1INSURANCE I. LEGISLATIVE REGULATION A. Insurance Defined 1.

Insurance defined: a contract whereby one undertakes to indemnify another or pay a specified amount upon determinab e dama!es. a" #ust be issued by an insurance company b" $ayab e upon certain contin!encies c" A mechanism for spreadin! oss %a form of indemnification& insurers are in the business of spreadin! risk& insurance shifts the risk to the insurers." d" #ust ha'e an insurab e interest (. SC Code: contract where one undertakes to indemnify another or pay a specified amount upon determinab e contin!encies& inc udes annuities ). *he insurance industry is hu!e+ ,. Insurance contracts are adhesion contracts. -ut state statutes and courts can chan!e the po icy terms. .. Insurance is a p annin! de'ice. B. Regulation 1. /o'ernment re!u ates insurance industry throu!h state e!is atures0 re!u atory a!encies0 and the 1udiciary. %#ost y state re!u ated". (. $au '. 2A0 1345: issuin! an insurance 6 is not a transaction in commerce0 so the federa !o'ernment can7t re!u ate it. ). US '. Southeastern Underwriters0 15,,: federa antitrust acts app y to insurance transactions& federa !o'ernment can re!u ate insurance. ,. 8e!is ati'e re!u ations: a" contro rates to make sure they are not: %1" inade9uate :rates must be hi!h enou!h to co'er payment of c aims0 profits for insurer0 and costs of operation& part of each premium do ar !oes to profit0 reser'es %for c aims"0 and operatin!;0 %(" e<cessi'e :peop e shou d be ab e to afford them;0 or %)" discriminatory :e!0 can7t char!e women hi!her premiums0 8A '. #eynhard;& %," Ratin! bureaus de'ise rate schedu es and submit them to the administrati'e a!ency headed by commissioner of insurance for appro'a & powers of enforcement are !ranted to the commissioner b" pre'ent unfair practices by insurers& c" $re'ents inso 'ency %for protection of insureds" d" re!u ate desi!nated assets and reser'es of insurance companies to pre'ent insurers7 inso 'ency and to protect insureds. %1" #ake sure the rates are hi!h enou!h to pay proceeds0 profits0 and administrati'e costs0 and a so makin! sure they are not discriminatory amount indi'idua s presentin! the same risks .. =ther ways of re!u atin!: Nationa Re!u ation a" Re!u ation of Unfair Competition: %1" >edera Unfair *rade $ractices Act doesn7t app y to insurance. %(" >edera McCarran-Ferguson Act0 15,.: re'erse preemption& Con!ress wi ea'e re!u ation of insurance to states0 but where states don7t re!u ate it0 fed aw wi fi in !aps.

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#cCarran?>er!uson Act: after ) year !race period0 the Sherman Act0 C ayton Act0 and >*C Act wou d be app icab e to insurance business to e<tent not re!u ated by state aw %i" #cC?>er! (%b": most tenuous ine& 9uestion of whether or not a particu ar area of unfair competition is sufficient y re!u ated by state aw to forec ose federa inter'ention %)" @See statutes for #cCarran >er!uson Act& starts on p. ( of supp ement %a" supports tota state re!u ation %b" 1. USC A1B11?1B1. %," SC has unfair trade statutes for insurance. b" Re!u ation of UnauthoriCed Insurers: %1" Re!u ated by Uniform UnauthoriCed Insurers Ser'ice of $rocess Act. %a" $ro'ides for ac9uisition of 1urisdiction o'er an out?of?state insurer and an in?state insured throu!h ser'ice of process on the state commissioner of insurance %(" Ser'ice on Insurance Commissioner is !ood a!ainst the insurer0 e'en if insurer is not re!istered in state. %SC" %)" Re!u ations are p aced by icensin!0 standard form re9uirements0 monitorin!0 bankruptcy0 and state statutes c" $re'ention of Inso 'ency: %1" 8icensin! re9uirements %(" Insurers are e<empt from bankruptcy code0 cannot dec are bankruptcy %)" Insurers must pay into !uarantee fund d" Standard >orm Re9uirements: forms ha'e been interpreted by the courts0 so we know what they mean e" Annua statements: insurers are not ta<ed on money in their reser'es %that they may ha'e to pay out in c aims"& annua report is to make sure they aren7t o'erstatin! their reser'es and understatin! earned surp us. :in mutua companies0 po icy ho ders are treated ike shareho ders; f" $ena ty statutes: e!.0 c aim for bad faith refusa of c aims SC re!u ation: a" Insurance Commission DE Fepartment of Insurance. %1" *it e )3 %a" Estab ishes Fept. of Insurance& Commission consists of G members appointed by the /o'ernor& e ects and emp oys Commissioner %i" Issues !enera po ices and broad ob1ecti'es re!ardin! the operation of the insurance industry in SC to the Commissioner0 who imp ements po ices and ob1ecti'es to the peop e %b" See p. ) for start of SC statutes %i" Fefinitions %ii" Fept of insurance and insurance commission estab ished %iii" $owers and duties of commission and chief insurance commissioner %i'" Fuets of chief insurance commissioner %'" Enforcement of artic e& promu !ation of re!u ation %'i" /E* )3?)?11B %pa!e 3" b" SC Hindstorm and Iai Underwritin! Ass7n: a insurers who write property insurance must 1oin.

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>urther re!u ation by re9uirin! insurers to 1oin the SC Hindstorm and Iai Underwritin! Assoc.& a pri'ate insurers authoriCed to write and en!a!e in property insurance are in the association un ess those insurers7 writin! are imited to property who y owned by parent0 subsidiary0 or a ied or!aniCations %a" E<c usion on y for insurers that write insurance for or!aniCations a ied with the insurer throu!h a form of ownership and contro %b" Foes N=* app y to insurers that are mere y a ied wJon another ERISA $reemption of State aw: ERISA preempts the state aw c aim for bad faith refusa to pay benefits when the bad faith c aim arises under an emp oyee benefit p an a" Duncan v. rovident !utual Life Insurance "o.# S" $%%&: $ro'ident mo'ed for !rounds to dismiss on 1(%b"%4" on ERISA pre?emptin! state aw& court disa!reed. %ERISA K Emp oyment Retirement Income Security Act" %1" "ause of action: participant in %or beneficiary of" a !roup hea th insurance p an can brin! a ci'i action to reco'er benefits due to him under terms of the p an0 or c arify ri!hts in the future benefits under the terms of the p an %a" State court 1urisdiction e<p icit y under USCA A 11)( %a"%1"%-"& concurrent 1urisdiction %(" Saving c ause: Hhere a state has promu !ated aw !o'ernin! the insurance issue in contro'ersy0 such state aw is not preempted by ERISA %e<cepts ERISA pre'ention when dea in! with insurance" %a" Dee'er c ause: pro'ides any state aw re!u atin! insurance cannot deem an emp oyee benefit p ans to be an insurance company or ike insurer %makes c ear that a state aw that purports to re!u ate insurance cannot deem an emp oyee benefit p an to be an insurance company" b" IE8F: that e<pansi'e scope of ERISA preempts state common aw tort and bad faith actions where they are asserted a!ainst an emp oyee benefit p an %1" *ort created by Nicho s %reco!nition in an action for bad faith refusa to pay benefits under an insurance po icy" is preempted when the bad faith c aim is under an emp oyee benefit p an c" -ottom ine: ERISA does N=* preempt insurance p an actions& does seem to preempt emp oyee benefit p ans d" ERISA pro'isions: %1" a ci'i action may be brou!ht by a participant in or beneficiary of a !roup hea th insurance p an to reco'er benefits due to him under the terms of the p an0 or to c arify his ri!hts to future benefits under the terms of the p an. -oth state courts and federa courts ha'e concurrent 1urisdiction o'er these actions. %(" Any state aw which re ates to emp oyee benefit p ans is preempted by ERISA0 e<cept that where a state has promu !ated aw !o'ernin!Jre!u atin! the insurance issue0 such state aw is not preempted. Any state aw re!u atin! insurance cannot deem an emp oyee benefit p ans to be an insurance company. %)" >or a aw to re!u ate insurance0 the aw must be specifica y directed toward the insurance industry. %," 8e!is ati'e re!u ation in business of insurance is chan!in!. e" State common? aw tort and contract actions a e!in! improper processin! of c aims for benefits under an emp oyee benefit p an are preempted by ERISA.

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II.

(UDI"IAL REGULATION)

Insurance re!u ation is !enera y percei'ed as statutory contro enacted by e!is atures and the acti'ities of administrati'e a!encies e<ercisin! power de e!ated by e!is ators Ludiciary7s 1ob is to interpret the insurance statutes K this eads to a retroacti'e app ication of the ru es in a particu ar fact pattern If court decides that an insurance po icy pro'ides co'era!e0 the insurer is co atera y estopped from takin! the counter position in future cases Note: other carriers are not bound by this decision0 howe'er they norma y wi ad1ust their conduct to comp y with the 1udicia decision I. "ontract Inter*retation $rocess by which the courts determine the an!ua!e used by parties in a 6 6 interpretation is the most important function of 1udiciary in the insurance re!u ation process $rimary areas where contractua an!ua!e is difficu t to ascertain meanin!: 2a!ue an!ua!e K imprecise in mar!ina app ication %term used MoccurrenceN" Ambi!uity in terms K when mu tip e means to a terms used Ambi!uity in synta< K imprecision of !rammar %inc udin! a disease in man7s po icy that wou d on y app y to a woman" Ambi!uity of or!aniCation K mis eadsJfai s to inform insured of e<tent of co'era!e Ambi!uity created by e<trinsic info K inc udin! confusin! brochures0 certificates0 ora e<p anations /ambre '. *ra'e ers Ins. Co.0 SC 153): a" Contract Interpretation princip es: +$, Insurance *olicies are su-.ect to general rules of contract construction. +/, Give *olic0 language its *lain# ordinar0# and *o*ular 'eaning. b" Statutory interpretation princip es: %1" e!is ati'e intent must pre'ai if it can be reasonab y disco'ered in the an!ua!e used %(" the words used shou d be taken in their ordinary and popu ar sense0 un ess there is somethin! in the statute re9uirin! a different interpretation. c" Io din!: *he purpose of SC Code A .4?5?3)1 %pro'idin! for underinsured motorist co'era!e" is to pro'ide co'era!e where the in1ured party7s dama!es e<ceed the iabi ity imits of the at?fau t motorist. *he on y imit is that the insured may not ha'e a !reater amount of underinsured motorist co'era!e than he has iabi ity co'era!e. *he in1ured party here can reco'er dama!es e<ceedin! the at?fau t motorist7s iabi ity co'era!e to the e<tent of her underinsured motorist co'era!e. L. for insured. d" =ne buys uninsured motorist co'era!e to protect himse f in case an at?fau t dri'er has no iabi ity co'era!e or has ess iabi ity co'era!e than re9uired by statutes. =ne buys underinsured motorist co'era!e to protect himse f in case an at?fau t dri'er has iabi ity co'era!e but the amount is insufficient to co'er the dama!es sustained. e" An insurance po icy must pro'ide the minimum co'era!e re9uired by statute. Edens '. SC >arm -ureau #ut. Ins.0 SC 153): a. Cance ation of insured7s po icy was ineffecti'e because he ne'er recei'ed notice. Insurer must pro'ide co'era!e. L for insured.

12ere language used in an insurance contract is a'-iguous# or 32ere it is ca*a-le of t3o reasona-le inter*retations# t2at construction 32ic2 is 'ost favora-le to t2e insured 3ill -e ado*ted. :whyO -ecause insurance is adhesion 6& insured has no bar!ainin! power; b" Court found that M!i'in! written noticeN was ambi!uous0 and interpreted it to mean actua receipt of the cance ation notice by the insured. c" Fissent: aw on y re9uires the insurer to pro'e that it proper y mai ed the cance ation notice& court shou d not interpret contract to add stricter re9uirement. *rimper '. Nationwide Ins.0 F.SC 153(: a" Insurance po icies are construed most stron! y in fa'or of co'era!e and a!ainst the insurer who drafted them. b" E'ery contract imposes on each party a duty of !ood faith and fair dea in! in its performance and enforcement. c" SC e!is ature has reco!niCed the 9uasi?fiduciary nature of insurance companies by creatin! statutory pro'isions which benefit consumers. d" *he courts wi reco!niCe first?party actions for bad?faith re1ection of an insurance c aim. e" Iere0 the po icy re9uired on y that there be 'isib e e'idence of forcib e entry& whether the e'idence was sufficient to support a reco'ery was proper y a 9uestion for the 1ury. #andatory statutory pro'isions re atin! to insurance contracts are he d to be part of the contract0 and any po icy pro'ision which contro'erts an app icab e statute is0 to that e<tent0 in'a id. *he interna inconsistency created by an e<c usion which purports to bar co'era!e for c aims arisin! out of the 'ery operation sou!ht to be insured renders the po icy ambi!uous0 and the court must reso 'e that ambi!uity in fa'or of co'era!e. A minor insured must affirm or disaffirm his contract in toto and is not a owed to affirm beneficia terms of the po icy and disaffirm the burdensome ones. #C/0 Inc. '. 6in!horn Ins. A!ency0 Ct. App. 1555: a. Hhere a motion for summary 1ud!ment presents a 9uestion as to the construction of a written contract0 the 9uestion is one of aw if the an!ua!e emp oyed by the a!reement is p ain and unambi!uous. b. In construin! an insurance contract0 a its pro'isions must be considered to!ether& the contract must be read as a who e. *hat construction wi be adopted which wi !i'e effect to the who e instrument and each of its 'arious parts0 so on! as it is reasonab e to do so. c. *he court must enforce0 not write0 insurance contracts& an insurer7s ob i!ation under a po icy is defined by the terms of the po icy itse f0 and cannot be en ar!ed by 1udicia construction. d. Ambi!uous or conf ictin! terms in an insurance po icy must be construed ibera y in fa'or of the insured and strict y a!ainst the insurer. e. If the intention of the parties is c ear0 courts ha'e no authority to torture the meanin! of po icy an!ua!e to e<tend or defeat co'era!e that was ne'er intended by the parties. f. Iere0 court found the po icy was unambi!uous and didn7t co'er dama!es arisin! from the use of a car %it is the occurrence itse f that is e<c uded0 not the type of dama!es". L for insurer. II. "ontract "onstruction S.C. Code Ann. A )3?41?1B K Ma contracts of insurance on property0 i'es0 or interests in this State are considered to be made inPthis State and are sub1ect to the aws of this state.N San!amo Heston0 Inc. '. Nat7 Surety Corp.0 SC 155(:

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a. Iistorica y0 in insurance co'era!e disputes0 SC Courts ha'e fo owed the doctrine of lex loci contractus0 app yin! the aw of the state where the contract was formed. -ut where A )3?41?1B app ies0 SC aw !o'erns the dispute. b. Rest. %(d" Conf icts of 8aw A 15): the aw of the p ace of the insured risk !o'erns un ess with respect to the particu ar issue0 some other state has a more si!nificant re ationship to the transaction and the parties. :Court dec ined to consider app yin! this ru e0 because the facts of this case were not sufficient y de'e oped.; c. Under A )3?41?1B0 it is irre e'ant where the contract was entered into0 and there is no re9uirement that the po icyho ders or insurers be SC citiCens. Hhat is so e y re e'ant is where the property0 i'es0 or interests insured are ocated. d. *he statute is not unconstitutiona : for a state7s substanti'e aw to be se ected consistent with the >u >aith Q Credit and Fue $rocess c auses0 the state must ha'e a si!nificant contact or a!!re!ation of contacts0 creatin! state interest0 such that the choice of its aw is neither arbitrary nor fundamenta y unfair. Adhesion Contract: one party ha'in! superior bar!ainin! power imposes its choice of terms on the other party. *his is what insurance contracts are. III. Doctrine of Reasona-le E4*ectation 5 Not A**lica-le in S" Re9uires that insurance 67s pro'ide the co'era!e that the insured reasonab y be ie'ed he was purchasin! Re9uires that insurance 6 pro'ide the co'era!e that a reasonab e person in the p ace of the insured wou d e<pect after readin! the po icy. Note: If insured read po icy !ot a meanin! from the an!ua!e that a reasonab e person in his position wou d !et0 then those e<pectations wou d be protected A state '. #a!num0 Ct. App. 1535: a. *he theory behind the doctrine of reasonab e e<pectations is that the construction of the an!ua!e of an insurance contract is not contro ed by the same standards as contro an arm7s en!th contract. b. SC does not accept this theory& insurance po icies are sub1ect to the !enera ru es of contract construction. c. If the intention of the parties is c ear0 the courts ha'e no authority to chan!e the contract in any particu ar. Iumana Iosp?-ayside '. 8i!ht e0 SC 1551: Court reser'ed ru in! on whether the po icy7s notice re9uirement shou d be re a<ed and the contract app ied as on y re9uirin! notice within a reasonab e time unti the issue is proper y before it. IV. E4istence of 6 of Insurance Hhether a insurance 6 has been entered into is a 9uestion of fact 8ayperson who has paid premium can reasonab y e<pect that they wi recei'e immediate co'era!e Iowe'er0 insurer may reser'e determination of whether app icant has insurab e risk $rocedure to reser'e: 1. Insurer use Mc ear and une9ui'oca N an!ua!e e'idencin! intent to do so (. Ca those conditions to app icant7s attention Note: A etter e<p ainin! that a po icy has apsed does not form a new insurance 6 V. 1aiver and Esto**el

Foctrine of Estoppel: detrimenta re iance on a course of conduct. Estoppe E ements: a. Actua misrepresentation b. Fetrimenta re iance c. Arises by operation of aw. d. -i atera e. Fepends on a pre1udicia chan!e of position by the insured. f. Can7t e<tend scope of risk by estoppe 0 e<cept insurer can7t use the contract to pro'e that the risk isn7t co'ered0 if the insurer mis ead the insured to be ie'e that the risk was co'ered. Crescent Co. '. Ins. Co. of North America0 SC 15G4: a. *he scope of risk under an insurance po icy can be e<tended by estoppe if the insurer has mis ed the insured into be ie'in! the particu ar risk is within the co'era!e. %Insurer cannot use the contract to pro'e that the risk is not co'ered." b. E ements of e9uitab e estoppe : 1. I!norance of the party in'okin! it of the truth as to the facts in 9uestion (. Representation or conduct of the party estopped which mis ead ). Re iance upon such misrepresentations or conduct ,. $re1udicia chan!e of position as the resu t of such re iance. Hai'er E ements: a. Arises by the act of one party %uni atera ". b. Fepends on know ed!e of the insured. c. Arises by operation of fact. d. Hai'er must be p eaded in the comp aint. e. 8imitations on the doctrine: 1. Neither the insured nor the insurer can wai'e a ri!ht that e<ists for a broader pub ic purpose. (. *he paro e'idence ru e operates in some situations to constrict the effect of the wai'er doctrine. ). Some courts ha'e he d that the doctrines of wai'er and estoppe cannot be used to e<pand the co'era!e of a po icy0 which is to be distin!uished from usin! the doctrine to pre'ent recision of a po icy or a defense to a c aim within co'era!e. SC >arm -ureau '. #ayer0 SC 155,: despite knowin! that the insured had another home0 the insurer paid the c aim in fu & the insurance company thus wai'ed its ri!ht to c aim reimbursement and was estopped from seekin! repayment. Unenforceab e pro'isions are b ue? ined from the insurance contract& 6 as a who e sti enforced. %E!.0 choice of aw pro'ision in insurance 6 written in another state& SC choice of aw statutes wi app y. :note that statutes can trump contract terms.;" Note: neither the insurer nor insured can wai'e statutori y created ri!hts that e<ist for the broader pub ic purpose III. SELE"TION AND "ONTROL O7 RIS6S A. 1arranties 1. Fefined: a" Harranty and condition refer to representations or promises by the insured0 incorporated into the contract and sa e0 on the truthfu ness or fu fi ment of which it is a!reed that the promise of the insurer sha depend.

