South Carolina - Insurance Flashcards
When does protection begin on insurance
A LAYPERSON that PAYS PREMIUM at the time of application can assume IMMEDIATE protection
Can be reserved for determination of whether applicant is an insurable risk by (1) CLEAR and UNEQUIVOCAL intent of such and (2) calling the limiting condition to the attention of the applicant
ESTOPPEL/WAIVER > Elements
Estoppel Elements, i think:
- Actual Misrepresentation, and
- Detrimental Reliance
ESTOPPEL/WAIVER > How to Waive
Unilateral action
MISREPRESENTATION >
Test for Misrepresentation: Oral Questions
Effect
TEST: (MaRK Undue Influence))
- UNTRUE/MISLEADING: Statement is untrue or misleading when made;
- MATERIAL: statement is material to the risk; [[material to issuance of policy at that rate, not to injury]]
- KNOWN TO BE FALSE: Statement is known by the applicant to be false;
- INTENT TO MISLEAD: Statement is made with the intent to mislead the insurer; and
- RELIANCE: Statement is relied upon by the insurer (at least as part of the basis) for issuance of the policy
EFFECT: oral misrepresentation sufficient to avoid policy
MISREPRESENTATION > Life Insurance Policies
Test for misrepresentation
Effect
TEST:
Same as general misrepresentation test, EXCEPT one extra factor
1. Statement is untrue or misleading when made;
2. statement is material to the risk;
3. Statement is known by the applicant to be false;
4. Statement is made with the intent to mislead the insurer; and
5. Statement is relied upon by the insurer (at least as part of the basis) for issuance of the policy
*6. Insurer must challenge the truthfulness of the application during the first TWO (2) years from policy’s ISSUANCE (not application) (must be during insured’s lifetime)
EFFECT: avoid policy
MISREPRESENTATION > Life Insurance Policies
Causal Connection between misrepresentation and death
In Life Ins. contracts, South Carolina DOES NOT require the insurer to show a causal connection between the material misrepresentation and the death
REPRESENTATIONS >
Insured’s obligation to correct representation
What is the sufficient level of correctness of a representation to uphold a contract
Obligation to correct representation that becomes untrue at any time BEFORE the contract is formed
Insured NOT obligated to correct representations that become untrue AFTER the contract is formed
Representation that is SUBSTANTIALLY CORRECT is sufficient to uphold a contract
REPRESENTATIONS >
Group Policies
Representations made by agent of insured
Representations made by third parties (e.g., employers) of the insured
GROUP POLICIES: same rules as individual policy (non-contestable after 2 years from issuance)
AGENT: binding on insured
THIRD PARTY: not binding on the insured
WARRANTIES >
DEFINITION
(1) Representations/promises by insured
(2) incorporated into the contract
(3) on the truthfulness or fulfillment of which it is agreed that the promise of the insurer will depend
WARRANTIES >
Difference between Representation and Warranty/Condition
REPRESENTATION
insurer has burden of proving materiality –> Not grounds for avoidance if “SUBSTANTIALLY CORRECT”
WARRANTY/CONDITION
Materiality is ASSUMED–> must be STRICTLY COMPLIED with, or else it insurer can avoid the policy
WARRANTIES >
Affirmative Warranty
Promissory Warranty
AFFIRMATIVE WARRANTY (default): Statement concerning fact at the time the contract is entered
PROMISSORY WARRANTY: statement/promise about the future of a continuing truth of the matter represented
WARRANTIES >
Divisibility of Insurance Contract
If Ins. K is divisible–consists of different items that are separately valued/insured–breach of warranty as to one WILL NOT affect the insurance on the remainder items.
