Chapter 3 Policy contract Analysis

Question 1

What is an example of a common residential limitation?

a. Theft of jewellery is typically limited to $5,000 in any one occurrence.

b. Roofs are covered for wear and tear up to a limit of $2,500.

c. Fire is not covered.

d. Windstorm is not covered.

Answer 1

a. Theft of jewellery is typically limited to $5,000 in any one occurrence.

Question 2

What correctly describes exclusions under a policy?

a. Restrict coverage

b. Are the same as conditions

c. Are not important when analyzing coverage

d. Are found in the statutory conditions of a policy

Answer 2

a. Restrict coverage

Question 3

Which is the best description of concurrent causation and when it is referred to?

a. Two or more covered perils are identified and the loss is covered.

b. Two or more excluded perils are identified and the loss is excluded.

c. Two or more perils are identified and at least one peril is covered and one is not covered.

d. peril is identified and it is covered.

Answer 3

c. Two or more perils are identified and at least one peril is covered and one is not covered.

Question 4

Lightning strikes an above-ground pool in a neighbour’s backyard, causing the pool’s wall to collapse. The water that filled the pool escapes and flows into the insured’s basement through a back door, causing water damage throughout the finished basement. What is the proximate cause of loss?

a. Flooding

b. Collapse of the pool wall

c. Water escaping from the pool

d. Lightning damage

Answer 4

d. Lightning damage

Question 5

How are exclusions construed?

a. Narrowly

b. Broadly

c. After limitations

d. When needed

Answer 5

a. Narrowly

Question 6

Liability policies can be written on what basis?

a. Claims-made only

b. Occurrence only

c. All-risks

d. Claims-made or occurrence

Answer 6

d. Claims-made or occurrence

Question 7

What is an important legal doctrine used when interpreting insurance contracts?

a. Contra proferentem

b. Doctrine of balance

c. Res ipsa

d. Mens rea

Answer 7

a. Contra proferentem

Question 8

What two types of things can exclusions be used for to limit coverage?

a. Perils of theft and water

b. Types of property and types of loss

c. Types of buildings and certain kinds of content

d. Perils of theft and other crimes

Answer 8

b. Types of property and types of loss

Question 9

What is one of the first things to look at when analyzing coverage?

a. Does the loss fall within the policy period?

b. Do any exclusions apply?

c. Have all the conditions been met?

d. Is there a deductible to be applied?

Answer 9

a. Does the loss fall within the policy period?

Question 10

What key component of a contract of insurance (the policy) is being assessed when asking, “Is the property the subject matter of the insurance?”

a. Insurable interest

b. Utmost good faith

c. Misrepresentation

d. Indemnification

Answer 10

a. Insurable interest

Question 11

A provision in some insurance and reinsurance contracts covering only claims made during the term of the contract.

Answer 11

claims-made basis

Question 12

As applied to insurance, the intentional withholding from an insurance company of information pertinent to a risk.

Answer 12

concealment

Question 13

A cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would not have happened.

Answer 13

proximate cause

Question 14

A sum of money to which a plaintiff is entitled that makes amends for an actual loss sustained and nothing more

Answer 14

compensatory damages

Question 15

Policies composed of unique wordings drafted to accommodate the needs of a particular risk.

Answer 15

manuscript policy

Question 16

Statements included in a policy that are agreed to by the insured and form the basis of the contract of insurance.

Answer 16

declarations

Question 17

Describes the intent of the policy, what insurance coverage is provided by the policy, and in what limits.

Answer 17

insuring agreement

Question 18

A legal term that provides that any ambiguity in a contract must be interpreted against the person who drew the contract because that person had the opportunity to make it clear.

Answer 18

contra proferentem

Question 19

A type of contract that is effectively non-negotiable because one party drafts the policy wording or offers a standardized contract wording.

Answer 19

contract of adhesion

Question 20

The date of inception of an insurance policy, or the date additional coverages become effective.

Answer 20

effective date

Question 21

The date on which a policy ends.

Answer 21

expiry date

Question 22

Under a liability policy, a basis for coverage on which the policy responds to a claim for a covered incident that occurs during the policy period, regardless of when the claim is made.

Answer 22

claims-made basis

Question 23

What is within the insuring agreements?

Answer 23

Limitations,
Additional coverage
Conditions
exclusions,

Question 24

What are the four principles to interpret insurance contracts in common law provinces?

Answer 24

1) Contra proferentem
2) Coverage provisions construed broadly
3) Exclusion clauses construed narrowly
4) Reasonable expectations and intent of the contracting parties

Question 25

What is contra proferentem?

Answer 25

“Against the offerer”

Question 26

Define contract of adhesion

Answer 26

Non-negotiable as one party drafts the policy wording or offers a standardized contract wording

Question 27

What are the general rules of contract interpretation in Quebec?

Answer 27

Common intention is given precedence over literal meaning (1425)

Nature, formation, usage and prior interpretation must all be considered (1426)

Treat the contract as a whole to determine the meaning (1427)

If an interpretation defeats the intentions of a party and one interpretation suggests the claim should be paid, it is paid (1428-1431)

If there is any doubt, it is interpreted against those that made it (1432)

If anything is illegible or incomprehensible, it is null (1436)

An abusive clause (1437)

Question 28

What are the eight questions you could ask to analyze the coverage of a property claim?

Answer 28

1) Does the loss fall within the policy period?
2) Has insurable interest in the property been confirmed?
3) What is the proximate cause of the loss?
4) Does the loss fall within the insuring agreement?
5) Do any exclusions or limiting clauses/sub-limits apply? If so, how is coverage affected?
6) Have all policy conditions been met?
7) Does the policy offer any extensions of coverage or do any endorsements apply?
8) Is there a deductible to be applied?

Question 29

What are the six questions you could ask to analyze the coverage of a liability claim?

Answer 29

1) Does the occurrence fall within the policy period? (occurrence vs claims made)
2) Does the loss fall within the insuring agreement?
3) Are there any exclusions under the policy which apply?
4) Are there limitations or conditions that affect the claim?
5) Does the insurer have a duty to defend? Indemnify? If not, why not?
6) Is there a deductible to apply?

Question 30

What is the best description of concurrent causation and when it is referred to?

Answer 30

Generally, concurrent causation refers to a situation where at least one peril is covered and one is not. It is then up to the adjuster to review the policy and consider if damages caused by each peril can be separated. Having two perils not covered or two perils covered would not be relevant as the outcomes would be clear.

Question 31

What is the principle of an insurance contract

Answer 31

indemnity

Question 32

A statement that applicant makes to the insured about the risk

Answer 32

Representation

Question 33

Courts may grant relief to a policyholder who failed to perform an obligation in a set time

Answer 33

Relief from perfect compliance