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condition D an e'ent uncertain to occur which must occur0 un ess e<cused0 before performance of a duty becomes due warranty D !i'es an assurance on the part of po icy ho der that a certain situation e<ists or wi continue which diminishes the ike ihood that the e'ent insured a!ainst wi occur e'identiary conditions doctrine: it imposes a ru e of e'id. upon the insured to estab ish that a oss was caused by a risk that the po icy was intended to co'er and fai ure to satisfy the itera an!. of the condition wi not pre'ent co'era!e so on! as the insured carries the e'identiary burden Representation 's. Harranty: %1" Insurer has the burden of pro'in! the materia ity of a misrepresentation before it wi be !rounds for a'oidance. If representation or warranty is materia to the risk0 po icy can be a'oided. %(" #ateria ity of a warranty or condition is conc usi'e y presumed %burden shifts to the insured". %)" Insurer has burden of proof on materia ity of representation. %," Representation wi not be !rounds for a'oidance as on! as it is substantia y true %." Harranty or condition must be strict y comp ied with to prec ude a'oidance. %4" A representation can become a warranty. A be ief or opinion is not a representation. E ements of Harranty: %1" Representation or promise must be e<press y inc uded or incorporated by c ear reference into the insurance contract %(" Contract must c ear y show that the parties intended that the ri!hts of the insured wou d depend on the truth or performance of the warranty or condition %)" C ear statement in the written contract that the insured warrants the truth of the statements under pena ty of oss of ri!hts under the contract. *ypes of Harranties: %1" Affirmative: statement concernin! a fact as of the time the contract is entered into. *he fact must be true on y at the time the 6 is made& it not true ater0 wi not be a breach. Harranties presumed to be affirmati'e and to act on y in the present0 un ess c ear y shown to be promissory %to act in the future". %(" Promissory: statement or promise about the future or continuin! truth of the matter represented. >act wi continue to be true. If possib e0 courts wi interpret a c ause in the po icy to be somethin! other than a warranty. Reid '. Iardware #utua Insurance Co.0 SC 1545: %1" >acts: po icy issued for fire insurance for house0 described as Mowner occupied.N At time of fire0 the house had been transferred to someone e se. %(" Issue: whether the desi!nation0 at the time the po icy was issued0 that the insured swe in! was Mowner occupiedN was a continuin! warranty %)" A promissory0 or continuin!0 warranty is an abso ute undertakin! by the insured that certain facts or conditions re atin! to the risk sha continue0 or that certain thin!s sha be done or not done. %," Harranty def K a statement0 description0 or undertakin! on the part of the insured0 appearin! in the po icy of insurance or in another instrument proper y incorporated in the po icy0 re atin! contractua y to the risk insured a!ainst. %." *he term Mowner occupiedN is not a promissory warranty& it is on y a description and not an a!reement that insured wi continue to occupy it0 and is thus an

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affirmati'e warranty %not a warranty that it sha continue to be so occupied but is on y a warranty of the situation at the time the insurance is effected". *emporary -reach: a" many courts ho d that po icy is mere y suspended durin! breach and is re'i'ed when the breach is cured0 where: %1" Harranty or condition is on y temporari y breached0 %(" Insurer does not take action to ha'e the po icy 'oided before the breach is cured0 and %)" *he risk is not substantia y increased durin! the period of the breach. b" If the temporary breach is not materia 0 then co'era!e sti a'ai ab e. c" *sa apatas '. $hoeni< Insurance Co.0 SC 154B: %1" 8ake #urray Case %(" >acts: boat was bein! mo'ed from dock to be repaired0 sank whi e bein! mo'ed. Insurance contract pro'ided that boat was to be M aid upN at the time boat sank. %)" Ie d: the boat was not M aid upN at the time dama!e was sustained0 resu tin! in a temporary breach of the warranty and a suspension of the insurance on the boat durin! the e<istence of the breach. *hus0 the insurance does not co'er the dama!e to the boat. %," *he p aintiff7s breach of the warranty resu ted in a suspension of the insurance on the boat at the time the oss is to ha'e occurred. *he breach of the promissory warranty or conditions subse9uent contained in the po icy such as that before us operates to suspend the co'era!e of the po icy durin! the e<istence of the breach %Schaefer v. Home Ins. Co." %." A warranty as to the p ace where the insured 'esse is to be ocated durin! the period co'ered by the po icy makes the ri!ht of the insured to reco'er for dama!es dependent on the 'esse bein! at the stated p ace when the oss occurs. Fi'isibi ity of contracts: a" Lohnson '. South State Insurance Co.0 SC 1534: %1" >acts: fraud as to the contents of the house pre'ents reco'ery for the content& but insured can sti reco'er for the house and i'in! e<penses because the fraud did not effect those items. %(" In the absence of fraud or any act condemned by pub ic po icy0 the contract is di'isib e0 and reco'ery may be had for the oss of property not affected by the particu ar warranty broken. %)" >raud on y 'oids the pro'isions tainted by the fraud. %," >orfeitures of insurance contracts are not fa'ored. %." Insurer must estab ish a causati'e ink between a po icy e<c usion and a oss before reco'ery may be defeated. %4" #a1ority of 1urisdictions ho ds that any fraud or misrepresentation as to any portion of the property under an insurance po icy 'oids the entire po icy. SC does not adopt this ru e. b" E ias '. >iremen7s Insurance Co.0 SC 155(: %1" >acts: insured had 1oint auto and home insurance po icy. Insured did not pay the premiums for the auto portion of the po icy0 but paid the home portion. Insurer did not comp y with statute7s re9uirements for cance in! po icy0 so home po icy was sti in effect when house burned down. %(" $ayment and acceptance of insurance premiums creates insurance contract. %)" Contract of insurance may be di'isib e where the property consists of different items which are separate y 'a ued or insured for separate amounts.

B.

12ere contract is divisi-le# a -reac2 of 3arrant0 or condition as to one ite' 3ill not affect t2e insurance on t2e re'ainder of t2e *ro*ert09 court 3ill enforce t2e contract to t2e e4tent 3arrant0 3asn:t -reac2ed. %." Insurer must comp y with SC )3?G.?G,B to cance po icy when insured is not in breach. ,. Curtai in! Effects of Harranties a" SC Insurance /uaranty Ass7n '. -roach0 SC 153G: %1" >acts: airp ane insurance contract pro'ided that on y certified pi ots wi f y p ane. Student pi ot did not !et appro'a to f y p ane& p ane crashed. %(" #a1ority ru e: an insurance e<c usion is effecti'e whether or not there is any causa connection between the e<c uded risk and the oss. %)" SC ru e: insurance e<c usion does not imit co'era!e un ess it is casua y re ated to the oss. %," Rationa e for SC ru e: when the parties made the contract0 they were not insertin! a mere arbitrary pro'ision0 but it was the purpose of the insurer to re ie'e itse f of iabi ity from accidents caused by the e<c uded pro'ision. %." Insurer must show the causa connection %ie0 must show that student f yin! p ane caused oss0 before it can e<c ude co'era!e for the oss". !isre*resentations 1. Fefined: a" A representation is any statement0 ora or written0 e<press or imp ied0 made by the insured to the insurer which forms at east part of the basis on which the insurer decides to enter into the contract. b" Representation does not become a term of the contract un ess it is e<press y incorporated into the written document0 in which case it becomes a warranty or condition. c" #a1ority ru e: any fraud or misrepresentations as to any portion of property under an insurance po icy 'oids the entire po icy. d" #inority ru e %SC": an insurer can use misrepresentation as !rounds for a'oidance of the po icy at any time %un ess po icy has become incontestab e" or as a defense to payment of proceeds under the po icy if: %1" a representation of the insured is untrue or mis eadin!0 %(" is materia to the risk0 and %)" is re ied on by the insurer in issuin! the po icy at the specified premium. e" *o 'itiate a po icy on !rounds of fraudu ent misrepresentation0 insurer must show: %1" >a se statement %(" #ateria to risk %)" 6nown to app icant to be fa se %," #ade with intent to mis ead or defraud insurer %pro'e with c ear and con'incin! e'idence" %." Re ied on by insurer in issuin! po icy. f" Ne! i!ent misrepresentation does not a'oid the po icy. (. /as9ue '. 2oya!er 8ife Insurance Co.0 SC App. 1534: a" >acts: insured indicated on ife insurance app ication that she did not ha'e any history of heartJ un! disease. She was bein! treated for somethin!0 but she did not understand that it was one of the diseases asked about on the po icy app ication. Ruestion of fact whether insured knowin! y made fa se statements. b" >a se representations a one wi not 'oid a po icy& must consider the insured7s !ood faith in makin! the representations. Insurer must show the statements were made with intent to decei'e.

+8,

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c" d"

At best0 this was a ne! i!ent misrepresentation. Ct says fa se reps won7t 'oid a po icy. Imp consideration is insured7s !ood faith. =nce a!ain0 insurer must show0 by C8EAR ANF C=N2INCIN/ E0 that: %1" >a se statement %(" #ateria to risk %)" 6nown to app icant to be fa se %," #ade with intent to mis ead or defraud insurer %pro'e with c ear and con'incin! e'idence" %." Re ied on by insurer in issuin! po icy.

".

D.

e" ). 8anham '. - ue Cross0 SC (BB(: a" >acts: insured said on insurance app ication that he did not ha'e i'er disease& doctor had been monitorin! his i'er enCymes0 but had not yet dia!nosed him with i'er disease. 8ater insured was dia!nosed with Iep C and - ue Cross cance ed his insurance for fraudu ent misrepresentations. Ruestion of fact on insured know ed!e of fa sity and intent to decei'e. b" SC )3?G1?,B: fa sity of statement in app ication does not bar ri!ht to reco'ery un ess the fa se statement was made with actua intent to decei'e or un ess it materia y affected either the acceptance of the risk or the haCard assumed by the insurer. c" Restates ru e in 1.e. abo'e. Notice of "lai' 1. Insured is considered in breach of the terms and conditions of the po icy where the insured fai s to notify the insurer of the insured7s c aim. (. -urden is on the insurer to show that the fai ure to notify substantia y pre1udiced the insurer. ). $urpose of notification re9uirement is to a ow insurer to ade9uate y in'esti!ate the facts and to prepare a defense. ,. Notification re9uirement app ies to mandatory automobi e insurance and 'o untary iabi ity insurance. Life Insurance 1. *o 'oid a ife insurance po icy and a'oid iabi ity because of misrepresentations in the app ication0 insurance company must show: a" Statements comp ained of were untrue b" *heir fa sity was known to the app icant c" *hey were materia to the risk d" *he carrier re ied on the statements in issuin! the po icy at the specified premium0 and e" *hey were made with intent to decei'e and defraud the company. (. SC does not re9uire the insurer to show a causa connection between the materia misrepresentation and the death to 'oid the po icy. ). Carro '. Lackson Nationa 8ife Insurance Co. 0 SC 155(: a" >acts: insured made misrepresentations on ife insurance app ication0 died within ( years. Insurer cannot show connection between misrepresentations and death. b" SC )3?4)?((B%d": a ife insurance po icies must pro'ide for a ( year contestabi ity period0 after which the insurer cannot cha en!e the truthfu ness of the app ication or the representations of the insured. c" Hhen the insured dies durin! the contestabi ity period of a ife insurance po icy0 the insurer is not re9uired to pro'e a causa connection between the death and materia misrepresentations by the insured& if the abo'e test is met0 the po icy is 'oid. d" Company isn7t re9 to pro'e a causa connection between the death and materia misrepresentations by the insured in the app ication of insurance.

11

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4.

G. 3.

5.

1B. 11.

e" #ust show the abo'e . e ements. f" Carro II chan!ed Carro I. Incontestabi ity C auses: a" must cha en!e po icy for fraud0 misrepresentation within ( years of issuance& shou d be ibera in those ( years construin! possib e misrepresentations. b" After ( years0 can7t cha en!e0 e'en if it7s fraudu ent. c" Cf. Incontestabi ity for hea th insurance: can cha en!e on !rounds of ne! i!ent misrepresentation for ( years& can cha en!e for fraud at any time0 but within ) years of disco'ery. Materiality: a" @@ Common aw: A representation is considered materia if it is such as to induce the reasonab e insurer to enter into a contract of insurance that it wou d otherwise ha'e refused0 or to accept a ower premium than it wou d ha'e otherwise re9uired. b" Statutes may a ter this definition& for e<amp e0 many statutes re9uire that the misrepresentation ha'e actua y increased the risk of oss. c" =ther statutes re9uire that the matter misrepresented actua y contribute to the oss before it is !rounds for a defense. d" SC: misrepresentation is materia to the risk when the insured knows or has reason to know that it wi ike y affect the decision of the insurer as to whether to insure the app icant or as to the terms of the contract. =b i!ation of Insured to Correct Representations: a" Insured is under ob i!ation to correct any representation that becomes untrue at any time before the contract is formed %ie0 thin!s that chan!e between app ication and issuance"0 but is not under an ob i!ation to correct a representation that becomes untrue after po icy issued. b" "ourts 3ill u*2old t2e contract if logicall0 *ossi-le& court wi not 'oid the po icy or permit a defense for insubstantia errors %ie0 representation is substantia y correct". Return of $remiums: if misrepresentation was fraudu ent0 no reco'ery of premiums is re9uired. Representations by Emp oyer: a" A !roup ife insurance po icies must a so ha'e a two year contestabi ity period0 after which the 'a idity of the !roup po icy cannot be contested e<cept for non?payment of premiums0 and 'a idity of an indi'idua 7s co'era!e cannot be contested based on his own statements. %SC )3?4.?(1B%("". :note: !roup insurance with ess than (. peop e are !o'erned by state aw& abo'e that0 ERISA app ies and preempts certain c aims; b" Rapak '. Companion 8ife Insurance Co.0 SC 155(: emp oyer to d insurer than emp oyee? insured was emp oyed fu time0 but emp oyee was not. Emp oyee died more than ( years ater. Ie d: incontestabi ity period app ies whether the statements were made by the emp oyer or the indi'idua insured. Representations by a!ents: a" representations by a!ent of insured wi be bindin! on the insured. b" -ut insured is not bound by representations made by third parties0 e'en if materia y fa se and re ied on by insurer. Assi!nee of Insured: assi!nee can ac9uire no !reater ri!hts than those possessed by an assi!nor. Renewa of a po icy: a" when a fire po icy is renewed0 it is considered to be on the basis of representations made and ori!ina y app ied at time of ori!ina po icy0 un ess a new app ication is submitted. b" Insured has an affirmati'e duty in renewin! the contract to ad'ise the insurer of any materia chan!es in the information supp ied since the time of the ori!ina representations.

1(

1(.

1).

Ri!ht to Chan!e -eneficiary: a" /enera y insured has the ri!ht to chan!e the beneficiary of a ife insurance po icy. -ut insured may enter into contract N=* to chan!e the beneficiary0 e'en thou!h the ri!ht to chan!e the beneficiary is set forth in the po icy itse f. b" 8ane '. Hi iamson0 SC App. 155(: %1" >acts: husband a!reed in court to maintain ife insurance for wife0 but ater attempted to chan!e the beneficiary. %(" I: the a!reement made in open court and appro'ed by the 1ud!e is fu y enforceab e& husband contracted away his ri!ht to substitute other beneficiaries for his wife. Absent a modification of the order0 wife !ets the proceeds of the po icy. %)" *he status 9uo %the e<istin! state of thin!s at any !i'en date" of an insurance po icy may be chan!ed: %a" by fai in! to pay the premiums %b" by namin! substitute beneficiaries %," Hhi e an insured person norma y has the ri!ht to chan!e the beneficiary0 the insured may a so enter in to a 6 not to chan!e the beneficiary0 e'en thou!h the ri!ht to chan!e the beneficiary is not set forth in the po icy itse f 6i er -eneficiaries: a" SC 4(?(?3B) denies proceeds under a ife insurance po icy %and under wi " to beneficiaries who fe onious y and intentiona y ki the decedent. b" *he estate of the decedent passes as if the ki er had predeceased the decedent. c" A fina con'iction is conc usi'e for this section. In the absence of a con'iction0 the court may determine by a preponderance of the e'idence whether or not the ki in! was fe onious and intentiona . d" *his section does not affect persons who purchases property from the ki er for 'a ue and without notice0 but ki er is iab e to estate for 'a ue of property so d.

