Personal Property, Bailments, and Insurance

1. BUSINESS LAW TODAYEssentials 9th Ed.Roger LeRoy Miller - Institute for University Studies, Arlington, TexasGaylord A. Jentz - University of Texas at Austin, Emeritus Chapter 23 Personal Property, Bailments, and Insurance

2. Learning Objectives • What is real property? What is personal property? • What is the difference between joint tenancy and tenancy in common? • What are the three elements necessary for an effective gift? • What are the three elements of a bailment? • What is an insurable interest? When must an insurable interest exist – at the time the insurance policy is obtained, at the time the loss occurs, or both?

3. Introduction • Definition: Property consists of legally protected rights and interests a person has in anything with an ascertainable value that is subject to ownership. • Difference Between Real and Personal Property. • Ownership rights in each. • Acquiring Ownership of Personal Property. • Laws Governing Mislaid, Lost, or Abandoned Property.

4. Property Ownership • Property ownership is viewed as a “bundle of rights”, including the: • Right to possess. • Right to sell. • Right to give. • Right to lease. • Right to destroy.

5. Fee Simple • Owner owns the entire “bundle of rights”. • Fee simple gives the owner the maximum possible estate or right of ownership of real property, continuing forever. • Chapter 36 will deal with realty estates.

6. Tenancy in Common A B C • A and B own an undivided interest in the property. • Upon B’s death interest passes to B’s heir, “C”. • The new owners of the property are A and C. X

7. Joint Tenancy A B • A and B own a Joint Tenant interest in property. • Upon B’s death, B’s interest automatically passes to A, the surviving joint tenant. X

8. Community Property • Community Property (limited number of states) • Property acquired by couple during their marriage is owned as an undivided ½ interest in property (real and personal).

9. Real Property Ownership

10. Acquiring Ownership of Personal Property • Possession. • Capture of wild animals (wild animals belong to no one). • Finding of abandoned property. • Adverse Possession. • Production. • Writers, inventors, manufacturers, and others who produce personal property acquire title to it.

11. Gifts • Voluntary transfer of property ownership from Donor (owner) to Donee (recipient) for no consideration. • Requirements: • Donative Intent. • Delivery—actual or “constructive” (symbolic, such as keys to car). Relinquishing Dominion and Control: Donor must give up complete control or dominion. • CASE 23.1In re Estate of Piper (1984).There was no evidence of actual delivery of the rings to plaintiff Kaufmann. Thus the rings remained in the estate of Piper. • Acceptance by donee.

12. Types of Gifts • Three types • Intervivos—while donor is living. • Causa Mortis: -- made by donor in contemplation of imminent death. • Testamentary – after death, by will/inheritance.

13. Acquiring Ownership of Personal Property • Accession. • Someone adds value to a piece of personal property by use of either labor or materials. • Confusion. • Commingling so that a person’s personal property cannot be distinguished from another’s. • Fungible goods consists of identical particles such as oil or grain.

14. Mislaid, Lost, and Abandoned Property • Mislaid Property: Voluntary placed somewhere, then inadvertently forgotten. Finder is steward for true owner. • Lost Property: Involuntarily left. Property owner acquires title against whole world, except for true owner. Finder must return to true owner or be liable for conversion. • Abandoned Property: Discarded by true owner with no intention of recovering. Acquires title against all the world, including the original owner.

15. Bailments • A bailment is formed by the delivery of personal property, without transfer of title, by one person (Bailor) to another (Bailee), usually under an agreement for a particular purpose. • The property must be returned by the Bailee to the Bailor, or a third party as directed by the Bailor, in the same or better condition.

16. Elements of a Bailment • Personal Property. (Tangible or Intangible--but not persons or realty.) • Delivery of Possession. • Bailee given exclusive control or possession. • Actual (physical) or constructive delivery. • Bailee must knowingly accept (Bailee must intend to exercise control over chattel). • “Involuntary” Bailments. • Bailment Agreement. • Express or Implied.

17. Ordinary Bailments: Duty of Care • Bailment for the sole benefit of Bailor: • A gratuitous Bailment; Bailee owes Bailor a low duty of care, liable only for gross negligence. • Bailment for the sole benefit of Bailee: • Bailee owes Bailor a high duty of care and is liable for even slight negligence. • Mutual Benefit Bailment: most common. • Each party owes the other a reasonable duty of care.

