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INSURANCE LAW SPRING 2010

INSURANCE LAW SPRING 2010. CLASS SESSION 3 PROFESSOR TRAVIS. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss. NEED FOR EXCLUSIONS. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss. NEED FOR EXCLUSIONS.

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INSURANCE LAW SPRING 2010

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  1. INSURANCE LAWSPRING 2010 CLASS SESSION 3 PROFESSOR TRAVIS

  2. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss NEED FOR EXCLUSIONS

  3. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss NEED FOR EXCLUSIONS (1) CONTROL ADVERSE SELECTION

  4. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss NEED FOR EXCLUSIONS (1) CONTROL ADVERSE SELECTION (2) REDUCE MORAL HAZARD

  5. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss NEED FOR EXCLUSIONS (1) CONTROL ADVERSE SELECTION (2) REDUCE MORAL HAZARD (3) CONTROL “CATASTROPHIC LOSSES”

  6. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss NEED FOR EXCLUSIONS (1) CONTROL ADVERSE SELECTION (2) REDUCE MORAL HAZARD (3) CONTROL “CATASTROPHIC LOSSES” (4) AVOID DUPLICATION OF COVERAGE (MARKET SEGMENTATION)

  7. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss INTRINSIC LOSS INSURE AGAINST THE UNEXPECTED

  8. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss INTRINSIC LOSS INSURE AGAINST THE UNEXPECTED NOT INHERENT CHARACTERISTICS OF THE PROPERTY

  9. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss CONCURRENT CAUSATION ONE CAUSE IS EXCLUDED

  10. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss CONCURRENT CAUSATION ONE CAUSE IS EXCLUDED ANOTHER CAUSE IS NOT

  11. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss CONCURRENT CAUSATION ONE CAUSE IS EXCLUDED ANOTHER CAUSE IS NOT IS IT COVERED?

  12. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss INCREASED RISK YOU WANT TO COVER LOSSES FROM ORDINARY NEGLIGENCE

  13. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss INCREASED RISK YOU WANT TO COVER LOSSES FROM ORDINARY NEGLIGENCE BUT YOU DON’T WANT TO ENCOURAGE MORAL HAZARD

  14. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss CHUTE V. NORTH RIVER INS. CO. (Pg. 211) POLICY INSURES JEWELRY AGAINST “ALL RISKS OF LOSS OR DAMAGE” INCLUDING “BREAKAGE”

  15. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss CHUTE V. NORTH RIVER INS. CO. OPAL BREAKS DUE TO “INHERENT VICE” IE. NO EXTERNAL FORCE CAUSES BREAK

  16. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss CHUTE V. NORTH RIVER INS. CO. HELD: NO COVERAGE

  17. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss CHUTE V. NORTH RIVER INS. CO. NO LIABILITY UNDER POLICY FOR LOSS DUE TO CONDITION INHERENT IN THE INSURED PROPERTY

  18. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss CHUTE V. NORTH RIVER INS. CO. PROBLEM MAY BE THAT THE RULE DATES FROM EARLY MARINE INSURANCE WHICH COVERS “PERILS OF THE SEA” AND LOSS IS DUE TO “INHERENT VICE”

  19. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss RULE IS SIMILAR TO “FRIENDLY FIRE” - HOSTILE FIRE DISTINCTION

  20. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss FRIENDLY FIRE RULE: FOR LOSS TO BE COVERED UNDER FIRE INSURANCE, FIRE MUST BE AN UNINTENDED FIRE AND NOT AN INTENTIONAL FIRE WHICH CAUSES DAMAGE

  21. Ch 4 E 2 Exclusions and Exceptions — Causation Problems STATE FARM FIRE & CAS CO v. BONGEN (Pg 214)

  22. Ch 4 E 2 Exclusions and Exceptions — Causation Problems STATE FARM FIRE & CAS CO v. BONGEN POLICY EXCLUDES “EARTH MOVEMENT” IMPROPER CONSTRUCTION TRIGGERS LANDSLIDE

  23. Ch 4 E 2 Exclusions and Exceptions — Causation Problems STATE FARM FIRE & CAS CO v. BONGEN HELD: NOT COVERED POLICY EXCLUDES CONCURRENT CAUSES

  24. Ch 4 E 2 Exclusions and Exceptions — Causation Problems STATE FARM FIRE & CAS CO v. BONGEN MAJORITY SAYS: ENFORCE THE POLICY AS WRITTEN AND THE LANGUAGE (Pg 215) IS CLEAR ENOUGH TO EXCLUDE COVERAGE

  25. Ch 4 E 2 Exclusions and Exceptions — Causation Problems STATE FARM FIRE & CAS CO v. BONGEN OTHER COURTS (AND THE DISSENT) REQUIRE COVERAGE OF CONCURRENT CAUSES

  26. Ch 4 E 2 Exclusions and Exceptions — Causation Problems CONCURRENT CAUSE: COVERED CAUSE AND EXCLUDED CAUSE JOIN OR CONCUR TO CAUSE LOSS

  27. Ch 4 E 2 Exclusions and Exceptions — Causation Problems CONCURRENT CAUSE DOCTRINE— WHEN A COVERED CAUSE JOINS WITH AN EXCLUDED CAUSE TO BRING ABOUT LOSS, IT WILL BE COVERED (ABSENT SPECIFIC EXCLUSION)