IV.

OLI"; E<"LUSIONS A. *opic Summary $o icy E<c usions: 8imitations or restrictions on co'era!e of which an insured has no notice are not bindin! Interna Inconsistencies: If an e<c usion is inconsistent with the rest of the po icy then the po icy is ambi!uous and the ambi!uity is construed in fa'or of co'era!e An insurance po icy contains an interna inconsistency when an e<c usion therein purports to bar co'era!e for c aims arisin! out of the 'ery operation sou!ht to be insured *his is 1ust an e<amp e of one possib e way to ambi!uity ob'ious y there are any number of ways a 6 cou d be ambi!uous Automobi e $o icies: SC Code Ann. )3?GG?1,B pro'ides no iabi ity insurance po icy sha be issued Mun ess it contains a pro'ision insurin! the persons defined as insuredN *his is pretty se f e<p anatory An insurer can e<c ude co'era!e for certain aspects of a business as on! as it is sti insurin! some other operation Random Notes: If a pro'ision of a po icy conf icts with a pro'ision of an endorsement the atter contro s $o icy and endorsement read to!ether

1)

 B.

*his chapter is short for a reason0 because it is not important Generall0 1. Courts are not in fa'or of denyin! co'era!e to insureds and narrow y interpret e<c usions in fa'or of co'era!e. (. Insurer must specifica y e<c ude the otherwise co'ered oss. ). Restrictions or imitations on co'era!e of which an insured does not ha'e notice are not bindin!. ,. Con ition: an e'ent uncertain to occur that must occur to create a duty or to terminate a duty .. Usua y conditions state imitations on co'era!e 4. Conditions must be strict y comp ied with. G. E<amp es of conditions: a" conditions precedentKe!.0 to pay premiums b" conditions subse9uent c" E'identiary: what you must pro'e before makin! c aim %this imits co'era!e" d" Reportin!: e!.0 report amount of in'entory in store0 po icy wi on y co'er reported amount. e" 2acancy %ob1ects" f" =ccupancy %peop e" Internal Inconsistencies "reated -0 E4clusions 1. Interna inconsistencies created by an e<c usion which purports to bar co'era!e for c aims arisin! out of the 'ery operation sou!ht to be insured renders the po icy ambi!uous0 and the court must reso 'e the ambi!uity in fa'or of co'era!e. (. Is e of $a ms $est Contro Co. '. #ontice o Ins. Co.: insured bou!ht po icy to protect itse f a!ainst dama!e to property of others caused by insured7s ne! i!ence. Insurer maintained that the po icy e<c uded professiona iabi ity. Ie d: to !i'e effect to this e<c usion wou d render po icy meanin! ess because it wou d e<c ude co'era!e for a c aims arisin! from the insured7s business0 the 'ery risk contemp ated by the parties. ). >orner '. A state Insurance Co.: in the absence of a po icy term definin! Mre ati'e0N construction most fa'orab e to the insured sha be adopted. Auto'o-ile olicies 1. SC )3?GG?)B%G" defined insured to inc ude any person who used with the consent0 e<press or imp ied0 of the names insured the motor 'ehic e to which the po icy app ies. (. American #utua >ire Insurance Co. '. Aetna Casua ty0 SC 1551: a" >acts: Aetna insured >ord dea ership0 American insured Loe Hoodward7s emp oyer& Loe was dri'in! within the scope of his emp oyment in a car owned by dea ership when accident happened. Aetna7s po icy e<c uded iabi ity for an indi'idua usin! a co'ered 'ehic e whi e workin! in the business of ser'icin! automobi es. b" I: the e<c usion is in'a id. c" )3?GG?1,B pro'ides that no iabi ity insurance po icy can be issued un ess it contains a pro'ision insurin! the persons defined as insured %ie0 any person who0 with consent0 uses the 'ehic e to which the po icy app ies" d" Certain statutes pro'ide specific e<emptions which may be proper y inc uded in an automobi e iabi ity po icy0 thus !i'in! rise to a stron! inference that no other e<ceptions were intended. ). #c$herson '. State -ud!et and Contro -oard0 SC 155): a" >acts: pedestrian sued Char eston after bein! hit by po ice car0 which was chasin! a suspect. -C- insures Char eston0 denied co'era!e for pedestrian7s in1uries. $o icy e<c uded iabi ity for persona in1ury arisin! out of the ownership0 operation and use of an

".

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automobi e owned or operated by the insured0 or an automobi e operated by a person in the course of his emp oyment for the insured. -, Rules of construction re=uire clauses of e4clusion to -e narro3l0 inter*reted# and clauses of inclusion to -e -roadl0 construed# to t2e -enefit of t2e insured. c" MArisin! out ofN is narrow y construed to mean Mcaused byN K here0 the in1uries arose out of Char eston7s ownership of the car0 so pedestrian7s in1uries are e<c uded from co'era!e. -8/ Enterprises '. >irst >inancia Insurance Co. 0 SC 1555: a" >acts: -8/ %a bar" ser'ed a coho to drunk person0 who then in1ured someone in car accident. -8/7s insurer c aims its po icy e<c udes dram shop iabi ity. b" Futy to defend: iabi ity insurer must defend any suit a e!in! bodi y in1ury or property dama!e seekin! dama!es payab e under the terms of the po icy. Insurer has no duty to defend an insured where the dama!e was caused for a reason unambi!uous y e<c uded under the po icy. c" Insurers ha'e the ri!ht to imit their iabi ity and to impose conditions on their ob i!ations pro'ided they are not in contra'ention of pub ic po icy or a statutory prohibition. $o icies pro'idin! products iabi ity co'era!e may contain e<c usions desi!ned to imit the insurer7s risk e<posure from haCards pecu iar to that business. d" An abso ute i9uor e<c usion %no co'era!e for any dama!e arisin! out of or connected with se in!0 distributin!0 ser'in! a coho " in a po icy co'erin! a ta'ern is i usory. -ut the dram shop e<c usion in -8/7s po icy %e<c udin! co'era!e for bodi y in1ury by reason of se in!0 ser'in!0 or !i'in! an a coho ic be'era!e0 but a owin!0 e!0 co'era!e for patron who s ips and fa s at ta'ern" is unambi!uous and enforceab e e" Endorsements: po icy and endorsement shou d be read to!ether. $o icy remains in fu force and effect to the e<tent its terms are modified by the words of the endorsement. If pro'ision in po icy conf icts with pro'ision of endorsement0 endorsement contro s. SEE N=*ES ANF FECISI=NS0 p. 4G. A" #isce aneous E<c usions: i. -usiness $ursuits ii. $o ution iii. Emp oyment?Re ated $ractices

2.

IN*EN*I=NA8 C=NFUC*: =2ER2IEH A. 7ortuit0 re=uire'ent 1. Insurer wi not pay for a oss un ess the oss is fortuitous. Can7t insure a!ainst a certainty. a" *he insurer bases its rates on the probabi ities of fortuitous osses& if the insured is in contro of the insured risk %ie0 if the po icy co'ers intentiona acts"0 then the abi ity of the insurer to ca cu ate fair rates is frustrated. b" $ub ic po icy forbids contracts indemnifyin! a person a!ainst oss resu tin! from his own wi fu wron!doin!. (. Courts wi imp y this re9uirement if not e<press y stated in contract. ). In SC: consider whether the incident was une<pected or unintended from the 'iewpoint of the in1ured party0 not the 'iewpoint of the insured. ,. State >arm Insurance Co. '. #oorer0 SC App. 1553: a" >acts: insurance po icy co'era!e e<tended to the use0 by an insured0 of a non?owned 'ehic e. Co'era!e was imited to accidents. Insured0 dri'in! a non?owned 'ehic e0 shot and ki ed a third person. b" 8imitation on co'era!e to accidents app ies to non?owned 'ehic es0 too. c" E<c usion of intentiona acts is contrary to state statute.

1.

B.

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SC >arm -ureau '. #umford0 1535: insurer may not e<c ude intentiona acts from statutori y re9uired po icies of iabi ity co'era!e. *his prohibition does not app y to 'o untary po icies of insurance that are not re9uired by SC aw. %(" Insurance a!ainst third party oss arisin! out of the use of a car is compu sory in SC. *he primary purpose of compu sory insurance is to compensate 'ictims who ha'e been in1ured by at?fau t motorists %cf.0 the purpose of 'o untary insurance is to sa'e harm ess the insured himse f". *hus0 the 'ictim7s ri!ht to reco'er from the insurance carrier does not depend on whether the insured7s conduct was intentiona or ne! i!ent. %)" Iowe'er0 co'era!e for non?owned 'ehic es is 'o untary0 so parties cou d e<c ude intentiona acts from co'era!e as to those cars. d" Acci ent: an occurrence is an accident if the e'ent is une<pected or not intended by the person sufferin! the harm or hurt. *his definition shou d app y un ess a tered by the parties. e" Iere0 the death of the third person was an accident as to the 'ictim0 so insured7s insurance must pro'ide co'era!e. ro*ert0 Insurance 1. If the insured intentiona y causes dama!e to his own property0 the oss is not co'ered. (. An innocent co?insured wi be ab e to reco'er for a oss intentiona y caused by the other insured0 because the interests of the coinsured are se'erab e %the uni atera acts of one coinsured cannot di'est the other of her separate contract ri!hts under the po icy". ). #cCracken '. /o'ernment Emp oyees Insurance Co. 0 SC 153.: a" Independent Spouses Foctrine: the acts of one spouse are not0 as a matter of aw0 imputed to the other spouse. b" In the absence of any statute or specific po icy an!ua!e denyin! co'era!e to a coinsured for the arson of another coinsured0 the innocent coinsured is entit ed to reco'er her share %ie0 S" of the insurance proceeds. ,. >ire Insurance: a" a friend y fire is one that is intentiona y kind ed and confined to a particu ar p ace. b" Iosti e fire is one that has burned out of contro . c" >ire insurance on y co'ers hosti e fires. %If a friend y fire turns hosti e0 those dama!es wi be co'ered." d" Fama!es resu tin! from !ood faith efforts to pre'ent or sa'e property from a hosti e fire wi be co'ered. %SC" Intent 1. Approaches to definin!: a" Narrowest0 #inority %the $atch test": ook to the natura and probab e conse9uences of the insured7s act& foreseeabi ity. %$ro?insurer." b" #a1ority: the insured must ha'e intended both the act and to cause some kind of in1ury or dama!e. c" -roadest: Insured must ha'e had the specific intent to in1ure and to cause the specific type of in1ury suffered. %$ro?insured". %SC" (. #i er '. >ide ity?$hoeni< Insurance Co.0 SC 15GG: a" *he act causin! the oss must ha'e been intentiona ANF the resu ts of the act must ha'e been intended. b" Insured must ha'e acted intentiona y in settin! the fire and a so ha'e intended that the fire cause the type of oss or in1ury which resu ted. ). Run!e '. #etropo itan 8ife Ins. Co.0 ,th Cir. 15G4:

%1"

14

If the death of the insured0 a thou!h unforeseen and une<pected0 resu ts direct y from the insured7s 'o untary act and a!!ressi'e misconduct0 or where the insured cu pab y pro'okes the act which causes the in1ury and death0 it is not death by accidenta means0 e'en thou!h the resu t may ha'e been an accidenta in1ury. b" *he insured7s death here was a natura and foreseeab e0 thou!h unintended0 conse9uence of his acti'ity. No co'era!e. c" Accidenta means: the unforeseen e'ent& the happenin! that eads to the resu t d" Accidenta death: the resu t %act was intentiona 0 but end was accidenta " ,. Feath whi e intentiona y in'o 'ed in crimina conduct: a" Some po icies prohibit co'era!e when the insured7s death resu ts from a crimina act. b" Se f?Fefense: %1" SC %maybe" has minority position: in1uries inf icted in se f?defense are not intentiona %and are co'ered". %SC ru e not c ear" %(" #a1ority position: acts of se f?defense are intentiona %and therefore e<c uded" where the insured intended to harm his attacker. c" Se f?$ro'oked Accidents: If you start the a!!ression0 it7s intentiona DE no co'era!e. d" E<ecution of con'icted crimina : shou d fami y of con'ict !et the ife insurance proceedsO Under ife insurance0 the fortuity is when& e<ecution is not a fortuity. -ut one case %not SC" !a'e the beneficiary the ife insurance proceeds. e" Suicide: po icies can e<c ude co'era!e for death due to suicide that occurs within ( years of the po icy bein! issued. f" Chi d Se<ua Abuse: perpetrator7s intent to in1ure the chi d is inferred as a matter of aw. !" SC 6i er -eneficiary Statute: beneficiary who brin!s about another7s death forfeits his ri!hts under wi or insurance. D. 1all0:s To*ic Su''ar0 Fortuity !e"uirement# /enera Ru e: a oss must be an MaccidentN to be co'ered under an insurance po icy MAccidentN can be defined in a number of different ways principa y from the 'iewpoint of the insured or the 'iewpoint of the in1ured party >or Compu sory Insurance %for e<amp e0 statutori y re9uired car insurance" determinin! whether an accident has occurred0 the courts in SC must consider whether the incident was une<pected or unintended from the 'iewpoint of the in1ured party rather than from the 'iewpoint of the insured. =f course the insured cou d be the in1ured party0 but that doesn7t chan!e the ana ysis -ECAUSE >or 2o untary Insurance %for e<amp e0 co'era!e for non?owned cars" the insurer can define MaccidentN to mean unintendedJune<pected from the 'iewpoint of the insured. *herefore0 if the insured crashes his car into E don because he hates E don0 then E don7s in1uries are co'ered under the insured7s iabi ity co'era!e because it is compu sory on an owned 'ehic e % $ally is still %itter a%out %eing calle on in Crim &ro when not prepare . '(oes it matter that I haven)t rea *+, If the insured is dri'in! Lared7s car and runs o'er Cory intentiona y then Lared7s iabi ity insurance wou d co'er Cory7s in1uries as the insured was a permissi'e user0 iabi ity insurance is compu sory0 and the incident was an accident from Cory7s 'iewpoint. If Lared7s iabi ity doesn7t comp ete y co'er Cory7s in1uries then the insured wou d be persona y iab e for the rest. 8et us say that the insured has co'era!e for non?owned 'ehic es. *his is 'o untary0 meant to protect the insured and not re9uired by statute. *he insurer can define MaccidentN as it p eases in the insurance contract and wi most ike y choose to do so from the 'iewpoint of the insured. *herefore0 as the insured intentiona y ran o'er Cory0 the incident wou d not be an MaccidentN from the insured7s 'iewpoint and wou d not be co'ered under the 'o untary non? owned 'ehic e po icy co'era!e. %-are is har%oring feelings of violence. watch out for that Isu/u Cory " It shou d come as no surprise that if you intentiona y ki yourse f you canTt reco'er on your ife insurance or if you burn your house down you canTt co ect on the insurance

a"

1G

 >or ife the insured and the in1ured party0 ie. dead !uy0 is a ways the same so there is no prob em discernin! the 'iewpoint with which to define accidenta 0 there is on y one and death must ha'e been accidenta from that 'iewpoint >or property insurance the same sort of ana ysis app ies a ot of the time0 but you a so ha'e instances of co?insureds Co-Insure # If two peop e are co?insured on the same property and one of them intentiona y dama!es the property then we ha'e a prob em Some states make distinctions based on whether the property is he d 1oint y or se'erab y0 but in SC the innocent co? insured is entit ed to reco'er re!ard ess of the sty e of ownership If I burn down our house and 8indsey doesn7t know anythin! about it then she can reco'er and I cannot Intent: *here is basica y three ways to term intent: 1. >oreseeabi ity: insured deemed to intend the natura and probab e conse9uences of his actUif I erect a hu!e !aso ine drenched pyre in my i'in! room and attempt to i!ht it with a arrow shot from the bedroom a a o ympic torch sty e it probab e that I wi that I wi burn the house down whether that is my intention or not0 but under this standard I am deemed to ha'e intentiona burned down the house (. #a1ority: insured deemed to ha'e acted intentiona y if he intended to cause some type of dama!eJin1uryUif I s ed!e hammer a wa to insert a hot tub and knock out key structura supports and the roof ca'es0 I ha'e intended to ca'e the roof essentia y ). South Caro inaUinsured must intend the act and intend the actua harmUunder this standard neither the house burnin! down or the roof ca'in! wou d be an intentiona act under a po icy0 I sti cou dn7t reco'er for wa I knocked out or at east a hu!e charred spot in the midd e of the i'in! room because I intended wa to come down and the pyre to burn. I am assumin! that the insurer cou d define intent any way it so chooses in the po icy so as to a'oid the two ridicu ous resu ts abo'e but I ha'e no case aw to back that up I7m 1ust !oin! on the fact that property insurance is 'o untary andJor there is no statute specifica y prescribin! the definition of intent Fire Insurance# >riend y fire: fire started intentiona y and confined to an area Iosti e fire: fire not started intentiona y or one that mo'esJspreads from the intended area >riend y fire isnTt co'ered0 hosti e is0 if you dama!e your house tryin! to stop a hosti e fire that dama!e is co'ered Self-(efense# Intentiona acts in se f defense are not e<c uded from co'era!eUif Lohnny tries to sweep Ra ph7s e! and he dropkicks him and breaks his nose0 Ra ph7s insurance wi co'er Lohnny7s nose if iabi ity is found Statutes: As noted abo'e0 if a statute re9uires co'era!e and doesn7t distin!uish between intentiona or accidenta acts then it supercedes the po icy an!ua!e attemptin! to e<c ude intentiona acts Chil Sex A%use# Intentiona harm is inferred as a matter of aw in chi d se< abuse cases so I assume this means that insurance doesn7t co'er it Self &rovo0e Acci ents# Co'era!e doesn7t e<tend to accidents brou!ht on by the insured7s a!!ressi'e or 'o untary conduct

13

 *herefore0 if you asphy<iate yourse f permanent y durin! some kinky so o o'in7 then your beneficiaries wi not on y think you are weird but they wi a so ha'e to !et 1obs If e<ecuted your fami y reco'ers VI. LIABILIT; INSURAN"E A. Defined 1. 8iabi ity co'era!e protects an at?fau t insured whi e dri'in! a particu ar 'ehic e owned by the insured. (. =b i!ations under a iabi ity insurance po icy: a" Futy to indemnify for successfu c aim within co'era!e b" Futy to defend c aim ). Insurance po icies don7t co'er contractua c aims. B. Dut0 to Defend 1. Usua y a c ause in the po icy !i'es the insurer the ri!ht and the ob i!ation to take o'er the defense of any action brou!ht by a third party a!ainst the insured on any cause of action that fa s within po icy co'era!e0 re!ard ess of whether c aim is fraudu ent0 fri'o ous0 etc. (. *he duty to defend is tri!!ered if any part of the comp aint fa s within the po icy. a" Ambi!uous c aims: as on! as there is potentia co'era!e0 the insurer is ob i!ated to defend. %Sometimes insurer may ha'e burden of in'esti!atin! co'era!e to determine if must defend." b" A ternati'e c aims: if third party a e!es both ne! i!ent and intentiona conduct0 some courts do not a ow the insurer to defend the action because of conf ict of interest arisin! from possib e intentiona tort %'io ates po icy". c" #u tip e causes of action: insurer must defend on y a!ainst the c aims within the po icy& insurer no on!er has e<c usi'e ri!ht to contro the iti!ation0 as it must share contro with counse representin! insured on the c aims outside the po icy. d" Untrue statements of fact in the comp aint: insurer must defend if the actua facts indicate a cause of action within co'era!e0 e'en if comp aint states facts in such a way that cause of action is without co'era!e. *o do otherwise wou d defeat the reasonab e e<pectations of the insured under the po icy. e" Unnecessary a e!ations: if any are p ed within po icy0 duty sti tri!!ered by potentia co'era!e. f" *ests for co'era!e: %1" Factual test: infer co'era!e from the actua facts known or reasonab y ascertainab e by the insurer& ook beyond the abe s in the comp aint. %(" Exclusive &lea ings test: ook to the four corners of the p eadin! to see if a e!ations are within co'era!e of po icy %SC0 Isle of &alms". If t2e underl0ing co'*laint creates a *ossi-ilit0 of coverage under *olic0# t2e insurer is o-ligated to defend. ). *he duty to defend may be broader than the duty to indemnify. ,. If the co'ered c aims are dismissed0 the duty to defend ends. .. $rior '. SC #edica #a practice 8iabi ity Ins. Underwriters 0 SC App.1551: a" If the facts a e!ed in the p aintiff7s comp aint fai to brin! a c aim within po icy co'era!e0 the insurer has no duty to defend. 8ook to the a e!ations of the comp aint to determine if the insurer must defend. b" Iere0 the c aim was for an intentiona tort0 which the insurance did not co'er0 so insurer did not ha'e to defend.

