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bar exam > South Carolina - Insurance > Flashcards

South Carolina - Insurance Flashcards

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1
Q

When does protection begin on insurance

A

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

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2
Q

ESTOPPEL/WAIVER > Elements

A

Estoppel Elements, i think:

  1. Actual Misrepresentation, and
  2. Detrimental Reliance
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3
Q

ESTOPPEL/WAIVER > How to Waive

A

Unilateral action

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4
Q

MISREPRESENTATION >

Test for Misrepresentation: Oral Questions

Effect

A

TEST: (MaRK Undue Influence))

  1. UNTRUE/MISLEADING: Statement is untrue or misleading when made;
  2. MATERIAL: statement is material to the risk; [[material to issuance of policy at that rate, not to injury]]
  3. KNOWN TO BE FALSE: Statement is known by the applicant to be false;
  4. INTENT TO MISLEAD: Statement is made with the intent to mislead the insurer; and
  5. 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

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5
Q

MISREPRESENTATION > Life Insurance Policies

Test for misrepresentation

Effect

A

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

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6
Q

MISREPRESENTATION > Life Insurance Policies

Causal Connection between misrepresentation and death

A

In Life Ins. contracts, South Carolina DOES NOT require the insurer to show a causal connection between the material misrepresentation and the death

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7
Q

REPRESENTATIONS >

Insured’s obligation to correct representation

What is the sufficient level of correctness of a representation to uphold a contract

A

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

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8
Q

REPRESENTATIONS >

Group Policies

Representations made by agent of insured

Representations made by third parties (e.g., employers) of the insured

A

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

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9
Q

WARRANTIES >

DEFINITION

A

(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

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10
Q

WARRANTIES >

Difference between Representation and Warranty/Condition

A

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

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11
Q

WARRANTIES >

Affirmative Warranty

Promissory Warranty

A

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

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12
Q

WARRANTIES >

Divisibility of Insurance Contract

A

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.

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13
Q

CHANGE IN BENEFICIARY >

Insured’s right to change beneficiary

Standard necessary to enforce change

A

Insured has the right to change the beneficiary

Insured must SUBSTANTIALLY COMPLY with procedures (need not be precise)

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14
Q

CHANGE IN BENEFICIARY >

Effect of Divorce

Effect of temporary hearing

A

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)

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15
Q

EXCLUSIONS > Definition

A

Limitation on coverage (of which insured must have notice)

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16
Q

EXCLUSIONS >

Causal connection between policy exclusion and loss

A

There MUST BE a causal connection between policy exclusion and loss (cf. misrepresentation; warranty)

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17
Q

EXCLUSIONS > “Relative” for the purpose of exclusions

A
  1. living under same roof;
  2. close intimate relationship;
  3. intended duration of relationship is substantial; AND
  4. Where parties would reasonably conclude to consider the relationship in contracting matters (e.g., insurance contracts)
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18
Q

EXCLUSIONS > Automobile Policies

Define “Insured” [for purposes of exclusion topic]

Exclusion for “Insured”

A

“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]]

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19
Q

EXCLUSIONS > Intentional Act Exclusions

General Rule

A

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

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20
Q

EXCLUSIONS > Intentional Act Exclusions

Test for excluding intentional acts

A

To be excluded under an intentional act exclusion, the insured must have had

  1. SPECIFIC INTENT, not only to injure, but also
  2. to CAUSE the particular type of injury suffered

[[[pretty much specific intent]]

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21
Q

EXCLUSIONS > Intentional Act Exclusions > Property Insurance

Insured intentionally damages

Co-Insured intentionally damages

A

INSURED
normal rules

CO-INSURED
Innocent co-insured can recover for loss of joint property by intentional act of co-owner, unless SPECIFIC EXCLUSION

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22
Q

EXCLUSIONS > Intentional Act Exclusions > Self-Defense

A
  1. Whether the ACT causing the loss was intentional, AND

2. Whether the RESULT of the act was intentional

23
Q

EXCLUSIONS > Intentional Act Exclusions > Life and Accidental Death Insurance

Suicide

A

Most policies exclude suicide, occurring within FIRST TWO (2) YEARS of issuance (can’t exclude past 2 years)

24
Q

LIABILITY INSURANCE > INSURER’S OBLIGATIONS > Insurer’s Duty to Defend

When does it arise

A

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

25
Q

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

A

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)

26
Q

LIABILITY INSURANCE > INSURER’S OBLIGATIONS > Insurer’s Duty to Defend

Punitive Damages: when are they within coverage

A

Covered when act is grossly negligent, wanton/willful, or reckless. BUT NOT INTENTIONAL

27
Q

LIABILITY INSURANCE > INSURER’S OBLIGATIONS > Insurer’s Duty to Defend

Remedies available to Insured for failure to defend

A

costs/attorneys fees
judgment rendered against insured
settlement–so long as it’s in good faith
additional harm (e.g., mental suffering)

28
Q

LIABILITY INSURANCE > INSURER’S OBLIGATIONS > Insurer’s Duty to Defend

Insurer’s protection mechanisms

A

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

29
Q

LIABILITY INSURANCE > Insurer’s duty to advise

Generally

A

Generally, no duty to advise

If insurer undertakes to advise (expressly/impliedly), must exercise due care

IMPLIED UNDERTAKING TO ADVISE

  1. Agent received consideration beyond mere payment of premium; OR
  2. Insured made a clear request for advice; OR
  3. Course of dealing over extended period of time
30
Q

LIABILITY INSURANCE > Reformation of Policy

A

If Insurer does not give the required coverage (“invalid endorsement”), then policy is reformed to the mandatory minimum

Mutual Mistake: grounds for reformation

31
Q

LIABILITY INSURANCE > Negligent Misrepresentation of Insurance Agent

Rule

Exception

A

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

32
Q

LIABILITY INSURANCE > Renewals

Duty to Renew

Notice of Non Renewal

A

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)

33
Q

PROTECTED PERSONS/INTERESTS > “Insured”

[For coverage purposes]

A

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”)

34
Q

PROTECTED PERSONS/INTERESTS >

Insured’s duty to cooperate with Insurer

A

To void policy, insurer must show it was prejudiced by the non-cooperation

((insignificant/immaterial breach is not enough))

35
Q
  • USE OF AN AUTOMOBILE >

When will an automobile policy cover injuries/damages?

