Chapter 2

Question 1

List 3 different reasons a person may buy property insurance

Answer 1

To comply with laws
To secure financing on major purchases
Protect themselves from financial disaster if loss or damage occurs

Question 2

What two things do civil courts decide in settling a dispute ?

Answer 2

Whether to rule in favour of the plaintiff or whether to assess compensation

Question 3

Define each of the following and explain how they interact in determining common law

Answer 3

The rule of precedent: it developed as unwritten law based on the rule of precedent. Under common law, the courts review cases that have already been decided.

Case law: for guidance on cases currently in dispute

Statute law : passed laws into written form

Common law has evolved into a mix of case law and statute law

Question 4

Define contra proferentem

Answer 4

A legal terms 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.

Question 5

Explain in plain English what relief from forfeiture means and how it helps establish a balance of power between the insured and the insurer

Answer 5

An insurer may argue that an insureds failure to comply with a particular condition of the policy forfeits the insureds claims under the policy.

Question 6

List the 15 statutory conditions

Answer 6

1. Misrepresentation
2. Property of others
3. Change of interest
4. Material change
5. Termination
6. Requirements after loss
   7 fraud
   8 who may give notice and proof
   9 salvage
   10 entry, control, and abandonment
7. Appraisal
   12 when loss is payable
   13 replacement
   14 action
   15 notice

Question 7

How does uberrimae fidei defend the insurer ?

Answer 7

The principle of uberrimae fidei or utmost good faith requires the insured to act with a high standard of honestly and disclose material facts

Question 8

Why is not misrepresenting material facts in the best interest for both the insured and the insurer when completing an application ?

Answer 8

Because the insurer may void the policy entirely

Question 9

Define ab inito and relate it to the action an insurer can take If it detects material misrepresentation

Answer 9

Ab initio - a Latin term meeting “to go back to the beginning “. When a policy is rejected or made void ab initio premium is refunded entirely and the contract is treated as though it never existed.

Question 10

What does statutory condition 2: property of others stipulate ? And how does it apply to spouse and relatives ?

Answer 10

The insurer is not liable to pay for losses to any person unless his or her interest is stated in the contract

The policy does not cover a spouse it also requires the presence of insurable interest

Question 11

What is the doctrine of privity of contract and how does its application affect the insureds ability to assign his or her rights under the insurance policy ?

Answer 11

Privity of contract: relationship that exists between 2 parties or more by virtue of their having entered into a contract.

Under the common law doctrine of privity of contract, the insurance cannot assign his or her rights and obligations under the contract to another party without the insurers consent. Statutory condition 3 identifies exceptions in which the insurer is obligated to ensure a new interest replacing the named insurds interest.

These exceptions may include:

• An unauthorized assignment under the bankruptcy and insolvency act
• a change of title by: succession, the operation of law, or death of the named insured

Question 12

What are the exceptional circumstances when interest can be transferred with out the insurers consent ? What obligations arise for the new insured ?

Answer 12

These exceptions include
An authorized assignment under the bankruptcy and insolvency act or change of title by: succession; the operation of law, or the death of the named insured

in these circumstances, the policy protects the new interest automatically, from the time of the change, regardless of whether the insurer has been informed. This condition protects only new interests falling strictly within the stated circumstances. even in such cases, there is a reasonable obligation for the successor, such as the executor of the estate or receiver in bankruptcy, to notify the insurer of the change in interest within a reasonable amount of time.

Question 13

Contrast statutory condition 1 to statutory condition 4

Answer 13

Statutory condition 1: misrepresentation
Statutory condition 4: material change

statutory condition 4 might be confused with statutory condition 1. But statutory condition 1 concerns material facts falsely described or misrepresented or fraudulently omitted before the contract takes effect. Statutory condition 4 applies after the policy takes effect. It concerns changes in material facts, with the control and knowledge of the insured, occurring during the policy term

Question 14

Explain how a material change that occurs after the policy is issued must be treated. What must the insured do? What are the insurers option if notified? And what are the insurers options if not notified?

