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Insurance Law
West Virginia University School of Law
Cady, Thomas C.

§ 1 Why study insurance law?
1.                    The U.S. is the most insurance ridden country in the world; a lot of litigation
a.       All liability is based on deep pockets (assets) or liability insurance
b.       risk adverse people
c.       Insurance pervasive across much of society
2.                    WV is the most lucrative insurance law jurisdiction – substantial portion of practices
a.       Such strict laws on insurance company bad faith
                                                               i.      Magic words “hell no, we won’t pay” = litigation
                                                              ii.      Claim for insurance proceeds and lurking bad faith case
b.       WV bad faith law is unequaled
§10 Defining Insurance
1.                    Risk – the chance, probability or degree of uncertainty that something bad will occur
a.       Coping mechanisms
                                                               i.      Minimize by safety procedures
                                                              ii.      Diversification
                                                            iii.      Avoid risk
                                                            iv.      Limit probability of loss
                                                             v.      Self insurance
                                                            vi.      Ignore
                                                          vii.      Transfer – Essence of insurance: transfer and distribution of risk from individual to a group 
1.        Transfer to insurance company who distributes risk among a pool
2.        Definition (p. 20) – basic operative definition
3.        A contract of insurance is an agreement in which one party (insurer) in exchange for a consideration provided by the other party (insured) assumes the other party’s risk and distributes it across a group of similarly situated persons each of whose risk has been assumed in a similar transaction.
2.                    Important WV statutes and cases on defining insurance:
a.       33-1-11 – defines insurance as a contract whereby one undertakes to indemnify another or to pay a specified amount upon determinable contingencies.
b.       33-4-2 – application of chapter to particular types of insurers (overrules Riffe)
3.                    Principles of Insurance
a.       A contract
b.       Written
c.       Referred to as an insurance contract (traditional contract elements not present)
                                                               i.      Bargaining at arms length among equals (no)
                                                              ii.      Boiler plate – unilateral; unequal bargaining strength
                                                            iii.      Contract of adhesion
1.        courts not willing to recognize as a contract of adhesion
a.        declarations page – only fill in part
                                                                                                                                       i.      single most important part – describes who is insured, coverage, and for how much
                                                                                                                                      ii.      Insurance Service Office – publishes policy kit so only difference is in declarations page
W.Va. Code § 33-1-1. Insurance. (1957).
W.Va. Code § 33-4-2.  Application of chapter to particular types of insurers. (1957)
Riffe v. Home Finders Associates, Inc., 205 W. Va. 216, 517 S.E.2d 313 (1999) (A home warranty contract is insurance.  Overruled by W. Va. Code § 33-4-2, June 6, 2002)
§11 Historical Overview
1.                    Maritime Insurance – loss from perils at sea
2.                    1600’s Lloyd’s developed at wharfs in London

Income Security Act) preempts all state legislation concerning employment benefit plans. 
                                                               i.      Idea is federal protection under federal law because of paternalism
                                                              ii.      Key ERISA case is Pilot Life Ins. Co. v. Dedeaux – 1987 (USSC)
                                                            iii.      Never take an ERISA case because poorly written, federal court, plaintiffs can’t win and winner collects attorney’s fees; only people who win or benefit are employers.                
4.        Important to differentiate that which is insurance from that which is not – warranties are not insurance because does not transfer risk; is simply a repair agreement; want to avoid label of insurance to avoid strict regulation; only control is general common law/UCC; depends on enforcement by individual; if insurance, then commissioner is regulatory agency designed to control unfairness.
5.             Self-Insurance as the business of insurance
                a.        Wal-Mart largest self-insured business; keeps all its money
                b.        Are self-insurers insurers?
i.                No but by virtue of self-insurance, can it escape public protection in a public insurance program? Go after comprehensive insurance – contains no fault med protection.
                c.        Self insurers must provide same protection as if insurer (Jackson v. Donohue)
e.       Cannot avoid public protection responsibility of comprehensive insurance if self-insured; must provide statutory equivalent.