AIC 301 QUIZ/TEST STUDY EXAM | QUESTIONS & ANSWERS (VERIFIED) | LATEST UPDATE | GRADED A+

1 AIC 301 QUIZ/TEST STUDY EXAM | QUESTIONS & ANSWERS (VERIFIED) | LATEST UPDATE | GRADED A+ Market Share Liability Correct Answer: Applies when a product that has harmed a consumer cannot be traced to a single manufacturer. They are liable unless they can prove they could not have made the product involved. A Defense to Fraud Correct Answer: The defendant must make the representation with the intent to influence the other party's action. If the defendant did not intend to deceive, there is no proof of fraud. Community Property Correct Answer: Under the community property concept two types of property can belong to a spouse - separate property as well as community property. Separate property is the respective spouse's sole property and it is free from the other spouse's interest or control. Parole Evidence Rule (PER) 2 Correct Answer: The parole evidence rule provides that oral evidence of agreements preceding or accompanying a written insurance policy cannot be used to prove a waiver. Thus, the agent's oral statements made at this time would not be admitted into evidence and thus would be ineffective as a waiver. A provision that prevents the terms of a contract from being modified by evidence of oral or other agreements after the contract has been written. Defenses to Tort Fraud Correct Answer: The statement was not false The statement did not relate to a material fact The defendant did not know the statement was false The defendant did not intend to deceive The plaintiff did not rely on the statements The plaintiff suffered no harm or or loss because of relying on the statement A Constructive Eviction Correct Answer: Actions or inactions of a landlord that create conditions that prevent a tenant from enjoying a substantial or integral part of the premise constitute a constructive eviction. Repudiation of a Contract Correct Answer: repudiation of a contract is the refusal to meet obligations under the contract, but it must be positive and unequivocal to constitute a breach. A statement of 3 inability to perform in the future is not repudiation. A person cannot sue for breach of contract until due date and person has failed to complete the job. Frustration of Purpose Correct Answer: A rental contract is useless to a person since the original purpose for the rental was frustrated because the celebrity was not there. Frustration of purpose can discharge a contract that is possible to perform, when a supervening event destroys the propose or value of the contract, provided that both parties are aware of that purpose or value. Direct Action Statutes Garnishment Correct Answer: Third parties are generally not allowed to sue insurers of negligent parties who injure them or damage their property. Some states have enacted direct action statutes permitting third party sue insurer directly or both insurer and insured/wrongdoer/tortfeasor directly If insured denies claim payments after judgement, some states allow third party to sue the insurer directly in a statutory action called garnishment. Consequential Damages 4 Correct Answer: The loss of the entry fee money is an example of consequential damages. Consequential damages are awarded by court to indemnify injured parties for losses that result indirectly from a wrong, such as a breach of contract as in this situation. Enterprise/Industry-Wide Liability Alternative Liability Market Share Liability Concert of Action Conspiracy Correct Answer: Each producer held liable based on its market share shifting burden of proof to each of several defendants when uncertain who caused the injury; each must prove either they did not cause harm or someone else did 5 similar to alternative liability where once can be liable for damages of an entire industry, plaintiff must sue all manufacturers; defendant not liable for entire amount but only their pro rata share most common, when all defendants acted together or cooperatively agreement existed among all defendants either to commit a wrongful act or to carry out a legal act by illegal means resulting in plaintiffs harm Fraud Correct Answer: Fraud is a false representation of a material fact knowingly made with intent to deceive on which the other party has placed justifiable reliance to his or her detriment. Unilateral mistake in a contract is a perception by one party that does not agree with the facts. Duress is the use of restraint, violence, threats of violence, or wrongful pressure to compel a party to act contrary to his or her wishes or interests. Undue influence is the improper use of power or trust to deprive a person of free will and substitute another's objective, resulting in lack of genuine assent to a contract. Battery Correct Answer: There is no ground for battery if contacts by both Jim and the police officer were accidental and not intended to be hostile or offensive. defenses if sued for batterplaintiff consented to act 6 act was in self defense or defense of others act was of physical discipline Assault Correct Answer: in contrast to battery, does not involve physical contact, but the other person must anticipate or expect and fear harm for assault to have occurred defensesself defense and defense of property Failed to Use Reasonable Care Correct Answer: One must prove this in a negligence lawsuit Contract Construction Correct Answer: Courts prioritize any changes to printed contract forms in this orderHandwriting prevails over printing WORDS prevail over numbers Res Judicata Correct Answer: The doctrine of res judicata prevents parties to a lawsuit on which a final judgment has been rendered from bringing a second lawsuit on the same claim or in related transactions. 