In June, Ken Developed Glaucoma, a Condition of the Eyes

question 13

Multiple Choice

In June, Ken developed glaucoma, a condition of the eyes where if untreated, results in blindness. By August, Ken was legally blind yet he continued to drive. He neither informed the Dept. of Motor Vehicles nor his insurance company of the changed condition of his eyes. On September 12th he got into a serious automobile accident where he was driving and was at fault. Will the insurance company need to pay this claim?

• A) No, because "utmost good faith" is required.
• B) No, because the insurer was not notified of the change in risk.
• C) Yes, because the policy had not been changed nor canceled.
• D) No, because his drivers license would be void.
• E) Yes, because he had a valid drivers license.

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Definitions:

Reserve Ratio

The fraction of deposits a bank must hold in reserve and not lend out, as dictated by central banking regulations.

Monetary Multiplier

A mechanism that describes the increase in aggregate production and income that results from an injection of spending.

Secondary Reserves

Assets that are not immediately liquid but can be quickly converted into cash without significant loss, serving as a secondary buffer for financial institutions.

Legal Reserve Requirement

The minimum amount of reserves a financial institution must hold against deposits, as mandated by regulatory authorities, to ensure liquidity.