South Carolina (Sc) Bar Exam - Insurance

Front 1

Estoppel - what is it used for and the elements

Back 1

Courts will not permit an insurer to mislead an insured into believing particular risk is within coverage and then use the contract to prove the contrary.

Insured must show:
1) ignorance of the truth of the facts
2) representations or misconduct which misled
3) reliance
4) prejudicial change of position from reliance

Front 2

Misrepresentation define

Back 2

Any statement, written or oral, express or implied, made by the insured to the insurer that forms at least part of the basis on which the insurer decides to enter into the contract.

Statement must be expressly incorporated into the contract.

Front 3

Avoidance of the policy based on misrepresentation

Back 3

Insurer may avoid policy by showing insured's representation was:
- untrue or misleading
- falsity was known to the applicant
- material to the risk
- relied upon by insurer and
- made with intent (scienter)

Front 4

Life insurance - avoidance

Back 4

Representation was:
- untrue or misleading
- falsity was known to the applicant
- made with the intent to deceive
- material to the risk
- relied upon by the insurer and
- the action to avoid is brought while the insured is alive and within two years of contracting

Front 5

Materiality

Back 5

Reasonable insurer standard - A representation is material if it would induce a reasonable insurer to enter into the contract.

Front 6

Obligation to correct

Back 6

Insured is under obligation to correct representations that become untrue any time before contracting

Front 7

Warranties and conditions

Back 7

Warranties are conclusively presumed to be material.

While representation is not grounds for avoidance if substantially true, conditions and warranties must have STRICT compliance

Front 8

when a representation is a warranty

Back 8

- expressly included or incorporated by clear reference
- conduct clearly shows parties intended that insured's rights would depend on the truth
- must have a clear statement within the contract to the effect that the insured warrants the truth of the statements

Front 9

Life insurance - changing beneficiary

Back 9

Substantial compliance - insured need not follow procedures precisely, must substantially comply

Front 10

Policy exclusions

Back 10

Insured must have notice (is presumed to have read their policy).

Rule - where a policy specifically provides coverage for a loss, insurer cannot exclude coverage under a general exclusion

Any internal inconsistencies render the policy ambiguous and are resolved in favor of the insured

Front 11

Automobile coverage - who is covered?

Back 11

Omnibus clause - "Insureds" in an automobile policy are
- named insured
- resident spouse
- resident relative
- permissive users
- guests

Front 12

Intentional conduct

Back 12

Must have the specific intent to cause the specific harm in order for intentional conduct to be excluded from coverage.

Suicide, sane or insane, will be excluded if within 2 years of issuance.

Front 13

Intentional conduct, property damage, and coinsured

Back 13

No coverage for intentional damage to your own home.

However, an innocent co-insured will be allowed to recover for the loss (absent specific language to the contrary)

Front 14

Duty to defend

Back 14

Insurers have the right and obligation to defend an insured for claims by third parties for any cause of action that falls within policy coverage.

If there are no allegations that, if proven true, would lead to coverage then there is no duty to defend.

The insured must be a named party for the duty to attach.

Front 15

Duty to indemnify

Back 15

Duty to defend is separate and distinct from duty to indemnify

There is no discharge of duty to defend by payment of process

Front 16

Avoiding defense and liability for failure to defend - insurer self-protections

Back 16

- Declaratory judgment action (still must defend while action pending)
- Nonwaiver agreement - Insurer retains any right to contest coverage in the event of liability by insured
- Reservation of rights notice
- Set-off benefits - insurer can set-off amounts owed if insured finds other sources of recovery

Front 17

Duty to advise insured

Back 17

There is no duty to advise, but an implied undertaking may be found if:
- agent received consideration beyond mere payment of premiums
- Insured made a clear request for advice or
- Course of dealing over extended period which would put an objectively reasonable insurance agent on notice that his advice is being sought/relied on

If found - due care is required

Front 18

Automobile - deviations

Back 18

Conversion rule approach - vehicle must be used within scope of permission granted or not a substantial deviation thereof

Front 19

Insured duty to cooperate

Back 19

corollary to duty to defend - insured has duty to cooperate

Insurer must show that it was prejudiced by failure to cooperate to discharge or suspend duties

Front 20

Automobile - "Use"

Back 20

an injury arises out of wnership, maintenance, or use of an automobile if:

Causal connection between vehicle and injury - vehicle more than mere site of injure, the injury foreseeably identifiable with the normal use of a motor vehicle

Front 21

Occurrence and risk

Back 21

An 'occurrence' is an unexpected or unintended event triggering policy coverage.

SC uses a modified continuous trigger rule - coverage is triggered at time of injury in fact and continuously thereafter

Allocation of damages = time on the risk

Front 22

Tyger River Action

Back 22

Bad faith cause of action arising out of insurer's negligence in failing to settle or refusal to settle in bad faith.

Simple negligence standard used- were insurer's actions unreasonable

Factors showing unreasonableness: strength of insured's claim, attempts by insurer to induce insured to contribute to settlement, insurer's rejection of own counsel advice, failure to inform of compromise offer, amount of financial risk for non-settlement, any other factor.

Front 23

First party claim

Back 23

An actual bad faith claim - insured suffers loss which insurer is obligated to pay and does not.

Elements (contract + tort)
1) contract of insurance between parties (privity)
2) refusal by insurer to pay benefits due under contract
3) Resulting from insured's bad faith or unreasonable action in breach of implied convenant of fair dealing and good faith
4) Causing damages to insured

Front 24

Insurable interest

Back 24

anyone has an insurable interest in property or who derives a benefit from its existence or would suffer a loss from its destruction

interest must exist at the time the contract is made

Front 25

Life insurance - insurable interest

Back 25

A person has an insurable interest in their own life.

A spouse and close relatives are presumed to have an insurable interest in insured's life. A spouse need not inform her husband of the insurance policy's existence.

All others will be subject to the benefit test

Front 26

Property insurable interest

Back 26

can insure both legal and equitable interests

Front 27

Uninsured and Underinsured Motorist coverage

Back 27

Automobile policies. Uninsured motorist coverage is mandatory in and covers damages caused by hit and run drivers, uninsured motorists, and motorists who have less than the mandatory minimum UM coverage.

Underinsured motorist coverage is optional and will cover damages beyond the motorists liability coverage.

Front 28

Meaningful offer

Back 28

An insured must have been given a 'meaningful offer' of underinsured motorist coverage. If a form conforming to the statute is used, a meaningful offer will be presumed. Otherwise, 4 part test:
1) notification process was commercially reasonable whether oral or in writing
2) unsurer must specify the limits of optional coverage
3) insurer must intelligibly advise that nature of the optional coverage and
4) the insured must be told that optional coverage is available for additional $