South Carolina - Insurance

Question 1

When does protection begin on insurance

Answer 1

A LAYPERSON that PAYS PREMIUM at the time of application can assume IMMEDIATE protection

Can be reserved for determination of whether applicant is an insurable risk by (1) CLEAR and UNEQUIVOCAL intent of such and (2) calling the limiting condition to the attention of the applicant

Question 2

ESTOPPEL/WAIVER > Elements

Answer 2

Estoppel Elements, i think:

1. Actual Misrepresentation, and
2. Detrimental Reliance

Question 3

ESTOPPEL/WAIVER > How to Waive

Answer 3

Unilateral action

Question 4

MISREPRESENTATION >

Test for Misrepresentation: Oral Questions

Effect

Answer 4

TEST: (MaRK Undue Influence))

1. UNTRUE/MISLEADING: Statement is untrue or misleading when made;
2. MATERIAL: statement is material to the risk; [[material to issuance of policy at that rate, not to injury]]
3. KNOWN TO BE FALSE: Statement is known by the applicant to be false;
4. INTENT TO MISLEAD: Statement is made with the intent to mislead the insurer; and
5. RELIANCE: Statement is relied upon by the insurer (at least as part of the basis) for issuance of the policy

EFFECT: oral misrepresentation sufficient to avoid policy

Question 5

MISREPRESENTATION > Life Insurance Policies

Test for misrepresentation

Effect

Answer 5

TEST:
Same as general misrepresentation test, EXCEPT one extra factor
1. Statement is untrue or misleading when made;
2. statement is material to the risk;
3. Statement is known by the applicant to be false;
4. Statement is made with the intent to mislead the insurer; and
5. Statement is relied upon by the insurer (at least as part of the basis) for issuance of the policy

*6. Insurer must challenge the truthfulness of the application during the first TWO (2) years from policy’s ISSUANCE (not application) (must be during insured’s lifetime)

EFFECT: avoid policy

Question 6

MISREPRESENTATION > Life Insurance Policies

Causal Connection between misrepresentation and death

Answer 6

In Life Ins. contracts, South Carolina DOES NOT require the insurer to show a causal connection between the material misrepresentation and the death

Question 7

REPRESENTATIONS >

Insured’s obligation to correct representation

What is the sufficient level of correctness of a representation to uphold a contract

Answer 7

Obligation to correct representation that becomes untrue at any time BEFORE the contract is formed

Insured NOT obligated to correct representations that become untrue AFTER the contract is formed

Representation that is SUBSTANTIALLY CORRECT is sufficient to uphold a contract

Question 8

REPRESENTATIONS >

Group Policies

Representations made by agent of insured

Representations made by third parties (e.g., employers) of the insured

Answer 8

GROUP POLICIES: same rules as individual policy (non-contestable after 2 years from issuance)

AGENT: binding on insured

THIRD PARTY: not binding on the insured

Question 9

WARRANTIES >

DEFINITION

Answer 9

(1) Representations/promises by insured
(2) incorporated into the contract
(3) on the truthfulness or fulfillment of which it is agreed that the promise of the insurer will depend

Question 10

WARRANTIES >

Difference between Representation and Warranty/Condition

Answer 10

REPRESENTATION
insurer has burden of proving materiality –> Not grounds for avoidance if “SUBSTANTIALLY CORRECT”

WARRANTY/CONDITION
Materiality is ASSUMED–> must be STRICTLY COMPLIED with, or else it insurer can avoid the policy

Question 11

WARRANTIES >

Affirmative Warranty

Promissory Warranty

Answer 11

AFFIRMATIVE WARRANTY (default): Statement concerning fact at the time the contract is entered

PROMISSORY WARRANTY: statement/promise about the future of a continuing truth of the matter represented

Question 12

WARRANTIES >

Divisibility of Insurance Contract

Answer 12

If Ins. K is divisible–consists of different items that are separately valued/insured–breach of warranty as to one WILL NOT affect the insurance on the remainder items.

