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Answer review questions 1,2,3,4,5,7 and application questions 1,2,3,4. Every question answer you can find in the google.

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APPLiCATion quESTionS 185 4. a. Explain the principle of subrogation. b. Why is subrogation used? 5. Explain the following legal doctrines: a. Misrepresentation b. Concealment c. Warranty 6. List the four requirements that must be met to form a valid insurance contract. 7. Insurance contracts have certain legal characteristics that distinguish them from other contracts. Explain the following legal characteristics of insurance contracts. a. Aleatory contract b. Unilateral contract c. Conditional contract d. Personal contract e. Contract of adhesion 8. Explain the general rules of agency that govern the actions of agents and their relationship to insureds. 9. Identify three sources of authority that enable an agent to bind the principal. 10. Explain the meaning of: a. Waiver b. Estoppel APPliCATion quEsTions 1. Jake borrowed $800,000 from the Gateway Bank to purchase a fishing boat. He keeps the boat at a dock owned by the Harbor Company. He uses the boat to earn income by fishing. Jake also has a contract with the White Shark Fishing Company to transport tuna from one port to another. a. Do any of the following parties have an insurable interest in Jake or his property? If an insurable interest exists, explain the extent of the interest. 1. Gateway Bank 2. Harbor Company 3. White Shark Fishing Company b. If Jake did not own the boat but operated it on behalf of the White Shark Fishing Company, would he have an insurable interest in the boat? Explain. 2. Ashley purchased a dining room set for $5,000 and insured the furniture on an actual cash value basis. Three years later, the set was destroyed in a fire. At the time of loss, the property had depreciated in value by – A principal is responsible for the actions of agents acting within the scope of their authority. – Limitations can be placed on the powers of agents. ■■ An agent can bind the principal based on express authority, implied authority, and apparent authority. ■■ Based on the legal doctrines of waiver and estoppel, an insurer may be required to pay a claim that it ordinarily would not have to pay. KEy ConCEPTs And TERms Actual cash value (172) Agency agreement (182) Aleatory contract (180) Apparent authority (182) Binder (179) Broad evidence rule (172) Commutative contract (180) Concealment (177) Conditional contract (181) Conditional premium receipt (179) Conditions (181) Contract of adhesion (181) Estoppel (183) Exchange of consideration (179) Express authority (182) Fair market value (172) Implied authority (182) Innocent misrepresentation (177) Legal purpose (180) Legally competent (180) Material (fact) (177) Offer and acceptance (179) Pecuniary (financial) interest (175) Personal contract (181) Principle of indemnity (171) Principle of insurable interest (174) Principle of reasonable expectations (181) Principle of utmost good faith (176) Replacement cost insurance (173) Representations (177) Subrogation (175) Unilateral contract (180) Valued policy (172) Valued policy law (173) Waiver (183) Warranty (178) REViEw quEsTions 1. a. Explain the principle of indemnity. b. How is actual cash value calculated? c. How does the concept of actual cash value support the principle of indemnity? 2. a. What is a valued policy? Why is it used? b. What is a valued policy law? c. What is a replacement cost policy? 3. a. Explain the meaning of an insurable interest. b. Why is an insurable interest required in every insurance contract? M09_REJD2578_13_SE_C09.indd 185 16/12/15 1:11 am 186 CHAPTER 9 / FunDAmEnTAL LEGAL PRinCiPLES technology to enable people find the law more easily. Visit the site at law.cornell.edu ■■ Lawyers.com is an online source for identifying qualified legal counsel. The site contains consumer information on numerous legal topics, including insurance. Visit the site at lawyers.com sElECTEd REfEREnCEs Fire, Casualty & Surety Bulletins (FC&S) service by the National Underwriter Company is the premier property and casualty insurance service. The complete print service is comprised of eight volumes of property and casualty insurance topics: Fire & Marine, Personal Lines, Casualty & Surety, Umbrella, Directors & Officers Liability, Guide to Policies I and II, and Companies & Coverages. These bulletins contain interesting cases concerning the meaning of actual cash value, insurable interest, and other legal concepts discussed in this chapter. Hopkins, Jamie P., Edward E. Graves, and Burke A. Christensen (Eds.). McGill’s Legal Aspects of Life Insurance, 9th ed. Bryn Mawr, PA: The American College, 2014. Lorimer, James