Insurance Law Outline

INSURANCE
 
 
General
Insurance=a contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies. One who writes insurance must be in insurance business.
Insurance contracts
Plain meaning
Ambiguity construed against insurer/ in favor of insured
Statute supplements/trumps contract
Broadest possible construction of undefined terms
Existence of contract=Q of fact
Oral contract allowed
Warranty: (1) expressly included into contract; (2) parties must intend that right of insured depended on truth of warranty; (3) clear statement in contract that insured warrants truth under PENALTY of loss of contract rights. Warranty strict compliance OR contract avoided: [SC abhors a forfeiture] Affirmative warranty=true at the time (favored construction)
Promissory warranty=continue to be true (disfavored)
Divisibility If divisible, breach as to one NO breach as to another. Temporary breach can be cured and policy revived.
Misrepresentation Any insured statement that insurer relies on to issue policy that is (1) untrue or misleading; (2) material to the risk [material=insurer would not have issued, or at that premium]; (3) relied on by insurer in issuing policy at specific premium=AVOID policy
Graham FACTORS (oral misrepresentation). EVEN if false, no avoidance UNLESS (1) material to risk; (2) insured knows false; (3) insured intended to mislead and defraud insurer; AND (4) insurer relied as basis for issuing policy.
Life Insurance Policy: Graham factors AND “incontestability clauses” [insurer must challenge within 2 years of issuance during life of insured, or too bad. No causal connection b/w misrepresentation and cause of death to avoid required] Change Beneficiary requires “substantial compliance” not strict compliance with rules. Can contract right to change beneficiary away.
Exclusions. MUST be specific; Notice required; CANNOT exclude what is specifically insured under contract (termite bond). [mother in law is NOT a relative] Member of household test (foster child): (1) living under same roof; (2) in close, intimate relationship; (3) intended substantial duration of relationship; (4) intent re: contracting whether child was to be considered in insurance plans (child=member)
Intentional Conduct= Insurer ONLY pay for “fortuitous” losses (accidental). Life insurance will pay for suicide after 2 years of issuance. “Innocent coinsured” may recover in equity her interest in house destroyed by joint owning spouse. [Bank mortgagee is NOT innocent coinsured because not named on policy] TEST: (1) specific intent to injure; AND (2) intent to cause particular type of injury (result) [child sets fire to hear fire engines; contract NOT avoided] Insurer had to pay when insured intentionally ran car into victim intending to kill her (car statute did not distinguish b/w intentional and negligent acts of insured=protect innocent victims)
Insurer Duties
Duty to Defend= Exclusive pleadings test. If one claim triggered from four-corners of complaint, insurer must defend EVEN if groundless, fraudulent, meritless [ONLY duty to defend insured] Conflict of interest may require appoint 3d party counsel (insured negligent)
Tender of policy limits does NOT relieve insurer of duty to defend
Remedies: If insurer fails to defend, insure gets atty fees, costs and indemnity (insurer cannot later challenge good faith, reasonable settlement); insured relieved of duty to cooperate an