Exam 16: Insurance and Guarantee

A,a smoker,applies for life insurance,designating his wife,who is also a smoker,the beneficiary.When A fills out the insurance application,he does not disclose that he is a smoker,and the insurance company agrees to insure him.A few weeks later,A has heart by-pass surgery and is told not to get out of bed.However,A does not listen and decides to go to the washroom.On his way to the washroom A suffers a stroke and dies.A's wife now wants to collect the insurance proceeds.In this situation,

Subrogation allows an insurance company to recover its loss from the person(s)responsible without having to pay the insurance proceeds to the insured.

A is going on vacation in the middle of December when the temperature will be below zero degrees Celsius.His policy requires that while he is away,A must arrange to have his house looked after by someone.A makes arrangements with his friend B,who agrees to regularly look after the house while A is away,and A gives B a key.While A is away,the furnace,which was installed three weeks ago by the manufacturer,stops working and the house temperature drops below zero.As a result,the pipes in the upstairs washroom freeze and then burst,causing water damage throughout the entire house.An investigation discloses that B,believing that the house would be fine,decided not to check the house as he had promised to do.In this situation,

An offer to purchase life insurance is accepted when the agent provides the applicant with an insurance binder.

Joe obtains a loan from a bank,and his wife,Mary,gives a personal guarantee as security.The guarantee is expressed as being a continuing guarantee.Two months later,Joe also obtains a line of credit from the same bank.This time Mary does not sign a guarantee.Mary is happy because she believes that the bank will not come after her if Joe defaults on the line of credit.Is Mary's belief true or false?

John and Henry go to the bank so that Henry can borrow $50 000.00.The bank will only give Henry the money if John guarantees it,and John agrees in writing to do this.A couple of months later and unknown to John,Henry and the bank agree to material changes to Henry's loan,including increasing the interest rate substantially.If Henry defaults on the loan and the bank decides to sue both Henry and John,

Medical malpractice insurance protects doctors from significant judgments in negligence suits.For many years the costs of this insurance in North America has been rising;however,doctors in the United States pay significantly more in premiums than do doctors in Canada.Why is there such a discrepancy between these levels of premiums?

In May,farmer Smith sold one of his tractors to farmer Jones for $26 000.Smith received $6000 down and a 7 percent note payable (for $20 000)to be paid on October 15th.In need of cash,farmer Smith brought the note to his bank for discounting.The bank gave cash less 5 percent for the note,whereas farmer Smith endorsed the note in favour of the bank.Farmer Smith performed an act of

Bill was a good friend of John and thought that John was gradually getting quite sickly.In fact it looked so serious that Bill thought John might lose his job due to depression and illness.Hoping to benefit from the situation,Bill purchased a life and disability policy on John.This policy would provide monthly payments to Bill if John was disabled due to illness.As it turned out,John was disabled due to illness,and pursuant to the terms of the policy of insurance,Bill made a claim under the policy.Will the insurance company pay Bill the monthly payments provided for under the policy? Explain your answer and comment on the applicable legal principles.

While Stella was in Hong Kong,a loan came due that she had guaranteed.The creditor,a kindly old man,extended the due date on the loan for thirty days,interest free.Did this action by the creditor discharge Stella from her obligation?

Subrogation in insurance law is the

Explain the difference between an indemnity and a guarantee.

LawnTrim Inc.is in need of working capital.It sold at a discount its account receivables to a factor-without recourse.LawnTrim is using a form of

Julie entered an art gallery with a bookbag over her shoulder.She was asked by a security guard to leave the bookbag at the front desk,but she refused to do so.As she looked at a display of pottery,she carelessly swung the bookbag around and knocked over a pottery display case,destroying its contents valued at $4000.Julie then asked the security guard if the gallery had insurance on the pottery,and she was told that it did.Will Julie need to pay the damages?

The concept of subrogation applies to the liability of a guarantor under a loan guarantee.Under the concept of subrogation,

Milton,who is 19 years old,purchased a car but found that he was in a position of having to pay extremely high insurance rates.As a way of avoiding those high payments,he had a bill of sale made out to his father and had the car registered in his father's name.His father took out an owner's policy from All Risk Insurance Limited.As was later revealed,Milton's father never paid for the vehicle and Milton remained the true owner and operator.Then,later,when Milton was involved in an accident,the claim was submitted by the father (since the policy was in his name).Upon discovering the true state of affairs,the insurance company refused to pay for damage caused by the accident.What legal basis would the insurance company have to refuse to pay the claim?

Which of the following does NOT affect the enforceability of a guarantee?

A company loans money from a bank.As part of the security for the loan,the bank takes security over the company's warehouse,the value of which is sufficient to pay off the loan.Henry,a shareholder in the company,also guaranteed the loan,but he did so because he knew that the value of the warehouse was enough to pay it off.The company defaults on the loan and the bank appoints a receiver-manager who is responsible for managing the company.The receiver-manager fails to renew the insurance on the warehouse,and one evening it catches fire and is badly damaged.Assume the company's loan is for $100 000.00 and that the value of the warehouse has been reduced from $120 000.00 to $60 000.If the company now defaults on its loan and the bank sues Henry on his guarantee,

Key Bank would not give Tony a business loan without a suitable guarantor.So Tony's father signed as a guarantor.He must make the loan payments when

Which of the following is NOT one of the four basic aspects of an insurance contract?