Question 13

CHANGE IN BENEFICIARY >

Insured’s right to change beneficiary

Standard necessary to enforce change

Answer 13

Insured has the right to change the beneficiary

Insured must SUBSTANTIALLY COMPLY with procedures (need not be precise)

Question 14

CHANGE IN BENEFICIARY >

Effect of Divorce

Effect of temporary hearing

Answer 14

DIVORCE: automatically voids spouse as beneficiary, UNLESS indication of intent otherwise

TEMPORARY HEARING: Party who agrees at a temporary hearing to change beneficiary is deemed to have CONTRACTED AWAY the right (must follow agreement at temporary hearing)

Question 15

EXCLUSIONS > Definition

Answer 15

Limitation on coverage (of which insured must have notice)

Question 16

EXCLUSIONS >

Causal connection between policy exclusion and loss

Answer 16

There MUST BE a causal connection between policy exclusion and loss (cf. misrepresentation; warranty)

Question 17

EXCLUSIONS > “Relative” for the purpose of exclusions

Answer 17

1. living under same roof;
2. close intimate relationship;
3. intended duration of relationship is substantial; AND
4. Where parties would reasonably conclude to consider the relationship in contracting matters (e.g., insurance contracts)

Question 18

EXCLUSIONS > Automobile Policies

Define “Insured” [for purposes of exclusion topic]

Exclusion for “Insured”

Answer 18

“INSURED”
Any person who
uses with the insured’s (express/Implied) consent, the motor vehicle to which the policy applies

EXCLUSION
Policy CANNOT exclude person defined as “insured”

[[*special circumstance where specific exclusion of husband who didn’t have driver’s license]]

Question 19

EXCLUSIONS > Intentional Act Exclusions

General Rule

Answer 19

GENERAL RULE
Insurers only pay for losses that are fortuitous [[fortuitous: happening by accident or chance, rather than design]]

PERSPECTIVE: Point of View of the Victim

Question 20

EXCLUSIONS > Intentional Act Exclusions

Test for excluding intentional acts

Answer 20

To be excluded under an intentional act exclusion, the insured must have had

1. SPECIFIC INTENT, not only to injure, but also
2. to CAUSE the particular type of injury suffered

[[[pretty much specific intent]]

Question 21

EXCLUSIONS > Intentional Act Exclusions > Property Insurance

Insured intentionally damages

Co-Insured intentionally damages

Answer 21

INSURED
normal rules

CO-INSURED
Innocent co-insured can recover for loss of joint property by intentional act of co-owner, unless SPECIFIC EXCLUSION

Question 22

EXCLUSIONS > Intentional Act Exclusions > Self-Defense

Answer 22

1. Whether the ACT causing the loss was intentional, AND

2. Whether the RESULT of the act was intentional

Question 23

EXCLUSIONS > Intentional Act Exclusions > Life and Accidental Death Insurance

Suicide

Answer 23

Most policies exclude suicide, occurring within FIRST TWO (2) YEARS of issuance (can’t exclude past 2 years)

Question 24

LIABILITY INSURANCE > INSURER’S OBLIGATIONS > Insurer’s Duty to Defend

When does it arise

Answer 24

arises from contract in action brought by 3P against insured on any cause of action within policy

Even if the allegations are groundless, false, or fraudulent

Question 25

LIABILITY INSURANCE > INSURER'S OBLIGATIONS > Insurer's Duty to Defend Ambiguous Claims Alternative Claims (deliberate and negligent claims) Multiple Causes of Action (where some do not fall within policy coverage) Intentional Torts After Insurer tenders policy limits

Answer 25

AMBIGUOUS CLAIMS > Must Defend: as long as there is potential for coverage ALTERNATIVE CLAIMS > Unclear: may be a conflict of interest MULTIPLE CAUSES OF ACTION: must defend, notwithstanding COAs that do not fall within coverage INTENTIONAL TORTS: No duty to defend: if intentional tort is excluded under policy AFTER TENDERING POLICY LIMITS: Duty to defend continues (this is different than a settlement)

Question 26

LIABILITY INSURANCE > INSURER'S OBLIGATIONS > Insurer's Duty to Defend Punitive Damages: when are they within coverage

Answer 26

Covered when act is grossly negligent, wanton/willful, or reckless. BUT NOT INTENTIONAL

Question 27

LIABILITY INSURANCE > INSURER'S OBLIGATIONS > Insurer's Duty to Defend Remedies available to Insured for failure to defend

Answer 27

costs/attorneys fees judgment rendered against insured settlement--so long as it's in good faith additional harm (e.g., mental suffering)

Question 28

LIABILITY INSURANCE > INSURER'S OBLIGATIONS > Insurer's Duty to Defend Insurer's protection mechanisms

Answer 28

DECLARATORY JUDGMENT (coverage;obligation to defend) NON-WAIVER AGREEMENT Insurer continues w/ defense, insured agrees that insurer shall retain right to content issues related to coverage RESERVATION OF RIGHTS NOTICE Insurer's unilateral statement IN WRITING notifying insured of intention to continue defense, while retaining right to contest issues related to coverage SET OFF BENEFITS if employer is paying BOTH workers compensation coverage and other coverage

