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Insurance Law
SUNY Buffalo Law School
Kohane, Dan D.

INSURANCE LAW OUTLINE

PART 1: CONCEPTS AND THE “BUSINESS OF INSURANCE”
Terms
Indemnity: obligation to make good any loss or damage another person has incurred

Insurable Interest: That relationship with a person or thing that will support the issuance of an insurance policy. “[t]here must always be an insurable interest when the insurance takes effect.” Gaunt v. John Hancock, p. 163.

No-Fault Insurance: Where a party in a car accident recovers damages up to a specific amount against his own insurance company regardless of who was at fault. Damages more than the specified amount are recovered by a lawsuit against the party who caused the accident.

Omnibus Clause: A clause in auto liability insurance policy that gives additional insured persons other than the person named in the liability policy as insured the benefit of the policy, with certain exceptions.

Premium: The sum paid to an insurer as consideration for an insurance policy.

Concealment: The failure of an applicant for an insurance policy to disclose information relevant to the insurer’s decision to insure the risk.

Uninsured Motor Vehicle: An unidentified motor vehicle which leaves the scene of an accident, a motor vehicle registered in NY which was uninsured, a stolen vehicle, a motor vehicle operated without permission of the owner, as well as an otherwise insured motor vehicle where the insurer disclaims liability or denies coverage.

Pollution Exclusion: Bars coverage for bodily injury or property damage arising out of the discharge, dispersal, release or escape of pollutants into or upon land. Does not apply if such discharge is sudden and accidental.

Deductible: The initial portion of a covered expense (usually in indemnity or PPO plans) that must be paid by the insured person before the insurance policy pays its part of the expense. (For example, if the deductible is $100, then you must pay the first $100 of the covered medical costs before the insurance will pay anything at all.

Primary Insurance: the insurance policy responding first to any loss in excess of the deductible.

Excess Liability Insurance: Insurance coverage that is written in excess of primary insurance. It is designed to increase the limits of liability, thereby providing catastrophe coverage. Excess liability coverage does not respond to a loss until the amount of the loss exceeds (or exhausts) any existing primary policy limits. Example: A primary $500,000 liability policy is written, and excess insurance is written for $2 million excess of the primary. The primary policy would pay all losses within $500,000 and the excess policy would pay losses in excess of the primary coverage, up to the excess policy limit of $2 million.

Important Statutes
1101: Defines what it means to participate in the business of insurance.

1102: Requires those that practice insurance to be licensed, with certain exceptions.

1113: Lists the kinds of risks that can be insured.

All Risk Policy
An “all risk” insurance policy covers all losses witch are fortuitous. A fortuitous event is “any occurrence or failure to occur which is … to a substantial extent beyond the control of either party.” (1101(a)(2)
Mere negligence of an insured is not a defense to coverage under an all risk policy. Danzeisen Realty Corp., 1991

License Requirement and What Constitutes Doing the Business of Insurance
If the agreement company offers is, contains or applies to:
a. Fortuitous consequences
b. A distribution among a large group
c. A legally binding promise
d. A premium paid
e. A profit motive on the part of the entity offering the plan.
f. It’s not an ERISA plan
g. Not offered by a labor union. (Blue Crest Plans, 1979)

McCarran-Ferguson Insurance Regulation Act
Aims to ensure that no act of Congress will be construed to supersede any state law regulating the b

a position it has taken or to coerce it into abandoning its position. Hartford.

PART 2: INTERPRETING INSURANCE CONTRACTS

Interpreting the Meaning of the Word “Accident” in a Policy
In an insurance policy, the word “accident” must be construed as the ordinary person would construe it when buying insurance or, when involving business, by looking at the reasonable expectation and purpose of the ordinary business when making an ordinary business contract. Michaels v. Memorial Ambulance, NY Ct. of Appeals, 1995, p. 158
However, this does not allow for construing any unexpected even as an accident. Id. The unexpected event should be “something catastrophic or extraordinary.” Id.
In automobile insurance policies, the word “accident” refers to an even involving some trauma, violence, or casualty, or application of external in which the auto is involved.

Where application provided that if first premium was paid when application was signed and that if company was satisfied on date of completion of Part B of application that applicant was insurable and that if application including Part B was, prior to applicant’s death, approved by the company at its home office, insurance should be in force as of date of completion of Part B, and premium was paid when application was signed and applicant and agent intended that insurance should be in force from date of Part B which was completed before applicant’s death, the company was liable though application had not been approved at company’s home office.” Gaunt v. John Hancock, 1947, p.161