Chapter 9 - New Questions Flashcards
Why might an insurer deduct for ‘betterment’ when settling a property insurance claim?
To account for the increased value of the property due to new repairs or improvements.
In the case of a total loss, what basis of indemnity might be problematic for old or obsolete buildings?
Cost of reinstatement to the original form.
What was the ruling in Reynolds and Anderson v. Phoenix Assurance Co. Ltd (1978) regarding the basis of indemnity?
Cost of reinstatement to the original form.
How did the ruling in Leppard v. Excess Insurance Co. Ltd (1979) differ from Reynolds and Anderson?
The claimant could only recover the market value of the property.
In the context of machinery and equipment indemnity, what typically happens if a piece of equipment is sold as scrap?
The indemnity is based on the scrap value.
What type of financial loss does pecuniary insurance NOT typically cover?
Loss of physical property or material damage.
What does the principle of indemnity allow parties to do in an insurance contract?
Agree to provide more or less than a strict indemnity.
Can average operate as an implied term in non-marine insurance policies?
No, average can only apply if there is an express average clause in the policy.
What does reinstatement cover provide in terms of indemnity?
Full indemnity including cost adjustments for wear and tear.
What is a key consideration when arranging insurance on a ‘new for old’ basis?
The sum insured must reflect the total replacement cost of all items ‘as new.’
What is typically the most common method of providing indemnity under an insurance policy?
Payment of money
When insurers opt for a cash payment, can the insured spend the money as they wish?
It depends on the insurance policy terms.
What can happen if the reinstated property is defective or inferior to the old property?
The insurer may have to pay compensation for breach of contract.
Which insurance policy clause typically grants insurers the right to choose between payment, repair, reinstatement, or replacement?
Insuring clause
Under what condition can the insured claim for a constructive total loss in marine insurance?
When the cost of repairing the damage exceeds the value of the property after repair.
