I. Course overview
· What are the basic facts? What is the insurance policy fact that is being construed? What is the court holding? Not to interested in procedural posture.
– Anything covered in class is fair game for the final.
– Exam – 40 Short answers fill in the blank and 2 short essay (15 pts and 5 pts).
– Babylonians started the first insurance related to shipping merchants. Lloyds of London expanded large. They are not the insurer. They brought the underwriters (people putting up the money) together with the insured. Started as a coffee house in London and focused on bringing people together. Fire insurance also started in London.
III. Insurance Law
– Most is a specific kind of contract law.
– Auto, Home, and Business insurance is regulated by the state. Most rules apply nationwide.
– Determines whether or not you get paid can depend on if the plaintiff has insurance.
– Terms to know
· Insurance company is the insurer.
· The beneficiary is the insured.
1. Named – Persons who name appeared in the declaration. You = named insured.
2. Other insured – referred to as insured.
· Insured who purchases the policy is termed the policyholder.
– The insured has the burden of proving that there was a policy in effect at the time of the injury.
– Two types
· First party insurance – designed to compensate the insured for their own losses or damages. To recover for personal losses suffered.
1. Auto, life, medical, etc…
· Third party insurance – covered for damages that a third party suffered that the insured is responsible for. Liability insurance is another name. Coverage for claims that third parties have against you.
1. Standard homeowner’s policy also has liability insurance to protect against third part claims.
– Rules of construction
· Ejusdem Generis – Where specific and particular enumerations of persons or things are followed by general words, the general words are not to be construed in their widest meaning or extent but are to be treated as limited and applying only to persons or things of the same kind or class as those expressly mentioned.
· Contra Proferentem – construe against the drafter (insurance company)
· Most court consider insurance an adhesion contract
· Reasonable expectation of the insured – what the reasonable insured would have expected to be covered. TX S Ct does not follow in Texas, yet not expressly rejected by the TX S Ct. Don’t really know if this applies in TX currently.
· State regulates what the policies are going to say. Standard forms.
– Carve out policy – when an individual is covered under more than one insurance policy, the second insurance company can carve out (deduct) whatever compensation is received from the first insurance company and then pay the individual the difference.
– Rules of construction from Barnett, (see page two of the case for the rules)(must be ambiguous to even look to the rules of construction). This is the courts job to determine if the language is ambiguous.
· If a contract is plan and unambiguous, then the policy is construed as written.
1. If the written instrument is worded so that it can be given one reasonable construction, it will be enforced as written.
· Construe the contract as a whole.
· Ambiguous means that the term or provision can be understood to mean more than one thing.
· Court will attempt to give provision
· Insurance policy must be construed against the drafter of the policy. Insured is protected first.
· Insurance policies are contracts.
· Something is considered ambiguous if there is more than one reasonable ambiguous statement. Must be more than one reasonable statement.
· An exception or limitation on the insured – exclusions are strictly construed. Exclusions can be construed in any reasonable way that will benefit the insured.
· Exclusions are strictly construed such that any understand by the insured must be used even if the insurance companies understanding is more reasonable.
· Intent to exclude coverage must be made in clear and unambiguous language.
· Ambiguity (on the test)
1. Patent ambiguity – appears from the language itself
2. Latent ambiguity – Policy language reads ok, but becomes ambiguous when applying it to a certain fact pattern.
– When construing a contract, determine the party’s intent, adopt the insured understanding of the policy.
– Policy Layout
· Insurance Agreement
· Exclusions to insurance policies
· Conditions to coverage – things that insured and insurer have to do.
1. Duty on insured to provide notice on a claim or accident.
· Definitions of special terms used in the policy
1. If a word is defined then the definition is controlling.
2. If not defined, then Webster can be used a source to define the word.
IV. Commercial general liability policy
– Policy required prompt notice in the event of a claim or law suit. This can be a condition of the policy.
· A prompt notice condition – insurance company can not deny coverage because they did not get prompt notice unless the lack of prejudiced the insu
y and intentional and the injury is the natural result of the act or conduct, the result was not caused by accident even though that result may have been unexpected, unforeseen and unintended. There is no insurance against liability for damages caused by mistake or error.
· Errors and mistakes can be covered.
– An intentional tort is neither an accident nor occurrence within the terms of the policy.
– An occurrence happen when there is a physical injury to or destruction of tangible property which occurs during the policy period. It is not the time that the complaining party complains, but the time the occurrence of the event.
· It is well settled that the time of the occurrence of the accident, within the meaning of a liability indemnity policy, is not the time the wrongful act was committed but the time the complaining party was actually damaged.
– The policy that in effect at the time of the occurrence pays the damages.
– Cowan rule – An effect that cannot be reasonably anticipated from the use of the means, or effect that produced it, an effect which the actor did not intend to produce and which he cannot be charged with the design of producing, is produced by accidental means.
– Sexual molestation of a child by an adult is an intentional harm as a matter of law. For a child to bring a lawsuit, they have to sue through a “next friend”, which are normally the parents or guardian. Sexual molestation is on the exam. Sexual molestation is never an accident as a matter of law.
– There can be multiple occurrences. Each time there is new damage, there can be an occurrence.
– The injuries or damages must occur during the policy period to be covered.
· Misrepresentations in the sale of a home do not represent an accident or occurrence and is not covered under a homeowner’s insurance policy.
– Commercial general liability policies (coverage A policies) pay because of bodily injury or property damages due to an occurrence.
– Bodily injury
· Bodily injury does not include intentional infliction of emotional distress or mental anguish.