Answer 14

the insured is obligated to promptly notify the insurer because changes in occupancy use, or any other factor may affect the premium or underwriting of the risk. The insurer can then consider the new circumstances and either accept the terms, amend the premium to reflect the change in risk, or cancel the contract. if the insured fails to notify the insurer of material changes, then the insured is in breach of the policy. When a change in risk is discovered following a loss, the burden of proof rests on the insurer to prove that the undisclosed circumstances are material to the underwriting of the risk and also that there is no connection between the cause of loss and material change. The statutory condition allows the insurance to avoid the policy ab initio as to the part of the policy affected by the unreported material change. But insurers will generally do so only when there has been a misrepresentation on the original application.

for an unreported material change, the insurer might deny the claim arising out of it, it might also cancel the policy. Mortgagee is in other lost payees listed on the policy are equally obligated to notify the insurer of any material change that comes to their knowledge.

Question 15

contrast the procedure and rules for an insured determinate and insurance policy versus the procedure and rules for an insurer to terminate an insurance policy

Answer 15

the insured May cancel the policy immediately, on request. Though the condition does not require it, prudent insures ask for written instruction. Some ask the insured to sign and show the effective date of cancellation on a special form called a cancellation receipt, cancellation voucher, lost policy voucher, or release of interest. Usually, loss pay is are asked to sign the document, too, relinquishing their interest in the policy. Some insurers May accept a letter signed by the insured, as long as it’s intent is clear.

when the policy is canceled by the insurer, statutory condition 5 requires the insurer to do so in writing. The length of notice depends on how it is given. The insurer may have noticed personally delivered or send it by registered mail. 5 days notice is required when notice is personally delivered. 15 days notice is required when notice is delivered by registered mail.

Question 16

Discuss notice by registered mail versus in person. What happens if the mail returns unopened?

Answer 16

5 days notice is required when notice is personally delivered. 15 days notices required when notice is delivered by registered mail the 15-day period begins the day following receipt of the letter at the post office to which it is addressed.if notice is returned unclaimed from the post office, the cancellation still takes effect, but it is recommended that The returned envelope remain unopened as proof of the policies cancellation.

Question 17

Define and discuss short rate cancellation and minimum retained premium

Answer 17

Short rate cancellation: the cancellation by the insured of a policy before it’s natural expiration the insurer pays and return premium that is less than the proportionate part that remains unearned

Minimum retained premium: a premium specified on an individual policy that is the minimum amount retained by the insurer in the event that the policy is canceled midterm by the insured

Question 18

Why can’t cancellation be backdated?

Answer 18

Cancellation is not usually backdated. This is, insurers will normally not Grant cancellation date proceeding the date it was requested. This prevents the insured from taking advantage of knowing and hindsight that no loss was sustained.

Question 19

what is covered by the proof of loss. Discuss it at a high level but also named seven specific things that need to be covered.

Answer 19

Proof of loss is a formal statement of facts about a loss, attested to by the claimant. It’s a form specified by the insurer. A proof of loss may need to be notarized.

The information in the proof of loss includes:

• How and when the loss occured
• an inventory of the damage and if required the undamaged property
• where the property was at the time of the loss
• a declaration that the loss was not caused by a wilful act of the insured
• other insurance covering the same property
• the interest of the insured and others
• notification of any changes in title use or occupation

Question 20

If the insurer will investigate the claim why is the proof of loss still important?

Answer 20

although the Peril may or may not be immediately identified as insured, the peril is not the only consideration in determining whether the loss is covered. Although the insurer investigates the loss, it’s still relies heavily on the facts presented by the insured

Question 21

What is the impact of even a small portion of an insurance claim being fraudulent and why

Answer 21

if the insured fraudulently represent a claim or any portion of it the claim is invalid entirely. Courts have taken the position that if any part of the claim is deemed fraudulent including inflating the severity of a loss the insurance credibility is called into question. If one part of a claim is untrue, then it is likely that other parts of the claim are also untrue.

