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INSURANCE LAW SPRING 2010. CLASS SESSION 3 PROFESSOR TRAVIS. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss. NEED FOR EXCLUSIONS. Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss. NEED FOR EXCLUSIONS.
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INSURANCE LAWSPRING 2010 CLASS SESSION 3 PROFESSOR TRAVIS
Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss NEED FOR EXCLUSIONS
Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss NEED FOR EXCLUSIONS (1) CONTROL ADVERSE SELECTION
Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss 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 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 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 INTRINSIC LOSS INSURE AGAINST THE UNEXPECTED
Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss 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 CONCURRENT CAUSATION ONE CAUSE IS EXCLUDED
Chapter 4 E Exclusions and Their Exceptions Chapter 4 E 1 The Problem of Intrinsic Loss 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 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 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 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 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 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 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 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 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 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 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
Ch 4 E 2 Exclusions and Exceptions — Causation Problems STATE FARM FIRE & CAS CO v. BONGEN (Pg 214)
Ch 4 E 2 Exclusions and Exceptions — Causation Problems STATE FARM FIRE & CAS CO v. BONGEN POLICY EXCLUDES “EARTH MOVEMENT” IMPROPER CONSTRUCTION TRIGGERS LANDSLIDE
Ch 4 E 2 Exclusions and Exceptions — Causation Problems STATE FARM FIRE & CAS CO v. BONGEN HELD: NOT COVERED POLICY EXCLUDES CONCURRENT CAUSES
Ch 4 E 2 Exclusions and Exceptions — Causation Problems 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 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 CONCURRENT CAUSE: COVERED CAUSE AND EXCLUDED CAUSE JOIN OR CONCUR TO CAUSE LOSS
Ch 4 E 2 Exclusions and Exceptions — Causation Problems 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 OKLAHOMA RULE IS CONTRARY TO BONGEN - KELLY V. FARMERS N. 1 Pg. 218 AND SUPPLEMENT Pg. 7
Chapter 4 D 2 Limited Interests - Leaseholds LIRISTIS V. AMERICAN FAMILY MUT. INS. CO.(Pg. 219)
Ch 4 E 2 Exclusions and Exceptions — Causation Problems 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 LIRISTIS V. AMERICAN FAMILY INSURANCE COMPANY REFUSES TO PAY FOR MOLD BECAUSE OF MOLD EXCLUSION
Ch 4 E 2 Exclusions and Exceptions — Causation Problems LIRISTIS V. AMERICAN FAMILY TRIAL COURT APPLIES EXCLUSION AND GRANTS SUMMARY JUDGMENT
Ch 4 E 2 Exclusions and Exceptions — Causation Problems 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 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 LIRISTIS V. AMERICAN FAMILY INSURANCE COMPANY HAS TO BE VERY SPECIFIC IN WHAT IT EXCLUDES
Ch 4 E 2 Exclusions and Exceptions — Causation Problems 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)?
Chapter 4 E 3 The Problem of Increased Risk ROSEN V. STATE FARM GENERALINSURANCE COMPANY(Pg. 225)
Chapter 4 E 3 The Problem of Increased Risk ROSEN V. STATE FARM INSURED HAS DECKS WITH DETERIORATED FRAMING SUPPORT WHICH MADE COLLAPSE IMMINENT
Chapter 4 E 3 The Problem of Increased Risk ROSEN V. STATE FARM INSURED REPAIRS THE DECKS RATHER THAN LET THEM COLLAPSE
Chapter 4 E 3 The Problem of Increased Risk 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 ROSEN V. STATE FARM TRIAL COURT FINDS FOR PLAINTIFF; COURT OF APPEALS AFFIRMS
Chapter 4 E 3 The Problem of Increased Risk 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 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 ROSEN V. STATE FARM IS THIS REALLY AN “INCREASED RISK” CASE?
Chapter 4 E 3 The Problem of Increased Risk NOTE: “SUE AND LABOR” CLAUSES APPEAR IN COMMERCIAL POLICIES (BUT NOT IN HOMEOWNERS POLICIES)
Chapter 4 E 3 The Problem of Increased Risk MAY PAY INSURED FOR COST OF PREVENTING COVERED LOSSES
Chapter 4 E 3 The Problem of Increased Risk DYNASTY, INC. V. PRINCETONINSURANCE COMPANY(Pg. 229)
Chapter 4 E 3 The Problem of Increased Risk DYNASTY, INC. V. PRINCETON INSUREDS OWNED RESTAURANT THEY WERE CONVERTING TO A NIGHTCLUB
Chapter 4 E 3 The Problem of Increased Risk DYNASTY, INC. V. PRINCETON CITY REQUIRED FIRE SPRINKLERS, WHICH INSUREDS INSTALLED
Chapter 4 E 3 The Problem of Increased Risk DYNASTY, INC. V. PRINCETON FIRE BURNS THE INSURED PREMISES AFTER VALVE OF SPRINKLER SYSTEM WAS LOCKED SHUT