Presentation is loading. Please wait.

Presentation is loading. Please wait.

INSURANCE LAW SPRING 2010 CLASS SESSION 3 PROFESSOR TRAVIS.

Similar presentations


Presentation on theme: "INSURANCE LAW SPRING 2010 CLASS SESSION 3 PROFESSOR TRAVIS."— Presentation transcript:

1 INSURANCE LAW SPRING 2010 CLASS SESSION 3 PROFESSOR TRAVIS

2 NEED FOR EXCLUSIONS Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

3 NEED FOR EXCLUSIONS (1) CONTROL ADVERSE SELECTION (1) CONTROL ADVERSE SELECTION Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

4 NEED FOR EXCLUSIONS (1) CONTROL ADVERSE SELECTION (2) REDUCE MORAL HAZARD Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

5 NEED FOR EXCLUSIONS (1) CONTROL ADVERSE SELECTION (2) REDUCE MORAL HAZARD (3) CONTROL “CATASTROPHIC LOSSES” Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

6 NEED FOR EXCLUSIONS (1) CONTROL ADVERSE SELECTION (2) REDUCE MORAL HAZARD (3) CONTROL “CATASTROPHIC LOSSES” (4) AVOID DUPLICATION OF COVERAGE (MARKET SEGMENTATION) Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

7 INTRINSIC LOSS INSURE AGAINST THE UNEXPECTED Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

8 INTRINSIC LOSS INSURE AGAINST THE UNEXPECTED NOT INHERENT CHARACTERISTICS OF THE PROPERTY Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

9 CONCURRENT CAUSATION ONE CAUSE IS EXCLUDED Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

10 CONCURRENT CAUSATION ONE CAUSE IS EXCLUDED ANOTHER CAUSE IS NOT Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

11 CONCURRENT CAUSATION ONE CAUSE IS EXCLUDED ANOTHER CAUSE IS NOT IS IT COVERED? Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

12 INCREASED RISK YOU WANT TO COVER LOSSES FROM ORDINARY NEGLIGENCE Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

13 INCREASED RISK YOU WANT TO COVER LOSSES FROM ORDINARY NEGLIGENCE BUT YOU DON’T WANT TO ENCOURAGE MORAL HAZARD Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

14 CHUTE V. NORTH RIVER INS. CO. (Pg. 211) POLICY INSURES JEWELRY AGAINST “ALL RISKS OF LOSS OR DAMAGE” INCLUDING “BREAKAGE” Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

15 CHUTE V. NORTH RIVER INS. CO. OPAL BREAKS DUE TO “INHERENT VICE” IE. NO EXTERNAL FORCE CAUSES BREAK Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

16 CHUTE V. NORTH RIVER INS. CO. HELD: NO COVERAGE Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

17 CHUTE V. NORTH RIVER INS. CO. NO LIABILITY UNDER POLICY FOR LOSS DUE TO CONDITION INHERENT IN THE INSURED PROPERTY Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

18 CHUTE V. NORTH RIVER INS. CO. PROBLEM MAY BE THAT THE RULE DATES FROM EARLY MARINE INSURANCE WHICH COVERS “PERILS OF THE SEA” AND LOSS IS DUE TO “INHERENT VICE” Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

19 RULE IS SIMILAR TO “FRIENDLY FIRE” - HOSTILE FIRE DISTINCTION Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

20 FRIENDLY FIRE RULE: FOR LOSS TO BE COVERED UNDER FIRE INSURANCE, FIRE MUST BE AN UNINTENDED FIRE AND NOT AN INTENTIONAL FIRE WHICH CAUSES DAMAGE Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss

21 STATE FARM FIRE & CAS CO v. BONGEN (Pg 214) Ch 4 E 2 Exclusions and Exceptions — Causation Problems

22 STATE FARM FIRE & CAS CO v. BONGEN POLICY EXCLUDES “EARTH MOVEMENT” IMPROPER CONSTRUCTION TRIGGERS LANDSLIDE Ch 4 E 2 Exclusions and Exceptions — Causation Problems

23 STATE FARM FIRE & CAS CO v. BONGEN HELD: NOT COVERED POLICY EXCLUDES CONCURRENT CAUSES Ch 4 E 2 Exclusions and Exceptions — Causation Problems

24 STATE FARM FIRE & CAS CO v. BONGEN MAJORITY SAYS: ENFORCE THE POLICY AS WRITTEN AND THE LANGUAGE (Pg 215) IS CLEAR ENOUGH TO EXCLUDE COVERAGE Ch 4 E 2 Exclusions and Exceptions — Causation Problems

