Course: Business Law

Insurance Law Lecture Notes

Material: Textbook chapter 28

Chapter 28: Insurance

-introduction
-insurance is a cornerstone of effective risk management
-but insurance can be expensive and may not be available at all
-example: certain houses in Calgary are built on floodplain and cannot get flood insurance at all
or if they can it is at an exhorbitant price
-legislation
-requires certain terms be in insurance contracts
-regulates the insurance industry
-monitors insurance companies for compliance with legislation
-purpose: protecting the public from unscrupulous, financially unstable, or otherwise
troublesome insurance providers
-three basic kinds of insurance
-life and disability insurance
-property insurance
-liability insurance
-deductible
-an amount the insured must pay before insurance will provide benefits
-example: $500 deductible on car insurance
-insurer must pay the first $500
-insurance company pays amount over $500
-the insurance contract
-duty to disclose
-insured has a duty to disclose to the insurer all information relevant to the risk
-failure to disclose = insurer may not honour policy and deny coverage
-even if loss has nothing to do with undisclosed information
-reason: insurer must be able to adequately assess the risk they are taking on
-duty to disclose does not include things not personal to the applicant
-insurable interest
-cannot obtain insurance for something in which you have no interest
-insurable interest = something that would prejudice or damage the insured if it were
lost, damaged, or destroyed
-hence why you cannot obtain insurance on your neighbour's house
-you have no interest in that
-a lender has an interest in the ability of the borrower to pay back the loan
-and so anything that reasonably enables the borrower to pay back the loan or any
security is something that the lender has an insurable interest in
-indemnity
-insurance contracts are contracts of indemnity
-meaning: insured not supposed to profit from coverage
-except for life insurance contracts
-subrogation
-insurer has right of subrogation
-meaning, the insurer gives up any right to sue any wrongdoer
 -the insurer gets his money from the insurance company
-insurance company assumes the right to sue any wrongdoer
-right of subrogation only occurs when insurer has paid the full extent of the loss
-not just part of it
-the policy
-exclusion clauses
-situations where insurer will not provide coverage
-example: no coverage of building if building left unoccupied for more than 30
consecutive days
-commonly include
-damage caused by
-wear and tear
-mould
-vandalism
-malicious acts of the insured
-rider
-a way to add or change the standard coverage that is included in the original contract
-essentially is a way to amend the contract later on
-endorsement
-alteration made after contract already in force
-insurance products
-types of insurance that may be obtained by business
-injury and proerty damage re business' operations
-personal injury to people the business employes/interacts with
-financial loss and injury caused by defected product/services
-financial loss and injury caused by employees
-injury and property damage caused by fire or other disaster
-loss of profit due to fire or other cause of business shut down
-environmental damage caused by the business
-death of a person vital to the business' operations
-occupier's liability insurance
-insurance if business held liable for failing to ensure premises are safe
-comprehensive general liability insurance
-covers liabilities incurred during the course of business
-very broad
-errors and omissions insurance
-applies more to professionals
-covers liabilities incurred due to an error or omission on the part of the insured
-property insurance
-insures property (land, buildings, equipment, etc)
-business interruption insurance
-insures a business against losses incurred because of a specified reason
-fire, flood, strike, etc
-environmental impairment insurance
-businesses that breach environmental regulations may face substantial fines and bear the costs
to cleanup any contaminated site
-general insurance policies usually exclude this type of damage because clean up is usually very
expensive
-you usually have to obtain a separate, and more expensive, insurance policy to cover
this type of damage
 -key-person life insurance
-sometimes, there are a few people who are key to a business' operations
-their lives can be insured so if they die then the business will be compensated
-remedies of the insured
-against the insurer
-if insured makes a claim, an insurance adjuster will likely investigate and evaluate the loss
-the adjuster will recommend an amount to the insurer and the insurer will offer to settle the
claim
-but, the amount the insurer offers and the amount the insured thinks they are entitled to can
differ
-may result in breach of contract and the insured suing the insurer
-insurers have duty of good faith
-if insurer breaches duty of good faith and fails to provide the insurer with adequate
compensation under their policy, the court may impose punitive damages
-Whiten v Pilot Insurance Co 2002
-W's family home burnt down in the middle of the night
-fire destroyed all their possessions and pets
-family was in poor financial state
-Pilot gave them a single $5000 payment for living expenses
-Pilot alleged W had burned his own house down
-even though adjuster and fire chief said it was accidental
-Pilot got a new adjuster and pressured him into giving an opinion that
supported Pilot's claim that W had burnt his own house down
-even gave new adjuster misleading information
-W got damages + $1 million in punitive damages
-punitive damages reduced to $100,000 on appeal