When Zack Simmons Insured 'Xanadu' Bowling Alley with Clayton's Insurance

question 16

Multiple Choice

When Zack Simmons insured 'Xanadu' bowling alley with Clayton's Insurance Co, he completed the proposal forms on his kitchen table before dashing out the door to attend a State of Origin football game.Because he answered the questions on the proposal in a rush, he described Xanadu as being constructed of brick and iron.However in truth, two of the walls were brick and the other two were made of wood, with an iron roof, and Xanadu was in a very derelict state.When Xanadu was damaged in a storm, the insurer refused to pay the claim because of the misrepresentation.Is the insurer entitled to refuse the claim?

• A)Yes, if it can prove that if it had correct information about Xanadu at the time it would have declined to provide insurance.
• B)Yes, if it can prove that the misrepresentation was innocent.
• C)No.The insurer should have checked the construction materials itself.
• D)No.To do so it must be proven that the misrepresentation was fraudulent.

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Definitions:

Running Balance

A continuously updated balance that reflects all transactions, often seen in bank statements and accounting ledgers.

Journal

A chronological record of all financial transactions, providing the initial point of entry for all accounting data into the accounting system.

Metric Unit

A system of measurement based on meters, liters, and grams, used internationally for scientific and commercial purposes.

Decimal Point

A dot or small mark used to separate the integer part from the fractional part of a decimal number.