Chapter 22 Personal Property, Bailments and Insurance

1. Chapter 22Personal Property, Bailments and Insurance

2. Learning Objectives • What is real property? What is personal property? • What does it mean to own property in fee simple? 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 for an effective bailment? • What are the basic rights and duties of the bailee? The Bailor?

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 • Person who owns the entire “bundle of rights” is said to be the owner in fee simple. • Fee simple gives the owner the maximum possible estate or right of ownership of real property, continuing forever. • Chapter 21 deals with realty estates.

6. A B Fig.1 C Fig. 2 A B Concurrent Ownership Tenancy in common (Fig. 1). A and B own an undivided interest in the property. Upon B’s death interest passes to B’s heir, “C”. Joint Tenancy (Fig. 2). A and B own an undivided interest in property but, upon B’s death, B’s interest passes to A, the surviving joint tenant.

7. Concurrent Ownership • Tenancy by the Entirety (not common) • Usually between husband and wife. • Community Property (limited # of states) • Property acquired by couple during their marriage is owned as an undivided ½ interest in property (real and personal).

8. 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.

9. Acquiring Ownership of Personal Property • Will or Inheritance. • 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.

10. Gifts • Voluntary transfer of property ownership from Donor (owner) to Donee (recipient) for no consideration. • Three types • Intervivos—while donor is living. • Causa Mortis: -- made by donor in contemplation of imminent death. • Testamentary – after death, by will/inheritance.

11. Gifts • Three requirements for valid gift: • Delivery—actual or “constructive” (symbolic, such as keys to car). • Donor must give up complete control or dominion. Delivery by a 3rd party is OK. • Donative intent on the part of the donor • Acceptance by the Donee.

12. Mislaid, Lost or 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.

13. 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.

14. Elements of a Bailment • Personal Property. (Tangible or Intangible--but not persons or realty.) • Delivery of Possession. • Bailee given exclusive control or possession. • May be actual or constructive. • Bailee must knowingly accept (Bailee must intend to exercise control over chattel). • Bailment Agreement. • Express or Implied.

15. Ordinary Bailments • Bailment for the sole benefit of the Bailor: • A gratuitous Bailment; Bailee owes Bailor a low duty of care, liable only for gross negligence. • Bailment for the sole benefit of the 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.

16. Rights and Duties of the Bailee • Right ToPossess. • Bailee may acquire or use property temporarily. Title does not pass. • Right toUse Bailed Property. • Rights ofCompensation. • Reimbursed for costs or services as provided in the agreement. • Right toLimit Liability. • Duty toReturnbailed property in same condition to Bailor. Bailee may liable for conversion and/or negligence.

17. 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 the Bailor

18. Common Carriers • Publicly licenses to provide transportation services to general public. • 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. • Shipper’s loss. • Connecting Carriers.

19. Warehouses and Innkeepers • Warehouses: • Owe 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.

20. 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.

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

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

23. 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.

24. 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.

25. Application For Insurance • 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.

26. 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.

27. Provisions and Clauses • Provisions Mandated by Statute. • Incontestability Clauses. • Coinsurance Clauses. • Appraisal and Arbitration Clauses. • Multiple Insurance Coverage. • Antilapse Clauses.

28. Incontestability Clauses • State statutes sometimes provide that once a life or health insurance policy has been in force for a specified length of time, the insurer cannot contest statements made in the application.

29. 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.

30. Appraisal and Arbitration Clauses • If insurer and insured cannot agree on value of property, an appraisal can be demanded. • Contract may also provide for arbitration.

31. 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.

32. 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.