Question 22

Why must all insured sign the insurance claim

Answer 22

if there are multiple policy holders, such as spouses, and the insurer can only deny a dignity to the person making the false statement. All policyholders must sign the proof of lost in a test the truth of the claim as it has been presented. Willfully signing a proof of loss that is known to be incorrect constitutes fraud, even if one or more parties did not actually fill in the incorrect information and innocent co-insured is only entitled to coverage if that party is not aware of the fraud.

Question 23

Who normally gives the proof of loss? What if they won’t or can’t? who else can? Is anyone else obligated to give notice if they insured won’t or can’t

Answer 23

notice of loss is generally provided by the insured or the entered representative usually the agent or broker. If the insurance is unable or refuses to notify the insurer of a loss any person to human insurance money is payable May report the loss or give proof of loss

Question 24

What medication duties does the insured have after a loss and why

Answer 24

Following loss or damage, the insured is required to protect the property from further damage and prevent damage to other property. This is referred to as mitigation, and it helps ensure that the insurance loss will be fortuitous a basic principle of insurance. The insurer must contribute its proportionate share of any reasonable cost the insured incurs to protect the property

Question 25

When does the insured have the rights to salvage? When does that insurer?

Answer 25

When the insurer compensates the policy holder for damage, the insurer is entitled to the salvage. If the insurer were not entitled to salvage, then the insured would both receive a claim settlement and retain the salvage, thus profiting by the loss and violating the principle of indignity another basic principle of insurance. By collecting and selling salvage that insurer is able to offset some of the losses paid, which is beneficial to all policyholders. But where an insurance coverage is inadequate, the insured has rights to the salvage to offset the uninsured losses.

Question 26

Explain how statutory condition 10: entry, control and abandonment is applied to a loss?

Answer 26

when a claim is reported, the insurer has immediate right to enter the building to survey the damage in order to evaluate its severity and cause. as a condition of the policy, the insured must allow such access prior to the undertaking of repairs. Although the insurer is entitled to quantify the damage, it does not have the right to take control of the property. Likewise, the insured cannot abandon it to the insurer without the insurers consent

Question 27

Why are appraisals sometimes need during the assessment of a claim? How does the process work, who pays for it?

Answer 27

From time to time, there maybe disagreements about the amount of a loss. These disputes must be resolved through an appraisal process, where the insurer and the insured each appoint and appraiser and the two appraisers appoint an umpire who will help achieve a resolution if the two appraisers fail to agree. The costs are shared equally between the insurer and the insured

Question 28

What happens if the insured and ensure or disagree about both the amount of damage and the cause of damage?

Answer 28

Appraisal can still be used to resolve the financial disagreement, the coverage dispute would be resolved through litigation

Question 29

how long does the insurer have to pay a claim and why? What can the insurer do if they want to change this length of time

Answer 29

The insurer is required to respond to the proof of lost and make a payment within 60 days. This period is granted to allow the insurer to investigate the circumstances, coverage, and amount of the claim. It also allows the insurer time to arrange for the funds to pay the claim.

the parties May agree, when the policy is issued or before a loss to change this time period. such an agreement should be written into the policy and signed by all parties. If the period is made less than 60 days, the insurer May write this into the policy unilaterally, the other parties will not dispute what is only to their benefit.

Question 30

Explain the conditions surrounding the insurers right to replace a repair the damage property. Include any relevant time frames and contingencies

Answer 30

the decision to repair a replace damaged property lies exclusively with the insurer. Well insurance is a contract of indignity and not generally one of performance, the insurer may, within 30 days of receiving the proof of loss, notify the insured in writing of its intent to directly repair replace the damage property. repairs must commence within 45 days of the insurance receipt of the proof of loss. If the insurer elects to proceed with repair and the extent of the damage is greater than was anticipated, the insurer must still complete the repairs even if the additional costs are above the insurance limit.