J., et al. The Legal Environment of Insurance, 4th ed., vols. 1 and 2. Malvern, PA: American Institute for Chartered Property and Liability Underwriters, 1993. “Two Landmark Anti-Stoli Decisions by the Delaware Surpreme Court.” The Insurance Forum, Vol. 38, No. 12, December 2011. Wiening, Eric A. Foundations of Risk Management and Insurance, Malvern, PA: American Institute for Chartered Property Casualty Underwriters/Insurance Institute of America, 2002, chs. 11–19. Wiening, Eric A. and Donald S. Malecki. Insurance Contract Analysis. Malvern, PA: American Institute for Chartered Property Casualty Underwriters, 1992. noTEs 1. Jefferson Insurance Company of New York v. Superior Court of Alameda County, 475 P. 2d 880 (1970). 2. Valued policy states include Arkansas, California, Florida, Georgia, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, 50 percent. The replacement cost of a new dining room set at the time of loss was $6,000. Ignoring any deductible, how much will Ashley collect from her insurer? Explain your answer. 3. Nicholas owns a laptop computer that was stolen. The laptop cost $1,000 when it was purchased 5 years ago. A similar laptop computer today can be purchased for $500. Assuming that the laptop was 50 percent depreciated at the time the theft occurred, what is the actual cash value of the loss? 4. Megan owns an antique table that has a current market value of $12,000. The table is specifically insured for $12,000 under a valued policy. The table is totally destroyed when a tornado touches down and damages Megan’s home. At the time of loss, the table had an estimated market value of $10,000. How much will Megan collect for the loss? Explain your answer. 5. A drunk driver ran a red light and smashed into Kristen’s car. The cost to repair the car is $8,000. She has collision insurance on her car with a $500 deductible. a. Explain how the principle of subrogation would be relevant in the above case. b. Explain how subrogation supports the principle of indemnity. 6. One requirement for the formation of a valid insurance contract is that the contract must be for a legal purpose. a. Identify three factors, other than the legal purpose requirement, that are essential to the formation of a binding insurance contract. b. Explain how each of the three requirements in part (a) is fulfilled when the applicant applies for an auto insurance policy. inTERnET REsouRCEs ■■ FreeAdvice.com has a section on insurance law that provides considerable consumer information on topics dealing with insurance law. These topics include auto insurance, health insurance, disability insurance, life insurance law, and numerous other topics. Visit the site at freeadvice.com ■■ Legal Information Institute at Cornell University Law School publishes free legal materials online, creates materials that help people understand the law, and explores new M09_REJD2578_13_SE_C09.indd 18 APPLiCATion quESTionS 185 4. a. Explain the principle of subrogation. b. Why is subrogation used? 5. Explain the following legal doctrines: a. Misrepresentation b. Concealment c. Warranty 6. List the four requirements that must be met to form a valid insurance contract. 7. Insurance contracts have certain legal characteristics that distinguish them from other contracts. Explain the following legal characteristics of insurance contracts. a. Aleatory contract b. Unilateral contract c. Conditional contract d. Personal contract e. Contract of adhesion 8. Explain the general rules of agency that govern the actions of agents and their relationship to insureds. 9. Identify three sources of authority that enable an agent to bind the principal. 10. Explain the meaning of: a. Waiver b. Estoppel APPliCATion quEsTions 1. Jake borrowed $800,000 from the Gateway Bank to purchase a fishing boat. He keeps the boat at a dock owned by the Harbor Company. He uses the boat to earn income by fishing. Jake also has a contract with the White Shark Fishing Company to transport tuna from one port to another. a. Do any of the following parties have an insurable interest in Jake or his property? If an insurable interest exists, explain the extent of the interest. 1. Gateway Bank 2. Harbor Company 3. White Shark Fishing Company b. If Jake did not own the boat but operated it on behalf of the White Shark Fishing Company, would he have an insurable interest in the boat? Explain. 