  28. Ch 4 E 2 Exclusions and Exceptions — Causation Problems OKLAHOMA RULE IS CONTRARY TO BONGEN - KELLY V. FARMERS N. 1 Pg. 218 AND SUPPLEMENT Pg. 7

  29. Chapter 4 D 2 Limited Interests - Leaseholds LIRISTIS V. AMERICAN FAMILY MUT. INS. CO.(Pg. 219)

  30. Ch 4 E 2 Exclusions and Exceptions — Causation Problems LIRISTIS V. AMERICAN FAMILY INSUREDS HAVE A FIRE; WATER USED TO PUT OUT THE FIRE CAUSES MOLD

  31. Ch 4 E 2 Exclusions and Exceptions — Causation Problems LIRISTIS V. AMERICAN FAMILY INSURANCE COMPANY REFUSES TO PAY FOR MOLD BECAUSE OF MOLD EXCLUSION

  32. Ch 4 E 2 Exclusions and Exceptions — Causation Problems LIRISTIS V. AMERICAN FAMILY TRIAL COURT APPLIES EXCLUSION AND GRANTS SUMMARY JUDGMENT

  33. Ch 4 E 2 Exclusions and Exceptions — Causation Problems LIRISTIS V. AMERICAN FAMILY HELD: REVERSED; POLICY COVERS LOSS BY FIRE AND EXCLUDES LOSS CAUSED BY MOLD

  34. Ch 4 E 2 Exclusions and Exceptions — Causation Problems LIRISTIS V. AMERICAN FAMILY HERE, FIRE CAUSED MOLD, WHICH WAS A LOSS RATHER THAN A CAUSE OF LOSS

  35. Ch 4 E 2 Exclusions and Exceptions — Causation Problems LIRISTIS V. AMERICAN FAMILY INSURANCE COMPANY HAS TO BE VERY SPECIFIC IN WHAT IT EXCLUDES

  36. Ch 4 E 2 Exclusions and Exceptions — Causation Problems LIRISTIS V. AMERICAN FAMILY COULD IT BE THE COURT DOESN’T LIKE THE MOLD EXCLUSION WHERE THE MOLD IS CAUSED BY A COVERED CAUSE (FIRE)?

  37. Chapter 4 E 3 The Problem of Increased Risk ROSEN V. STATE FARM GENERALINSURANCE COMPANY(Pg. 225)

  38. Chapter 4 E 3 The Problem of Increased Risk ROSEN V. STATE FARM INSURED HAS DECKS WITH DETERIORATED FRAMING SUPPORT WHICH MADE COLLAPSE IMMINENT

  39. Chapter 4 E 3 The Problem of Increased Risk ROSEN V. STATE FARM INSURED REPAIRS THE DECKS RATHER THAN LET THEM COLLAPSE

  40. Chapter 4 E 3 The Problem of Increased Risk ROSEN V. STATE FARM INSURANCE COMPANY DENIES CLAIM BECAUSE POLICY COVERS ONLY ACTUAL COLLAPSE, NOT IMMINENT COLLAPSE

  41. Chapter 4 E 3 The Problem of Increased Risk ROSEN V. STATE FARM TRIAL COURT FINDS FOR PLAINTIFF; COURT OF APPEALS AFFIRMS

  42. Chapter 4 E 3 The Problem of Increased Risk ROSEN V. STATE FARM HOLDS PUBLIC POLICY DOES NOT FAVOR REQUIRING THE INSURED TO LET THE STRUCTURE COLLAPSE BEFORE THERE IS COVERAGE

  43. Chapter 4 E 3 The Problem of Increased Risk ROSEN V. STATE FARM SUPREME COURT REVERSES; POLICY IS CLEAR AND MUST BE ENFORCED AS WRITTEN

  44. Chapter 4 E 3 The Problem of Increased Risk ROSEN V. STATE FARM IS THIS REALLY AN “INCREASED RISK” CASE?

  45. Chapter 4 E 3 The Problem of Increased Risk NOTE: “SUE AND LABOR” CLAUSES APPEAR IN COMMERCIAL POLICIES (BUT NOT IN HOMEOWNERS POLICIES)

  46. Chapter 4 E 3 The Problem of Increased Risk MAY PAY INSURED FOR COST OF PREVENTING COVERED LOSSES

  47. Chapter 4 E 3 The Problem of Increased Risk DYNASTY, INC. V. PRINCETONINSURANCE COMPANY(Pg. 229)

  48. Chapter 4 E 3 The Problem of Increased Risk DYNASTY, INC. V. PRINCETON INSUREDS OWNED RESTAURANT THEY WERE CONVERTING TO A NIGHTCLUB

  49. Chapter 4 E 3 The Problem of Increased Risk DYNASTY, INC. V. PRINCETON CITY REQUIRED FIRE SPRINKLERS, WHICH INSUREDS INSTALLED

  50. Chapter 4 E 3 The Problem of Increased Risk DYNASTY, INC. V. PRINCETON FIRE BURNS THE INSURED PREMISES AFTER VALVE OF SPRINKLER SYSTEM WAS LOCKED SHUT

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