25 STATE FARM FIRE & CAS CO v. BONGEN OTHER COURTS (AND THE DISSENT) REQUIRE COVERAGE OF CONCURRENT CAUSES Ch 4 E 2 Exclusions and Exceptions — Causation Problems

26 CONCURRENT CAUSE: COVERED CAUSE AND EXCLUDED CAUSE JOIN OR CONCUR TO CAUSE LOSS Ch 4 E 2 Exclusions and Exceptions — Causation Problems

27 CONCURRENT CAUSE DOCTRINE— WHEN A COVERED CAUSE JOINS WITH AN EXCLUDED CAUSE TO BRING ABOUT LOSS, IT WILL BE COVERED (ABSENT SPECIFIC EXCLUSION) Ch 4 E 2 Exclusions and Exceptions — Causation Problems

28 OKLAHOMA RULE IS CONTRARY TO BONGEN - KELLY V. FARMERS N. 1 Pg. 218 AND SUPPLEMENT Pg. 7 Ch 4 E 2 Exclusions and Exceptions — Causation Problems

29 LIRISTIS V. AMERICAN FAMILY MUT. INS. CO. (Pg. 219) Chapter 4 D 2 Limited Interests - Leaseholds

30 LIRISTIS V. AMERICAN FAMILY INSUREDS HAVE A FIRE; WATER USED TO PUT OUT THE FIRE CAUSES MOLD Ch 4 E 2 Exclusions and Exceptions — Causation Problems

31 LIRISTIS V. AMERICAN FAMILY INSURANCE COMPANY REFUSES TO PAY FOR MOLD BECAUSE OF MOLD EXCLUSION Ch 4 E 2 Exclusions and Exceptions — Causation Problems

32 LIRISTIS V. AMERICAN FAMILY TRIAL COURT APPLIES EXCLUSION AND GRANTS SUMMARY JUDGMENT Ch 4 E 2 Exclusions and Exceptions — Causation Problems

33 LIRISTIS V. AMERICAN FAMILY HELD: REVERSED; POLICY COVERS LOSS BY FIRE AND EXCLUDES LOSS CAUSED BY MOLD Ch 4 E 2 Exclusions and Exceptions — Causation Problems

34 LIRISTIS V. AMERICAN FAMILY HERE, FIRE CAUSED MOLD, WHICH WAS A LOSS RATHER THAN A CAUSE OF LOSS Ch 4 E 2 Exclusions and Exceptions — Causation Problems

35 LIRISTIS V. AMERICAN FAMILY INSURANCE COMPANY HAS TO BE VERY SPECIFIC IN WHAT IT EXCLUDES Ch 4 E 2 Exclusions and Exceptions — Causation Problems

36 LIRISTIS V. AMERICAN FAMILY COULD IT BE THE COURT DOESN’T LIKE THE MOLD EXCLUSION WHERE THE MOLD IS CAUSED BY A COVERED CAUSE (FIRE)? Ch 4 E 2 Exclusions and Exceptions — Causation Problems

37 ROSEN V. STATE FARM GENERAL INSURANCE COMPANY (Pg. 225) Chapter 4 E 3 The Problem of Increased Risk

38 ROSEN V. STATE FARM INSURED HAS DECKS WITH DETERIORATED FRAMING SUPPORT WHICH MADE COLLAPSE IMMINENT Chapter 4 E 3 The Problem of Increased Risk

39 ROSEN V. STATE FARM INSURED REPAIRS THE DECKS RATHER THAN LET THEM COLLAPSE Chapter 4 E 3 The Problem of Increased Risk

40 ROSEN V. STATE FARM INSURANCE COMPANY DENIES CLAIM BECAUSE POLICY COVERS ONLY ACTUAL COLLAPSE, NOT IMMINENT COLLAPSE Chapter 4 E 3 The Problem of Increased Risk

41 ROSEN V. STATE FARM TRIAL COURT FINDS FOR PLAINTIFF; COURT OF APPEALS AFFIRMS Chapter 4 E 3 The Problem of Increased Risk

42 ROSEN V. STATE FARM HOLDS PUBLIC POLICY DOES NOT FAVOR REQUIRING THE INSURED TO LET THE STRUCTURE COLLAPSE BEFORE THERE IS COVERAGE Chapter 4 E 3 The Problem of Increased Risk

43 ROSEN V. STATE FARM SUPREME COURT REVERSES; POLICY IS CLEAR AND MUST BE ENFORCED AS WRITTEN Chapter 4 E 3 The Problem of Increased Risk

