Insurance Fall Finkel-Outline
I. Chapter One: The Legislative Mode
a. Insurance Introduction
1. Insurance is a regulated industry- courts legislated industry
2. Usual definition: occurrence: event unexpected or unintended, from the standpoint of the insured.
3. Most regulation done by the courts although courts very ill equipped to do so.
4. Insurance: “contract whereby one undertakes to indemnify another to pay a specified amt upon determined contingencies”
5. Must be issued by qualified insurance mechanism for spreading loss.
6. Due to the keen governmental interest in having its citizens adequately protected, the government regulates the insurance industry through state legislatures, regulatory agencies created by statute and the judicial system.
1. Began in England as marine insurance form of gaming
2. 1670’s must have property interest to insure
3. 1690’s must have interest in life to insure
4. Paul v. Va 1869: issuing a policy in insurance is not a transaction in commerce.
5. US v. Southeaster Underwriters 1944: Criminal case which was a violation of the Sherman Act to fix premiums and boycott non-members. Federal anti-trust laws can apply to insurance.
b. National Regulation, Regulation of Unfair competition
i. Federal regulation only if states don’t regulate insurance activity.
1. McCarran-Ferguson Act deals with thisà see pg 2 and 3
ii. After case NALC formed and got fed reg. See pg 2
1. this reversed the preemption statute, no Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any state for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance.
iii. Control Rates
1. prevention of unfair practices
2. prevent insolvency of insurers
iv. Mutual company-not stockholders “shareholders” are policy holders aka owners
c. Regulation in South Carolina pp.3-10
i. Rates: rating bureau sets rates for states àall but auto. These are sufficiently high to keep business but low enough to be affordable. Now for auto insurance can put up bond instead of paying insurance.
1. Rates help to prevent discrimination and regulate unfair competition
2. Licensing requirements keep reserves
3. Insurance companies cannot declare bankruptcy and have to provide annual statements
4. Standard form requirements already been interpreted and everyone knows what it means. Penalty statutes for bad faith.
5. 38-3-110: Duties of Insurance Commissioner
d. Regulation of Unauthorized Insurers p.3
i. Unauthorized insurers are regulated by the Uniform Unauthorized Insurers service of Process Act, which provides for the acquisition over an out-of-state insurer by an in-state insured through service of process on the state commissioner of insurance.
e. ERISA Preemption of State Law
i. Duncan v. Provident Mutual Life Insurance Co. of Philadelphia p. 10
1. ERISA preempts state law claim for bad faith refusal to pay benefits when the bad faith claim arises under an employee benefit plan.
II. Chapter 2: Judicial Regulation
a. Contract interpretation: Process by which a court determines the meaning that it will give the language used by the parties to a contract.
1. Gambrell v. Travelers Ins
tion for the jury.
i. Issue of bad faith by insurer
b. Contract Review
a. Mutual Agreement
b. Consideration-one party gets benefit wouldn’t ordinarily have or detriment
c. competent parties
d. lawful purpose
2. if contract valid made enforceable here under the full faith and credit
3. Statute of Frauds
a. Over 1 yr=writing
b. Transfer of real estate (parties only)
c. K to pay debt of another=writing
d. Consideration of marriage
c. More on Contract Interpretation
1. K interpretation is a matter of law, not fact. Existence of k is matter of fact. Can have oral agreement for insurance
2. Insurance policies are adhesion k’s with one party having lesser bargaining power than the other.
3. Rules of Insurance K:
a. insurance policies are done by plain meaning. [See Gambrell pg. 14] b. Construction of language most favorably to insured. [See Edens p. 17] c. Internal consistency
d. Technical meanings
e. Legality over illegality
ii. What makes policy Ambiguous?
1. Vague-imprecise in marginal applications
2. ambiguity in terms—could have multiple meanings
3. organization- “comprehensive theft policy” but excluded to any forcible entry – Trimper case p. 19
(extrinsic information)Outside literature/factorsàinducements to purchase like flyers etc. may create ambiguity