Question 1

Which of the following is an inaccurate statement about the insurable interest requirement?

Accepted Answer

A) The beneficiary named in a life insurance policy may recover under the policy if she possessed an insurable interest in the relevant person's life at the time she (the named beneficiary)procured the policy but no longer possessed the insurable interest at the time the relevant person died. 
B) When an equitable interest in a property translates into a legal interest,it is considered to be an insurable interest. 
C) Persons who are business partners are generally held to possess insurable interests in each other's lives. 
D) A policy owner may recover under a property insurance policy if he possessed an insurable interest in the relevant property at the time he procured the policy but no longer possessed the property. 
A) The beneficiary named in a life insurance policy may recover under the policy if she possessed an insurable interest in the relevant person's life at the time she (the named beneficiary)procured the policy but no longer possessed the insurable interest at the time the relevant person died. 
B) When an equitable interest in a property translates into a legal interest,it is considered to be an insurable interest. 
C) Persons who are business partners are generally held to possess insurable interests in each other's lives. 
D) A policy owner may recover under a property insurance policy if he possessed an insurable interest in the relevant property at the time he procured the policy but no longer possessed the property.

Question 2

To recover under a property insurance policy,an insurable interest must exist:

Accepted Answer

A) When the policy is purchased and at the time of loss 
B) When the policy is purchased,but not at the time of loss 
C) Not when the policy is purchased but at the time of loss. 
D) Neither when the policy is purchased nor at the time of loss. 
A) When the policy is purchased and at the time of loss 
B) When the policy is purchased,but not at the time of loss 
C) Not when the policy is purchased but at the time of loss. 
D) Neither when the policy is purchased nor at the time of loss.

Question 3

How does an insurance company fully perform on an insurance contract?

Accepted Answer

A) Pay out the amount specified in the contract when an event occurs 
B) Accept the insured premium payment 
C) Notify the State of the contract 
D) File the insurance contract with the court 
A) Pay out the amount specified in the contract when an event occurs 
B) Accept the insured premium payment 
C) Notify the State of the contract 
D) File the insurance contract with the court

Question 4

Martha had a property insurance policy on her home with a subrogation clause.A fire started because of a faulty stove.Martha made a claim and received $100,000 from her homeowners' insurer for fire damages totaling $100,000.The stove manufacturer was clearly responsible for the fire starting and has admitted its stove was faulty.Can the stove manufacturer be sued?

Accepted Answer

A) Yes,by Martha. 
B) Yes,by the insurance company. 
C) No,because the insurance company already covered losses. 
D) No,because Martha chose to make an insurance claim and thus waived the right to sue. 
A) Yes,by Martha. 
B) Yes,by the insurance company. 
C) No,because the insurance company already covered losses. 
D) No,because Martha chose to make an insurance claim and thus waived the right to sue.

Question 5

The insurance relationship is contractual.

Accepted Answer

A) True 
 B)False

Question 6

An insurer's "duty to defend" the insured requires:

Accepted Answer

A) paying the insured any compensatory damages incurred. 
B) ensuring that there is no breach in bad faith. 
C) furnishing the insured with an attorney for a liability case. 
D) accepting any punitive damages on behalf of the insured. 
A) paying the insured any compensatory damages incurred. 
B) ensuring that there is no breach in bad faith. 
C) furnishing the insured with an attorney for a liability case. 
D) accepting any punitive damages on behalf of the insured.

Question 7

Under modern rules in all states,the insured's breach of warranty automatically relieves the insurer of the duty to perform,regardless of whether the breached warranty was actually material to the insurer's risk.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true of insurance contracts?

Accepted Answer

A) Some statutes require them to be in writing. 
B) Contracts for property insurance are usually within the statute of frauds. 
C) Once formed,insurance contracts cannot be amended or reformed. 
D) Insurance contracts are governed by federal laws. 
A) Some statutes require them to be in writing. 
B) Contracts for property insurance are usually within the statute of frauds. 
C) Once formed,insurance contracts cannot be amended or reformed. 
D) Insurance contracts are governed by federal laws.

Question 9

Why are insurers liable for both compensatory and punitive damages for a breach which is in bad faith?

Accepted Answer

A) The insured needs to be compensated for the amount spent on the case. 
B) Bad faith is considered an independent tort by itself. 
C) Courts have traditionally favored punitive damages. 
D) Such breaches in bad faith are a very rare phenomenon. 
A) The insured needs to be compensated for the amount spent on the case. 
B) Bad faith is considered an independent tort by itself. 
C) Courts have traditionally favored punitive damages. 
D) Such breaches in bad faith are a very rare phenomenon.

Question 10

The extent of a person's insurable interest in property is limited:

Accepted Answer

A) to the value of that interest. 
B) to the market value of the property. 
C) to the maximum value of the property. 
D) the reasonable value of the property. 
A) to the value of that interest. 
B) to the market value of the property. 
C) to the maximum value of the property. 
D) the reasonable value of the property.

Question 11

Bailey is sued for causing an accident and is found to be liable for $50,000 in compensatory damages,$50,000 in court costs and $250,000 in punitive damages.His policy limits are $300,000 and the most common rules apply regarding an insurer's obligations to pay damages incurred by the insured.How much does the insurer have to pay?