15

c"

4.

G.

3.

5.

>ai ure to !i'e insurer time y notice of the c aim wi pre'ent reco'ery0 e'en if the insurer was not harmed by the de ay. "urrent Rule see's to -e t2at t2e insurer 'ust -e *re.udiced -0 failure to give notice or ti'el0 notice. d" Insurer can defend and yet reser'e its ri!ht to ater contest co'era!e %ie0 if it finds the e'ent was intentiona ". e" Vou ha'e to ook beyond the abe s0 this was se<ua assau t. C* says LUA had no duty to defend0 not in course of emp oyment. Is e of $a ms $est Contro Co. '. #ontice o Insurance Co. 0 SC App. 155,: a" Inc usion of some non?co'ered c aims does not abro!ate an insurer7s duty to defend when a comp aint raises c aims co'ered by a po icy. b" A !enera iabi ity po icy is intended to pro'ide co'era!e for tort iabi ity for physica dama!e to the property of others& it is not intended to pro'ide co'era!e for the insured7s contractua iabi ity which causes economic osses %i.e. won7t co'er c aims of fau ty workmanship0 but instead co'ers c aims of fau ty workmanship that causes an accident". c" -ecause the p aintiff here a e!es that the insured7s ne! i!ence resu ted in property dama!e0 the insurer is ob i!ated to defend. d" E<c usion which purports to bar co'era!e for c aims arisin! out of the 'ery operation sou!ht to be insured renders the po icy ambi!uous& construe in fa'or of co'era!e %i.e. e<c udes co'era!e of c aims arisin! from professiona ser'ices0 when the entire purpose of the business is to pro'ide professiona ser'ices". e" Ruestions of co'era!e and the duty of a iabi ity insurance company to defend a c aim brou!ht a!ainst its insured are determined by the a e!ations of the third party7s comp aint. p. 33. Fischar!e of Futy to Fefend: a" Foes payment of proceeds in the amount of the po icy imits dischar!e duty to defendO b" *hree 'iewpoints: %1" =nce insurer has paid insured the fu amount for which it can be he d iab e under the po icy0 it has rendered fu performance %(" Insurer can e<tin!uish its duty to defend by payment of the fu po icy imit to a third party tort c aimant0 ea'in! insured on his own for the rest of the c aims %)" =b i!ation to pro'ide defense is independent of ob i!ation to indemnify the insured for iabi ity0 and therefore sur'i'es the payment of the po icy imit % S."". c" Some po icies say that it does. d" SC: duty to defend is separate and distinct from the duty to pay a 1ud!ment rendered a!ainst the insured. Insurer7s tender of the po icy imits does not re ie'e the insurer of a duty to defend0 if the insured doesn7t want to sett e %Simmons". Remedies for >ai ure to Fefend: a" Costs and attorney7s fees incurred by insured pro'idin! his own defense0 as on! as they are reasonab e b" Amount of the 1ud!ment or sett ement %if reasonab e" that insurer shou d ha'e paid %e9uitab e subro!ation" c" Conse9uentia dama!es %e!.0 cost of se in! assets& emotiona distress" d" Insurer oses ri!ht to contro defense %and cannot comp ain that case improper y defended" e" Insured is re ie'ed of duty to cooperate with insurer. f" If a secondary insurer defends because the primary insurer won7t0 the secondary insurer can reco'er its costs from the primary insurer. $rotections for Insurer:

(B

".

-rin! eclaratory 1u gment action whi e main c aim pendin! to determine if there is co'era!e for the c aim& these cases !et priority %but if insured wins0 wi !et costs from insurer" b" Nonwaiver letter: a bi atera a!reement that insurer wi defend0 but can cha en!e co'era!e ater if insured found iab e %insured shou dn7t si!n this+" F= N=* F= *IIS. E2ER. c" !eservation of !ights letter: a uni atera statement that insurer wi defend0 but is in'esti!atin! co'era!e and may not indemnify or wi cha en!e co'era!e ater. *his is weak a ternati'e to Nonwai'er etter. 1B. $uniti'e Fama!es: %to punish for bad conduct and deter from future conduct" a" Insurabi ity of puniti'e dama!es arises as an issue on y in cases in'o 'in! !ross ne! i!ence or wanton or reck ess conduct by the insured0 because puniti'e dama!es are rare y assessed for mere y ne! i!ent conduct0 and intentiona conduct pre'ents co'era!e for a dama!es. b" A po icy may e<press y e<c ude co'era!e of puniti'e dama!es0 e<cept where the doctrines of contra proferentum and reasonab e e<pectations wou d app y. c" Reasons not to insure puniti'es: %1" *hey are meant to be punishment& defeat purpose if risk shifted to insurer %(" $uniti'es deter tortfeasor %)" Hi resu t in hi!her premiums to pub ic d" Reasons to insure puniti'es: %1" 8ine between ne! i!ence and !ross ne! i!ence often indistin!uishab e0 so co'era!e wi not increase incidence of !ross ne! i!ence %(" Sympathetic 1urors& money !oes to make p aintiff who e %)" >reedom of contract e" #a1ority of courts %including S"" a ow insurabi ity of puniti'e dama!es. %)3?GG?)B: dama!es inc ude puniti'e dama!es" f" $uniti'e dama!es wi a so be co'ered if an emp oyer is he d iab e for puniti'e dama!es of its emp oyee. !" Hhen co ectin! U# co'era!e from your insurer0 can e'en co ect puniti'e dama!es. Dut0 to "oo*erate 1. Insured has a duty to cooperate with the insurer& this cooperation is a condition to the insurer7s ob i!ation to perform its duties. If not e<press y in contract0 then imp ied duty e<ist. (. >irst?party insurance: duty to cooperate imp icit ). A party may not suspend his own performance in response to an insi!nificant or immateria breach by the other party %i.e. insurer must sti defend e'en if insured doesn7t te them about accident0 if hears about it from )rd party". ,. A fai ure to cooperate is a breach0 but wi suspend the other party7s performance on y if the breach is materia . .. -efore an insurer can 'oid a po icy for insured7s non?cooperation0 insurer must show it was pre1udiced as a resu t of the ack of cooperation % See &uc0ett,. 4. $urpose of re9uirin! insured to !i'e notice of c aim to insurer is to enab e the insurer to in'esti!ate the accident and prepare a time y defense. G. #ore statutes: a" )3?.5?(B: Improper c aim practices %pa!e 1B1" b" )3?G1?,B: effect of fa se statements in app ication %1B(" c" )3?GG?1B: dec aration of purpose %1B(". d" )3?.5?1B: proof of oss forms re9uired to be furnished %1BB" 3. $uckett '. State >arm0 SC 155,:

a"

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D.

$uckett purchased renta dwe in! po icy from insurer that insured oss by fire. >ire occurs ( months ater0 thinkin! arson. b" An insured7s fai ure to cooperate may bar reco'ery under a po icy on y where the insurer can show pre1udice therefrom. c" Immateria fai ures to cooperate wi not forfeit the po icy. 5. Conf icts of interest: a" Usua y insurer has the ri!ht to contro the defense& this ri!ht may be modified where there is a conf ict of interest. b" Insurer may not be ab e to contro the iti!ation where: %1" Insurer contends that insured and third party c aimant are in co usion %(" Conduct of the insured cou d be found to be either ne! i!ent or intentiona %insurer wi want outcome to be intentiona 0 so it doesn7t ha'e to pay" %)" *actica choice of defense by the insurer conf icts with the persona interests of the insured %e!.0 insurer wants to sett e0 insured doesn7t" c" Hhen defense counse earns of co usion from the insured0 the attorney must cease to defend. Fefense counse cannot notify insurer of fraud un ess doin! so wou d pre'ent c ient from committin! crimina act. d" Insurer can defend under reser'ation of ri!hts to contest co'era!e e" Attorney paid by insurer is actua y representin! insured 1B. Cowan Q - andin! '. A state0 SC App. (BB(: a" )3?GG?1,(%-": if insurer has actual notice of a comp aint0 the fai ure of the insured to turn o'er the comp aint to the insurer wi not defeat co'era!e0 pro'ided the insured otherwise cooperates and does not pre1udice the insurer. b" *he in1ured party can pro'ide notice of the awsuit to the insured7s insurer. c" Insurer wi not ha'e to pay defau t 1ud!ment where it had no opportunity to participate in or defend case. d" An insurer can enforce its cooperation c ause as a defense a!ainst the c aim if neither the insured nor the in1ured party pro'ided the insurer with notice of the awsuit. e" SC is no on!er a mandatory insurance state %can be uninsured if you pay a fee and re!ister"0 so insurers can imit their iabi ity and impose whate'er conditions they want on the insured0 if not in 'io ation of statute or pub ic po icy. %See *age $>? 'iddle# t2is see's to -e t2e o**osite of 32at case sa0s" 11. United Ser'ices Automobi e Ass7n '. #arkosky0 SC App. (BBB: a" 8iabi ity of the insurance carrier becomes abso ute when the in1ury occurs. b" >raud in an app ication for motor 'ehic e iabi ity insurance is not a defense to the insurer7s iabi ity once in1ury has occurred0 but on y for the statutory minimum amount. c" As to any co'era!e in e<cess of the statutory minimum0 the insurer is not prec uded by statute or pub ic po icy from assertin! the defense of fraud. d" Insurer can enforce cooperation c ause where no notice !i'en. e" Botto' Line) Re!ardin! statutori y mandated automobi e iabi ity insurance co'era!e0 co'era!e may not be defeated by the insured7s fai ure to comp y with insurer7s notice pro'isions up to the mandatory minimum imits %e'en if insurer was pre1udiced". *his represents pub ic po icy of protectin! innocent third parties. Iowe'er0 re!ardin! any amount of co'era!e in e<cess of mandatory minimum0 the insurer may enforce notice pro'isions. Dut0 to Advise t2e Insured 1. Insurers and their a!ents !enera y do not ha'e a duty to ad'ise an insured. (. Absent a promise to do so0 an a!ent has no duty to procure insurance on the best terms or at the owest rate.

a"

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). ,.

..

4.

G.

If the a!ent ne'erthe ess undertakes to ad'ise the insured0 he must e<ercise due care in !i'in! ad'ice. Rickborn '. 8iberty 8ife Insurance Co.0 SC 1554: a" An a!ent of an insurance company has the duty to proper y comp ete app ications for insurance0 to proper y e<p ain the terms and imitations of co'era!e0 and to assure that the initia premium is proper y tendered and hand ed. b" *hose dea in! with such an a!ent0 without notice of restrictions on his authority0 ha'e a ri!ht to presume that his authority is coe<tensi'e with its apparent scope. A imitation on the authority of a !enera a!ent ha'in! power to make contracts of insurance0 wi not re ie'e the insurer of iabi ity on a po icy issued by the a!ent0 thou!h in 'io ation of the imitation0 where the insured did not ha'e actua or constructi'e notice of the imitation. c" *he ob i!ation to ad'ise created by an a!ent actin! within the scope of his actua or apparent authority becomes the ob i!ation of the insurer. d" Insurer owed insured a duty of care in super'isin! its a!ents0 because possib e harm to the insured by the a!ent cou d ha'e been reasonab y anticipated by the insured. e" *he app ication for insurance is an offer& a contractua re ationship wi not e<ist between insured and insurer unti the insurer accepts the offer. f" Imp ied acceptance of the app icant7s offer: ne! i!ent de ay in actin! upon an app ication or in notifyin! the app icant of the re1ection of the app ication. =b'ious y acceptin! payment of premium wou d 9ua ify. !" *he app icant0 not the a!ent0 must pay the premium to !uarantee co'era!e. h" /et p. 1B4 hi!h i!hted. /eor!e '. Empire >ire Q #arine Insurance Co. 0 SC (BB1: a" E<c udin! a c ass of permissi'e users from po icy co'era!e 'io ates SC aw0 which defined insured as inc udin! permissi'e users %1ust not named insured". b" Hhen an endorsement is in'a idated0 po icy wi be e!a y reformed to pro'ide co'era!e in the amount of the statutory minimum imits %un ess both parties stipu ate a certain amount that was intended". c" A contract may be reformed on the !round of mutua mistake when the mistake consists of an omission or insertion of some materia e ement affectin! the sub1ect matter or the terms of the contract. A mistake is mutua where both parties intended a certain thin! and by mistake in the draftin! did not obtain what was intended. Contract wi be reformed to what the parties intended. Ne! i!ent #isrepresentations by Insurance A!ent: a" /enera y an insured cannot comp ain of fraud in the misrepresentation of the contents of the po icy when the truth cou d ha'e been ascertained by readin! the instrument. b" Hhere an insured asks his own insurance a!ent about the terms of the po icy and reasonab y re ies on the a!ent7s response0 the insurer may be iab e for oss e'en if the actua written an!ua!e of the po icy e<c uded the co'era!e which the a!ent a e!ed the po icy pro'ided. 8ook at re ationship with a!ent %ie trust factor" Renewa s: a" )3?GG?1(B%b": offer of renewa must be sent more than 1. days prior to ori!ina effecti'e date of termination. b" Hhere an insurer issues proper notice of an offer to renew and the insured fai s to accept the offer0 the po icy has been nonrenewed by the insured0 and the insurer does not ha'e to send a notice of nonrenewa under )3?G.?G,B. A<son '. A. #ort!a!e Co.0 SC App. 155,. c" Ha ton '. Cana Insurance Co.0 SC 1553: %1" Renewa is the issuance of or the offer to issue by an insurer a po icy succeedin! a po icy pre'ious y issued.

()

%(" %)"

%,"

Nonrenewa is the termination of a po icy at its e<piration date. If the insurer fai s to notify the insured within the statutori y prescribed time period of offer to renew0 the po icy is renewed as a matter of aw for )B days after notice is recei'ed. Insured must act within those )B days to renew0 or po icy wi terminate at end of )B days. Statute pro'ides that if insurer fai s to furnish renewa terms as re9uired by statute0 insured may cance po icy for )B days after receipt of the renewa terms. )3?G.?G.B.

VII.

ERSONS

A.

@ INTERESTS ROTE"TED Identif0ing t2e Insured 1. See Supp. for statutes definin! insured and other terms& a!reement to e<c ude persons from co'era!e. (. *he insured is the person whose oss tri!!ers the insurer7s duty to pay proceeds. ). Usua y the insured is identified by specifica y desi!natin! the person whose ife0 property0 or other interests are co'ered. ,. =mnibus C ause: a statutori y mandated description of who insureds are %this definition wi be imp ied if not e<p icit y stated in contract". a" C ass I insureds: the named insured0 and resident spouse and resident re ati'es. b" C ass II insureds: persons who use the car with the consent of the c ass I insureds0 and !uests. .. A corporation cannot ha'e spouses or fami y members. *herefore0 if the spouse of the so e shareho der in a corporation is in1ured whi e dri'in! the corporation7s insured 'ehic e0 there wi not be co'era!e. 4. MResidentN is other than a temporary or transient 'isitor& one who i'es in the same house for a period of some duration0 a thou!h he may not intend to remain there permanent y. G. MInsuredN is broader than Mnamed insuredN 3. Approaches to definin! MconsentN: a" Ie or Ii!h Hater: once consent is !ranted0 permittee can use the car for any purpose and wi be co'ered. b" #idd e of the Road0 #inor Fe'iation Ru e: minor de'iations from consent are a owed0 the use wi sti be co'ered& materia de'iations wi not be co'ered. c" Con'ersion Ru e %strictest": permitted must use 'ehic e within the scope of consent0 or no co'era!e. %SC" 5. US 7ire Ins. "o. v. !aclosAie# SC App. 155.: a" >acts: In1ured emp oyee was on y supposed to be usin! a company truck to dri'e to and from work. Ie wrecked the truck when he went out drinkin!. b" *he in1ured person7s use of the insured truck was not a minor de'iation0 but a substantia departure from the scope of permission !ranted by the insured. c" SC app ies the con'ersion ru e0 and therefore pro'ides no co'era!e for the in1ured person under insured7s po icy. d" Ie or Ii!h Hater Ru e& #a1? S i!ht Fe'iation wi be co'ered0 !ross ones wi not& ast ru e is con'ersion ru e K permitted on y to do what7s within parameters of 1ob %con'ert 'ehic e to your own use". SC ooks at Edwards for Con'ersion ru e %whyO" 1B. 8iberty #utua Ins. Co. '. Edwards0 SC 1533: a" >acts: A woman rented a car and was in1ured when she et her dau!hter dri'e it. *he contract between the car renta company and the in1ured woman said Mon y icensed dri'ers named on this a!reement are insured.N

(,

B.