7 Voidable Contracts Correct Answer: The contract is voidable if, due to Emily's innocent misrepresentations. It is not a bilateral mistake because both parties are not making the same mistake. Elements of Negligence Correct Answer: Legal duty owed by the defendant to plaintiff Breach of that duty The act was proximate cause of the injury or actual injury or damage Reasonable Person Test Correct Answer: An objective test based on how a theoretical reasonably cautious person would act under the circumstances best describes the reasonable person test to determine the standard of care in negligence cases. The reasonable person test is an external, objective test under which the defendant's individual or personal judgment, or that of other parties involved, is not considered. The test is based on how a jury perceives that a reasonable person would have acted. Bankruptcy Act Correct Answer: Chapter 7-liquidation, you turn in the key Chapter 11-business to reorganize debt Chapter 12-for farmers and fisherman Chapter 13-individuals and small business to reorganize their debt Administrative Agencies (DOI) 8 Correct Answer: produce the most laws Two primary functions include rulemaking and adjudication Binder Correct Answer: Informal written contracts that summarize the basic coverages and terms of insurance agreement and provide evidence of insurance until the official policy is issued (temporary insurance contract that provides coverage as per its terms; binder is effective here, whether policy is issued or not) Estoppel Correct Answer: Estoppel arises in insurance law from the following sequence of events: false representation of a material fact, reasonable reliance on that representation, and resulting injury or detriment to the insured. Unusual Risk in the Community Correct Answer: The justification for imposing strict liability on those who carry on ultrahazardous activities is that they have for their own purposes created an unusual risk in the community. If the activity causes an injury or damage, then another person's or animal's unexpected action, or a force of nature, is immaterial to the defendant's liability. Compensatory Damages include Special Damages and General Damages 9 Punitive/Exemplary Damages Correct Answer: Awarded by court to reimburse victim for actual damage Medical expenses or lost wages Pain and suffering Awarded by court to punish defendant for their bad action Severable Correct Answer: When possible, courts interpret insurance policies as severable. If one policy provision is invalid, it need not invalidate the entire policy, but can be severed from the policy. Bailee Duties (has custody of goods temporarily but no transfer of ownership) Correct Answer: Standard of care for bailee is reasonable care If for bailor's benefit only-bailee has slight care If for bailee's benefit only-bailee duty is extraordinary care Insurance Application Correct Answer: Signed by the applicant and sent to insurer is the offer Warehouse Receipt Correct Answer: Serves two primary functions 10 describes the goods stored acts as a negotiable instrument that can be traded or sold Warehouse operators provide the goods' owner with a receipt that describes the amount, type, and condition of the goods and the conditions of storage. This receipt can be considered a document of title to the goods, which, if properly worded, becomes a negotiable instrument that can be traded, sold, swapped, or used as collateral for borrowing. Types of Contracts Correct Answer: An implied-in-law contract is not an actual contract but is imposed by law for a variety of reasons. The type of contract that has not been completely performed by one or both of the parties is an executory contract. The implied-in-law contract is not voidable since it is not a contract. An implied-in-fact contract is one that is presumably intended Reservations of Rights Letters Correct Answer: Investigate or defend under a reservation of rights or nonwaiver agreement allows the insurer to conduct an investigation into the coverage issue without waiving any of its rights to deny coverage. Refusing defense or denying the insured's claim in this situation could result in severe adverse consequences to the insurer, if the 11 facts ultimately show that the insured is covered. Investigating without reservation of rights or nonwaiver would result in the insurer waiving its coverage defenses. Valued Policy Correct Answer: A valued policy is one in which the insurer pays a stated amount in the event of a specified loss (usually a total loss) regardless of the actual value of the loss. Subrogation Correct Answer: Subrogation reinforces the principle of indemnity (principle that insurance policies should provide a benefit no greater than the loss suffered by an insured) Subrogation provisions clarify that the insured cannot collect from both the insurer and the responsible party for more than the amount of the loss. The principle of indemnity means that insurance policies should provide a benefit no greater than the loss suffered by an insured. With a valued policy, an exception to the principle, the actual value of the loss does not matter and the recovery could be more than the insured item is worth. The remaining answer choices can be deduced as wrong. A replacement cost provision is an exception to the principle of indemnity as the insured can end up better off because the insured item is usually worth less (because of depreciation or wear and tear) than the cost to replace it. Limits are caps on what an insurer must pay. Contra Proferentum Correct Answer: Contra proferentum, meaning "against the offeror." Ambiguous language is interpreted against the interests of its creator. This encourages parties to be as clear as possible when drafting contracts. 12 Contract Rights Correct Answer: third parties that benefit from contracts may also have enforceable rights under those contracts. Assignment of contracts is common in a variety of situations. Creditors may assign the right to receive money from debtors to third parties. Most contract rights are assignable. Misrepresentation Correct Answer: Even innocent misrepresentation of material facts permit avoidance of an insurance policy.