Question 31

What was the original period allowable to grieve against the ensure in court? Why did it change and what did it change

Answer 31

originally, the limitation period in all provinces was one year after the date of loss, which still applies in some provinces. The period was set at one year when the insurance acts considered only fire insurance and not property insurance more generally. Losses caused by fire are often more immediately identified and more easily adjusted than property losses caused by other perils

eventually, the limitation. That applies only to insurance against fire came into conflict with limitation periods that apply to insurance against other property perils. The supreme Court of Canada set an important precedent some provinces changed their legislation to establish a limitation period of 2 years from the date that insured new or ought to have known that loss or damage to the insured property had occurred.

Question 32

How can the insurance and notice to the insurer? Why would they want or have to?

Answer 32

Statutory condition 15 notice, requires that, to send notice to the insurer the insured deliver it or send it by registered mail to that chief agent or head office. To send notice to the insured, the insurer must either personally deliver it or send it by registered mail to the last known post office address. written notice me include termination of the policy or notification of changes to the terms and conditions of the policy contract. Policy renewals do not require sending by registered mail they must however be sent to the last address known to the insurer

Question 33

Explain the main difference between Quebec and other provinces regarding statutory conditions

Answer 33

the main difference between Quebec and carbon law provinces and territories in the development of policy warnings is that civil code does not require any of its articles to be included in the fire insurance policies.provisions required by the code apply in all instances, but conditions not required by the code will not be inferred and must be printed in a policy to have legal effect.

Question 34

Explain the main difference between Quebec and other provinces regarding duty of insured to disclose

Answer 34

Like the common law, the civil code of Quebec requires the ensure to act with a high standard of honesty. The code designates this as a standard of good faith. Impractical terms, the insured is not obligated to offer, at the time of the application or thereafter, information that any reasonable person could know but only information within the insurance knowledge but not others.

Question 35

When does PIPEDA apply?

Answer 35

PIPEDA applies to commercial activities, Federal matters such as those involving governments, or were private sector activities cross borders.

Question 35

When does PIPEDA apply?

Answer 35

PIPEDA applies to commercial activities, Federal matters such as those involving governments, or were private sector activities cross borders.

Question 36

What is personal information? Contrast PIPEDAS definition to that of the privacy act

Answer 36

PIPEDAS definition of personal information : it simply means information about an identifiable individual

the privacy act, as much more detailed definition of personal information:

A) Information relating to race, National or ethnic origin, color, religion, age, or marital status of the individual

B) information relating to the education or the medical criminal or employment history of the individual or information relating to financial transactions in which the individual has been involved

Question 37

Explain why insurers need to protect the information about the insured that they collect

Answer 37

if the information is not properly protected, and insured could be left vulnerable to a variety of problems, such as unsolicited marketing or more seriously identity theft

Question 38

What questions must he insure be able to answer about the insurance collected personal information

Answer 38

Insurance must answer the following questions for their insurance about personal information
What personal information was collected 
Why is it collected ? 
How is it collected ? 
What is it used for ? 
Where is it kept ? 
How is it secured ? 
Who has access to it or uses it ? 
To whom is it disclosed ? 
When is it disposed of ?

Question 39

Where is freedom of information and protection of privacy act (FOIPPA) used ? What does it regulate ?

Answer 39

Applied to all provinces except Quebec and the territories although each province has its own act

Regulates public bodies such as provincial government departments, municipalities, universities, school boards and crown corporations

Covers professional regulatory bodies such as the law society and the college of physicians and surgeons

Question 40

Define PIPA personal information protection act

Answer 40

Governs private sector organizations on the course of commercial business activities

Contains specific provisions regarding the collection and use of electronic data

Question 41

Access to information and protection of privacy act

Answer 41

Applies to Yukon and Northwest territories and Nunavut

Relates to information held by public bodies and the department of Justice

Question 42

Act respecting access to documents held by public bodies and protection of personal information

Answer 42

Specific to Quebec
Includes information held by public bodies including municipalities and other government agencies, schools, and health and social services institutions and in flies held by the public