Baer and Rendall

Question 1

List and Describe the Types of insurers

Answer 1

• Joint stock cies: For profit, owned by stockholders
• Mutual insurance: Corporate insurer owned by the PHs
• Reciprocal/inter-insurance exchanges: Members are individually, not jointly liable
• Individual underwriters (Lloyd’s)
o UW members accept “risks” under their own account
o Non-UW members have all privileges except for insuring

Question 2

What are the reason(s) insurance is exempt from anti-combines legislation?

Answer 2

• Uncontrolled price competition in the short term is not in the public’s long term interest
• Price competition results in insurers collecting less in premiums than in necessary to meet future liabs
• Result in bankruptcy of insurer, which can have a CAT effect on customers
• Special rules are necessary to guarantee their continued solvency
• Industry encouraged to charge adequate premiums, usually through the authorization of rating bureaus

Question 3

What are the Objectives of Insurance Bureau of Canada (IBC)?

Answer 3

• Discuss general insurance
• Collect and analyze statistical information
• Study legislation
• Engage in research
• Promote better public understanding

Question 4

Identify Main areas of focus of the Canadian Insurance Regulation

Answer 4

• Solvency: Guarantee the financial solvency of insurers
• Canadianization
• Government Revenue: Promote revenue collection
• Improving insurance contract and promoting marketing integrity
• Promote honesty and competence of intermediaries

Question 5

How has Canadian legislation promoted solvency?

Answer 5

• Control the creation of domestic insurers
• Licensing of foreign insurers
• Periodic filling of info
• Governmental power of enforcement
• Creation of rating bureau + in some prov admin boards
• Limit on the type of investment insurer could make

Question 6

Why does Canada have such strict solvency regulation?

Answer 6

• Loss of public confidence following bankruptcies in the 1860s/1870s
• Aggressive short-term price competition not in the public interest
• Fiduciary nature of insurance - involves the management of large pools of prepaid premiums

Question 7

Why is the Canadianization of insurance important?

Answer 7

• 1865-77 fed legislation required foreign cies to maintain sufficient assets in Canada to meet Canadian liabs (Protects PH; Prevented the expatriation of large amounts of investment capital)
• Resulted in the withdrawal of almost half of foreign cies and the expansion of Canadian cies

Question 8

What are the Forms/Levels of insurance legislation?

Answer 8

• Legislation
• Regulation by lieutenant governor in council
• Guidelines or directives from Supt

Question 9

Why are guidelines favored over other forms of insurance regulation?

Answer 9

• Seen as more flexible
• Less obtrusive: To the extent that they are voluntary
• Less open to judicial interpretation: Public is given no rights
• Quicker to impl: Adoption does not require approval of other parts of government

Question 10

What is the role of the Canadian Council of Insurance Regulation (CCIR)?

Answer 10

• Performs the functions of the Uniform Law Conference of Canada in the area of insurance law
• Drafting legislation
• Encourages uniform practices in the industry through such things as industry-wide rules and common teaching and testing materials for the licensing of insurance agents
• Consider public input

Question 11

What are differences between social and private insurance?

Answer 11

Social insurance:
• Generally has a universal application and does not involve risk selection
• Less need to protect the public from gaming
• No need for elaborate rules to guarantee solvency
• Intermediaries are civil servants, hence a diff admin and judicial supervision

Question 12

What are similarities between social and private insurance?

Answer 12

• Rules to protect the insurance fund and prevent double recovery
• Problem defining covered events and determining covered losses
• Difficulty establishing a fair and efficient claims settlement process and loss valuation

Question 13

What are the possible solutions for handling multiple recovery situations?

Answer 13

• Election: Victim can choose its compensation source
• Cumulation : Victim can collect from more than one source
• Reimbursement: Tortfeasor pays the full amount of the damage and any excess (after insured is made whole) is returned to collateral source
• Relieving the tortfeasor: Tortfeasor’s overall liab is reduced by the amount of the collateral benefit received by the injured person
• All the above methods, except cumulation, prevent double recovery
• Relieving the tortfeasor and possibly Election reduce or remove the tortfeasor’s liability

Question 14

What is the goal of subrogation?

Answer 14

• Current emphasis for subrogation is on compensation victims rather than reprimand/warning
• Because of insurance, subrogation does not put the ultimate burden on the wrongdoer
• Should ONLY be indemnified: Not be able to recover from multiple sources and “gaining” from loss event

Question 15

What are the requirements for duty of care to exist?

Answer 15

Will owe a duty of care if:
• Reliance exists
• Reliance is reasonable
• Reliance is expected

Question 16

Describe the Glynn v. Scottish Union Ins. case

Double Recovery

Answer 16

• Glynn and his wife were injured in an car accident because of the negligence the other. He obtained a settlement for medical expenses, but he also wants to recover from his own insurer under section B
• Does the insurer have the right to subrogation to prevent a double recovery from Glynn? Need to know if the contract is one of indemnity: Yes, insurer can subrogate, else insurer cannot
• Even though the section of the policy dealt with personal accident coverage, since it involved the payment of actual expenses incurred, it is a contract of indemnity, so subrogation applies

Question 17

Describe Fletcher v. Manitoba Public Ins. case

Duty of Care

Answer 17

Manitoban Insured suffered 1.8M injuries with an at-fault driver in Ontario having 500K limit. Insured did not have UMC. When purchasing the policy, the insured asked for max available coverage. Insured did not know about UMC, relied on expertise of MPIC

• Did company have a duty to advice? Yes
• Is there a duty of care? Yes
• MPIC fulfil his duty? No
• Is MPIC liable for Fletcher loss? Yes

Plaintiffs were awarded, in negligence and in contract, for the damages in the amount of the shortfall

Question 18

Describe Broadhurst & Ball v. American Home Assurance Co. Case
(Duty to Defend)

Answer 18

Insured is sued for alleged conspiracy, breach of fiduciary duty and negligence. Primary Professional Liab with American Home. Excess Professional Liab with Guardian. Both say they do not have a duty to defend. Trial judge said Guardian did not have an obligation to defend. Burden of defense is on primary. Court of appeal found that as judgment will exceed the limit, duty to defend of excess insurer is triggered.

Primary and excess insurer should split defence cost 50/50

Question 19

Describe the Dillon v. Guardian Insurance Co. case

Standard of Absolute Liability

Answer 19

Dillon injured a child in a car accident and was sued for 100K but had policy limits of 50K. Insurer fails to agree to a settlement within policy limits

• Insurer is liable to reimburse its insured for claim above the limit. Avoids problem if settlement was reasonable. Eliminates the danger of an insurer, when faced with a decision near policy limits, gambling with the insured’s money to further its own interests
• Insurer did not use reasonable care in refusing to settle and is guilty of bad faith

Question 20

Describe Regal Films Corporation LTD v. Glens Falls Insurance Company
(Classification of Insurance for the Purpose of Regulating the Contract)

Answer 20

Insurer issued a policy “IM Policy” but also protecting against fire. Plaintiff filed a fire claim. Insurer resisted b/c the plaintiff had not provided proof within 60 days as per the policy, but that proof shall be delivered as soon as “practicable”

• Insurer argued the policy does not come under Part IV of the Act b/c it is headed “IM Policy”. But the policy is a contract to insure against fire
• Plaintiff received all payments for their loss and costs

Question 21

Describe the difference between Valued Policies and Non-Indemnity Policies

Answer 21

• Valued policies involve payment of an agreed value if an insured proves occurrence of a loss (Contracts of indemnity)
• Nonindemnity insurance provides a fixed sum or calculable amount based on the happening of some contigent event, regardless of whether the insured suffers a pecuniary loss