If the named insured has e<press y prohibited a permittee from a owin! a third party to operate the 'ehic e0 a third party dri'er is not a permissi'e user and therefore not an insured. c" An insured7s actua know ed!e and ac9uiescence to third party7s use constitutes imp ied permission. Iere0 the car renta company did not ha'e actua know ed!e that the woman7s dau!hter wou d dri'e the car0 so there was no imp ied permission. 11. Unisun Insurance Co. '. Schmidt0 SC (BBB: A permissi'e user was in1ured when a third person crashed the car. *he owner7s insurance wou d not co'er the dri'er0 who did not ha'e permission to use the car and was therefore not an insured& therefore the dri'er was uninsured0 and the owner7s uninsured motorist insurance co'ered the in1ury. a" *he Court a so notes that the uninsured motorist statute is remedia in nature0 enacted for the benefit of in1ured persons0 and is to be ibera y construed so that the purpose intended may be accomp ished. 1(. Construction of S.C. *ort C aims Act : 8an!ua!e of the po icy pro'idin! co'era!e to any emp oyee actin! in the course of emp oyment is broader than the definition in the *ort C aims Act of Mscope of officia dutyN and therefore pro'ides broader co'era!e. 12at "onstitutes BUseC of an Auto'o-ile 1. Insurance wi co'er occurrences arisin! out of the ownership0 maintenance0 or use of the insured 'ehic e. (. An in1ury arises out of the ownership0 maintenance0 or use of the car if: a" *here is a causa connection between the 'ehic e and the in1ury. %1" i.e. *he 'ehic e was an acti'e accessory to the assau t0 %(" Causa connection means somethin! ess than pro<imate cause and more than the car bein! the mere site of the in1ury0 and %)" *he in1ury must be foreseeab y identifiab e with the norma use of the car. b" No act of independent si!nificance occurred which broke the causa ink0 and c" *he 'ehic e is bein! used for transportation at the time of the assau t. ). Hausau Underwriters Ins. Co. '. Iowser0 SC 155(: a" *he court found a sufficient causa connection between the use of the car and the in1uries %where car chase 'ictim was shot by unknown dri'er of unidentified car0 the car was an acti'e accessory to the in1ury"0 and there was no independent act which broke the causa ink. *herefore in1uries arose out of the use of the assai ant7s car %'ictim7s own uninsured motorist co'era!e wi pay". b" Estab ishes (?part test %causa connection0 no act of independent si!nificance." c" 2ehic e was an acti'e accessory by fo owin! her. *ra'e ers Indemnity Co. '. Auto Hor d of =ran!ebur!0 SC App. 1555: a" >acts: 2ictims and assai ant had pu ed o'er on the side of the road. *he assai ant !ot out of his car and shot the 'ictims whi e they were sittin! in their car. b" Adds another pron! to test: it must be shown that the 'ehic e was bein! used for transportation at the time of the in1ury. %MuseN imited by statute to transportation uses& )3?GG?1,B." c" the in1ury must be foreseeab y identifiab e with norma use of the car. d" Hhen the on y connection between an in1ury and the insured 'ehic e7s use is the fact that the in1ured person was an occupant of the 'ehic e at the time of the in1ury0 that is not a sufficient casua connection. e" An insured can reco'er dama!es arisin! out of the use of an uninsured car. f" Iere0 the 'ictims were not a owed to reco'er because neither the 'ictims7 car nor the assai ant7s car were bein! used for transportation at the time of the in1ury. *he on y

b"

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connection between the 'ictims7 car and their in1uries was the fact that they were sittin! in the car when they were shot. .. If po icy of insurance contains a c ause of inc usion which co'ers in1uries arisin! from the ownership0 maintenance or use of an automobi e0 the ru e in *owe and Iowser app ies0 and the court shou d broad y interpret the po icy to determine if co'era!e e<ists. 4. If po icy of !enera iabi ity insurance e<c udes in1uries arisin! out of the use of a car0 Marisin! out ofN shou d be construed narrow y to mean Mcaused by.N G. State 7ar' v. BooAert0 SC 1555: dri'e?by shootin! in1uries not foreseeab y identifiab e with norma use of the car0 so no co'era!e. a. Get 'ore facts for BooAert -. /uys in Iardees. Son not hit by pe ets. So diers in car0 etc. Sup Ct !a'e Sum Lud! to #aryJ#ichae 0 then ) part test. 3. eagler v. USAA Insurance "o'*an0 K shot!un in back of car dischar!es0 ki s hunter7s wife. >act truck was runnin! didn7t matter since the !un dischar!ed. In1ury was foreseeab e to use of truck0 but no causa connection bt truck and accidenta shootin!. No co'era!e. $. 1... 12at "onstitutes an BOccurrenceC 1. Insurance pro'ides co'era!e for dama!e caused by an MoccurrenceN %an une<pected or unintended e'ent :accident; from the standpoint of the insured". (. *heories of when an occurrence takes p ace: a" Continuous trigger: ook at date of e<posure& a po icies in p ace after e<posure must co'er the dama!e. b" Exposure: occurrence is when e<posure to harm took p ace %e!.0 when oi started eakin!". Co'era!e is tri!!ered at the time of the in1ury?causin! e'ent0 e'en thou!h dama!es ha'e not yet occurred0 and the po icy in effect at the time of this e'ent co'ers a ensuin! dama!e. c" Manifestation: occurrence is when the in1uryJdama!e manifests itse f. $o icy in effect when dama!e manifests itse f must co'er a dama!e0 e'en if some dama!e occurred ear ier but was undetected. d" Hy%ri in1ury-in-fact2continuous trigger: after in1ury?in?fact occurs0 a subse9uent po icies are tri!!ered and must pro'ide co'era!e. ). Spin< =i '. >ederated Ins.0 SC 155): In haCardous waste cases0 occurrence is the time that the eaka!eJdama!e is disco'ered. %*his is the 'anifestation rule." when does the in1ury manifest itse fJwhen crime occursO a" Contaminants eaked into !round from !as tanks. Ct ooks at an!ua!e from statute0 and fo ows #raC. MCommence and MoccurN are synonymous. /et hi!h i!hted0 p. 14B. Ie7s not sure if it7s !ood aw anymore. ,. Loe Iarden -ui ders '. AE*NA0 SC 155G: a" Court adopts the hybrid in.ur0DinDfactJcontinuous trigger approach. b" Cracks in wa s here. Condo association. Hent to arbitration. Concrete was misa i!ned in f oors. c" !anifestation Rule K "overage triggered 32en in.ur0 'anifested itself . Spin< case here0 not fo owed by Loe Iarden. Spin< conf icts with p ain an!ua!e of po icy. d" occurrence is at the time eakJdama!e is disco'ered e" E4*osure t2eor0 ? Co'era!e is tri!!ered at the time of an in1ury in fact %when the dama!e first started K not the same as e<posure"0 e'en if it is before dama!e became apparent0 and the po icy in effect at the time of the in1ury in fact co'ers a the ensuin! dama!es. %And a subse9uent po icies tri!!ered as we ." f" "overage triggered continuousl0 fro' ti'e of in.ur0 causing event 32ile da'age *rogresses ?

(4

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4.

"overage triggered at t2e ti'e of an in.ur0 in fact ? "ontinuous trigger K p. 14(. An insured may be ab e to pro'e in retrospect that dama!e occurred durin! the po icy period0 to !et co'era!e. i" :Says it doesn7t o'erru e Spin<0 but rea y it does.; 1" No pro ratin! of imits& fu po icy tri!!ered. Century Indemnity Co. '. /o den Ii s -ui ders0 Inc.0 SC (BB(: Repeated e<posure to water dama!e be!an durin! po icy period& po icy pro'ides co'era!e for property dama!e that occurred durin! the po icy period and for any continuin! dama!e. a" Carrier ar!ued a !ood ar!ument here. =ther Cases: a" 8?L0 Inc. '. -ituminous >ire and #arine Ins. Co. K Ct of App. Ie d that fau ty workmanship0 standin! a one0 cannot constitute an occurrence. Iowe'er0 fau ty workmanship that causes an accident can be an occurrence because the dama!e is neither e<pected nor intended by the insured. 2ery confusin! case. An occurrence was an accident causin! -od In1Jprop dama!e to another. *hey a!reed no occurrence if no accident. b" Auto =wners '. Car -raCe -ui ders0 ? Insureds a e!e that haCardous materia s on their property shou d be co'ered by their property dama!e insurance. *he court found that insureds had on y a e!ed economic dama!es0 particu ar y the diminished 'a ue of their property0 which did not meet the definition of Mproperty dama!eN. c" Ambi!uous terms shou d be interpreted in fa'or of the insured.

VIII.

BAD 7AITE @ E<"ESS LIABILIT; A. Bad 7ait2 "ause of Action 1. *o protect the interests of insureds in dea in! with insurance companies (. #a1ority of states reco!niCe this cause of action ). Arises in: a" *hird party c aims0 in which the insured is seekin! defense and indemnification from iabi ity to a third party b" >irst party c aims0 in which the insured is seekin! indemnification from the insurer for a oss suffered by the insured persona y. ,. E ements for findin! bad faith: a" Stren!th of the in1ured c aimant7s case b" Attempt by the insurer to induce the insured to contribute to a sett ement c" >ai ure of the insurer to proper y in'esti!ate d" Insurer7s re1ection of its attorney7s ad'ice e" In'esti!ator7s opinion that it shou d sett e f" >ai ure of insurer to inform insured of compromise offer !" Amount of e<posure to financia risk if case not sett ed h" >au t of insured in contributin! to insurer7s re1ection of sett ement B. T2ird art0 "lai's 1. *he insurer has the ri!ht to contro the defense of the action0 inc udin! the ri!ht to decide to accept or re1ect a sett ement offer. Hhat duty does the insurer owe to !i'e consideration to the interests of the insured in makin! its sett ement decisionO (. -efore *y!er Ri'er0 insurer abso ute y contro ed defense and sett ement0 owed no duty to the insured. ). *y!er Ri'er $ine Co. '. #ary and Casua ty Co.0 SC 15)1: a" *here is a uni'ersa imp ied duty of !ood faith and fair dea in! in e'ery contract.

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G.

3. 5. 1B.

*he insurer wi be iab e in tort if it e<ercises its e<c usi'e ri!ht of sett ement %or fai s to sett e" in bad faith or for purposes of fraud0 to the in1ury of the insured. %1" Insurance company won7t be responsib e if it makes a mistake when the 0matter of the sett ement is within its contro under the 6& but the insurer must act in !ood faith or it wi be responsib e for the conse9uent in1ury to the insured %(" He sett ed that these pro'isions in po icies of insurance indemnifyin! emp oyers a!ainst oss by in1ury that the insurer sha ha'e the e<c usi'e ri!ht to compromise and sett e such c aims if e4ercised in good fait2 %a" Insurer is a so iab e if it e<ercises the e<c usi'e ri!ht of sett ement in bad faith or for purposes of fraud0 to the in1ury of the insured c" *he insurer owes the insured the duty of sett in! the c aim if that is the reasonab e thin! to do. %1" If the insurer ne! i!ent y makes no serious attempt to sett e unti matters are in such a shape that the c aim can7t be sett ed as ad'anta!eous y as former y0 the assured may reco'er the insurer the oss so occasioned to him *y!er Ri'er $ine Co. '. #ary and Casua ty Co.0 SC 15)): (nd appea & F contended that the $ wasn7t entit ed to reco'er for ne! i!ence unaccompanied by fraud or bad faith on the part of the F in the ne!otiations re atin! to the compromise and sett ement& court e<press y he d that an insurer ne! i!ent y fai in! to sett e the case a!ainst the insured by an in1ured emp oyee is iab e for the oss e'en in the absence of fraud or bad faith a" If the insurer7s interests conf ict with those of the insured0 the insurer must0 in !ood faith0 sacrifice its interests in fa'or of the insured7s interests. b" An insurer ne! i!ent y fai in! to sett e a case a!ainst the insured wi be iab e for the oss to the insured e'en in the absence of bad faith or fraud. :on y a minority of states ha'e fo owed SC in reducin! the standard from bad faith to ne! i!ence.; M*y!er Ri'er 8ettersN: e'idence that p aintiff was wi in! to sett e within the po icy imits. :the demand for sett ement must be within po icy imits for insurer to be iab e.; Remedy under *y!er Ri'er: insured can reco'er more than the po icy a owed for& !ets back the e<cess iabi ity that resu ted because insurer wou dn7t sett e. *his resu t doesn7t benefit the third party 'ictim& it benefits the insured. Sometimes dama!es for menta sufferin!0 or e'en puniti'e0 are a owed. Assi!nment: a" If the insured didn7t ha'e any assets to pay the e<cess c aim anyway0 insured wi ha'e no incenti'e to sue insurer for the e<cess& so insured may assi!n his c aim a!ainst the insurer. %#ay assi!n it to the ori!ina tort p aintiff0 so that p aintiff can reco'er his award& this is a third party c aim a!ainst the insurer." b" =n y the c aim for the e<cess 1ud!ment o'er po icy imits is assi!nab e %c aims for emotiona distress0 puniti'e dama!es not assi!nab e" c" Assi!nment uphe d e'en if po icy conditions assi!nment on insurer7s consent. d" If an insured has an e<cess iabi ity insurance po icy0 the e<cess 1ud!ement wi fa on the e<cess insurer& in that case0 the e<cess insurer can brin! the bad faith cause of action a!ainst the primary insurer. ERISA preempts the state aw c aim for bad faith refusa to pay benefits when the bad faith c aim arises under an emp oyee benefit p an. An in1ured third party does not ha'e standin! to assert a bad faith cause of action a!ainst an insurer0 un ess the c aim is assi!ned to them. South Caro ina reco!niCes the e<istence of a cause of action for %reach of the implie covenant of goo faith an fair ealing by an insured for conse9uentia dama!ed a e!ed y suffered bJc of the insurer7s bad faith hand in! of )rd party c aims

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11. 1(.

1).

Courts are sp it on whether cause of action is in tort or contract& important for statute of imitations purposes %shorter for tort". *ad ock $aintin! Co. '. #ary and Casua ty Co.0 SC 1554: a" ISSUE: #ay an insured assert a cause of action on an imp ied co'enant of !ood faith and fair dea in! a!ainst his insurance company for conse9uentia dama!es he a e!ed y suffered bJc of the insurance company7s bad faith in hand in! of third party c aimsO %1" Case arose out of dama!e to )B cars whi e Insured was performin! an industria paintin! 1ob %(" Insurer sent a etter to Insured statin! it wou d e<ercise its ri!ht to sett e and wou d seek reimbursement for the deductib e after ne!otiations were comp eted %a" Fispute arose o'er whether the deductib e app ied to each c aim or if it was a one?time dea %b" Fue to the dispute0 the Insurer sent Insured a etter sayin! it wou dn7t proceed further unti the Insured acknow ed!ed the Insurer7s interpretation of the deductib e as correct& Insurer refused to process the c aims %i" Insured was ab e to sett e a of them for under the deductib e amount %W.BB" %)" Insured then brou!ht the bad faith action a!ainst Insurer b" *here is an imp ied co'enant of !ood faith and fair dea in! in e'ery insurance contract that neither party wi do anythin! to impair the other7s ri!hts to recei'e benefits under the contract. %1" If an insured can demonstrate bad faith or unreasonab e action by the insurer in processin! a third party c aim0 he can reco'er conse9uentia dama!es in a tort action for breach of the co'enant of !ood faith and fair dea in!. %(" E<tendin! duty as an e<tension of !ood faith in a ob i!ations undertaken by the insurer for the insured c" Insured is not on y bar!ainin! for security from financia oss0 but a so the additiona security of knowin! they wi be dea t with fair y and in !ood faith %1" Foesn7t come from the contractua terms0 but from the imp ied co'enant of !ood faith and fair dea in! d" A breach of an e<press contract pro'ision is not necessary to brin! a cause of action for bad faith. %*he bad faith c aim is in tort0 not contract& the benefits due an insured are not imited by those e<press y set out in the contract." %1" Hhether the insurer is iab e for bad faith must be determined by the e'idence before it denied the c aim %Ioward '. State >arm" /askins '. Southern >arm -ureau Casua ty Co. %S.C. (BB)" a" *he /askins sued their insurance company for fraudu ent y inducin! them to si!n a c aim7s re ease& Randy /askins7 comp aint a e!es that Randy7s dad accidenta y shot him whi e huntin!0 resu tin! in in1uries tota in! o'er W)46 %1" A so a e!ed that S. >arm insured Randy7s dad0 and that one of their insurance a!ents to d Randy7s dad the po icy imit was W5k when it was rea y W1BBk %(" C aimed they re ied on erroneous information when they accepted W5k for Randy7s in1uries b" Issue: Can the /askins reco'er in tort for fraudu ent inducement to si!n a re ease of a c aimsO c" SC aw prohibits an insurer from knowin! y misrepresentin! to third?party c aimants pertinent facts or po icy pro'isions re atin! to co'era!e at issue or pro'idin! decepti'e or mis eadin! info wJrespect to co'era!e

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%1" ".

