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Exam 9: Fundamental Legal Principles

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Question 1

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A contract in which the values exchanged are not equal because chance is involved is called a(n)

A) contract of adhesion.
B) unilateral contract.
C) conditional contract.
D) aleatory contract.

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Question 2

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The principle of utmost good faith is supported by all of the following legal doctrines EXCEPT

A) representations.
B) warranty.
C) subrogation.
D) concealment.

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Question 3

Multiple Choice

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What is the legal significance of a material misrepresentation in an insurance application?

A pharmaceutical company employs a young chemist who is responsible for three new patents last year and for the development of the company's two best-selling drugs.The company purchased a large life insurance policy on the chemist.In this case,the insurable interest requirement was met because of a(n)

Why are insurance contracts said to be contracts of adhesion?

Under which of the following rules is actual cash value determined by taking into consideration all relevant factors an expert would use to determine the value of the property?

All of the following statements about the rules governing agency relationships are true EXCEPT

Melody's car was damaged when another driver ran a stop sign and hit her car.Melody decided to collect from her own insurer and to let her insurer recoup the loss payment from the negligent driver who hit her.What fundamental legal principle is illustrated in this scenario?

Which of the following statements about consideration in an insurance contract is (are) true? I.The insured's total consideration is submission of a completed application. II.The insurer's consideration is the promise to do those things specified in the policy.

Frank asked his company's employee benefits director if his group health coverage could be converted to individual coverage.The benefits director said,"Yes,you can convert to an individual policy,and the coverage is identical to your group coverage." Frank quit his job and converted to an individual policy.Six months later he filed a claim.He was dismayed to learn the conversion policy was more limited compared to the group coverage,and his claim was denied.What legal doctrine will allow Frank to bring a successful legal action against his former employer because he was financially harmed due to his reasonable reliance upon a representation of fact?

Which of the following statements about offer and acceptance for insurance contracts is true?

Which of the following is a fundamental purpose of the principle of indemnity?

When must an insurable interest legally exist in property insurance for an insured to receive payment for a loss from the insurer?

Ted's insurance claim was denied by XYZ Insurance Company.When Ted inquired why the claim was denied,he was told to,"Read the exclusion on page 5 of the policy." Ted read the exclusion.In his opinion,the exclusion was poorly worded and vague.If a court of law agrees with Ted's assessment of the exclusion,Ted may still be able to have his claim paid by the insurer because insurance contracts are

All of the following statements are true about insurance agents and agency EXCEPT

Kim purchased a one-year property insurance policy.She agreed to pay half the premium when she bought the coverage,and the other half six months later.If Kim fails to pay the second premium,the insurer cannot sue her for the premium because insurance contracts are

What is the practical effect of an insurance policy being a conditional contract?

Sam's furniture was destroyed by a fire.The furniture cost $1200 when it was purchased,but similar new furniture now costs $1800.Assuming the furniture was 50 percent depreciated,what is the actual cash value of Sam's loss?

Bob purchased insurance on his home with an insurer that was not licensed to do business in the state.In this case,which requirement to form a binding insurance contract is lacking?

When must an insurable interest legally exist in life insurance?