Property Insurance Flashcards
The Architecture and Scope of Property Insurance Policies
i. Declarations – summary of policyholder-specific features (limits, deductibles)
ii. Base policy – combination of first-party and third-party insurance
1. First-party insurance – protects the insured against their own loss
2. Third-party insurance – protects against legal liability to third parties
iii. Perils insured against – affirmative grant of coverage
iv. Exclusions – losses the insurance company has specifically contemplated covering but has chosen not to cover
v. Conditions – dispute resolution, calculating recovery, etc.
Richard and Margaret Gossett v. Farmers Insurance Company of Washington
Plaintiffs bought a house to renovate and assigned their sale agreement to a third party, who took title. The plaintiffs apparently had some sort of arrangement to perform the renovations. The house was lost in a fire, and their insurance company claimed they had no insurable interest since they didn’t own it.
An insured does not have an insurable interest in a covered property beyond improvements the insured made to the property, if the insured had no ownership interest in the property at the time of the loss.
Port Authority of New York and New Jersey v. Affiliated FM Insurance Company
Plaintiff claimed loss for the cost of removing asbestos from its building, and the insurance company denied, arguing there was no physical loss or damage to the building caused by the asbestos.
Insurance coverage for physical loss or damage isn’t triggered by the mere presence of asbestos without impact on a building’s utility.
All-risk/open-peril
Covers losses caused by any peril not expressly excluded
Specified-risk/named-peril
Covers losses caused only by the named risks
Exclusions address four concerns
i. Adverse selections
ii. Moral hazard
iii. Problem of catastrophic losses – correlated losses suffered at the same time by many
iv. Market segmentation – avoiding duplication of coverage by different kinds of policies
Chute v. North River Insurance Company
Plaintiff had an all-risk policy on her jewelry and submitted a claim when her opal cracked. It was determined that crack was due to a defect and not caused by outside force.
A policyholder cannot recover for damages caused by inherent defects to an insured property, unless those defects are caused by an insured peril or the policy explicitly covers losses arising from inherent defects.
