Contract Formation

Standardized put together by Insurance Services Office, standardized language compiled by various companies, contracts of adhesion no negotiation, NY 165 lines in fire insurance Manuscript high premiums big companies, individually manuscripted for company, large premiums over 1 mil usually Ways to tell insurer they are wrong? Ambiguity in wording is wording clear? Not all states follow, some will say what did person expect they were getting? Asserting Estoppel or Waiver- way to stop denial Vargas . Insurance Company of North America World Trade Center Properties, LLC, v. Hartford Fire Insurance Company Atwood v. Hartford Accident & Indemnity Co. Atwater Creamery Company v. Western National Mutual Insurance Company Elmer Tallant Agency, Inc., v. Bailey Wood Products, Inc. Roseth v. St. Paul Property & Liability Insurance Company Life insurance policy two ways to pay premium, can take out new policy each year, or pay premium yearly, cost more when 27 than should but less when 50, ERISA can organize group insurance Paulson v. Western Life Insurance Company Public Policy Restrictions, what can and cant do Gosset v. Farmers Insurance Company of Washington Ryan v. Tickle Mayo v. Hartford Life Insurance Company Hartford Casualty Insurance Company v. Powell First Bank Billings v. Transamerica Insurance Company Strickland v. Gulf Life Insurance Company Industry Regulation Is insurance interstate commerce? Originally no then southeastern underwriters decision made industry ask for regulation, McCaron Ferguson Public

Law 15, insurance regulated by states but was interstate commerce, Sherman Act applies to boycott, coercion and intimidation, got safe harbor under rest of Sherman, but federal law can regulate, ERISA, premiums cannot be in excess, insurers must be solvent, can be discriminatory, what do state regulators do? Conduct audits, ensure license for insurance companies, oversight of claims practices, anything unfair is bad, oversight of marketplace, want it competitive but not overly rates can become inadequate, difficult to get licensed, insurance is unique in what you are paying for you do not get anything in return for a while or until you need it, creditors are individuals weak bargaining, NAIC national association of insurance commissioners, do not function well same recurring arguments, Grahm Leach Bliley gave them credence, threatened federal take over, not just work to promote uniformity, nervous because of Federal Insurance Office, FIO looks at state regulation, NAIC has risk based capital models, determine risks of investments insurance companies were making, reduce amounts, if you think 10 after risk factor may only be 7, on other side you have claim liability, value of risk adjusted assets should match potential value of claims, insurance companies keep two sets of books, Generally Accepted Accounting Principles generally accepted code used for accounting can be compared to other things determine financial condition of company, SAP is statutory Accounting Principles more conservative, if invest only along SAP return less risk less, then Non Admitted Assets, can invest in riskier things, Guaranty Fund if all else fails there is guaranty fund if solvency does not work fund will cover liabilities, all companies pay into fund industry must cover risk of insolvency, if too large regulators would work to sell business to other companies to get business liabilities down to small size to be covered, no bailouts needed, AIG failed because of non regulated insurance risk, credit default swaps etc., If Insurance Company cannot pay goes into receiver ship, three kinds, Conservation where insurance regulator struggling to get company back on feet, usually 90 days to fix problem and continue operate with guidance support, Rehabilitation 1st stage takes court order commissioner appointed receiver, bankruptcy for insurance company, companies can come out, but ones that do not go into Liquidation some states have special bureau like New York, in most states 49 guaranty fund works if companies become insolvent others pay liabilities, new york is pre assessment fund, fund is funded at any time based on liabilities of companies, governors steal from it statutory limit to guaranty fund payments, super rich do not get, net worth limit, limit per claim, non covered claims are financial claims, fidelity and surety, residual value, disability, credit, assumed reinsurance and subrogation and insured worth over 50,000,000 Allocation of Regulatory Powers Rate regulation Insurance unique because at time rates set company has no idea what claims will actually cost them, use prior history to determine Know in any given year what paid out in claims look in terms of how much money taken in, claims ratio, must consider expenses as well, expenses of doing business as percentage of premium is expense ratio, want it below one take in more than pay out