2. Ashley purchased a dining room set for $5,000 and insured the furniture on an actual cash value basis. Three years later, the set was destroyed in a fire. At the time of loss, the property had depreciated in value by – A principal is responsible for the actions of agents acting within the scope of their authority. – Limitations can be placed on the powers of agents. ■■ An agent can bind the principal based on express authority, implied authority, and apparent authority. ■■ Based on the legal doctrines of waiver and estoppel, an insurer may be required to pay a claim that it ordinarily would not have to pay. KEy ConCEPTs And TERms Actual cash value (172) Agency agreement (182) Aleatory contract (180) Apparent authority (182) Binder (179) Broad evidence rule (172) Commutative contract (180) Concealment (177) Conditional contract (181) Conditional premium receipt (179) Conditions (181) Contract of adhesion (181) Estoppel (183) Exchange of consideration (179) Express authority (182) Fair market value (172) Implied authority (182) Innocent misrepresentation (177) Legal purpose (180) Legally competent (180) Material (fact) (177) Offer and acceptance (179) Pecuniary (financial) interest (175) Personal contract (181) Principle of indemnity (171) Principle of insurable interest (174) Principle of reasonable expectations (181) Principle of utmost good faith (176) Replacement cost insurance (173) Representations (177) Subrogation (175) Unilateral contract (180) Valued policy (172) Valued policy law (173) Waiver (183) Warranty (178) REViEw quEsTions 1. a. Explain the principle of indemnity. b. How is actual cash value calculated? c. How does the concept of actual cash value support the principle of indemnity? 2. a. What is a valued policy? Why is it used? b. What is a valued policy law? c. What is a replacement cost policy? 3. a. Explain the meaning of an insurable interest. b. Why is an insurable interest required in every insurance contract? M09_REJD2578_13_SE_C09.indd 185 16/12/15 1:11 am 186 CHAPTER 9 / FunDAmEnTAL LEGAL PRinCiPLES technology to enable people find the law more easily. Visit the site at law.cornell.edu ■■ Lawyers.com is an online source for identifying qualified legal counsel. The site contains consumer information on numerous legal topics, including insurance. Visit the site at lawyers.com sElECTEd REfEREnCEs Fire, Casualty & Surety Bulletins (FC&S) service by the National Underwriter Company is the premier property and casualty insurance service. The complete print service is comprised of eight volumes of property and casualty insurance topics: Fire & Marine, Personal Lines, Casualty & Surety, Umbrella, Directors & Officers Liability, Guide to Policies I and II, and Companies & Coverages. These bulletins contain interesting cases concerning the meaning of actual cash value, insurable interest, and other legal concepts discussed in this chapter. Hopkins, Jamie P., Edward E. Graves, and Burke A. Christensen (Eds.). McGill’s Legal Aspects of Life Insurance, 9th ed. Bryn Mawr, PA: The American College, 2014. Lorimer, James J., et al. The Legal Environment of Insurance, 4th ed., vols. 1 and 2. Malvern, PA: American Institute for Chartered Property and Liability Underwriters, 1993. “Two Landmark Anti-Stoli Decisions by the Delaware Surpreme Court.” The Insurance Forum, Vol. 38, No. 12, December 2011. Wiening, Eric A. Foundations of Risk Management and Insurance, Malvern, PA: American Institute for Chartered Property Casualty Underwriters/Insurance Institute of America, 2002, chs. 11–19. Wiening, Eric A. and Donald S. Malecki. Insurance Contract Analysis. Malvern, PA: American Institute for Chartered Property Casualty Underwriters, 1992. noTEs 1. Jefferson Insurance Company of New York v. Superior Court of Alameda County, 475 P. 2d 880 (1970). 2. Valued policy states include Arkansas, California, Florida, Georgia, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, 50 percent. The replacement cost of a new dining room set at the time of loss was $6,000. Ignoring any deductible, how much will Ashley collect from her insurer? Explain your answer. 3. Nicholas owns a laptop computer that was stolen. The laptop cost $1,000 when it was purchased 5 years ago. A similar laptop computer today can be purchased for $500. Assuming that the laptop was 50 percent depreciated at the time the theft occurred, what is the actual cash value of the loss? 4. Megan owns an antique table that has a current market value of $12,000. The table is specifically insured for $12,000 under a valued policy. The table is totally destroyed when a tornado touches down and damages Megan’s home. At the time of loss, the table had an estimated market value of $10,000. How much will Megan collect for the loss? Explain your answer. 5. A drunk driver ran a red light and smashed into Kristen’s car. The cost to repair the car is $8,000. She has collision insurance on her car with a $500 deductible. a. Explain how the principle of subrogation would be relevant in the above case. b. Explain how subrogation supports the principle of indemnity. 