44 ROSEN V. STATE FARM IS THIS REALLY AN “INCREASED RISK” CASE? Chapter 4 E 3 The Problem of Increased Risk

45 NOTE: “SUE AND LABOR” CLAUSES APPEAR IN COMMERCIAL POLICIES (BUT NOT IN HOMEOWNERS POLICIES) Chapter 4 E 3 The Problem of Increased Risk

46 MAY PAY INSURED FOR COST OF PREVENTING COVERED LOSSES Chapter 4 E 3 The Problem of Increased Risk

47 DYNASTY, INC. V. PRINCETON INSURANCE COMPANY (Pg. 229) Chapter 4 E 3 The Problem of Increased Risk

48 DYNASTY, INC. V. PRINCETON INSUREDS OWNED RESTAURANT THEY WERE CONVERTING TO A NIGHTCLUB Chapter 4 E 3 The Problem of Increased Risk

49 DYNASTY, INC. V. PRINCETON CITY REQUIRED FIRE SPRINKLERS, WHICH INSUREDS INSTALLED Chapter 4 E 3 The Problem of Increased Risk

50 DYNASTY, INC. V. PRINCETON FIRE BURNS THE INSURED PREMISES AFTER VALVE OF SPRINKLER SYSTEM WAS LOCKED SHUT Chapter 4 E 3 The Problem of Increased Risk

51 DYNASTY, INC. V. PRINCETON TRIAL COURT INSTRUCTS ON ARSON BUT NOT ON “INCREASE OF HAZARD” BASED ON DISABLING SPRINKLER SYSTEM Chapter 4 E 3 The Problem of Increased Risk

52 DYNASTY, INC. V. PRINCETON JURY FINDS FOR INSUREDS Chapter 4 E 3 The Problem of Increased Risk

53 DYNASTY, INC. V. PRINCETON HELD: REVERSED; TRIAL COURT SHOULD HAVE INSTRUCTED ON INCREASE OF HAZARD DEFENSE Chapter 4 E 3 The Problem of Increased Risk

54 OKLAHOMA ADOPTS THE NEW YORK STANDARD FIRE POLICY (36 O.S. § 4803) (36 O.S. § 4803) Chapter 4 E 3 The Problem of Increased Risk

55 STATUTORY STANDARD POLICY HAS “INCREASE OF HAZARD” CLAUSE Chapter 4 E 3 The Problem of Increased Risk

56 STATUTORY FORM ALSO CONTAINS “VACANT OR UNOCCUPIED” CLAUSE THAT THERE IS NO COVERAGE IF THE PROPERTY IS VACANT OR UNOCCUPIED MORE THAN 60 DAYS Chapter 4 E 3 The Problem of Increased Risk

57 OKLAHOMA LAW: MONARCH INS. CO. v. RIPPY (Supp. Pg 11) INSUREDS LIVE IN OKLAHOMA BUT SPEND WINTERS IN SOUTH TEXAS Chapter 4 E 3 The Problem of Increased Risk

58 MONARCH INS. CO. v. RIPPY WHILE INSUREDS ARE IN SOUTH TEXAS, GAS LINE GETS CUT AND THERE IS NO HEAT IN HOUSE SO PIPES FREEZE Chapter 4 E 3 The Problem of Increased Risk

59 MONARCH INS. CO. v. RIPPY HELD: HOUSE IS NOT VACANT OR UNOCCUPIED SO EXCLUSION DOES NOT APPLY Chapter 4 E 3 The Problem of Increased Risk

60 “VACANT” AND “UNOCCUPIED” MEAN DIFFERENT THINGS “VACANT” = NOTHING THERE “UNOCCUPIED” = NO ONE LIVES THERE Chapter 4 E 3 The Problem of Increased Risk

61 “COURTS ARE RELUCTANT TO VOIDCOVERAGE BASED ON INCREASE OF HAZARD OR VACANT OR UNOCCUPIED CLAUSES Chapter 4 E 3 The Problem of Increased Risk

62 ZOCHERT v. NATIONAL FARMERS UNION PROPERTY & CASUALTY CO. (Pg 237) Chapter 4 F Measure of Recovery

63 ZOCHERT v. NAT. FARMERS UNION POLICY PROVIDES FOR “ACTUAL CASH VALUE” (ACV) PAYMENT DO YOU DEDUCT DEPRECIATION? Chapter 4 F Measure of Recovery

64 ZOCHERT v. NAT. FARMERS UNION HELD: YES; FAILURE TO DEDUCT DEPRECIATION WOULD VIOLATE INDEMNITY PRINCIPLE Chapter 4 F Measure of Recovery

65 BROAD EVIDENCE RULE SAYS THAT USUAL RULE OF REPLACEMENT COST LESS DEPRECIATION MAY NOT RESULT IN PROPER ACTUAL CASH VALUE Chapter 4 F Measure of Recovery