Commissioner of Insurance v. North Carolina Rate Bureau Allstate Insurance Company v. Schmidt Fire and Property Insurance First thing to look at is declaration page, right name, right dates, coverage outlined Northwest Farm Bureau Insurance Company v. Althauser Alaska Insurance Company v. RCA Alaska Communications, Inc. Paramount Fire Insurance Company v. Aetna Casualty and Surety Company Home Insurance Company v. Adler Folger Coffee Company, Inc. v. Great American Company Insurance Company Port Authority of NY and NJ v. Affiliated FM Insurance Company Duane Reade, Inc. v. St. Paul Fire & Marine Insurance Company Chute v. North River Insurance Company J. Rosen v. State Farm General Insurance Company State Farm Fire and Casualty Company v. Bongen Liristis v. American Family Mutual Insurance Company M. Broussard v. State Farm Fire and Casualty Company Dynasty, Inc. v. Princeton Insurance Company Zochert v. National Framers Union Property and Casualty Company Great Northern Oil Company v. St. Paul Fire and Marine Insurance Company Life Insurance Types of Life Insurance Term Policy, policy for 1 year, 15 year term life means one year term for 15 years, premium starts out lower almost triples over 15 years

rises dramatically as you get older, industry says should be 20 times your actual earnings annually get when late 20s, few dependents Set Amount of Money Term to 70 ordinary whole life policy, take premium not go up stay flat, too much at younger age too little at old age, company invests premium gets return Cash Value Account can get upside, can also get downside, used to have vanishing policies, good for people not good at saving Insured not necessarily owner of policy, can take out policy on someone must have insurable interest though, beneficiary gets money, owner controls beneficiary, owner owns policy, contingent beneficiary gets paid if beneficiary not paid, dividends can get paid for policy owner, can be substantial, Incontestability only in life insurance, statute of limitations on certain defenses insurer might assert to not pay, fraud or misrepresentation, usually two years to assert Suicide usually one year exclusion for suicide, after year ok will still pay Double Indemnity unique to life insurance accidental death certain categories face amount will double Gaunt v. John Hancock Mutual Life Insurance Company Engleman v. Connecticut General Life Insurance Company Grisby v. Russel State Mutual Life Assurance Company of America v. Hampton Silverstein v. Metropolitan Life Insurance Company Amex Life Insurance Company v. Superior Court Health Insurance Affordability is issue, coverage used to be issue, still is but not as much, cost containment bigger issue, used to be blue cross blue shield would do community rating, everybody bought in paid same thing, negotiate with hospitals fees for services, after world war two expansion of group health insurance, provide benefits other then compensation because limits, flowed into 60s control inflation and wages, employers got into health insurance, get contract in group plan, flare in in 90s of health insurance, HIPPA passed people losing health insurance, if you lost job lost insurance, insurance at new job now covered preexisting conditions, imposed limits, can still have gaps but closed many of them

Lawson ex rel. Lawson v. Fortis Insurance Company Aetna Health, Inc. v. Davila McGann v. H & H Music Company Fuja v. Benefit Trust Life Insurance Company Associated Hospital Service of Philadelphia v. Pustilnik Affordable Care Act Subrogation, Bad Faith Silber v. California Life Insurance Company Pilot Life Insurance Company v. Dedeaux Liability Need to know what happened, when it happened, and if it is a covered event, and if it qualifies as occurrence, occurrence is defined, accident or exposure to same harmful condition, who what where when why, nees to be bodily injury or property damaged A.Y. McDonald Industries Inc. v. Insurance Company of North America F & H Construction v. ITT Hartford Insurance American Home Products Corporation v. Liberty Mutual Insurance Company In Re Silicone Implant Insurance Coverage Litigation Metropolitan Life Insurance Company v. Aetna Casualty & Surety Company StoneWall Insurance Company v. Asbestos Claims Management Corporation Unigard Mutual Insurnace Company v. Argonaut Business Risk, Duty to Defend Weedo v. Stone-E-Brick, Inc. Mighty Midgets, Inc. v. Centennial Insurance Company West Bay Exploration v. AIG Specialty Agencies Beckwith Machinery Company v. Travelers Indemnity Company

Gray v. Zurich Insurance Company Burd (other potentiality test) Parsons v. Continental National American Group Settlement Usually insurance company can settle on its own, retains right to settle even if you do not want, in claims made policies limit to defense costs, if you step out and settle better do so with company consent or else you pay, company must operate in good faith fair dealing, if rejecting settlement must meet those standards, usually requirement for insured to operate in good faith Crisci v. Security Insurance Company of New Haven, Connecticut Thoracic Cardiovascular Associates, Ltd. v. St. Paul Fire and Marine Insurance Company Secondary market If voluntary market not available, secondary market is, certain insurance coverage mandatory, auto, someone must issue policy but not in regular market, mechanisms to spread coverage available and spread losses, subsidization, JUA joint underwriting associations, everyone who purchases insurance subsidizes, not financially solvent dont charge we really should we subsidize