Can7t maintain an action a!ainst an insurer for fraudu ent y obtainin! a re ease unti he pro'es the materia ity of the fa se representation

7irst art0 "lai's 1. >irst $arty insurance in'o 'es po icies co'erin! osses suffered direct y by the insured. (. #a1ority 'iew: fai ure to e<ercise !ood faith in decidin! whether or not to pay a c aim is a breach of the imp ied duty of !ood faith and fair dea in!0 and therefore actionab e in tort. If he can pro'e insurer7s actions were wi fu or reck ess in disre!ard of insurer7s ri!hts0 he can reco'er puniti'e dama!es %Adopted in SC0 be ow" a" $ro'ision app ied on y to breach of 6 and not to tort b" If an award sounds in tort0 the award of attorney7s fees is improper ). Nicho s '. State >arm0 SC 153): a" ( causes of action: %1" breach of contract %(" bad faith refusa to pay benefits b" ISSUE: shou d this state reco!niCe an action for bad faith in insurer7s hand in! of c aim for first party benefitsO c" If an insured can demonstrate bad faith or unreasonab e action by the insurer in processin! a first party c aim under their mutua y bindin! insurance contract0 the insured can reco'er conse9uentia dama!es in a tort action. d" $o icy reasons: insured doesn7t norma y possess bar!ainin! power and has no means of protectin! himse f form the kind of treatment respondent comp ained of %1" Absent the threat of a tort action0 the insurance company can deny any c aim0 re!ard ess of whether or not it is 'a id e" Actua dama!es are not imited by the contract %1" If $ wins in contract and tort0 may ha'e to reform the 'erdict so $ on y !ets actua dama!es once f" If insured can demonstrate that the insurer7s actions were wi fu or in reck ess disre!ard of the insured7s ri!hts0 he can reco'er puniti'e dama!es. %*ort action on y." !" :this was the first case that a owed a direct action a!ainst your own insurer for fai ure to pay first?party c aim; ,. E ements of cause of action for bad faith refusa to pay first?party benefits: a" E<istence of a mutua y bindin! insurance contract& b" Refusa by insurer to pay benefits due under the contract0 c" Resu tin! from insurer7s bad faith or unreasonab e action in breach of imp ied co'enant of !ood faith and fair dea in!0 d" Causin! dama!e to the insured. .. Cock?n?-u Steakhouse '. /enera i Ins.0 SC 1554: a" -ad faith denia standard: was there a reasonab e basis for denyin! the c aimO If no reasonab e basis0 denia is in bad faith. b" EmphasiCes tortious e ements of bad faith c aim. c" Sets forth test0 abo'e. d" /enera i here tried to !et out of payin! by imitin! the po icy to the short?hand descriptions and i!nored their own detai ed an!ua!e of the contract that set for the scope of co'era!e %stupid bastards" %1" *wo of their own witnesses testified to the unreasonab eness of their po icy 4. Remedies for bad faith refusa to pay: a" $o icy proceeds b" Emotiona distress %conse9uentia " c" Economic harm

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G. 3. 5.

$uniti'e dama!es Attorneys7 fees Statutory remedies: %1" )3?.5?,B: insurer iab e for amount of the c aim0 and attorney7s fees. %(" )3?G1?15B: insurance po icy can pro'ide for subro!ation %substitution" of insurer for insured in ri!ht of reco'ery a!ainst third party0 but not for more than insurer has paid to insured for the in1ury caused by the third party. Chucktown Fry C eaners '. Xurich: independent insurance ad1usters ha'e no duty of care to an insured for their ne! i!ent or bad faith ad1ustment of c aims %ma1ority ru e" Cross ey '. State >arm: no unreasonab e for insurer to in'esti!ate medica history of an app icant who was dia!nosed as ha'in! coronary artery disease the day after app yin! for a hea th insurance po icy Note that contract c aims can !et conse9uentia dama!es0 attorney7s fees0 but tort c aims can !et puniti'e dama!es.

I<. I.

"EA TER I<) AUTO!OBILE INSURAN"E AND STA"6ING Statutory Re9uirements for 8iabi ity Co'era!e a. )3?GG?)B Fefinitions i. automobi e insuranceUco'ers automobi e bodi y in1ury0 property dama!e0 inc udin! medica payments0 uninsured motorist co'era!e0 automobi e physica dama!e0 economic oss benefits0 and any nonowner po icy which co'ers an indi'idua who rides in a car not owned by the insured or fami y member of the insured ii. insuredUnamed insured0 and spouse or re ati'e of insured if resident of the same househo d& a so0 any person who used the insured motor 'ehic e with consent of the insured and a !uest in the insured motor 'ehic e iii. uninsured motor 'ehic eUa car to which: %1" no insurance in the amounts ac9uired by aw0 %(" insurer denies co'era!e0 %)" insurer is dec ared inso 'ent0 etc. i'. underinsured motor 'ehic eUcar that has insurance app icab e at time of accident in amounts re9uired by aw0 but the amount of the insurance is ess that the amount of the insured7s dama!es. b. )3?GG?),B: a!reement to e<c ude person from co'era!e i. person can7t be e<c uded un ess %1" dri'er7s icense has been turned in to the Fept. of $ub ic Safety0 or %(" the insured a ready has an appropriate po icy of iabi ity insurance c. )3?GG?1,B: minimum re9uired co'era!e: 1.J)BJ1B i. W1.0BBB for bodi y in1ury to one person in any one accident0 ii. W)B0BBB for bodi y in1ury to ( or more person in any one accident0 iii. W1B0BBB for dama!e to property of others in any one accident d. )3?GG?(3B: co ision0 comprehensi'e co'era!e e. )3?GG?((B: Not re9uired to co'er any iabi ity under Horker7s Comp f. )3?GG?14B: additiona uninsured0 underinsured co'era!e i. additiona uninsured and underinsured co'era!e has to be offered in amounts up to the imits of the insured7s iabi ity !. )3?GG?).B >orms used in offerin! insurance po icies must ha'e: i. e<p anation of co'era!e ii. ist of a'ai ab e imits and ran!e of premiums for the imits iii. space for insured to mark whether he accepts or re1ects the co'era!e and a space for insured to se ect the imits of co'era!e he desires

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II.

i'. space for insured to si!n '. mai in! address and te ephone number of Insurance Fept. in case insured has 9uestions the a!ent can7t answer h. )3?GG?1(B: re9uirements for notice of cance ation or refusa to renew i. insurer has to mai or de i'er to insured7s address shown in the po icy a notification of cance ation or refusa to renew ii. notification must say that po icy wi be terminated in no ess than 1. days after mai in! or de i'erin! iii. notification must state specific reason for cance ation or refusa to renew i'. notification must inform insured of his ri!ht to re9uest within 1. days of receipt of notice that that the director re'iew the action of the insurer '. must inform insured of possib e a'ai abi ity of other insurance 'i. doesn7t app y if insurer has a ready issued a renewa po icy0 certificate etc. that indicates to the insured that he sti has insurance or if insured demonstrates to insurer that he intends for po icy to be cance ed. i. )3?GG?),1: unfair trade practices 1. )3?GG?))B: no c aim for property dama!e can be denied or de ayed because of pendin! c aim for persona in1ury k. .4?1B?,B: notification to department when insurance apses . )3?GG?()B: payments made for a c aim a!ainst insured are not admissions of iabi ity. m. )3?GG?(4B: re ease0 assi!nment of c aims i. insurer cannot contract with the insured to !et a !enera re ease0 co'enant not to sue0 assi!nment0 or artic e of subro!ation that wou d assi!n the insured7s c aim a!ainst another party ii. some e<ceptions n. .4?1B?((B: E'ery re!istered 'ehic es must be insured. o. )3?)?11B: duties of chief insurance officer p. )3?GG?11(: insurers are not re9uired to write automobi e insurance for e'ery app icant 9. .4?1B?1B: security re9uired on re!istered 'ehic es r. .4?1B?(B *ype of security re9uired s. .4?1B?)B Automatic suspension of re!istration upon apse or termination of security t. .4?1B?.B Suspension of re!istration not to affect tit e to 'ehic e u. .4?1B?(1B: definitions0 insured motor 'ehic e '. Hhen ( po icies e<tend co'era!e to the operation of a 'ehic e0 the po icy insurin! the iabi ity of the owner of a described 'ehic e has the first and primary ob i!ation0 and the other po icy is the e<cess carrier. Unisun Insurance Co. '. >irst Southern Insurance Co.0 SC App. 155,.)3?GG?),B Statutory re9uirements for Uninsured #otorist Co'era!e %U#" a. )3?GG?)B Fefinitions 1.)3?GG?)B: definin! uninsured motor 'ehic e: a" *here is no iabi ity insurance0 or b" Insurer denies co'era!e0 or c" Insurer is inso 'ent0 and d" *here is no security in ieu of the insurance0 and e" *he owner of the 'ehic e is not a se f?insurer. =R f" =wner is unknown. =R !" State 'ehic e is dri'en by unauthoriCed person. b. )3?GG?1.B minimum uninsured motorist co'era!e re9uired is 1.J)BJ1B i. U# automatica y ro s on to e'ery automobi e iabi ity po icy in minimum imits: 1. 1.0BBB for sin! e in1ury (. )B0BBB for sin! e occurrence

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III.

). 1B0BBB for persona property dama!e %of others" (.Sin! e?8imits $o icy: e!.0 ).J).J).. U# ro ed on at 1.. c. )3?GG?14B Additiona uninsured motorist co'era!e& underinsured motorist co'era!e i. additiona uninsured and underinsured co'era!e has to be offered in amounts up to the imits of the insured7s iabi ity ii. Can purchase U# abo'e minimum imits0 up to your po icy7s iabi ity imit co'era!e. d. )3?GG?141 Uninsured or underinsured co'era!e not re9uired in e<cess or umbre a po icy e. )3?GG?1GB If owner of car is unknown0 can7t reco'er under uninsured motorist pro'ision un ess: i. insured or witness reported accident within reasonab e time ii. in1uryJdama!e caused by physica contact with unknown 'ehic e or accident witness by someone other than owner or operator of insured 'ehic e iii. insured was not ne! i!ent in fai in! to determine the identity of the other 'ehic e and its dri'er f. )3?GG?13B MLohn FoeN actions a!ainst unknown defendant& ser'ice of process and defense by insurer& action a!ainst or 1oinder of identified owner or operator. !. )3?GG?15B Subro!ation of insurer who pays c aim under uninsured motorist pro'ision to ri!hts of insured i. insurer who pays U# c aim is subro!ated to insured a!ainst responsib e third parties h. )3?GG?(BB Arbitration c ause prohibited in uninsured motorist pro'ision i. )3?GG?(1B Uninsured motorist pro'ision not re9uired to co'er property dama!es paid to insured. i. UI motorist pro'ision doesn7t ha'e to co'er property dama!es for a oss the po icyho der has a ready been compensated for by insurance or otherwise. 1. Uninsured motorist insurance is carried on your own po icy0 acts as iabi ity co'era!e when you are in1ured by an uninsured tortfeasor. ).Se f?insurers as we as insurance carriers must pro'ide uninsured motorist co'era!e. Underinsured #otorist Co'era!e %UI#" a. )3?GG?)B%1." Fefinitions i. underinsured motor 'ehic eUthe car is insured at minimum imits0 but the dama!es are more than the co'era!e& tortfeasor7s insurance doesn7t co'er your in1uries b. *he tortfeasor must ha'e been insured at minimum imits& be ow that0 dri'er is considered uninsured. c. Insured must recei'e meanin!fu offer up to po icy imits. d. Assi!nment of Underinsurance Co'era!e i. )3?GG?14B Additiona uninsured motorist co'era!e& underinsured motorist co'era!e 1. additiona underinsured motorist co'era!e is not re9uired0 but is considered e<cess insurance (. benefits paid to this section are not sub1ect to subro!ation and assi!nment ii. #c#i an '. Lohn Iu!hes Seafood Co.0 Inc. %SC 155G"UY a!reed to pursue a e<cess insurance reco'eries a'ai ab e and assi!n the reco'eries to the Zs. *his is an impermissib e assi!nment of a c aim for underinsured motorist co'era!e under )3?G?14B. e. )3?GG?141 Uninsured or underinsured co'era!e not re9uired in e<cess or umbre a po icyUa po icy that supp ements the under yin! primary po icy. f. *ucker '. A state Ins. Co. %SC Ct. App. 1555" i. &?DFFD$G> re=uires t2at auto insurers offer UI! to t2eir insureds u* to t2e li'its of t2e insured lia-ilit0 coverage. To co'*l0 3it2 t2is re=uire'ent# t2e offer of UI! 'ust -e 'eaningful. ii. If t2e insurer fails to co'*l0 3it2 t2is dut0 to 'aAe a 'eaningful offer# t2e *olic0 3ill -e refor'ed -0 o*eration of la3 to include UI! coverage u* to t2e li'its of t2e lia-ilit0 insurance carried -0 t2e insured. iii. Iere0 the offer sufficient y con'eyed the re9uired information and was meanin!fu 0 e'en thou!h it did not inc ude an offer of UI# in the precise amount of the iabi ity co'era!e. !. State >arm '. Lames %SC Ct. App. 1555"

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I2.

i. *he po icies at issue e<c uded reco'ery for in1uries to an insured7s emp oyees arisin! out of emp oyment. ii. Insurers ha'e the ri!ht to imit their iabi ity and to impose whate'er conditions they desire on an insured0 pro'ided they are not in contra'ention of some statutory inhibition or pub ic po icy. iii. *his e<c usion does not conf ict with any statutory mandate0 )3?GG?((B0 and is enforceab e. i'. A suit to determine co'era!e under an automobi e iabi ity po icy is an action at aw. '. *he terms underinsured and uninsured are mutua y e<c usi'e& you can on y !et one of them. h. )3?GG?1GB If owner of car is unknown0 can7t reco'er under uninsured motorist pro'ision un ess the ) conditions are met. A witness must be re9uired to si!n an affida'it. A fa se statement in the affida'it may sub1ect the person to crimina pena ties. i. Courts ha'e re9uired strict comp iance with this statue. Co ins '. Foe %SC (BB(" he d that a Y7s strict comp iance with the affida'it re9uirement is mandatory. E'en if a witness testifies0 there sti must be an affida'it& there is no pro'ision for the functiona e9ui'a ent of an affida'it. i. As a !enera ru e0 when ( po icies e<tend co'era!e to the operation of a 'ehic e0 the po icy insurin! the iabi ity of the owner of a described 'ehic e has the first and primary ob i!ation0 and the other po icy is the e<cess carrier. Unisun Ins. Co. '. >irst So. Ins. Co. %SC Ct. App. 155,". #eanin!fu =ffer of UI# a. Norwood '. A state Ins. Co. %SC Ct. App. 155G" i. >our e ements re9uired for an insurer to make a meanin!fu offer of co'era!e: 1. Notification process must be commercia y reasonab e0 whether ora or in writin! (. Insurer must specify the imits of optiona co'era!e and not mere y offer additiona co'era!e in !enera terms ). Insurer must inte i!ib y ad'ise the insured of the nature of the optiona co'era!e ,. *he insured must be to d that optiona co'era!es are a'ai ab e for an additiona premium b. State >arm #ut. Auto Ins. Co. '. Hannamaker %SC 153G" i. Court found that 5 pa!e book et was not an effecti'e offer of UI#. ii. Statutes pro'ide that the insured wi ha'e the option of acceptin! or re1ectin! the offer of UI#. *he insured must be pro'ided with ade9uate information0 and in such a manner as to a ow the insured to make an inte i!ent decision of whether to accept or re1ect the co'era!e. iii. Court adopts the test abo'e for meanin!fu offer. i'. Issue is whether he rec7d ade9uate notice of UI# co'era!e0 and came up with the HANNA#A6ER *ES*. '. If mutua mistake0 no meetin! of minds. Cts wi reform 6 to ref ect what #o# shou d ha'e been. *he other is fraudOOO #aybe. 'i. /E* A88 => )3?GG?14B. U# and UI# are considered persona and portab e. c. Lackson '. State >arm #utua Auto. Ins. Co. %1551" i. An insurer makes a meanin!fu offer of UI# if it pro'ides the insured with a premium renewa notice that refers to underinsured and uninsured motor 'ehic e co'era!e and inc udes and insert e<p ainin! the terms. ii. *he initia burden of proof is on the insurer to show that it made a meanin!fu offer. iii. *he offer here was meanin!fu because it: 1. referred to uninsured and underinsured co'era!e (. inc uded an insert e<p ainin! the co'era!e ). contained a statement instructin! the insured to read the insert for further information. ,.In another case0 found that offer wasn7t meanin!fu where is p aced critica information in ( documents and didn7t inc ude anythin! in the renewa notice a ertin! the insured to read the insert %this did not draw the insured7s attention to the nature of the offer." ..>orm has chan!ed now0 has to ist a co'ered0 and be si!ned by insured. d. American Security Ins. Co. '. Ioward %SC Ct. App. 155)"

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2.

