TUTORIAL CHAPTER 5

LEGAL ASPECT OF INSURANCE

1. When two or more policies cover the same loss, the right of the one insurer to call upon
the other to share the loss is called the principle of _______________
A. Indemnity
B. Subrogation
C. Contribution
D. Utmost good faith
2. Which of the following principles of insurance denotes a positive duty of the person
seeking insurance to voluntarily disclose all material facts to the risk being proposed
whether requested or not?
A. Utmost good faith
B. Contribution
C. Subrogation
D. Indemnity
3. A thief could not insure the goods he or she stole because he or she does not have a legally
recognized financial interest towards the goods. This statement refers to:
A. Utmost good faith
B. Contribution
C. Indemnity
D. Insurable interest
4. An insured may not be compensated by the insurance company in an amount exceeding
the insured’s economic loss refers to ____________
A. Principle of contribution
B. Principle of utmost good faith
C. Principle of indemnity
D. Principle of proximate cause
5. All of the following the principles of insurance, EXCEPT:
A. Insurable interest
B. Utmost good faith
C. Subrogation
D. Premiums
6. Which of the following situation is TRUE concerning subrogation arising out of contract?
A. A shipper whose cargoes suffered damage while in custody of the carrier may exercise
his or her right against the carrier who is liable for the loss under the contract of carriage
or his or her marine cargo insurer.
B. The Innkeepers Act 1952 enables a hotel guest to recover from the hotel owner the
value of goods lost while in the custody of the hotel owner.
C. A car driven by Ahmad was hit by another car driven negligently by Mr Harraz
D. The wreckage of an insured object
7. ____________ is recognizable relationship between insured and the subject matter of
insurance.
A. Insurable loss
B. Insurable risks
C. Insurable interest
D. Insurable subject
8. Which of the following is FALSE concerning the principle of utmost good faith?
A. Utmost good faith is breached if the duty of disclosure is not observed
B. Principle of utmost good faith holds the insured to a higher standard of honesty
C. The legal maxima of utmost good faith is equivalent to “caveat emptor”
D. The duty to disclose the material facts lasts until the completion of the insurance
contract.
9. In the principle of _______________, customer must provide the insurer with correct
information relating to the risk.
A. Utmost good faith
B. Assignment
C. Indemnity
D. Subrogation
10. The four methods of indemnity used by insurers are ______________.
A. Cash, repair, renovation and cheque
B. Reinstatement, cash, repair and replacement
C. Cheque, replacement, repair and claim
D. Renovation, reinstatement, replace and repair
11. There are four ways in which subrogation rights may rise.
A. Agreement, tort, policy and contract
B. Contract, tort, statute and salvage
C. Tort, statute, property and policy
D. Salvage, contract, policy and tort
12. Insurable interest refers to _____________.
A. The item to be insured should be legal and not against public policy
B. Accidental, unintentionally and randomly occurred loss
C. A legally recognized relationship between the insured and the financial loss
D. Risk that have high frequency and high severity