Topic 8 - Insurance Law

Question 1

What is the Insurance Act in Alberta?

Answer 1

the statute for insurance in Alberta the is clearly divided into sections (auto, life and property) and contains provisions regarding the requirements of insurance contracts, the operation and standards of the insurance industry

Question 2

What is a premium?

Answer 2

the consideration (price) paid for the policy

Question 3

Who are agents?

Answer 3

people that sell insurance contracts, they may represent several insurance companies

Question 4

Who are Brokers?

Answer 4

retained by the insured to secure necessary coverage

Question 5

Who are Adjusters?

Answer 5

investigate and settle insurance claims on behalf of insurance companies

Question 6

Who are Insurance Defence Lawyers?

Answer 6

represent the interests of insurance companies and their insured parties (typically the Defendant in civil lawsuits)

Question 7

What is the definition of insurance?

Answer 7

A contract where the insured pays premiums in exchange for the insurer’s promise to cover the risk

Question 8

As risk increases, so do _________

Answer 8

premiums

Question 9

What happened in the Omega Inn Ltd. v. Continental Insurance Co. case?

Answer 9

After a fire caused the hotel to burn down the insurance company wanted an investigation to prove there was no arson committed. Appeal Court found that the business interruption policy was clear and only required the insurance company to pay for the time the business would be interrupted while diligent effort was being made to rebuild, not for the time investigating the arson.

Question 10

What is the Contra Proferentum rule?

Answer 10

Because most insurance contracts are drafted by the insurer, any ambiguities in the contracts are interpreted by courts in favour of the insured

Question 11

What are the 5 main types of insurance?

Answer 11

1. Property insurance
2. Business interruption insurance
3. Life & Health insurance
   4.Liability insurance
4. Bonding

Question 12

What does property insurance cover?

Answer 12

losses on property, due to fire or other perils

• the policy my include a co-insurance clause, requiring the insured to bear some risk of loss themselves (a deductible)

Question 13

What is business interruption insurance?

Answer 13

insurance to cover lost profits and added expenses incurred to bring a business back into production

(often paired with property insurance)

Question 14

What are two of the variations of life insurance?

Answer 14

1. S.647 of the Insurance Act states who’s lives can be insured: spouses (common law or married), children, grandchildren, dependents (does not include siblings unless they are dependents)
2. businesses can insure the lives of key personnel (but must have insurable interest = something to lose)

Question 15

What does health insurance cover?

Answer 15

paying health care expenses, income while unable to work (can be part of a benefits package)

Question 16

What does the case Chantiam v. Packall Packaging Inc. illustrate?

Answer 16

The appeal court held that the appropriate time for determining whether an insurable interest existed or not was at the time the policy was taken out. So even though Chantiam switched companies, the original company took the life insurance policy out while he was still working there at a time when insurable interest existed

The case illustrates that with life insurance, the question of insurable interest only relates to when the policy is taken out

Question 17

What is liability insurance?

Answer 17

The insurer only pays if the insured is at fault

EX: doctors usually have legal liability insurance to cover them if they are sued for malpractice

EX: a business will usually have liability insurance to cover if they are sued by a customer for negligence (the customer has suffered a loss or injury)

Question 18

What does Liability insurance NOT cover?

Answer 18

Willful, deliberate acts such as deceit, arson or assault

Question 19

What are the 2 types of Bonding insurance?

Answer 19

1. Fidelity bonds
2. Surety bonds

Question 20

What are Fidelity bonds?

Answer 20

An employer will pay a fee to have the employee bonded. The if the employee commits a wrong, the employer recovers from the insurer (and the insurer can go after the employee to be reimbursed)

Question 21

What are Surety bonds?

Answer 21

provide assurance that a contract will be performed. If a party fails to complete the task, the bonding insurer pays compensation to the injured contracting party

Question 22

What are the 2 General Insurance Principles?

Answer 22

1. if one commits a wrongful act that results in the loss, on public policy grounds, the contract lacks legality and becomes unenforceable
2. contracts of insurance are unenforceable if there does not exist an insurable interest

Question 23

The Insurance Act dictates that without __________ ___________, the contract is void

Answer 23

insurable interest

Question 24

What are the consequences of nondisclosure or false statements?

Answer 24

Failure to disclose material information may render the contract voidable by the insurer.

Providing false information when submitting a claim also renders the contract voidable by the insurer– and the right of the insured to indemnity is lost.

Question 25

What is the bottom line of misrepresentation?

Answer 25

it doesn’t pay to try and fool your insurer

Question 26

When Sara applied for automobile insurance she failed to tell the insurer that she had previously been convicted of driving while impaired. Which one of the following statements regarding this situation is true?

a) Sara’s past driving record is an immaterial fact. Accordingly, Sara is not obliged to disclose it to the insurer.

b) If Sara is involved in a collision that is caused by the other driver, Sara’s insurer will be required to pay out on the policy.

c) Sarah’s failure to disclose breaches her obligation to her insurer

d) The duty to ask whether Sara has a clean driving record or not rests with the insurer.

Answer 26

c) Sarah’s failure to disclose breaches her obligation to her insurer

Question 27

What is Subrogation?

Answer 27

Once the insurer pays out on the policy, it steps into the insured’s shoes and can bring any lawsuit that the insured was entitled to bring against the perpetrator (action brought in the insured’s name)

Question 28

What is salvage?

Answer 28

Enables the insurer to minimize its loss

e.g. if the item is damaged beyond repair and must be replaced (or is written off) the insurer has the right to sell the item and keep the proceeds

Question 29

What is the Forfeiture Rule?

Answer 29

A criminal should not be allowed to profit from their crime, similarly, the insured is not permitted to profit from their willful misconduct

The insured cannot collect if they deliberately cause the loss

Question 30

Which one of the following statements regarding insurance policies is FALSE?

a) If the insurer pays out a claim to the insured, then the insurer is entitled to bring a subrogated claim as against the party who caused the loss.

b) If the insured deliberately causes a loss, the courts will not enforce the contract, as to do so would be against public policy.

c) An insurance policy will be declared void if the insured did not have an insurable interest in the thing insured.

d) Anyone may purchase a life insurance policy on the life of anyone else, without obtaining the prior consent of that person.

Answer 30

d) Anyone may purchase a life insurance policy on the life of anyone else, without obtaining the prior consent of that person