Question 29

LIABILITY INSURANCE > Insurer's duty to advise Generally

Answer 29

Generally, no duty to advise If insurer undertakes to advise (expressly/impliedly), must exercise due care IMPLIED UNDERTAKING TO ADVISE 1. Agent received consideration beyond mere payment of premium; OR 2. Insured made a clear request for advice; OR 3. Course of dealing over extended period of time

Question 30

LIABILITY INSURANCE > Reformation of Policy

Answer 30

If Insurer does not give the required coverage ("invalid endorsement"), then policy is reformed to the mandatory minimum Mutual Mistake: grounds for reformation

Question 31

LIABILITY INSURANCE > Negligent Misrepresentation of Insurance Agent Rule Exception

Answer 31

RULE: Cannot complain of fraud (misrepresentation) if the truth could be ascertained by reading the instrument EXCEPTION: If insurance agent SPECIFICALLY STATES the policy provides something, and insured REASONABLY RELIES. Insurer will be liable for loss despite ritten language of policly

Question 32

LIABILITY INSURANCE > Renewals Duty to Renew Notice of Non Renewal

Answer 32

Duty: no duty to renew, but insurer can't non-renew in retaliation Notice of Non Renewal: If insurer issues proper notice of offer to renew an insured fails to accept: Policy is NON-RENEWED (insurer does not need to send notice of non-renewal)

Question 33

PROTECTED PERSONS/INTERESTS > "Insured" [For coverage purposes]

Answer 33

Generally: person whose loss triggers the insurer's duty to pay proceeds Most Commonly: specifically designated person Omnibus Clause (usually for automobile policies)--names one specific insured and others by description: (1) the named insured; (2) resident spouse (3) resident relative (4) permissive user (express/implied) (5) guest (in car or house) or the personal representative of any of the above *the vehicle must be within the scope of the permission granted (not a "substantial deviation")

Question 34

PROTECTED PERSONS/INTERESTS > Insured's duty to cooperate with Insurer

Answer 34

To void policy, insurer must show it was prejudiced by the non-cooperation ((insignificant/immaterial breach is not enough))

Question 35

* USE OF AN AUTOMOBILE > When will an automobile policy cover injuries/damages?

Answer 35

When the injury/damage arises out of the "OWNERSHIP, MAINTENANCE, OR USE" of an automobile: 1. "CAUSAL CONNECTION" between the vehicle and injury: (a) Vehicle must be an "ACTIVE ACCESSORY" to the assault: more than merely being at site, but can be less than proximate cause; and (b) Injury must be "FORESEEABLY IDENTIFIABLE with the normal use of a motor vehicle as a motor vehicle" 2. No act of "INDEPENDENT SIGNIFICANCE" occurred to break the causal link; and 3. Vehicle must have been USED FOR TRANSPORTATION at the time of the accident

Question 36

OCCURRENCE > What constitutes an "occurrence" in SC

Answer 36

South Carolina defines "occurrence" under the MODIFIED CONTINUOUS TRIGGER Approach Coverage is triggered at THE TIME OF THE INJURY IN FACT and CONTINUOUSLY THEREAFTER. ((This allows coverage under all policies in effect from the time of the injury in fact to the time of the progressive damage))

Question 37

BAD FAITH > Bad Faith Claim for Failure to Settle THIRD PARTY CLAIMS When do they arise [[keep eye out for secondary part to a question]]

Answer 37

SOURCE: contract and tort Arise when insured seeks defense/indemnification from liability to a third party.

Question 38

BAD FAITH > Bad Faith Claim for Failure to Settle THIRD PARTY CLAIMS What is the standard Factors

Answer 38

STANDARD: Negligence standard (i.e., were insured's actions reasonable) FACTORS ("RACISM O") 1. STRENGTH of injured's claim on issues of liability and damages 2. Attempts by insurer to induce insured to CONTRIBUTE to the settlement 3. Failure of the insurer to properly INVESTIGATE 4. Insurer's rejection of ADVICE of its own agent/attorney/adjuster 5. Failure of insurer to INFORM the insured of a compromise offer 6. Amount of financial RISK to which each party is exposed in event of non-settlement 7. (insured's factor): Fault of the insured in inducing insurer's rejection of the compromise by MISLEADING insurer 8. Any other Factor [[*No bad faith if reasonable grounds to investigate]]

Question 39

When can a third party sue the insured's insurer?