6. One requirement for the formation of a valid insurance contract is that the contract must be for a legal purpose. a. Identify three factors, other than the legal purpose requirement, that are essential to the formation of a binding insurance contract. b. Explain how each of the three requirements in part (a) is fulfilled when the applicant applies for an auto insurance policy. inTERnET REsouRCEs ■■ FreeAdvice.com has a section on insurance law that provides considerable consumer information on topics dealing with insurance law. These topics include auto insurance, health insurance, disability insurance, life insurance law, and numerous other topics. Visit the site at freeadvice.com ■■ Legal Information Institute at Cornell University Law School publishes free legal materials online, creates materials that help people understand the law, and explores new M09_REJD2578_13_SE_C09.indd 18 and920insurance%20132007 APPLICATION QUESTIONS 185 - A principal is responaible for the actions of agents acting within the scope of their authority, -Limitations can be placed on the powers of agents. - An agent can bind the principal based on express author- ity, implied authority, and apparent authority. - Based on the legal doctrines of waiver and estoppel, an insurer may be required to pay a claim that it ordinarily would not have to pay. KEY CONCEPTS AND TERMS Actual cash value (172) Legally competent (180) Agency agreement (182) Material (fact) (177) Aleatory contract (180) Offer and acceptance (179) Apparent authority (182) Pecuniary (financial) Binder (179) interest (175) Broad evidence rule (172) Personal contract (181) Commutative Principle of contract (180) indemnity (171) Concealment (177) Principle of insurable Conditional contract (181) interest (174) Conditional premium Principle of reasonable receipt (179) expectations (181) Conditions (181) Principle of utmost good Contract of adhesion (181) faith (176) Estoppel (183) Replacement cost Exchange of insurance (173) consideration (179) Representations (177) Express authority (182) Subrogation (175) Fair market value (172) Unilateral contract (180) Implied authority (182) Valued policy (172) Valued policy law (173) misrepresentation (177) Waiver (183) Legal purpose (180) Warranty (178) 4. a. Explain the principle of subrogation, b. Why is subrogation wed? 5. Explain the following legal doctrines: a. Misreprezntation b. Concealment c. Warranty 6. List the four requirements that must be met to form a valid insurance contract. 7. Insurance contracts have certain legal characteristics that distinguish them from other contracts. Ezplain the following legal characteristics of insurance con- tracts. a. Aleatory contract b. Unilateral contract c. Conditional contract d. Personal contract e. Contract of adhesion 8. Explain the general rules of agency that govern the actions of agents and their relationship to insureds. 9. Identify three sources of authority that enable an agent to bind the principal. 10. Explain the meaning of: a. Wajver b. Estoppel APPLICATION QUESTIONS REVIEW QUESTIONS 1. a. Explain the principle of indemnity. b. How is actual cash value calculated? c. How does the concept of actual cash value support the principle of indemnity? 2. a. What is a valued policy? Why is it used? b. What is a valued policy law? c. What is a replacement cost policy? 3. a. Explain the meaning of an insurable interest. b. Why is an insurable interest required in every insur- ance contract : 1. Jake borrowed $800,000 from the Gateway Bank to purchase a fishing boat. He keeps the boat at a dock owned by the Harbor Company. He uses the boat to carn income by fishing. Jake also has a contract with the White Shark Fishing Company to transport tuna from one port to another. a. Do any of the following parties have an insurable interest in Jake or his property? If an insurable inter- est exists, explain the extent of the interest. 1. Gateway Bank 2. Harbor Company 3. White Shark Fishing Company b. If Jake did not own the boat but operated it on behalf of the White Shark Fishing Company, would he have an insurable interest in the boat? Explain. 2. Ashley purchased a dining room set for $5,000 and insured the furniture on an actual cash value basis Three years later, the set was destroyed in a fire. At the time of loss, the property had depreciated in value by Sipil 786 CHAPTER / FUNDANINTAL LEGAL PRINCIPLES technogy to enable people find the law more easily. Visit the site at kaw.cammelletu Lawyers.com is an online source for identifying qualified legal counsel. The site contains consumer information on numerous kyal copies, including insurance. Visit the site at Lawyers.com 50 perawat. The replacement cont of a new dining room star the time of low was $6,000. Ignoring any deler ine, how much will Ashley colley from her insurer) Explain your answer 3. Nicholas owns a laptop computer that was stolen. The laptop ext $1,000 when it was purchased 5 years ago A similar laptop computer today can be purchased for $500. Assuming that the laptop was 50 percent depre cited ar the time the theft orxurred, what is the actual cash value of the low) * Meppan owns an antique table that has a current marker value of $12,000. The table is specifically insured for $12,000 under a valued policy. The table is totally destroyed when a tomado touches down and damages Megan home. At the time of loss, the cable had an estimated market value of $10,000. How much will Megan collect for the loss? Explain your answer. 