18. Bailments: Bailee Duty of Care Bailment for Benefit of Bailor Bailment for Benefit of Bailee Mutual Benefit Reasonable Care High Duty of Care Low Duty of Care

19. Rights of the Bailee • Right To Possess. • Bailee may acquire or use property temporarily. Title does not pass. • Right to Use Bailed Property. • Rights of Compensation. • Reimbursed for costs or services as provided in the agreement. • Right to Limit Liability.

20. Duties of Bailee • Duty to return bailed property in same condition to bailor, or bailee may liable for conversion and/or negligence. • CASE 23.2LaPlace v. Briere. (2009). Presumption of negligence occurs when bailed property is damaged under the bailee’s control; can be rebutted by proof of bailee using reasonable and ordinary care.

21. Right to have property protected and used as agreed. Right to have property back at end of bailment with service or repair done properly. Right to have the Bailee not convert. Right to not be bound to limitation of liability unless Bailor knows. Duty to Provide safe goods: Mutual Benefit Bailment: free from known or hidden defects; Sole Benefit of Bailee: notify if any known defect. Rights and Duties of Bailor

22. Special Types of Bailments: Common Carriers • Common Carriers are strictly liable for damages except if the damages caused by: • An act of God. • An act of the public enemy. • An order of the public authority. • An act of the shipper. • The inherent nature of the goods.

23. Special Bailments: Warehouses and Innkeepers • Warehouses: • Issue documents of title (warehouse receipts) subject to contractual negotiations. Owes duty of reasonable care. • Can’t exculpate, can limit. • Innkeepers: • Owe duty of strict liability, modified by state statutes; if innkeeper provides safe and notifies guests. • If parking area provided and innkeeper accepts bailment, then may be liable.

24. Insurance • Insurance is a contractual arrangement for transferring and allocating risk. • Risk. • Prediction concerning potential loss based on known and unknown factors. • Risk Management. • Involves the transfer of certain risks from the individual to the insurance company by a contractual agreement. • Classifications of Insurance. • All risk insurance (added terrorism).

25. Insurance Terminology • Policy (Insurance contract). • Premium is the consideration to be paid to the insurer. • Underwriter (usually an insurance company). • Broker v. Agent.

26. Insurable Interest • A person can insure anything in which he or she has an insurable interest. • Types of insurable interest: • Life. • Property.

27. The Insurance Contract • Governed by the general principles of contract law, and regulated by the state. • Application is an offer, which insurance company can either reject or accept. • Acceptance sometimes conditional. • Need consideration. • Parties need capacity.

28. The Insurance Contract • Application For Insurance. • Effective Date.  • Provisions and Clauses.  • Interpreting Provisions of an Insurance Contract.  • Cancellation.  • Basic Duties and Rights.  • Defenses Against Payment. 

29. Insurance Contract: Application • Filled in application attached to the policy and made a part of the contract. • Misstatements or misrepresentation can void a policy, specially if company can show it would not have issued policy if it had known the facts.

30. Insurance Contract: Effective Date • Broker is agent for the applicant. • Agent is agent for the insurance company. He can issue a binder, if some consideration is paid, which will immediately bind the insurance company, depending on certain conditions being met. • Parties may agree contract will not be effective until policy is issued and delivered or sent to applicant. • Parties may agree policy will be binding, not be effective, until first premium paid, or physical exam passed.

31. Insurance Contract: Coinsurance Clauses • If owner insures her property for at least 80% of its value, owner will be able to recover up to the face value of the policy. • If owner insures for less than 80%, owner will be responsible for a proportionate share of the loss. Amount of insurance Recovery Coinsurance percentage = Percentage (80%) x Property value

32. Insurance Clauses

33. Insurance Contract: Good Faith Obligations • Cancellation. • Insured can cancel policy at any time, and the insurer can cancel according to terms of policy. • Insurer must give written notice of cancellation. • Good Faith Obligations. • CASE 23.3Woo v. Fireman’s Fund Insurance Co. (2007). Insurance company had a contractual duty to cover the dentist, even if his work was a ‘practical joke’ on his patient. • Bad Faith Actions. • Tort action. When insurance fails to reasonably settle within policy limits.

34. Defenses Against Payment • Insurance company can raise any of the defenses that would be valid in any ordinary action or contract: • Fraud, misrepresentation. • Not if information given was optional. • Not incorrect statement of age. • Concurrent causation doctrine.