The Main Issue in This Case Is Insurable Interest

question 57

Essay

The main issue in this case is insurable interest.To be able to insure the ferry,Doug must be able to show this interest is present.The interest may be anything in which Doug has a financial interest,which on the occurrence of some event might result in a loss.The interest may arise out of a profession or activity,to protect income or assets.In this case,Doug has a financial interest in the ferry,albeit indirect,as it is the only method to transport guests to the resort.If some event caused the ferry to be destroyed or stop running,guests could no longer access the resort,resulting in financial loss to Doug.Provided that Doug makes the nature of the risk known to the insurer and discloses all material facts known to him,the ferry can probably be insured in much the same way as key personnel can be insured by persons who have a pecuniary interest in them.
The amount of insurance payable if the ferry sinks would be the amount required to put Doug in the same position he was in before the sinking.Since he cannot profit from his loss,the amount of insurance payable would be only the actual amount of lost revenue resulting from reduced room rentals and sales of other items.If Doug were in any way connected with or responsible for the ferry's demise he would not be entitled to any claim.
-Malcolm obtained a mortgage from the Big Bank on a building he owned.The loan agreement with Big Bank required him to obtain insurance to protect Big Bank 's interest in the event of fire.Malcolm then obtained a policy of insurance that named him as the owner and Big Bank as mortgagee.Loss was payable to Big Bank first to the extent of its loan and the remainder of the insured value to Malcolm.A standard clause in the policy stated that the policy would remain in force even in the event of misrepresentation of the insured.
After the building was destroyed by fire the insurance company refused to pay Big Bank or Malcolm.The refusal was based on what the insurance company believed was a untrue appraisal of the building's worth at the time the policy was taken out.It felt that the overstated value of the property resulted in the insured value having been set too high,which would result in a financial gain for Malcolm from the fire.Because it held that the amount of the insurance coverage was obtained by untrue statements,the insurance company maintained that the contract of insurance was void ab initio,and it was not required to indemnify any of the loss payees.Big Bank decided to take legal action against the insurance company.Discuss the legal issues that will be raised by the parties and indicate how the situation is likely to be resolved.

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Definitions:

Negative Reinforcer

A stimulus whose removal or avoidance increases the likelihood of a behavior occurring again in the future.

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Positive Reinforcer

A stimulus that, when presented after a behavior, increases the likelihood of that behavior being repeated.

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