CHANGE IN BENEFICIARY >
Insured’s right to change beneficiary
Standard necessary to enforce change
Insured has the right to change the beneficiary
Insured must SUBSTANTIALLY COMPLY with procedures (need not be precise)
CHANGE IN BENEFICIARY >
Effect of Divorce
Effect of temporary hearing
DIVORCE: automatically voids spouse as beneficiary, UNLESS indication of intent otherwise
TEMPORARY HEARING: Party who agrees at a temporary hearing to change beneficiary is deemed to have CONTRACTED AWAY the right (must follow agreement at temporary hearing)
EXCLUSIONS > Definition
Limitation on coverage (of which insured must have notice)
EXCLUSIONS >
Causal connection between policy exclusion and loss
There MUST BE a causal connection between policy exclusion and loss (cf. misrepresentation; warranty)
EXCLUSIONS > “Relative” for the purpose of exclusions
- living under same roof;
- close intimate relationship;
- intended duration of relationship is substantial; AND
- Where parties would reasonably conclude to consider the relationship in contracting matters (e.g., insurance contracts)
EXCLUSIONS > Automobile Policies
Define “Insured” [for purposes of exclusion topic]
Exclusion for “Insured”
“INSURED”
Any person who
uses with the insured’s (express/Implied) consent, the motor vehicle to which the policy applies
EXCLUSION
Policy CANNOT exclude person defined as “insured”
[[*special circumstance where specific exclusion of husband who didn’t have driver’s license]]
EXCLUSIONS > Intentional Act Exclusions
General Rule
GENERAL RULE
Insurers only pay for losses that are fortuitous [[fortuitous: happening by accident or chance, rather than design]]
PERSPECTIVE: Point of View of the Victim
EXCLUSIONS > Intentional Act Exclusions
Test for excluding intentional acts
To be excluded under an intentional act exclusion, the insured must have had
- SPECIFIC INTENT, not only to injure, but also
- to CAUSE the particular type of injury suffered
[[[pretty much specific intent]]
EXCLUSIONS > Intentional Act Exclusions > Property Insurance
Insured intentionally damages
Co-Insured intentionally damages
INSURED
normal rules
CO-INSURED
Innocent co-insured can recover for loss of joint property by intentional act of co-owner, unless SPECIFIC EXCLUSION
EXCLUSIONS > Intentional Act Exclusions > Self-Defense
- Whether the ACT causing the loss was intentional, AND
2. Whether the RESULT of the act was intentional
EXCLUSIONS > Intentional Act Exclusions > Life and Accidental Death Insurance
Suicide
Most policies exclude suicide, occurring within FIRST TWO (2) YEARS of issuance (can’t exclude past 2 years)
LIABILITY INSURANCE > INSURER’S OBLIGATIONS > Insurer’s Duty to Defend
When does it arise
arises from contract in action brought by 3P against insured on any cause of action within policy
Even if the allegations are groundless, false, or fraudulent
LIABILITY INSURANCE > INSURER’S OBLIGATIONS > Insurer’s Duty to Defend
Ambiguous Claims
Alternative Claims (deliberate and negligent claims)
Multiple Causes of Action (where some do not fall within policy coverage)
Intentional Torts
After Insurer tenders policy limits
AMBIGUOUS CLAIMS > Must Defend: as long as there is potential for coverage
ALTERNATIVE CLAIMS > Unclear: may be a conflict of interest
MULTIPLE CAUSES OF ACTION: must defend, notwithstanding COAs that do not fall within coverage
INTENTIONAL TORTS: No duty to defend: if intentional tort is excluded under policy
AFTER TENDERING POLICY LIMITS: Duty to defend continues (this is different than a settlement)
LIABILITY INSURANCE > INSURER’S OBLIGATIONS > Insurer’s Duty to Defend
Punitive Damages: when are they within coverage
Covered when act is grossly negligent, wanton/willful, or reckless. BUT NOT INTENTIONAL
LIABILITY INSURANCE > INSURER’S OBLIGATIONS > Insurer’s Duty to Defend
Remedies available to Insured for failure to defend
costs/attorneys fees
judgment rendered against insured
settlement–so long as it’s in good faith
additional harm (e.g., mental suffering)
LIABILITY INSURANCE > INSURER’S OBLIGATIONS > Insurer’s Duty to Defend
Insurer’s protection mechanisms
DECLARATORY JUDGMENT (coverage;obligation to defend)
NON-WAIVER AGREEMENT
Insurer continues w/ defense, insured agrees that insurer shall retain right to content issues related to coverage
RESERVATION OF RIGHTS NOTICE