Answer 39

Assignment of Bad Faith clause by insured to third party Fraudulent Release: 1. 3P can show insured was negligent in underlying tort; and 2. Insurer fraudulently induced third party to sign release

Question 40

BAD FAITH > Bad Faith Claim for Failure to Settle FIRST PARTY CLAIMS

Answer 40

("BRED") 1. EXISTENCE of a contract of insurance 2. REFUSAL by the insurer to pay benefits due under the contract (long enough to constitute a denial) 3. Resulting from the insurer's BAD FAITH or UNREASONABLE ACTION in breach of the covenant of good faith and fair dealing 4. DAMAGE to the insured

Question 41

INSURABLE INTEREST > Insurable Interest in Property Timing

Answer 41

Anyone who 1. derives a BENEFIT from its existence, OR 2. would suffer a DETRIMENT from its destruction Insurable interest must exist at (a) the time the contract is CREATED; and (b) the time of LOSS

Question 42

INSURABLE INTEREST > Insurable Interest in Life Timing

Answer 42

Person might suffer a pecuniary loss as a result of the person's death/injury Timing: need only exist at the time contract is CREATED

Question 43

INSURABLE INTEREST > Taking out life insurance on yourself Taking out life insurance on another person

Answer 43

ON YOURSELF: (1) done and done ON ANOTHER: (1) insurable interest in the person; and (2) person's consent

Question 44

SUBROGATION > In property/casualty In health/accident

Answer 44

PROPERTY/CASUALTY: no express contractual provision is required for subrogation HEALTH/ACCIDENT: Right to subrogation must be expressly included in the contract of insurance

Question 45

MOTORIST COVERAGE > Meaningful Offer of UIM

Answer 45

Insurer must make a meaningful offer of UIM Wannamaker Test--determines if there's a meaningful offer [[apply whenever there is no UIM on a car]] ("CALI") 1. Notification process must be "COMMERCIALLY REASONABLE" 2. Insurer must SPECIFY the "LIMITS OF OPTIONAL COVERAGE" (can't offer additional coverage in general terms) 3. Insurer must "INTELLIGIBLY ADVISE" the insured of the nature of the optional coverage 4. Insured must be told that optional coverages are available for an ADDITIONAL PREMIUM

Question 46

MOTORIST COVERAGE > Meaningful Offer of UIM For what type of customers does an insurer have to make a meaningful offer of UIM

Answer 46

For every new person/coverage ((i.e., unless it renews, extends, changes, supersedes, or replaces an existing policy)) (If policy is transferred, transferee is considered a new applicant, and must be given a meaningful offer of UIM)

Question 47

MOTORIST COVERAGE > Motorist Coverage Analysis

Answer 47

1. Liability of the tortfeasor and UIM; OR UM 2. The Car you are in 3. Reach Back (portability) 4. Stacking

Question 48

MOTORIST COVERAGE > Measuring Vehicle Rule

Answer 48

Applies to person who OWNS the vehicle in the accident When reaching back/stacking, can only get coverage equal to the car in the accident ("measuring car").

Question 49

MOTORIST COVERAGE > Unknown Driver Test

Answer 49

[[John Doe/Hit-and-Run scenarios]] You can get UM coverage if 1. Accident reported to appropriate police authority within a reasonable time 2. physical contact injury/damage OR witness (other than driver/owner) signs affidavit 3 Insured is not negligent in failing to determine identity of driver

Question 50

MOTORIST COVERAGE > Who may stack?

Answer 50

Only Class I Insured may stack: named insured [of vehicle], resident spouse [of named insured of vehicle], resident relative [of named insured of vehicle]

Question 51

LIABILITY INSURANCE > INSURER'S OBLIGATIONS > Insurer's Duty to Defend When can insured obtain separate counsel What effect does this have

Answer 51

when claims fall outside the coverage insurer would no longer have exclusive right to control

Question 52

UIM > When does an insurer NOT have to make a meaningful offer of UIM?

Answer 52

1. when RESIDENT SPOUSE, who is CO-INSURED, rejects it on behalf of insured 2. When it is for HIRED or NON-OWNED VEHICLES, or 3. When it is Offered in conjunction with an UMBRELLA policy (that supplements an underlying primary policy)

Question 53

Mortgages > Difference between Loss Payable (or open mortgage) Standard (clause) Mortgage (or Union or New York Mortgage)

Answer 53

LOSS PAYABLE MORTGAGE: Misconduct by insured bars claim payment to mortgagee STANDARD CLAUSE MORTGAGE: Misconduct by insured DOES NOT bar claim payment to mortgage. Mortgagee must pay premium to keep mortgage though.