66 CONSIDER OBSOLETE PROPERTY OR PROPERTY THAT HAS A GREATLY INFLATED VALUE IN LIGHT OF DEVELOPMENT Chapter 4 F Measure of Recovery

67 BROAD EVIDENCE RULE GIVES THE COURT LEEWAY TO TAKE THESE THINGS INTO ACCOUNT Chapter 4 F Measure of Recovery

68 OKLAHOMA PROBABLY ADOPTS BROAD EVIDENCE RULE BUT NOT BY THAT NAME Chapter 4 F Measure of Recovery

69 SEE: EAGLE FIRE INS. CO. OF NEW YORK V.SNYDER, 392 F.2D 570 (10TH CIR. 1968): ACV IN OKLAHOMA IS DETERMINED BY CONSIDERING ORIGINAL COST, REPLACEMENT COST, AGE OF PROPERTY, CONDITION OF MAINTENANCE, AND LOCATION, USE AND PROFIT FROM ITS USE. Chapter 4 F Measure of Recovery

70 SEEMS TO ADOPT BUT NOT NAME “BROAD EVIDENCE RULE.” SEE ALSO: ROCHESTER AMERICAN INS. CO. V. SHORT, 252 P.2D 490 (OKLA. 1953) (MARKET VALUE NOT EXCLUSIVE). Chapter 4 F Measure of Recovery

71 ZOCHERT v. NAT. FARMERS UNION DECISION IS PROBABLY WRONG BECAUSE OF PECULIAR POLICY PROVISION ON pg 238 Chapter 4 F Measure of Recovery

72 POLICY MAY PROVIDE FOR REPLACEMENT COST — ENABLES INSURED TO REBUILD OR REPLACE Chapter 4 F Measure of Recovery

73 POLICY MAY REQUIRE ACTUAL REPLACEMENT Chapter 4 F Measure of Recovery

74 HOW DOES THIS ACTUALLY WORK? INSURED PROBABLY CAN’T AFFORD TO FRONT THE MONEY TO REPLACE PROPERTY Chapter 4 F Measure of Recovery

75 INSURANCE COMPANY PAYS ACV INSURED USES THAT TO REPLACE SOME OF THE PROPERTY Chapter 4 F Measure of Recovery

76 INSURANCE COMPANY THEN PAYS THE DIFFERENCE BETWEEN ACV AND REPLACEMENT COST FOR THAT AND INSURED USES THAT TO REPLACE MORE Chapter 4 F Measure of Recovery

77 COINSURANCE REQUIREMENT: REDUCES PARTIAL LOSS PAYMENTS TO RATIO BY WHICH PROPERTY IS UNDERINSURED Chapter 4 F Measure of Recovery

78 GREAT NORTHERN OIL CO. v. ST. PAUL F&M (pg 246) Ch 4 G Subrogation

79 GREAT NORTHERN v. ST. PAUL F&M REFINERY BUYS “ALL RISK” POLICY COVERING, AMONG OTHERS, BUSINESS INTERRUPTION Ch 4 G Subrogation

80 GREAT NORTHERN v. ST. PAUL F&M AFTER POLICY BUT BEFORE LOSS REFINERY CONTRACTS WITH CONSTRUCTION CO. Ch 4 G Subrogation

81 GREAT NORTHERN v. ST. PAUL F&M CONSTRUCTION K RELEASES DAMAGES Ch 4 G Subrogation

82 GREAT NORTHERN v. ST. PAUL F&M LOSS FROM CONSTRUCTION ACCIDENT CAN REFINERY RECOVER? Ch 4 G Subrogation

83 GREAT NORTHERN v. ST. PAUL F&M HELD: YES – ADVANCE RELEASE DOES NOT DESTROY COVERAGE Ch 4 G Subrogation

84 CLEARLY, POST-LOSS RELEASE DESTROYS CLAIM EXCEPT WHEN TORT-FEASOR KNOWS OF SUBROGATION AETNA v. ASSOCIATES TRANSPORTS, (OKLA SUPP Pg 11) AETNA v. ASSOCIATES TRANSPORTS, (OKLA SUPP Pg 11) Ch 4 G Subrogation

85 FUNCTIONS OF SUBROGATION: * FOSTERS INDEMNITY PRINCIPLE * AVOIDS WINDFALLS * HOLDS DOWN PREMIUMS Ch 4 G Subrogation

86 RELATION TO COLLATERAL SOURCE RULE: KEEPS LOSS ON WRONGDOER SUBROGATION: DOES SAME AND AVOIDS WINDFALL Ch 4 G Subrogation