Insurer’s unilateral statement IN WRITING notifying insured of intention to continue defense, while retaining right to contest issues related to coverage
SET OFF BENEFITS
if employer is paying BOTH workers compensation coverage and other coverage
LIABILITY INSURANCE > Insurer’s duty to advise
Generally
Generally, no duty to advise
If insurer undertakes to advise (expressly/impliedly), must exercise due care
IMPLIED UNDERTAKING TO ADVISE
- Agent received consideration beyond mere payment of premium; OR
- Insured made a clear request for advice; OR
- Course of dealing over extended period of time
LIABILITY INSURANCE > Reformation of Policy
If Insurer does not give the required coverage (“invalid endorsement”), then policy is reformed to the mandatory minimum
Mutual Mistake: grounds for reformation
LIABILITY INSURANCE > Negligent Misrepresentation of Insurance Agent
Rule
Exception
RULE: Cannot complain of fraud (misrepresentation) if the truth could be ascertained by reading the instrument
EXCEPTION: If insurance agent SPECIFICALLY STATES the policy provides something, and insured REASONABLY RELIES. Insurer will be liable for loss despite ritten language of policly
LIABILITY INSURANCE > Renewals
Duty to Renew
Notice of Non Renewal
Duty: no duty to renew, but insurer can’t non-renew in retaliation
Notice of Non Renewal: If insurer issues proper notice of offer to renew an insured fails to accept: Policy is NON-RENEWED (insurer does not need to send notice of non-renewal)
PROTECTED PERSONS/INTERESTS > “Insured”
[For coverage purposes]
Generally: person whose loss triggers the insurer’s duty to pay proceeds
Most Commonly: specifically designated person
Omnibus Clause (usually for automobile policies)–names one specific insured and others by description:
(1) the named insured;
(2) resident spouse
(3) resident relative
(4) permissive user (express/implied)
(5) guest (in car or house)
or the personal representative of any of the above
*the vehicle must be within the scope of the permission granted (not a “substantial deviation”)
PROTECTED PERSONS/INTERESTS >
Insured’s duty to cooperate with Insurer
To void policy, insurer must show it was prejudiced by the non-cooperation
((insignificant/immaterial breach is not enough))
- USE OF AN AUTOMOBILE >
When will an automobile policy cover injuries/damages?
When the injury/damage arises out of the “OWNERSHIP, MAINTENANCE, OR USE” of an automobile:
- “CAUSAL CONNECTION” between the vehicle and injury:
(a) Vehicle must be an “ACTIVE ACCESSORY” to the assault: more than merely being at site, but can be less than proximate cause; and
(b) Injury must be “FORESEEABLY IDENTIFIABLE with the normal use of a motor vehicle as a motor vehicle” - No act of “INDEPENDENT SIGNIFICANCE” occurred to break the causal link; and
- Vehicle must have been USED FOR TRANSPORTATION at the time of the accident
OCCURRENCE > What constitutes an “occurrence” in SC
South Carolina defines “occurrence” under the MODIFIED CONTINUOUS TRIGGER Approach
Coverage is triggered at THE TIME OF THE INJURY IN FACT and CONTINUOUSLY THEREAFTER.
((This allows coverage under all policies in effect from the time of the injury in fact to the time of the progressive damage))
BAD FAITH > Bad Faith Claim for Failure to Settle THIRD PARTY CLAIMS
When do they arise
[[keep eye out for secondary part to a question]]
SOURCE: contract and tort
Arise when insured seeks defense/indemnification from liability to a third party.
BAD FAITH > Bad Faith Claim for Failure to Settle THIRD PARTY CLAIMS
What is the standard
Factors
STANDARD: Negligence standard (i.e., were insured’s actions reasonable)
FACTORS (“RACISM O”)
1. STRENGTH of injured’s claim on issues of liability and damages
- Attempts by insurer to induce insured to CONTRIBUTE to the settlement
- Failure of the insurer to properly INVESTIGATE
- Insurer’s rejection of ADVICE of its own agent/attorney/adjuster
- Failure of insurer to INFORM the insured of a compromise offer
- Amount of financial RISK to which each party is exposed in event of non-settlement
- (insured’s factor): Fault of the insured in inducing insurer’s rejection of the compromise by MISLEADING insurer
- Any other Factor
[[*No bad faith if reasonable grounds to investigate]]
When can a third party sue the insured’s insurer?