A

When the injury/damage arises out of the “OWNERSHIP, MAINTENANCE, OR USE” of an automobile:

  1. “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”
  2. No act of “INDEPENDENT SIGNIFICANCE” occurred to break the causal link; and
  3. Vehicle must have been USED FOR TRANSPORTATION at the time of the accident
36
Q

OCCURRENCE > What constitutes an “occurrence” in SC

A

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))

37
Q

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]]

A

SOURCE: contract and tort

Arise when insured seeks defense/indemnification from liability to a third party.

38
Q

BAD FAITH > Bad Faith Claim for Failure to Settle THIRD PARTY CLAIMS

What is the standard

Factors

A

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

  1. Attempts by insurer to induce insured to CONTRIBUTE to the settlement
  2. Failure of the insurer to properly INVESTIGATE
  3. Insurer’s rejection of ADVICE of its own agent/attorney/adjuster
  4. Failure of insurer to INFORM the insured of a compromise offer
  5. Amount of financial RISK to which each party is exposed in event of non-settlement
  6. (insured’s factor): Fault of the insured in inducing insurer’s rejection of the compromise by MISLEADING insurer
  7. Any other Factor

[[*No bad faith if reasonable grounds to investigate]]

39
Q

When can a third party sue the insured’s insurer?

A

Assignment of Bad Faith clause by insured to third party

Fraudulent Release:

  1. 3P can show insured was negligent in underlying tort; and
  2. Insurer fraudulently induced third party to sign release
40
Q

BAD FAITH > Bad Faith Claim for Failure to Settle FIRST PARTY CLAIMS

A

(“BRED”)

  1. EXISTENCE of a contract of insurance
  2. REFUSAL by the insurer to pay benefits due under the contract (long enough to constitute a denial)
  3. Resulting from the insurer’s BAD FAITH or UNREASONABLE ACTION in breach of the covenant of good faith and fair dealing
  4. DAMAGE to the insured
41
Q

INSURABLE INTEREST >

Insurable Interest in Property

Timing

A

Anyone who

  1. derives a BENEFIT from its existence, OR
  2. 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

42
Q

INSURABLE INTEREST >

Insurable Interest in Life

Timing

A

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

43
Q

INSURABLE INTEREST >

Taking out life insurance on yourself

Taking out life insurance on another person

A

ON YOURSELF:
(1) done and done

ON ANOTHER:

(1) insurable interest in the person; and
(2) person’s consent

44
Q

SUBROGATION >

In property/casualty

In health/accident

A

PROPERTY/CASUALTY: no express contractual provision is required for subrogation

HEALTH/ACCIDENT: Right to subrogation must be expressly included in the contract of insurance

45
Q

MOTORIST COVERAGE > Meaningful Offer of UIM

A

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”)

  1. Notification process must be “COMMERCIALLY REASONABLE”
  2. Insurer must SPECIFY the “LIMITS OF OPTIONAL COVERAGE” (can’t offer additional coverage in general terms)
  3. Insurer must “INTELLIGIBLY ADVISE” the insured of the nature of the optional coverage
  4. Insured must be told that optional coverages are available for an ADDITIONAL PREMIUM
46
Q

MOTORIST COVERAGE > Meaningful Offer of UIM

For what type of customers does an insurer have to make a meaningful offer of UIM

A

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)

47
Q

MOTORIST COVERAGE > Motorist Coverage Analysis

A
  1. Liability of the tortfeasor and UIM; OR UM
  2. The Car you are in
  3. Reach Back (portability)
  4. Stacking
48
Q

MOTORIST COVERAGE > Measuring Vehicle Rule

A

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”).

49
Q

MOTORIST COVERAGE > Unknown Driver Test

A

[[John Doe/Hit-and-Run scenarios]]

You can get UM coverage if

  1. Accident reported to appropriate police authority within a reasonable time
  2. physical contact injury/damage OR witness (other than driver/owner) signs affidavit

3 Insured is not negligent in failing to determine identity of driver

50
Q

MOTORIST COVERAGE > Who may stack?

A

Only Class I Insured may stack:

named insured [of vehicle],
resident spouse [of named insured of vehicle],
resident relative [of named insured of vehicle]

51
Q

LIABILITY INSURANCE > INSURER’S OBLIGATIONS > Insurer’s Duty to Defend

When can insured obtain separate counsel

What effect does this have

A

when claims fall outside the coverage

insurer would no longer have exclusive right to control

52
Q

UIM > When does an insurer NOT have to make a meaningful offer of UIM?

A
  1. when RESIDENT SPOUSE, who is CO-INSURED, rejects it on behalf of insured
  2. When it is for HIRED or NON-OWNED VEHICLES, or
  3. When it is Offered in conjunction with an UMBRELLA policy (that supplements an underlying primary policy)
53
Q

Mortgages > Difference between

Loss Payable (or open mortgage)

Standard (clause) Mortgage (or Union or New York Mortgage)

A

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.

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