1. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. Twomey & Jennings BUSINESS LAW Chapter 49 Insurance Chapter 49 Insurance

2. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 2 The Insurance Contract Insurance is a contract, called a policy. Under an insurance policy, provision is made by the insurer, in consideration of premium payments, to pay the insured or beneficiary a sum of money if the insured sustains a specified loss or is subjected to a specified liability. Insurance is a contract, called a policy. Under an insurance policy, provision is made by the insurer, in consideration of premium payments, to pay the insured or beneficiary a sum of money if the insured sustains a specified loss or is subjected to a specified liability.

3. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 3 The Insurance Contract Statutory Provisions All provisions required by statute apply, even if not included in the contract Duties of Parties Insured and insurer owe each other obligations imposed by the contract and by statute The Application Generally part of contract by express stipulation of the policy The Insurance Contract

4. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 4 The Insurance Contract Insurance contracts are made through an insurance agent or through an insurance broker. –An insurance agent is an agent for the insurance company, –An insurance broker is the agent of the insured when obtaining a policy for the latter. Insurance contracts are made through an insurance agent or through an insurance broker. –An insurance agent is an agent for the insurance company, –An insurance broker is the agent of the insured when obtaining a policy for the latter.

5. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 5 The Insurance Contract Governed by general contract principles. Antilapse and Cancellation Provisions. Interpretation of Contract. Governed by general contract principles. Antilapse and Cancellation Provisions. Interpretation of Contract. Mount Vernon Fire Insurance Co. v Belize NY, Inc. (1987) Were the exclusions clear enough?

6. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 6 Insurable Interest The person purchasing an insurance contract must have an insurable interest in the insured life or property. An insurable interest in property exists when the damage or destruction of the property will cause a direct monetary loss to the insured. The person purchasing an insurance contract must have an insurable interest in the insured life or property. An insurable interest in property exists when the damage or destruction of the property will cause a direct monetary loss to the insured.

7. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 7 Insurable Interest An insurable interest in the life of the insured exists if the purchaser would suffer a financial loss from the insured’s death. Graves v Norred (1987) Who is entitled to the proceeds from the life insurance policy?

8. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 8 SubrogationSubrogation A BC 1. Premiums Insurance Policy Original Claim A BC 2. Payment for Loss A BC 3. Subrogated Claim A = Insurer B = Insured C = Third Party Who Caused B to Sustain Loss

9. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 9 Business Liability Insurance Comprehensive (general liability). –Broad “all risk” to body and property. ‘Key Man’ Insurance of directors/officers. Comprehensive (general liability). –Broad “all risk” to body and property. ‘Key Man’ Insurance of directors/officers. Anderson Development v Traveler’s Indemnity Co. (1995) Was the insurer obligated to pay for cleanup costs?

10. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 10 Marine Insurance Ocean marine policies insure ships and their cargoes against the perils of the sea. Inland marine policies insure goods being transported by land, by air, or on inland and coastal waterways. Ocean marine policies insure ships and their cargoes against the perils of the sea. Inland marine policies insure goods being transported by land, by air, or on inland and coastal waterways. Commodities Reserve Co v St. Paul Fire & Marine Ins. Co. (1989) This coverage was worth a ‘hill of beans.’

11. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 11 Fire Insurance In order for a fire loss to be covered by fire insurance, there must be an actual, hostile fire that is the immediate cause of the loss. The insurer is liable for the actual amount of the loss sustained up to the maximum amount stated in the policy. A homeowners insurance policy provides fire, theft, and liability protection in a single contract. In order for a fire loss to be covered by fire insurance, there must be an actual, hostile fire that is the immediate cause of the loss. The insurer is liable for the actual amount of the loss sustained up to the maximum amount stated in the policy. A homeowners insurance policy provides fire, theft, and liability protection in a single contract.

12. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 12 Automobile Insurance Automobile insurance may provide protection for collision damage to the insured’s property and injury to persons. It may also cover liability to third persons for injury and property damage, and loss by fire or theft. Automobile insurance may provide protection for collision damage to the insured’s property and injury to persons. It may also cover liability to third persons for injury and property damage, and loss by fire or theft.

13. © 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 13 Life Insurance A life insurance policy requires the insurer to pay a stated sum of money to a named beneficiary upon the death of the insured. It may be a term insurance policy, a whole life policy, or an endowment policy. State law commonly requires the inclusion of an incontestability clause, whereby, at the conclusion of the contestability period, the insurer cannot contest the validity of the policy. A life insurance policy requires the insurer to pay a stated sum of money to a named beneficiary upon the death of the insured. It may be a term insurance policy, a whole life policy, or an endowment policy. State law commonly requires the inclusion of an incontestability clause, whereby, at the conclusion of the contestability period, the insurer cannot contest the validity of the policy.