Assignment of Bad Faith clause by insured to third party
Fraudulent Release:
- 3P can show insured was negligent in underlying tort; and
- Insurer fraudulently induced third party to sign release
BAD FAITH > Bad Faith Claim for Failure to Settle FIRST PARTY CLAIMS
(“BRED”)
- EXISTENCE of a contract of insurance
- REFUSAL by the insurer to pay benefits due under the contract (long enough to constitute a denial)
- Resulting from the insurer’s BAD FAITH or UNREASONABLE ACTION in breach of the covenant of good faith and fair dealing
- DAMAGE to the insured
INSURABLE INTEREST >
Insurable Interest in Property
Timing
Anyone who
- derives a BENEFIT from its existence, OR
- would suffer a DETRIMENT from its destruction
Insurable interest must exist at (a) the time the contract is CREATED; and (b) the time of LOSS
INSURABLE INTEREST >
Insurable Interest in Life
Timing
Person might suffer a pecuniary loss as a result of the person’s death/injury
Timing: need only exist at the time contract is CREATED
INSURABLE INTEREST >
Taking out life insurance on yourself
Taking out life insurance on another person
ON YOURSELF:
(1) done and done
ON ANOTHER:
(1) insurable interest in the person; and
(2) person’s consent
SUBROGATION >
In property/casualty
In health/accident
PROPERTY/CASUALTY: no express contractual provision is required for subrogation
HEALTH/ACCIDENT: Right to subrogation must be expressly included in the contract of insurance
MOTORIST COVERAGE > Meaningful Offer of UIM
Insurer must make a meaningful offer of UIM
Wannamaker Test–determines if there’s a meaningful offer [[apply whenever there is no UIM on a car]] (“CALI”)
- Notification process must be “COMMERCIALLY REASONABLE”
- Insurer must SPECIFY the “LIMITS OF OPTIONAL COVERAGE” (can’t offer additional coverage in general terms)
- Insurer must “INTELLIGIBLY ADVISE” the insured of the nature of the optional coverage
- Insured must be told that optional coverages are available for an ADDITIONAL PREMIUM
MOTORIST COVERAGE > Meaningful Offer of UIM
For what type of customers does an insurer have to make a meaningful offer of UIM
For every new person/coverage
((i.e., unless it renews, extends, changes, supersedes, or replaces an existing policy))
(If policy is transferred, transferee is considered a new applicant, and must be given a meaningful offer of UIM)
MOTORIST COVERAGE > Motorist Coverage Analysis
- Liability of the tortfeasor and UIM; OR UM
- The Car you are in
- Reach Back (portability)
- Stacking
MOTORIST COVERAGE > Measuring Vehicle Rule
Applies to person who OWNS the vehicle in the accident
When reaching back/stacking, can only get coverage equal to the car in the accident (“measuring car”).
MOTORIST COVERAGE > Unknown Driver Test
[[John Doe/Hit-and-Run scenarios]]
You can get UM coverage if
- Accident reported to appropriate police authority within a reasonable time
- physical contact injury/damage OR witness (other than driver/owner) signs affidavit
3 Insured is not negligent in failing to determine identity of driver
MOTORIST COVERAGE > Who may stack?
Only Class I Insured may stack:
named insured [of vehicle],
resident spouse [of named insured of vehicle],
resident relative [of named insured of vehicle]
LIABILITY INSURANCE > INSURER’S OBLIGATIONS > Insurer’s Duty to Defend
When can insured obtain separate counsel
What effect does this have
when claims fall outside the coverage
insurer would no longer have exclusive right to control
UIM > When does an insurer NOT have to make a meaningful offer of UIM?
- when RESIDENT SPOUSE, who is CO-INSURED, rejects it on behalf of insured
- When it is for HIRED or NON-OWNED VEHICLES, or
- When it is Offered in conjunction with an UMBRELLA policy (that supplements an underlying primary policy)
Mortgages > Difference between
Loss Payable (or open mortgage)
Standard (clause) Mortgage (or Union or New York Mortgage)
LOSS PAYABLE MORTGAGE: Misconduct by insured bars claim payment to mortgagee
STANDARD CLAUSE MORTGAGE: Misconduct by insured DOES NOT bar claim payment to mortgage. Mortgagee must pay premium to keep mortgage though.
