Exam 49: Insurance

Ace Investments, Inc., is the mortgagee for a warehouse owned by Best Storage, Inc. Ace obtains an insurance policy from Complete Insurance Corporation (CIC) to cover the warehouse. Best also obtains a policy from CIC to cover the warehouse. Later, Best sells the warehouse to Delta Company but keeps the policy. Delta also obtains a pol?icy from CIC to cover the warehouse. Ace agrees to act as Delta's mortga?gee. A fire to?tally destroys the warehouse. Who can recover for the loss?

Tira obtains two fire insurance policies on her house. Each is an open policy with a pro rata clause. Tira's policy with Unity Insurance Company is for a maximum amount of $100,000. Her policy with Verity Insurance Company is for a maximum amount of $50,000. Each policy includes a pro rata clause. Due to defective electrical wiring, Tira's house catches fire and burns completely. The value the house at the time of the loss is $120,000. Tira files a proof of loss with each insurer. What is an open policy? What is a pro rata clause? What is the liability of Unity and Verity for this event?

Trina pays a premium to United Insurance Corporation for fire insurance against the loss of her Viewpoint Office Building. After Trina sells the building to Wade, it burns down. Under the policy, United must pay

Felicity Cookware Company makes and sells kitchen products. To cover injuries to consumers if the products prove de?fective, Felicity should obtain

An insurance application is usually not part of the insurance contract.

International Foods Corporation insures its real and personal property, as well as the lives of its key employees, to protect its financial interest should some event undermine its security. This is

Rolling Transport & Storage Corporation wants to insure its warehouse to obtain the maximum possible recovery for the lowest possible pre?mium. To obtain the maximum recovery under a coinsurance clause, the percentage of the value of the property that should be insured is

Cash surrender value is the amount an insured must pay to cancel a policy.

State law may mandate that a certain provision be included in an insur?ance policy.

Misstatements or misrepresentations in an application for insurance can void a policy.

A sibling may have an insurable interest in his or her sibling's life.

Fred misstates his age in applying for a life insurance policy with Gamma Insurance Company. Due to this "error," Gamma can

All-risk insurance is property insurance that covers damage resulting from all risks except those specifically excluded.

Sheila obtains a life insurance policy with no cash surrender value and names her son Theo as the beneficiary. This is

An insurable interest in property must exist when a policy is purchased.

Insurance is classified according to the nature of the risk involved.

Speedy Shipping Corporation applies to TransInsurance Company for a fire insurance pol?icy on Speedy's warehouse. On the application, Speedy misrepresents the age of the property to obtain a lower premium. When a fire soon destroys the ware?house, TransInsurance can

Term life insurance provides life insurance for a specified term with no cash surrender value.

Kelsy obtains a business liability insurance policy from Luminous Insurance Company for Kelsy's Framing & Art Supplies store. When an event occurs that gives rise to a claim, each party has a duty to

Infinite Sales Corporation obtains an insurance policy that covers losses to Infinite Sales caused by fire. This is