5. A drunk driver ran a red light and smashed into Kristen car. The cost to repair the car is $8,000. She has collision insurance on her car with a $500 deductible a. Explain how the principle of subrogation would be relevant in the above case. b. Explain how subrogation supports the principle of indemnity. 6. One requirement for the formation of a valid insurance contract is that the contract must be for a legal purpose ), a. Identify three factors, other than the legal purpose requirement, that are essential to the formation of a binding insurance contract. h. Explain how each of the three requirements in part (a) is fulfilled when the applicant applies for an auto msurance policy. SELECTED REFERENCES Fire. Coswlty & Surety Bulletins (FC&S) service by the National Underwriter Company is the premier prop- erty and casualty insurance service. The complete print service is comprised of eight volumes of prop- erty and casualty insurance topics: Fire & Marine, Personal Lines, Casualty & Surety, Umbrella, Direc- tors & Officers Liability, Guide to Policies I and II, and Companies & Coverages. These bulletins contain interesting cases concerning the meaning of actual cash value, insurable interest, and other legal concepts discussed in this chapter. Hopkins, Jamie P., Edward E. Graves, and Burke A. Christensen (Eds.). McGill's Legal Aspects of Life Insurance, 9th ed. Bryn Mawr, PA: The American Colleges , 2014 Lorimer, James J. et al. The Legal Environment of Insur- unce, th ed., vols. 1 and 2. Malvern, PA: American Institute for Chartered Property and Liability Under- writers, 1993, *Two Landmark Anti Stoli Decisions by the Delaware Sur- preme Court." The Insurance Fornern, Vol. 38, No. 12, December 2011. Wiening. Eric A. Foundations of Risk Management and Insurance, Malvern, PA: American Institute for Char tered Property Casualty Underwriters/Insurance Insti- tute of America, 2002. chs. 11-19 Wiening, Eric A. and Donald S. Malecki. Insurance Contract Analysis. Malvern, PA: American Institute for Chartered Property Casualty Underwriters, 1992. INTERNET RESOURCES FreeAdvice.com has a section on insurance law that pro- vides considerable consumer information on topics deal- ing with insurance law. These topics include auto insurance, health insurance, disability insurance, life insur- anco law, and numerous other topics. Visit the site at tre advice.com NOTES • Legal Information Institute at Comell University Law School publishes free legal materials online, creates materials that help people understand the law, and explores new 1. Jefferson las ruce Company of New York v. Superior Court of Alameda County, 475 P. 2d 88011970). 2. Valul policy states include Arkansas Califomia, Florida, Georgia, Kansas, Louisiana, Minnesota, Mississippi, Missouri Montana Nebraska, New Hampshire,
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Review Questions
Number 1
a. The principle of indemnity – this principle simply means putting the insured party at the
financial position it was before the loss occurred. This happens without subjecting the insured to
penalties or rewards.
b. Actual cash value is calculated by subtracting depreciation away from the cost of replacement.
Calculating depreciation is done by determining the percentage of a commodity's life is left of its
useful life.
c. The concept of actual cash value is backed by the indemnity principle, this is so because the
actual cash value ensures that all parties involved do not benefit from an accidental loss. This is
achieved by either direct reimbursement or getting the actual market value of a commodity.
Number 2
a. Valued policy- this is a policy where an insurer consents in advance that the insured
matter shall be considered as the value of the particular matter upon loss
b. Valued policy law- this is a law that instructs all insurance companies to fully pay the
insurance value to the insured when a loss occurs. It mandates that the total loss is paid.
c. Replacement cost policy –this is the policy that covers the replacement or re...


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