Question 1

What is the purpose of insurance,and how does it achieve its purpose?

Accepted Answer

The purpose of insurance is to purchase protection against a possible loss.It shifts the risk of loss from the person purchasing the protection to an insurance company,who spreads the risk among its policy holders-each having paid in premiums to the company.

Question 2

In the case of Demeter v.Dominion Life Assurance Co.,a husband applied to the court as owner and beneficiary of a policy of life insurance for payment of the proceeds as a result of the death of his wife.She died because he murdered her.Why will courts not enforce a contract of insurance in these circumstances?

Accepted Answer

Where the claim for insurance proceeds arises as a result of a criminal or deliberate wrongful act of an insured,the courts will not enforce a contract of life insurance.First of all,it would be contrary to public policy to allow the insured to profit from his or her own crime.Furthermore,it would be contrary to the purpose of insurance to allow the insured to recover compensation for a loss he or she had deliberately caused.Demeter,as owner and beneficiary under policies issues on the life of his wife,was unable to recover and his action dismissed.

Question 3

The right of subrogation does not apply in all cases,but it is presumed to apply if it is not expressly excluded.

Accepted Answer

A) True 
 B)False  True

Question 4

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

Accepted Answer

A) A's insurance company will not have to honour the policy and restore the house. 
B) A's insurance company will only honour the policy and sue the furnace manufacturer to recover the cost of restoring the house. 
C) A's insurance company will only honour the policy and restore the house. 
D) A's insurance company will only honour the policy and will sue B to recover the cost of restoring the house. 
E) A's insurance company will honour the policy and sue both B and the furnace manufacturer to recover the cost of restoring the house. 
A) A's insurance company will not have to honour the policy and restore the house. 
B) A's insurance company will only honour the policy and sue the furnace manufacturer to recover the cost of restoring the house. 
C) A's insurance company will only honour the policy and restore the house. 
D) A's insurance company will only honour the policy and will sue B to recover the cost of restoring the house. 
E) A's insurance company will honour the policy and sue both B and the furnace manufacturer to recover the cost of restoring the house.

Question 5

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

Accepted Answer

A) the release by the creditor of security placed in support of the loan without the guarantor's approval 
B) the absence of a note or memorandum signed by the guarantor 
C) lack of consideration 
D) the release of other guarantors by the creditor without the knowledge of the remaining guarantors 
E) the death of the primary debtor 
A) the release by the creditor of security placed in support of the loan without the guarantor's approval 
B) the absence of a note or memorandum signed by the guarantor 
C) lack of consideration 
D) the release of other guarantors by the creditor without the knowledge of the remaining guarantors 
E) the death of the primary debtor

Question 6

A comprehensive general insurance policy is one that covers most types of damage or loss to an insured's property as well as providing third party liability.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) nature of the risk covered 
B) amount of the premium 
C) amount of insurance coverage 
D) duration of the protection 
E) designation of the beneficiary 
A) nature of the risk covered 
B) amount of the premium 
C) amount of insurance coverage 
D) duration of the protection 
E) designation of the beneficiary

Question 8

Simon purchased for cash a used boat and trailer from Haggard Maritime Inc.at 4:56 p.m.He phoned his insurance agent and asked if he could get insurance immediately so he could bring the boat and trailer home.The agent said,"You are covered as of 12:01 noon today." Simon got into a traffic accident at 6:32 p.m.the same day,whereby the boat and trailer were severely damaged.Will the insurance company pay this claim?

Accepted Answer

A) No,it won't,since the agent's actions were illegal and probably against company policy. 
B) This would depend on who was at fault in the accident. 
C) No,it won't,since acceptance had not been received from the company. 
D) No,it won't,because the agent would not have been able to bind the company. 
E) Yes,it will,because the agent would have authority to bind the company. 
A) No,it won't,since the agent's actions were illegal and probably against company policy. 
B) This would depend on who was at fault in the accident. 
C) No,it won't,since acceptance had not been received from the company. 
D) No,it won't,because the agent would not have been able to bind the company. 
E) Yes,it will,because the agent would have authority to bind the company.

Question 9

Exemption clauses in insurance contracts are strictly interpreted by the courts.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) Henry will have no liability because his guarantee is discharged by the wrongful omission of the receiver-manager. 
B) Henry will have no defence and will be liable for $100 000.00. 
C) the bank must first sell the warehouse before it can sue Henry. 
D) Henry will rely on the bank's devaluation of the warehouse and will be liable for $40 000.00. 
E) Henry will rely on the bank's devaluation of the warehouse and will be liable for $60 000.00. 
A) Henry will have no liability because his guarantee is discharged by the wrongful omission of the receiver-manager. 
B) Henry will have no defence and will be liable for $100 000.00. 
C) the bank must first sell the warehouse before it can sue Henry. 
D) Henry will rely on the bank's devaluation of the warehouse and will be liable for $40 000.00. 
E) Henry will rely on the bank's devaluation of the warehouse and will be liable for $60 000.00.

Question 11

Larson had a fire last month in his sportswear shop.Luckily he had "business interruption insurance." This insurance will NOT pay for

Accepted Answer

A) lost profits during the time the shop is closed. 
B) reduction in the value of inventory. 
C) overhead expenses while the shop is closed. 
D) cost of moving to temporary accommodations. 
E) money expended to reduce business losses. 
A) lost profits during the time the shop is closed. 
B) reduction in the value of inventory. 
C) overhead expenses while the shop is closed. 
D) cost of moving to temporary accommodations. 
E) money expended to reduce business losses.