87 NORTHWEST FARM BUREAU INS. CO. v. ALTHAUSER (Pg. 253) Chapter 4 H 1 Limited Interests - Mortgages

88 NORTHWEST v. ALTHAUSER INSURED BARRED FROM RECOVERY BY FRAUD AND FALSE SWEARING Chapter 4 H 1 Limited Interests - Mortgages

89 NORTHWEST v. ALTHAUSER INS CO PAYS MORTGAGE CO MORTGAGE CO SUES TO FORECLOSE Chapter 4 H 1 Limited Interests - Mortgages

90 NORTHWEST v. ALTHAUSER HELD: INS CO CAN FORECLOSE INS CO STANDS IN SHOES OF MORTGAGE CO Chapter 4 H 1 Limited Interests - Mortgages

91 NORTHWEST v. ALTHAUSER INSURANCE COMPANY WHICH DOESN’T OWE INSURED WILL PAY MORTGAGEE AND SUBROGATE AGAINST INSURED Chapter 4 H 1 Limited Interests - Mortgages

92 INNOCENT COINSURED (N.1. P. 254) Chapter 4 H 1 Limited Interests - Mortgages

93 INNOCENT COINSURED BARRED IN OKLAHOMA – SHORT v OKLA FARMERS UNION, 1980 OK 155, 619 P.2d 588 Chapter 4 H 1 Limited Interests - Mortgages

94 REBUILD OR REPAY NO CLEAR RULE (N.2 P. 255) Chapter 4 H 1 Limited Interests - Mortgages

95 ALASKA INS. CO. v. RCA ALASKA (pg 256) Chapter 4 H 2 Leaseholds

96 ALASKA INS. CO. v. RCA ALASKA TENANT CAUSES FIRE LANDLORD’S INS CO SUES TENANT IS TENANT A CO-INSURED? Chapter 4 H 2 Leaseholds

97 ALASKA INS. CO. v. RCA ALASKA HELD: YES LANDLORD’S INS CO CAN’T SUBROGATE AGAINST TENANT BECAUSE CAN’T SUBROGATE AGAINST OWN INSURED Chapter 4 H 2 Leaseholds

98 ALASKA INS. CO. v. RCA ALASKA OKLA LAW – SAME, SUTTON v. JONDAHL HOWEVER, MUST BE INSURED UNDER SAME COVERAGE, TRAVELERS v. DICKEY (Supplement pg. 10) Chapter 4 H 2 Leaseholds

99 PARAMOUNT FIRE INS. CO. v. AETNA CAS. & SUR. CO. (pg 262) Chapter 4 H 3 Real Estate Sales

100 PARAMOUNT FIRE INS. CO. v. AETNA BUYER AND SELLER BOTH INSURE PROPERTY WHICH BURNS BEFORE CLOSING Chapter 4 D 3 Limited Interests - Real Estate Sales

101 PARAMOUNT FIRE INS. CO. v. AETNA BUYER TAKES PROPERTY AND PAYS, TAKING ASSIGNMENT Chapter 4 D 3 Limited Interests - Real Estate Sales

102 PARAMOUNT FIRE INS. CO. v. AETNA WHICH INS CO HAS TO PAY?AETNA- PURCHASER’S INSURANCE CO. Chapter 4 D 3 Limited Interests - Real Estate Sales

103 PARAMOUNT FIRE INS. CO. v. AETNA WHEN DO YOU DETERMINE LOSS? TRIAL COURT AND SUPREME COURT LOOK TO WHOLE TRANSACTION Chapter 4 D 3 Limited Interests - Real Estate Sales

104 PARAMOUNT FIRE INS. CO. v. AETNA DISSENT AND COURT OF APPEALS LOOK TO TIME OF FIRE Chapter 4 D 3 Limited Interests - Real Estate Sales

105 WHO HAS THE RISK OF LOSS? COMMON LAW: PURCHASER Chapter 4 D 3 Limited Interests - Real Estate Sales

106 WHO HAS THE RISK OF LOSS? Chapter 4 D 3 Limited Interests - Real Estate Sales

107 UNIFORM VENDOR AND PURCHASER RISK ACT - 16 O.S. § 202: ON VENDOR UNTIL LEGAL OR EQUITABLE TITLE PASSES. ON PURCHASER AFTER LEGAL OR EQUITABLE TITLE PASSES. Chapter 4 D 3 Limited Interests - Real Estate Sales


Download ppt "INSURANCE LAW SPRING 2010 CLASS SESSION 3 PROFESSOR TRAVIS."

Similar presentations


Ads by Google