Accepted Answer

A) $50,000.00 
B) $100,000.00 
C) $300,000.00 
D) $350,000.00 
A) $50,000.00 
B) $100,000.00 
C) $300,000.00 
D) $350,000.00

Question 12

Guy takes out a property insurance policy on his home,buying the policy from Ace Insurance.Guy's home was damaged when a contractor,building an addition to his neighbor's home,negligently swung a crane through Guy's dining room wall.Ace Insurance may force Guy to seek compensation from the contractor.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following terminates the insurer's duty to perform under the policy?

Accepted Answer

A) The insured's breach of warranty 
B) An increase in the value of the insured property 
C) A decrease in the value of the insured property 
D) A case of innocent misrepresentation by the insured 
A) The insured's breach of warranty 
B) An increase in the value of the insured property 
C) A decrease in the value of the insured property 
D) A case of innocent misrepresentation by the insured

Question 14

Which of the following is a sufficient condition for courts to allow reformation in a written insurance policy?

Accepted Answer

A) The insurer's misunderstanding about a contract term 
B) The insured's misunderstanding about a contract term 
C) A fraud committed by the insurer 
D) An increase in the market value of the insured property 
A) The insurer's misunderstanding about a contract term 
B) The insured's misunderstanding about a contract term 
C) A fraud committed by the insurer 
D) An increase in the market value of the insured property

Question 15

Joe's homeowner's insurance denied a claim for damage to his floors because the insurer reasonably believed that the damage came from a flood,which was not covered.It later turned out the problem was caused by wind damage,which was covered.Is Joe entitled to punitive damages due to the initial denial of his claim?

Accepted Answer

A) Yes,because a proper claim was denied. 
B) It depends upon the terms of Joe's insurance policy. 
C) No,because the insurer acted in good faith. 
D) No,because an insurer never has to pay punitive damages under any circumstances. 
A) Yes,because a proper claim was denied. 
B) It depends upon the terms of Joe's insurance policy. 
C) No,because the insurer acted in good faith. 
D) No,because an insurer never has to pay punitive damages under any circumstances.

Question 16

Generally courts interpret ambiguities in the insurance clauses against the:

Accepted Answer

A) insurer. 
B) insured. 
C) owner. 
D) lesser. 
A) insurer. 
B) insured. 
C) owner. 
D) lesser.

Question 17

Adams purchases insurance coverage from Prince insurance company for his office building.There is an increase of hazards clause in the contract.However,after some days Adams is forced to keep highly explosive material in the office building for official purpose.The building sustains damage from inside due to an explosion caused by the hazardous substance.Adams now seeks insurance coverage for the loss.Prince is refusing to pay.Will Adams succeed in getting his insurance claim paid?

Accepted Answer

No,Adams won't succeed on his insurance

Question 18

Property insurance policies are indemnity contracts.

Accepted Answer

A) True 
 B)False

Question 19

Acme,Inc.owned a warehouse that was insured under a property insurance policy issued by Feelsafe Insurance Co.The warehouse was heavily damaged when a fire that was negligently started by a hotdog stand worker (an employee of Funfoods Corp. )went out of control and engulfed portions of the building.Since fire was a covered peril,Feelsafe paid the claim submitted by Acme.What rights,if any,does Feelsafe acquire? Explain.

Accepted Answer

Having paid Acme's claim under the polic

Question 20

Courts will always grant reformation of a written insurance policy in order to make it conform to the coverage assumptions of a unilaterally mistaken insured.

Accepted Answer

A) True 
 B)False

Exam 27: Insurance Law

Which of the following is an inaccurate statement about the insurable interest requirement?

To recover under a property insurance policy,an insurable interest must exist:

How does an insurance company fully perform on an insurance contract?

The insurance relationship is contractual.

An insurer's "duty to defend" the insured requires:

Under modern rules in all states,the insured's breach of warranty automatically relieves the insurer of the duty to perform,regardless of whether the breached warranty was actually material to the insurer's risk.

Which of the following is true of insurance contracts?

Why are insurers liable for both compensatory and punitive damages for a breach which is in bad faith?

The extent of a person's insurable interest in property is limited:

Which of the following terminates the insurer's duty to perform under the policy?

Which of the following is a sufficient condition for courts to allow reformation in a written insurance policy?

Generally courts interpret ambiguities in the insurance clauses against the:

Property insurance policies are indemnity contracts.

Courts will always grant reformation of a written insurance policy in order to make it conform to the coverage assumptions of a unilaterally mistaken insured.

The Nature of Law

The Resolution of Private Disputes

Business and the Constitution

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

Criminal Law and Procedure

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

The Agreement: Acceptance

Consideration

Reality of Consent

Capacity to Contract

Illegality

Writing

Rights of Third Parties

Performance and Remedies

Formation and Terms of Sales Contracts

Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Introduction to Credit and Secured Transactions

Security Interests in Personal Property

Bankruptcy

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Transfers

The Agency Relationship

Third-Party Relations of the Principal and the Agent

Introduction to Forms of Business and Formation of Partnerships

Operation of Partnerships and Related Forms

Partners Dissociation and Partnerships Dissolution and Winding up

Limited Liability Companies, limited Partnerships, and Limited Liability Limited Partnerships

History and Nature of Corporations

Organization and Financial Structure of Corporations

Management of Corporations

Shareholders Rights and Liabilities

Securities Regulation

Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals

Administrative Law

The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

The Clayton Act, the Robinsonpatman Act, and Antitrust Exemptions and Immunities

Employment Law

Environmental Regulation

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