Exam 16: Insurance and Guarantee

A guarantee occurs when a third party agrees to pay off a loan made to another.

A tenant carelessly drops a candle,and the resulting fire destroys the landlord's premises.The landlord's loss is fully covered under the landlord's fire insurance policy,and the insurance company compensates the landlord for the loss.In these circumstances

James was the guarantor for a loan Edward had at the bank.Edward had also pledged a coin collection as security for the loan.The loan came in default,so James made the remaining payments.Who gets the coin collection?

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?

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

Donna owns a commercial building that has a small retail shop,three offices,and a small warehouse.Each unit is rented out to a different company.She has taken out a standard fire insurance policy for the appraised value of the building.On July 1st,the building and its contents are destroyed by fire.The cause of the fire was never determined.Which of the following is TRUE?

An insurance contract is one that is usually said to require utmost good faith on the part of the parties.

If a material change in risk occurs after a fire insurance policy has been entered into,what must the insured do in order to maintain his or her coverage? When this occurs,what options does the insurer have?

A promise to perform the obligation of another person if that person defaults is referred to at law as a guarantee.It will usually arise in one of three common business situations.Briefly describe these circumstances.

The act of forbearance of some deed at the request of the guarantor is usually consideration to the guarantor in a contract of guarantee.

Leah,while driving her vehicle on a narrow road in the mountains,comes to a bridge that does not appear very stable.After considering her alternatives for a moment,she decides to drive over the bridge.The bridge collapses and her vehicle is destroyed.Is the insurance company liable on her car insurance policy? What legal arguments could they raise if they wish to deny coverage?

When Dennis applied for a policy of life insurance,one of the questions on the medical questionnaire asked: "Have you ever been hospitalized?" Dennis answered truthfully that he had been hospitalized in 1993 to have his tonsils out and in 1996 to have his appendix out.The life insurance policy was issued.Sixteen months later Dennis died of a heart attack and the insurance company discovered that he had been hospitalized in 1985 due to a mild heart attack.The beneficiary of the life insurance policy applied for the death benefit,claiming quite correctly that Dennis had been truthful in the application,but the insurance company refused to pay the death benefit.What legal basis does the insurance company have for refusing to pay?

What constitutes the consideration to the guarantor in a contract of guarantee?

A life insurance policy of the type that accumulates a cash surrender value is an item of property known as

Uncle Ralph told Jody's parents,"Supply Jody with what she needs to get off to a good start at university and I'll take care of all the bills." Legally,we identify Uncle Ralph as

Which of the following is NOT a defence available to a guarantor when an action is brought by the creditor to have the guarantor held liable for the debt of the principal debtor?

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

C guarantees the loan of A to Happy Bank.The guarantee provides that before the bank can sue C,it must give C notice.A defaults on the loan and the bank simply sues A and C.In this case

Janice was a restaurant operator in a small town.As a result of a mine closure,business in the town dried up.Rather than declare bankruptcy Janice decided to set the restaurant on fire and apply to collect the insurance proceeds.The investigators determined that the cause of the loss was arson and that Janice was responsible.In these circumstances,why would courts not enforce the contract of insurance.

Explain the difference between an indemnity and a guarantee.