2I.

i. =ffer found to be improper because it: 1. automatica y ro ed on UI# with mandatory iabi ity co'era!e0 and then !a'e the insured the ri!ht to re1ect the co'era!e and recei'e a partia refund of the premium. *his is an i e!a ne!ati'e sa e. (. offered UI# on y for an amount e9ua to the iabi ity co'era!e. *he statute re9uires optiona co'era!e to be offered in any amount up to the imits of iabi ity co'era!e. ). did not specifica y state the imits of the co'era!e. *he offer must specify the imits of the additiona co'era!e in do ar amounts. ,. did not pro'ide the insured with a separate y stated premium amount for co'era!e at the specified imits. .. did not e<p ain the nature of UI# co'era!e and how it differs from other co'era!es. ii. E'en if the insured e<press y refuses the co'era!e0 a noncomp yin! offer has the e!a effect of no offer at a . iii. Underinsured motorist co'era!e is not imited to the use of the insured 'ehic e. i'. Concrete Ser'ices0 Inc. '. U.S. >ide ity and /uaranty Co. %SC 1553"0 Supreme Court he d that ownership of the 'ehic e is not re9uired in order to stack co'era!e. *herefore0 American Security is o'erru ed to the e<tent that is imp ies that ownership is re9uired. e. #cFona d '. SC >arm -ureau Ins. Co. %SC Ct. App. 1555" i. If the form pro'ided in )3?GG?).B for new app icants is proper y comp eted by the named insured0 there is a presumption that the insured made an informed co'era!e decision. ii. Substitutin! a new person as the named insured on a po icy creates a new po icy0 and an offer of UI# is re9uired to the new insured. f. =n y the named insured0 and not 1ust any insured0 can wai'e UI# by re1ectin! the offer. *he named insured must make a knowin!0 informed se ection of co'era!e. $ersona In1ury $rotection %$I$" a. )3?GG?1,, $ersona in1ury protection co'era!e not mandated. i. $I$ pays0 re!ard ess of fau t0 anyone in1ured for medica costs and ost wa!es. ii. Used to be re9uired by SC aw. Not re9uired now. b. State >arm #utua Automobi e Ins. Co. '. Richardson %SC 155)" i. If an insurer se s no?fau t insurance co'era!e which pro'ides persona in1ury protection0 medica payment co'era!e0 or economic oss co'era!e0 the co'era!e cannot be assi!ned or subro!ated and is not sub1ect to set off. Iowe'er0 contract can pro'ide for setoff of $I$. ii. -efore reforms0 a tortfeasor cou d reduce his iabi ity by amount of $I$ benefits recei'ed by c aimant under )3?GG?(5B%f". After the reforms0 the 8e!is ature e<press y pro'ided the $I$ co'era!e was not sub1ect to set off under )3?GG?1,,. *he court reasoned that the set off prohibited by )3?GG?1,, is the tortfeasor7s reduction in iabi ity former y a owed by )3?GG? (5B%f". c. -urns '. State >arm #utua Auto. Ins. Co. %SC 1535" i. -asic $I$ is W10BBB. Additiona $I$ %A$I$" is anythin! about W10BBB. ii. E<c usions can be made to both $I$ and A$I$ po icies. iii. #otorcyc es may be 'a id y e<c uded from both $I$ and A$I$ co'era!e. Stackin! a. Stackin! is an insured7s reco'ery of dama!es under more than one po icy in succession unti a dama!es are satisfied or unti the tota imits of a po icies ha'e been e<hausted. Lackson '. State >arm #utua Auto. Ins. %SC 1534". b. =wnership of the 'ehic e is not re9uired to stack. It must be a motor 'ehic eUie. not a tractor. c. >or purposes of stackin!: i. C ass I insuredUan insured or named insured that has a 'ehic e in'o 'ed in the accident ii. C ass II insuredUan insured whose 'ehic e was not in'o 'ed in the accident.

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d. Ru es are the same for interpo icy stackin! %where cars are co'ered by different insurers or po icies" and intrapo icy stackin! %where cars are co'ered under the same po icy. e. Ru es i. C ass I insureds %named insured0 resident spouse and re ati'es" may stack basic 1.J)BJ1B ii. C ass II insureds %permissi'e users and !uests" may not stack e'en basic imits po icies. 1. Richardson '. SC >arm -ureau #utua Ins. Co. %SC Ct. App. 1555" iii. Sin! e imit W).0BBB po icies are considered e<cess and can be stacked in appropriate cases on y in the amount of W1.0BBB. i'. An insured can reco'er both iabi ity and UI# benefits from the same po icy in certain cases '. *he insured cannot reco'er both U# and UI# benefits for the same accident. 'i. A C ass I insured that has UI# co'era!e on the car in'o 'ed in the accident in e<cess of the basic statutory imits may stack UI# co'era!e from other po icies in an amount e9ua to the co'era!e on the car in'o 'ed in the accident. 1. SC >arm -ureau #utua Ins. Co. '. #ooneyham %1551" a. If an insured or named insured is protected by uninsured or underinsured motorist co'era!e in e<cess of the basic imits0 the insured wi be protected on y to the e<tent of the co'era!e he has on the 'ehic e in'o 'ed in the accident. %)3?GG? 14B" b. *he statute imits the amount of co'era!e which may be stacked from po icies on 'ehic es not in'o 'ed in an accident to an amount no !reater than the co'era!e on the 'ehic e in'o 'ed in the accident. c. 12en a class I insured 2as UI! coverage on t2e car involved in t2e accident in e4cess of t2e -asic statutor0 li'its# t2e insured is entitled to stacA UI! fro' ot2er *olicies in an a'ount e=ual to t2e coverage on t2e car involved in t2e accident. 'ii. Reduction UI# Co'era!e '. E<cess UI# Co'era!eUReduction UI# co'era!e pro'ides benefits to an insured under his own po icy on y when the c aimant7s UI# co'era!e is !reater that the at fau t dri'er7s iabi ity co'era!e bJc the amount of reco'ery from the c aimant7s UI# co'era!e is reduced by the amount of reco'ery from the at?fau t motorist. E<cess UI# co'era!e pro'ides benefits to an insured under his own po icy at any time the at fau t dri'er7s iabi ity is ess than the amount of the c aimant7s actua dama!es. SC is an e<cess co'era!e state. 'iii. Stackin! Uninsured #otorist Co'era!eU*he insured is a C ass I insured and may stack uninsured motorist co'era!e e'en thou!h the insured does not ha'e an owned 'ehic e in the accident. 1. Concrete Ser'ices0 Inc. '. US >ide ity and /uaranty Company %SC 1553" a. So on! as the indi'idua otherwise 9ua ifies as a c ass I insured0 he need not own the 'ehic e to stack i<. An insured may be barred by the insurance contract from the stackin! of mu tip e 'ehic e iabi ity co'era!e from the same po icy e'en thou!h the po icy can be treated as theoretica y separate po icies. 1. Ruppe '. Auto?=wners Insurance % SC 1553" a. $o icy can imit or prohibit stackin! of iabi ity co'era!e. b. Stackin! of U# or UI# in an amount no !reater than the co'era!e on the 'ehic e in'o 'ed in the accident %Mooneyham" cannot be prohibited. -ut where none of the insured7s 'ehic es is in'o 'ed in the accident0 stackin! of U# or UI# can be prohibited. c. Stackin! of non?owned iabi ity co'era!e %which protects an at?fau t insured whi e dri'in! someone e se7s 'ehic e" may be prohibited by contract because it is

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not statutori y mandated co'era!e %LAC6S=N Case". ))?GG?1,B re9s iabi ity by statute0 and is imited by 'ehic e for which it is purchased. d. Stackin! can be prohibited if it is consistent with statutory insurance re9uirements. e. Ar!ued0 since iabi ity is mandatory0 you shou d be ab e to stack them. <. Stackin! E<cess Underinsured #otorist Co'era!e 1. American Sec. Ins. Co. '. Ioward a. can stack co'era!es for wife7s ) other cars bJc husband is a C ass I insured. b. If the sum of a the app icab e co'era!e a'ai ab e throu!h stackin! e<ceeds the actua dama!es0 the co'era!e wi be apportioned pro rata between the po icies. (. Underinsured co'era!e in amounts not e<ceedin! the basic imits of 1.J)BJ1B on each 'ehic e under an insurance po icy can !enera y be stacked. ). Concrete Ser'ices0 Inc. '. US >ide ity and /uaranty Company %SC 1553" a. So on! as the indi'idua otherwise 9ua ifies as a c ass I insured0 he need not own the 'ehic e to stack <i. .4?5?)31 No Stackin!U 1. If none of the insured7s or named insured7s 'ehic es is in'o 'ed in the accident0 co'era!e is a'ai ab e on y to the e<tent of co'era!e on any one of the 'ehic es with the e<cess or underinsured co'era!e. <ii. Stackin! $I$ Co'era!e 1. -Jc $I$ is non?mandatory0 the insurer may p ace an anti?stackin! c ause in the po icy as to $I$ co'era!e.

a. i. %1" ii. %1" %(" iii. %1"

%(" %)" %," %." -.

<. INSURABLE INTEREST Insura-le Interest Defined Vou can insure somethin!0 and be indemnified for oss0 on y if you ha'e an insurab e interest in it. :ori!inated in En! and& can7t use property in which you don7t ha'e an interest as a wa!erin! de'ice; Insurab e interest in prop means you deri'e a benefit from its e<istence or wou d suffer a oss from its destruction Re9uirement of insurab e interest before one can obtain benefits under an insurance po icy ser'es ( main purposes: E imination of insurance as a 'ehic e for !amb in! Remo'a of temptation pro'ided by a prospect of a net profit throu!h insurance proceeds to de iberate y brin! about the e'ent insured a!ainst. -enton Q Rhodes0 Inc. '. -oden0 SC App. 155): Anyone has an insurab e interest in property who deri'es a benefit from its e<istence or wou d suffer oss from its destruction. An insurab e interest in property is any ri!ht0 benefit0 or ad'anta!e arisin! out of or dependent thereon0 or any iabi ity in respect thereof0 or any re ation to or concern therein of such a nature that it mi!ht be so affected by the contemp ated peri as to direct y damnify the insured. An insurab e interest doesnt necessari y imp y a prop interest in0 or ien upon0 or possession or0 the sub1ect matter of the insurance0 and neither the tit e nor a beneficia interest is re9uisite to the e<istence of such an interest It is not necessary to constitute an insurab e interest that the e'ent insured a!ainst wou d necessarily sub1ect the insured to oss& it is sufficient that it might do so. A mort!a!ee of rea or persona property has an insurab e interest to the e<tent of the mort!a!e debt0 e'en after he has assi!ned the mort!a!e0 if he has !uaranteed its payment. *he mort!a!or retains his insurab e interest after se in! the property if the mort!a!or remains persona y iab e on the debt. Iere0 respondent so d a fe erbuncher to a third party0 but retained an insurab e interest in the fe erbuncher bJc use of the fe erbuncher enab ed the third party to make payments to respondent Life Insurance

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i. ii. %1" %a" iii. i'. %1" %(" '. %1" %(" %)" %," %." 'i. 'ii. 'iii. %1" %(" %)" %," i<. %1" %(" %)" <. %1" %(" %)" %," c. i. ii. %1"

Resemb es an in'estment more than true insurance based on a contin!ency& the on y contin!ency is when0 not if. E'eryone has an insurab e interest in his own ife. =ne can procure ife insurance on his own ife and name whate'er beneficiary he wants0 if done in !ood faith and not to co'er a wa!er. %E ison '. Independent 8ife Q Accident Insurance Co.0 SC 15.B" %it7s assumed you won7t name a beneficiary who wi ki you". . Can assi!n a po icy to a )rd party0 who then takes o'er premium payments and can chan!e the beneficiary %e'en thou!h the )rd party did not ha'e an insurab e interest when po icy was first created" Reason for free transferabi ity is that ife insurance is 'iewed as an in'estment more than strai!ht insurance =ne cannot obtain ife insurance on the ife of a person in whom you ha'e no insurab e interest. *he insurab e interest must e<ist at the time the po icy is made0 but does not ha'e to e<ist at the time of death. E!.0 di'orce does not defeat the e<?spouse7s c aim for ife insurance proceeds %assumin! the e<?spouse is sti the named beneficiary". Can make a 6 not to chan!e beneficiary. If husband insures his ife wJ wife as beneficiary. As part of di'orce0 can a!ree that husband wi not chan!e the beneficiary and it wi be enforceab e e'en if husband ater tries to chan!e benes -ut cannot renew a po icy after insurab e interest has ended Hho e se has an insurab e interest in your ife %and can therefore buy po icy insurin! your ife"O Spouse %in SC0 insurer or person buyin! po icy must notify spouse that you are insurin! him" Chi dren $arents sib in!s0 maybe !randparents -eyond these0 insurers wi hesitate to insure. Re ationships in affinity %fami y re ationship without b ood" are usua y not insurab e0 un ess it arises in business conte<t %see 6ey #an Insurance"0 whi e re ationships in consan!uinity %!enetic re ationship0 Re ated by descent from a common ancestor" usua y are Insurer %and sometimes third parties" can raise defense of no insurab e interest to issuin! po icy. HJ re!ard to spousa ife insurance0 in SC0 must !et spouse7s permission before you can insure their ife =ther interests in ife: 6ey #an insurance: business partnership insures its partners7 i'es. $roceeds !o to company. Creditors Sa ary Continuation A!reements: emp oyer starts payin! out after 4.& po icy be on!s to the business0 more of an in'estment because you pay in premiums. -uy?out a!reements: corporation takes ife insurance on partners& corp !ets paid on death0 then transfers proceeds to decedent7s estate0 which a!rees to return a shares of the corporation to the company. Statutes: )3?4)?((B: re9uired po icy pro'isions for ife insurance )3?45?1(B: re9uirements for annuities )3?4)?(1B: who e contract must appear in po icy Conditiona Receipts and *emporary Insurance: Iamrick '. 8ife Q Casua ty Insurance Co.0 SC 1535: In ife insurance0 there are bindin! receipts which at east conditiona y afford an app icant interim co'era!e between the date of the app ication and the actua issuance and de i'ery of the po icy. =ne type of pro'ision makes the effecti'eness of the temporary insurance dependent on the appro'a of the app ication by the insurance company. Another pro'ision makes the effecti'eness of temporary insurance conditioned on the insurabi ity of the app icant at the time of the app ication. Hhere a bindin! receipt is issued to the app icant statin! that the insurance wi be bindin! from the date of the app ication if the insurance company is satisfied that the app icant is an insurab e risk at that time0 a contract of pre iminary insurance is created with the reser'ed ri!ht in the insurer to determine in !ood faith the app icant7s insurabi ity. ro*ert0 Insurance An insurab e interest must e<ist in the property to be insured at the time the po icy is issued and at the time of oss. Insurab e Interest: interest that ho der deri'es benefit from its e<istence or who suffers a oss from its destruction. Imp time for an insurab e interest in prop is the time of the oss.

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iii. %1" %(" %a" %)" %a" %b" %i" %ii" %iii" %," %a" %." %4" %a" %G" %3" %a" i'. %1" %(" %a" %)" d. i. ii. iii. i'. '. 'i. 'ii. %1" %(" 'iii. %1" %(" %)"

*ypes of insurab e interests in property: 8e!a tit e E9uitab e tit e %e!.0 beneficiary of a trust" 6 beneficiary7s e<pectation interest %buyer of home after 6 is si!ned but before c osin! has an insurab e interest in the home" $ossessory interest $erson who has temporary use of 'ehic e may ha'e it insured -ai ments can be insured you ask friend to take care of your car whi e away0 friend has a possessory interest friend asks to borrow your car0 friend has possessory interest rent a car0 you can turn down their insurance0 and your insurance can co'er it Creditor7s interest -ank has insurab e interest in prop that it mort!a!es >uture interests in property %e!.0 a remainder" Representati'e7s interest $R of someone7s estate has a representati'e interest Stockho der7s interest in corporate property %c ose y he d corp." 8iabi ity interest %e!.0 !uarantor" If purchaser assumes your mort!a!e in home sa e0 and your name is sti on the bank note0 it can be enforced a!ainst you if buyer defau ts so you sti ha'e an insurab e interest in the house $owe '. Insurance Co. of North America0 SC App. 153.: =ne cannot insure for his own benefit the property of another in which he has no interest. %An insured must possess an interest of some kind in the sub1 matter of the po icyKif not the insured sustains no oss by the prop7s desturction" An e<pectancy %ie0 to recei'e property in the future" is not an insurab e interest. #ust ha'e a present interest in the property. If the !ift is not to !o into effect unti the death of the donor0 it is testamentary and 'oid un ess e<ecuted in a 'a id wi Iere0 $7s mother to d him she wanted him to ha'e her si 'er when she died0 but she ne'er de i'ered the si 'er to him and her wi made no !ift of the si 'er0 so $ has no insurab e interest Su-rogation If insured reco'ers from a third party for his dama!es0 insured must repay insurer for amounts insurer paid for the same dama!es. $urpose is to pre'ent an insured from profitin! from his oss0 to p ace the u timate economic burden on the party causin! the oss in the first p ace0 and to hopefu y reduce insurance rates. SC: an insurer is subro!ated to the insured7s c aim a!ainst a tortfeasor to the e<tent of the amount paid on the c aim. *his is usua y in the contract0 but can be imp ied. 8e!a %e9uitab e" subro!ation: stand in the shoes of the in1ured person to co ect the debt you a ready paid for %1BB[". *his is a form of indemnity that fu y compensates the insurer Contractua Subro!ation: In SC0 don7t reco!niCe e9uitab e subro!ation in ife ins0 but it is reco!niCed in prop ins or iabi ity ins Ia Q Co.0 Inc. '. -ai ey 8inco n?#ercury0 Inc.0 SC 1535: 8e!a subro!ation is an e9uitab e doctrine0 not dependent on contract0 whose purpose is to re9uire the u timate dischar!e of a debt by a person who in e9uity and !ood conscience ou!ht to pay it. Hhen an insurer pays its insured for a oss resu tin! from the tortious conduct of a third party0 the insurer is subro!ated to the ri!hts of its insured a!ainst the third party. Shumpert '. *ime Insurance Co.0 SC App. 1553: Subro!ation is the substitution of one person in the p ace of another with reference to a awfu c aim or ri!ht. Subro!ation enab es the insurer to reco'er the amount paid to the insured out of any 1ud!ment or sett ement proceeds recei'ed by the insured from the third party. Subro!ation can arise by contract0 statute0 or e9uity. E9uitab e % e!a " subro!ation is imp ied subro!ation that arises under

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%," %a" %b" %c" %d" %." %4" i<. e. i. %1" %("

common aw. E ements of e9uitab e subro!ation: $arty c aimin! subro!ation has paid the debt $arty had a direct interest in the dischar!e of the debt and was not 1ust a 'o unteer $arty was secondari y iab e for the debt0 and No in1ustice wi be done to the other party by a owin! the e9uity. Statute a ows subro!ation in accident and hea th insurance po icies. )3?G1?15B. A hea th insurer which does not inc ude a pro'ision for subro!ation in the insurance contract is not entit ed to obtain e9uitab e subro!ation %hea th insurers are primari y iab e for the e<penses& courts !enera y don7t reco!niCe imp ied subro!ation for persona insurance". Hhen ( po icies of primary co'era!e e<tend co'era!e to the same property0 the po icy insurin! the iabi ity of the owner of the property has the primary ob i!ation. "onditional Recei*ts and Te'*orar0 Insurance Iamrick '. 8ife and Casua ty Ins. Co. of *enn.0 SC 1545 Hhere a bindin! receipt is issued to the app icant wJ a pro'ision that the ins be bindin! from the date of the app ication or the medica e<am if the ins co is satisfied that the app icant was an insurab e risk at that time0 the !enera ru e is that a 6 of pre iminary ins is created wJ the reser'ed ri!ht in the insurer to determine in goo faith the app icant7s insurabi ity Insurer0 cannot arbitrari y and capricious y determine that the app icant does not ha'e an insurab e interest.