Question 12

A wants to insure his business property and contacts his insurance agent,who has agency contracts with a number of different insurance companies.The agent prepares a binder of insurance and sends it to A.A few days later,A receives the insurance policy.In this case,the contract is made

Accepted Answer

A) when A pays the first premium. 
B) when the agent prepares the insurance binder. 
C) when A receives the policy and pays the first premium. 
D) when A receives the policy of insurance. 
E) when A receives the insurance binder. 
A) when A pays the first premium. 
B) when the agent prepares the insurance binder. 
C) when A receives the policy and pays the first premium. 
D) when A receives the policy of insurance. 
E) when A receives the insurance binder.

Question 13

When the parties agree to a change in the terms of an existing insurance contract,they may do so by attaching a separate paper called

Accepted Answer

A) an amendment. 
B) a supplement. 
C) an endorsement. 
D) a recommendation. 
E) a rider. 
A) an amendment. 
B) a supplement. 
C) an endorsement. 
D) a recommendation. 
E) a rider.

Question 14

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?

Accepted Answer

There are two main reasons why,as a gene

Question 15

If an insured has been negligent,the insurance policy will generally be void.

Accepted Answer

A) True 
 B)False

Question 16

Explain the difference between an insurance agent and an insurance broker.

Accepted Answer

Generally speaking,an insurance broker c

Question 17

Kathleen,feeling quite depressed,decides that a few rounds of Russian Roulette would cheer her up.Unfortunately,she loses.Two years earlier,a life insurance policy was issued to her mother,Joan.Will the insurance company pay Joan under this policy? Discuss the legal basis for the insurance company's argument that they are not liable.

Accepted Answer

Russian Roulette has the attendant risk

Question 18

Sam needs a loan for his carpet business.The bank agrees to make him a loan provided that his wife Pam gives the bank a personal guarantee agreeing to be responsible is there is default under the loan agreement.Pam signs a guarantee for the loan.Sam defaults under the loan agreement and the bank sues Pam on the personal guarantee.Pam's defence is that there was no consideration for the guarantee because she had no ownership or financial interest in her husband's business,and she received none of the loan proceeds.Is she correct that she is not bound by the guarantee because there is no consideration?

Accepted Answer

In order for there to be consideration,i

Question 19

The right of subrogation can place the insurer in a better position than the insured.

Accepted Answer

A) True 
 B)False

Question 20

A's building is insured by B Co.under a standard policy that covers all loss occasioned by fire.A's business is not doing well,and A figures that if his building is destroyed by fire,he can put part of the insurance proceeds into his business to keep it running.One evening,A starts a fire in his building that subsequently destroys it.In this case

Accepted Answer

A) the insurance company is bound to pay the proceeds of insurance to A. 
B) the insurance company is not bound to pay the insurance proceeds at all. 
C) the insurance company is not bound to pay the proceeds of insurance to A,but must pay it to A's family. 
D) the insurance company is bound to pay the insurance proceeds to A's business. 
E) none of the above 
A) the insurance company is bound to pay the proceeds of insurance to A. 
B) the insurance company is not bound to pay the insurance proceeds at all. 
C) the insurance company is not bound to pay the proceeds of insurance to A,but must pay it to A's family. 
D) the insurance company is bound to pay the insurance proceeds to A's business. 
E) none of the above

Exam 16: Insurance and Guarantee

What is the purpose of insurance,and how does it achieve its purpose?

The right of subrogation does not apply in all cases,but it is presumed to apply if it is not expressly excluded.

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

A comprehensive general insurance policy is one that covers most types of damage or loss to an insured's property as well as providing third party liability.

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

Exemption clauses in insurance contracts are strictly interpreted by the courts.

Larson had a fire last month in his sportswear shop.Luckily he had "business interruption insurance." This insurance will NOT pay for

A wants to insure his business property and contacts his insurance agent,who has agency contracts with a number of different insurance companies.The agent prepares a binder of insurance and sends it to A.A few days later,A receives the insurance policy.In this case,the contract is made

When the parties agree to a change in the terms of an existing insurance contract,they may do so by attaching a separate paper called

If an insured has been negligent,the insurance policy will generally be void.

Explain the difference between an insurance agent and an insurance broker.

The right of subrogation can place the insurer in a better position than the insured.

Law, society, and Business

The Machinery of Justice

Government Regulation of Business

The Law of Torts

Professional Liability: the Legal Challenges

Formation of a Contract: Offer and Acceptance

Formation of a Contract: Consideration and Intention

Formation of a Contract: Capacity to Contract and Legality of Object

Grounds Upon Which a Contract May Be Set Aside: Mistake and Misrepresentation

Writing and Interpretation

Privity of Contract and the Assignment of Contractual Rights

The Discharge of Contracts

Breach of Contract and Its Remedies

Sale of Goods and Consumer Contracts

Bailment and Leasing

Agency and Franchising

The Contract of Employment

Negotiable Instruments

Intellectual Property

Interests in Land and Their Transfer

Landlord and Tenant

Mortgages of Land and Real Estate Transactions

Sole Proprietorships and Partnerships

The Nature of a Corporation and Its Formation

Corporate Governance: the Internal Affairs of Corporations

Corporate Governance: External Responsibilities

Secured Transactions

Creditors Rights

International Business Transactions

Electronic Commerce

Privacy

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