC Insurance denied both claims. -Which of the following is true regarding the contention of ABC Insurance that it is not required to pay to Image Company the amount for which Bruno's life was insured?

Which of the following is false regarding insurance and the international sale of goods?

Sally is involved in a motor vehicle accident. She is sued by George, the driver of the other vehicle. Sally calls her insurer and tells them to handle it for her. Later, she is asked to give some information to the insurer regarding the incident and to give a deposition in litigation. She tells the insurer that she is too busy and that the insurer should simply handle the matter because that is the reason she has insurance; and that, furthermore, the insurer should not call her again regarding the accident. Is Sally correct about her duties and why or why not?

A workers' compensation insurance policy is an example of which of the following types of insurance?

What is meant by an antilapse clause, and how do these usually work? Do you believe that all states and all types of policies should have antilapse clauses, and why or why not?

Which of the following types of life insurance provides protection for the entire life of the insured and has a cash-surrender value?

To have a[n] ______ in property or life, a person must be subject to economic loss if there is damage or harm to the person or property.

Which of the following is true regarding the reduction of the impact of moral hazard by insurers?

Which of the following was the result in Hartford Underwriters Insurance Company v. The Cincinnati Insurance Company, the case in the text involving whether insurance coverage was available to a party injured when a vehicle hit her while she was loading a van and the policy at issue provided coverage for a person "occupying" a vehicle defined as "in, upon, getting in, on, out or off"?

"Wild Things." Image Company, a company specializing in photography of exotic and wild animals, took out a life insurance policy through ABC Insurance on its president Bruno and also on a company-owned jeep that he drove. Bruno got a better offer from Wild Things Company, another company specializing in the photography of exotic animals, and went to work for them. He parted on good terms with Image Company and taking the jeep with him under the mistaken idea that the jeep was part of his severance benefits. Neither of the insurance policies was cancelled by Image. Unfortunately, while photographing a lion for Wild Things Company, Bruno was attacked and eaten. His jeep was then stolen by an unknown bystander who apparently saw the attack and took the opportunity to take the jeep. Image Company had been in the process of contacting Bruno in an attempt to obtain possession of the jeep but had not reacquired it at the time of his death. Image Company had renewed the policy on the jeep reaffirming to the insurer that its purpose was for use by Image employees because Image planned to have possession of the vehicle shortly. Image Company filed a claim to collect on the life insurance policy and also on the vehicle policy. ABC Insurance denied both claims. -Which of the following is a term referencing the concept that a sufficient interest must exist on the part of an insured in order to take out a policy of insurance?

The parties express their agreement for insurance in a document called a[n] _____.