Milton, Who Is 19 Years Old, Purchased a Car but Found

question 40

Essay

Milton, who is 19 years old, purchased a car but found that he was in a position of having to pay extremely high insurance rates. As a way of avoiding those high payments he had a Bill of Sale made out to his father and had the car registered in his father's name. His father took out an owner's policy from All Risk Insurance Limited. As later revealed, Milton's father never paid for the vehicle and Milton remained the true owner and operator. Then later, when Milton was involved in an accident, the claim was submitted by the father (since the policy was in his name). Upon discovering the true state of affairs, the insurance company refused to pay for damage caused by the accident. What legal basis would the insurance company have to refuse to pay the claim?

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Definitions:

Coupon

A coupon is the interest payment made to bondholders, usually on an annual or semi-annual basis.

Market Rate of Interest

The prevailing rate at which interest is paid by borrowers for accessing funds in the financial market.

Selling For

The process or act of offering goods or assets for sale at a particular price.

Normal Yield Curve

When the yield curve slopes upward, it is said to be “normal,” because it is like this most of the time.