<I. !iscellaneous Insurance a.(isa%ility ii.Fisabi ity insurance pays when you can7t work iii.*ota disabi ity doesn7t mean abso ute he p essness& the insured may reco'er where he is unab e to do substantia y a materia acts necessary to perform: %1"his former occupation in the customary manner0 3Shealy v. 4nite Ins. Co. of America, or %("an occupation or emp oyment for which he is reasonab y fitted and that rationa y approaches the same i'e ihood and standard of i'in! which he en1oyed prior to his disabi ity 3(unlap v. Marylan Casualty Co.,. i'.*ypes of $o icies: %1"=wn =ccupation: can !et benefits when you can7t en!a!e in your specific occupation& the fact that you can do other work doesn7t pre'ent reco'ery. %("Any =ccupation: can reco'er if you cannot do any occupation0 and are therefore comp ete y disab ed %)"Iybrid: own occupation for ( years0 then becomes any occupation. '.Rowe '. Iome Security 8ife Insurance Co.0 SC App. 1534: E<amp e of hybrid po icy. Hi !et co'era!e if there is a comp ete inabi ity to en!a!e in his re!u ar occupation& or 0 If indemnities are paid for ( years in any continuous disabi ity0 then for the remainin! duration of such period of continued disabi ity. Co. paid benefits for ( years and refused to pay anymore after that. %1"Issue: whether he was considered tota y disab ed after this period. %("Fispute D 1ury char!e %)"Ct. Ie d Fisabi ity was defined accordin! to Fun ap and Shea y: *ota disabi ity doesn7t mean abso ute he p essness& the insured may reco'er where he is unab e to do substantia y a materia acts necessary to perform: %a"his former occupation in the customary manner0 3Shealy v. 4nite Ins. Co. of America, or %b"an occupation or emp oyment for which he is reasonab y fitted and that rationa y approaches the same i'e ihood and standard of i'in! %c"Re'ersed K the 1ury cou d ha'e found the work wou d not Mrationa y approaches the same i'e ihood and standard of i'in!N 'i.$oston '. Hor d Insurance Co.0 SC App 153.: %1"$o icy defined disabi ity as that re9uirin! continuous confinement

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%("8itera comp iance with such re9uirements is not necessary for reco'ery. %)"Insurer c aimed the insured was not Mcontinuous y confinedN because he was ab e to wa k a ha f a mi e some days0 oad feed once0 dri'en to a farm to watch tobacco be oaded three times0 'isited chi dren %) who i'e on his and0 1 i'es by Fr."0 and fished ) times on a pond on his and. %,"Ct he d: MContinuous confinementN is meant to describe the character and e<tent of the i ness0 not to prescribe a imitation on his conduct 3Shealy,. %."Issue (: the ct he d the ower court did not error in definin! tota disabi ity in terms of economic oss. *he ower court used the definition of disabi ity from Shealy and (unlap and the ct he d that this was the proper definition ii.Horkers Compensation: if 'o untary co'era!e has been pro'ided by the emp oyer0 not the indi'idua 0 then a po icy can re9uire setoff of the amounts recei'ed under Horkers Comp a!ainst the amount the po icy pays. =therwise setoff not a owed. -.Accident i.'Acci ent+ is to be construed accordin! to the meanin! of the term !enera y understood and accepted by most peop e. It doesn7t matter that the insured caused the in1ury so on! as the resu t was not intended or e<pected. i.e. if the insured was ne! i!ent0 he sti can !et accident co'era!e 35oethe v. 67 8ife Ins. Co., ii.Ste'enson '. Connecticut /enera 8ife Insurance Co. 0 SC 15G.: %1"$o icy co'ered accidenta bodi y in1ury and resu tant osses. %Iot boat deck0 insured cou d not fee because of oss of fee in! due to diabetes0 )rd de!ree burns DE foot amputated" %("Accident) sudden e'ent or chan!e occurrin! without intent or 'o ition throu!h care essness and producin! an unfortunate resu t. %)"An e'ent wi be an accident0 e'en if the in1ured person or some third person 'o untari y set in motion the series of e'ents which caused the in1ury0 if the resu tin! in1ury: 38ic0lei er v. Iowa State 9raveling Men)s Assoc., %a" *ook p ace une<pected y %b"Has an une<pected resu t from a known cause %c"Has produced without desi!n or intention %d"Has an unusua and une<pected resu t attendin! the performance of a usua or necessary act %e"Has an e'ent happenin! without the concurrence of the wi of the person who caused it %f"Has caused or produced without desi!n %,"Insurer c aimed that it was not re9uired to pay because a reasonab y prudent person in the same position wou d ha'e foreseen the accident0 i.e. because he was ne! i!ent %."Un ess the po icy expressly exclu es acts caused by the ne! i!ence of the insured0 reco'ery under an accident po icy wi not be defeated 1ust because the insured7s ne! i!ence contributed to the in1ury. %4"Hhether the in1ury was accidenta is to be determined in terms of whether it occurred with the insured7s intent and whether it was an e'ent which he actua y e<pected or anticipated as a resu t of his conduct0 not whether the in1ury was reasonab y foreseeab e. %G"*he accident must ha'e been the pro<imate cause of the oss& the fact that some other cause may ha'e contributed to a minor de!ree wi not defeat reco'ery. %3"A pro'ision re9uirin! oss to be caused by accident Mindependent of a other causesN wi be construed as re9uirin! that the accident be the pro<imate cause of the oss. %5"*IIS CASE: the in1ury was the nearest efficient cause and was therefore the pro<imate cause of the oss. %1B"*he insured does not ha'e to be in perfect hea th at the time the accident occurs in order to reco'er for an accidenta in1ury under po icy an!ua!e 3:ilgore v. !eserve 8ife Ins. Co., f."ontri-utive Insurance i.If ( or more po icies are written on the same property0 they are considered to be contributi'e insurance. Each insurer is iab e for its pro rata share of the oss. )3?G.?(B. %Foesn7t app y to chatte s or persona property." ii.SC Insurance Co. '. >ide ity Q /uaranty Insurance0 SC 155G: %1"A b anket insurance po icy and a specific insurance po icy0 each he d by a different insurer0 co'ered the same property and interest. -oth po icies pro'ided that their co'era!e wou d be Me<cessN to any Mother insuranceN on the property. %("Issue: Hhen a b anket insurance po icy and a specific po icy pro'ide co'era!e for the same peri to the same property and interest0 does SC re9uire that the specific insurance po icy co'era!e imits be e<hausted 1 st before app ication of the

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b anket po icy0 or wi the po icies be pro rated accordin! to the respecti'e po icy imits of each po icyO %)"M=ther insuranceN c auses are intended to apportion an insured oss between or amon! insurers where ( or more po icies offer co'era!e of the same risk and same interest for the benefit of the same insured for the same period. Used to pre'ent fraud in the o'er?insurin! of property %,">orms of Mother insuranceN c auses: %a"&ro rata: insurer wi pay its share of the oss in the proportion its po icy imits re ates to the tota iabi ity co'era!e a'ai ab e %b"Excess: an insurer wi pay a oss on y after other a'ai ab e primary insurance is e<hausted& co'ers amounts e<ceedin! the po icy imits of the other insurers. %c"Escape: the insurer is abso 'ed of a iabi ity if other co'era!e is a'ai ab e %d"Excess escape: insurer is iab e for the amount of a oss e<ceedin! other a'ai ab e co'era!e0 but that insurer is not iab e when other a'ai ab e insurance has imits e9ua to or !reater than its own. %("*IIS CASE: *he ( po icies %1" co'er the same risk %(" co'er the same interest %)" are for the benefit of the same insured and %," app y to the same time period %)"Iere0 the court is reso 'in! competin! Me<cessN Mother insuranceN c auses %,"SC: Hhen po icies insure the same entity and interest a!ainst the same casua ty0 their co'era!e is concurrent and the oss must be prorated0 absent po icy an!ua!e in Mother insurance c auseN to the contrary. %."/enera y0 when ( po icies both ha'e e<cess c auses0 ct finds repu!nant and the c auses cance each other out and both po icies are treated as primary %and oss is prorated". 3In iana Ins. Co. v. Mission 6at)l Ins. Co., %a"*his ru e shou d not app y when its use wou d distort the meanin! of the terms of the po icies in'o 'ed. %4"In determinin! whether a oss co'ered by mu tip e insurers shou d be prorated or whether one po icy shou d be treated as an e<cess po icy %whether they are intended to pro'ide primary or secondary co'era!e"0 courts shou d consider the Mtota po icy insurin! intentN based on a the an!ua!e of the insurance po icies at issue. %G">actors to consider in determinin! the intent of the parties inc ude: %a"*he Mother insuranceN c ause %b"*he state co'era!e pro'ided in the po icy %c"*he premium paid for such co'era!e %d"Any re9uirements in the po icy that the insured ha'e under yin! insurance po icies S CASE: %a"-oth po icies %absent the e<cess c auses" appear to pro'ide primary co'era!e %b"Neither po icy re9uired the insured to possess Munder yin! insuranceN as to commercia property co'era!e %most strict y e<cess po icies re9uire" %c"=n y main diff K one co'ers more bui din!s at more ocations K this does not contro + F: Under SC aw0 the po icies7 Me<cessN c auses are mutua y repu!nant0 both po icies pro'ide primary co'era!e0 and the oss with re!ard to the ) bui din! reco'ered shou d be prorated between the ( ins. co. accordin! to their respecti'e po icy imits -."oDInsurance iii.An insured must insure up to a specified percenta!e of the 'a ue of the property at the time of oss0 or the owner wi bear a pro rata percenta!e of the oss himse f. %Ie0 if underinsured0 wi !et ess than the po icy imits." i'.$ermissib e in SC0 but they are frowned upon+ '.>or these c auses to be permissib e0 a co?insurance f a! must be prominent y disp ayed on the face of the po icy. SC A )3?G.?,B. %1"Hithout the f a!0 the co?insurance c ause is 'oid. 'i./enera y0 if insured insures 3B[ of the 'a ue of the property0 insured can reco'er fu 'a ue of the po icy. g.!ortgagee Insurance i.Usua y mort!a!ee must ha'e proof of property insurance. ii.Hays the mort!a!ee protects itse f a!ainst oss: %1"8oss payee policy: mort!a!ee becomes a named insured on the po icy0 up to the e<tent of the debt. :but if fire intentiona 0 mort!a!ee won7t !et paid either.; %("In epen ent policy: mort!a!ee is the on y named insured.

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%a"Force place insurance: the mort!a!ee buys the po icy0 insures itse f. %("Stan ar or 4nion Mortgage Clause: a c ause put in the oss payee po icy0 statin! that no act of the insured other than nonpayment of premiums wi 'oid the insurance po icy. ii.#ort!a!ee cannot recei'e insurance proceeds in e<cess of its interest in the property. iii.Nationwide #utua Insurance Co. '. Iunt0 SC 155G: %)"Ins Co. c aims because fire ins. was obtained throu!h fraud0 intentiona concea ment0 and misrep by the insured0 the po icy was 'oid and there was this no co'era!e for the mort!a!ee . %,"Hhether a mort!a!ee can reco'er on an insurance po icy where there has been misconduct by the insured depends on the type of mort!a!ee c ause in the insurance contract. %."8oss paya%le clauses %open mort!a!e": the oss0 if any0 is payab e to a mort!a!ee as its interest appears. %a"insured7s misconduct bars reco'ery by mort!a!ee %b"Fiff. with Standard: this c ause mere y identifies the person who may co ect the proceeds. *he mort!a!ee stands in the insured7s shoes and is usua y sub1ect to the same defenses. %("Stan ar clauses %Union or NV mort!a!e": as to the interest of the mort!a!ee0 the insurance wi not be in'a idated by certain acts of the insured& the acts wi sti be !rounds of forfeiture a!ainst the insured. %1" insured7s misconduct does not bar reco'ery. %(" Fiff with 8oss $ayab e: the mort!a!ee wi become iab e to pay the premium to the insurance company if the mort!a!or fai s to do so0 and wi be freed from po icy defenses which the company may ha'e a!ainst the insured. %)" as on! as mort!a!ee has not breached any po icy conditions0 mort!a!ee can reco'er e'en thou!h the risk is e<c uded from the po icy co'era!e0 the mort!a!or caused the oss0 and there is no co'era!e for the insured. %," #a1ority ru e %substanti'e y the same as SC": E'en thou!h the po icy may be deemed 'oid ab initio as to the insured because of nonpayment of the premium0 it wi remain 'iab e as to the mort!a!ee unti cance ed in accordance with the mort!a!ee cance ation c ause. #ort!a!ee7s status is separate and independent from the mort!a!or. #ort!a!ee7s status is so independent that no act or ne! ect by the mort!a!or can dero!ate his status pro'ided that if mort!a!or fai s to pay the premium0 the mort!a!ee must do so. %." SC ru e: Foes not fu y accept the ma1ority ru e that a standard mort!a!ee c ause creates a distinct and independent contract. A mort!a!ee is 'ested with a status which inc udes a of the ri!hts incident to an independent and separate contract0 and the insured can do nothin! which wi di'est the mort!a!ee of these ri!hts e<cept pay off the mort!a!e debt. %4" *his ct ho ds no substanti'e diff between ma1ority ru e and SC ru e %G" *IIS CASE: *he court finds a standard c ause in the contract because the mort!a!ee is re9uired to pay the premiums on the insurance if the insured fai s to do so. II. Readin! an Insurance Contract a.$arts of the Contract i.Lacket: %1"Contains po icy definitions0 terms of art %("Conditions of co'era!e %e!.0 payment of premiums" %)"Supp ementa repayments common to a iii.Insert: %1"Co'era!e part form %("*he core of the po icy

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%)"Each insurance form has to be appro'ed by state insurance department %can use forms from Insurance Ser'ices =fficeKa nationa !roup" i'.Fec arations $a!e: the most important

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1. (. ). ,. .. 4. G. 3.

Hho is co'ered %names insureds" $o icy period Hhat the premiums are Iow much the co'era!e is Hhat property is co'ered Hhat tri!!ers iabi ity Insurer a!reement: Mwe wi insure...N %Hhat the co'era!e is& conditions& e<c usions" Iow c aims are paid0 and to whom

h.Consumer $o icies i.*hose bou!ht by indi'idua s ii.State re!u atory scheme !o'erns iii.#ust be readab e %e!.0 \ of sy ab esJ1BB words" i'.$rob ems: information oad0 readabi ity0 conceptua abi ity of reader '.>orms are used because they shou d be predictab e& but courts interpret them different y. Steps to Readin! Contract Fec arations pa!e %name of parties0 po icy period0 amount of insurance for each co'era!e0 what personsJproperty is insured" Fefinition of insured %is c aimant an identified insuredO Foes insured ha'e insurab e interestO" Insurin! c ause %is e'ent co'eredO" E<c usionsO Conditions of comp iance % ast few pa!es of 1acket" SC Code0 what it says about this type of po icy %statute may chan!e terms of po icy" Check ists in po icy Imp ied e<ceptions #easure of reco'ery c ause %co?insurance0 share cost with insurer& apportionment of partia interests." Subro!ation c ause $rob ems with definitions within po icyO Ri!hts of beneficiaries %e!.0 ki er beneficiaries" Assi!nments of beneficiaries %probab y in separate document" Incontestabi ity periodO ]II. REAFIN/ AN INSURANCE C=N*RAC* A. arts of t2e "ontract 1. Lacket: a" Contains po icy definitions0 terms of art b" Conditions of co'era!e %e!.0 payment of premiums" c" Supp ementa repayments common to a (. Insert: a" Co'era!e part form b" *he core of the po icy c" Each insurance form has to be appro'ed by state insurance department %can use forms from Insurance Ser'ices =fficeKa nationa !roup" ). Fec arations $a!e: the most important a" Hho is co'ered %names insureds" b" $o icy period c" Hhat the premiums are d" Iow much the co'era!e is e" Hhat property is co'ered f" Hhat tri!!ers iabi ity !" Insurer a!reement: Mwe wi insure...N %Hhat the co'era!e is& conditions& e<c usions" h" Iow c aims are paid0 and to whom

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"onsu'er olicies 1. *hose bou!ht by indi'idua s (. State re!u atory scheme !o'erns ). #ust be readab e %e!.0 \ of sy ab esJ1BB words" ,. $rob ems: information oad0 readabi ity0 conceptua abi ity of reader .. >orms are used because they shou d be predictab e& but courts interpret them different y. ". Ste*s to Reading "ontract 1. Fec arations pa!e %name of parties0 po icy period0 amount of insurance for each co'era!e0 what personsJproperty is insured" (. Fefinition of insured %is c aimant an identified insuredO Foes insured ha'e insurab e interestO" ). Insurin! c ause %is e'ent co'eredO" ,. E<c usionsO .. Conditions of comp iance % ast few pa!es of 1acket" 4. SC Code0 what it says about this type of po icy %statute may chan!e terms of po icy" G. Check ists in po icy 3. Imp ied e<ceptions 5. #easure of reco'ery c ause %co?insurance0 share cost with insurer& apportionment of partia interests." 1B. Subro!ation c ause 11. $rob ems with definitions within po icyO 1(. Ri!hts of beneficiaries %e!.0 ki er beneficiaries" 1). Assi!nments of beneficiaries %probab y in separate document" Incontestabi ity periodO

B.

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