RMI4420 Exam 1 Study Guide
Introduction to Law and Civil Dispute Resolution (11 questions)
 The Common Law and Insurance (1 question)
o Paul v. Virginia (1869)- Supreme Court of the United States decision held that
insurance is a contract delivered locally and governed by state law rather than
federal law
o From 1869 – 1944 federal law did not apply
o United States v. South-Eastern Underwriters Association (1943)- Supreme Court
of the United States overturned Paul v. Virginia and held that the Sherman
Antitrust Act applies to insurance. (Federal government now in charge of
regulating insurance.)
o 1945: Congress passes the McCarren-Ferguson Act which ensures that states
continue to have authority to regulate insurance.
 Classifications of Law (1 question)
o Criminal Law: applies to acts that society deems so harmful to the public welfare
that government is responsible for prosecuting and punishing the perpetrators.
o Civil Law: classifications of the law that applies to legal matters not governed by
criminal law and that protect rights and provide remedies for breaches of duties
owed to others.
o Substantive Law: classification of law that creates, defines, and regulates
parties’ rights, duties, and powers.
o Procedural Law: classification of law that prescribes the steps, or processes, for
enforcing the rights and duties defined by substantive law.
o Hypo: Insured has a claim for hail damage on her business property that
occurred in 2006. In 2013, she files suit against her insurance company, claiming
the company breached the terms and conditions of the insurance contract.
Insurance company files a motion to dismiss, claiming the 5-year state statute of
limitations for contractual actions has expired. Is this a question of substantive
or procedural law?
 Procedural (statute of limitations)
 Constitutional Principles Relevant to Insurance (1 question)
o Basic Principles: U.S. Constitution is the “supreme law of the land” per Article VI,
Section II of the Constitution (Supremacy Clause); federal laws cannot violate
the U.S. Constitution; federal law trumps state law.
o Article I, Section 8 Commerce Clause- gives Congress the power to regulate
commerce (trade) with foreign nations and among states (interstate commerce).
 Health insurance does not
o Due process Clause, 5th Amendment (extended to states through the
“incorporation doctrine” of 14th Amendment): guarantees notice and a hearing
before the federal government can deprive any person of life, liberty or
property.
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o Equal Protection Clause, 14th Amendment: prohibits state laws that discriminate
unfairly or arbitrarily, and require equal treatment to all persons under like
circumstances and conditions.
Discrimination and Insurance (2 questions)
o Federal Law: apply to insurance and prohibit discrimination due to certain
factors
o Patient Protection and Affordable Care Act of 2010: prohibits health insurers
from considering pre-existing conditions to deny coverage
o Genetic Information Nondiscrimination Act (GINA): prohibits health insurers
from denying coverage and charging different premiums on the basis of genetic
information
o Fair Housing Act: it is unlawful “to refuse to sell or rent after the making of a
bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise
make available or deny, a dwelling to any person because of race, color, religion,
familial status, or national origin.”
o Regulations issued by the U.S. Department of Housing and Urban Development
make the fair Housing Act applicable to homeowner’s insurance.
o Other Areas of Insurance – Auto Insurance? Life Insurance? Disability Insurance?
There are no specific federal laws relating to discrimination in these areas.
o State Law
o According to research by Professors Ronen Abraham, Kyle D. Logue, and Daniel
Schwarez, Understanding Insurance Antidiscrimination Laws, 87 SOUTHERN
CALIFORNIA LAW REVIEW (2014):
 More than half of all states do not have statutes that explicitly bar the
use of race in life, health, and disability insurance.
 18 states do not bar the use of race in property/casualty insurance
 40 states do not bar the use of gender in auto insurance
 Only 9 states ban the use of age in auto insurance
o National Fair Housing Alliance v. Travelers indemnity Company (2017)
 In 2015, the National Fair Housing Alliance began testing insurers and
insurance brokers in Washington, D.C. Every landlord tester was
informed Travelers had policies which would not underwrite an
apartment building because they had residents who utilized Housing
Choice Vouchers
 Is this policy permissible?
 No, held to be violation of Fair Housing Act
o Florida Law
o Florida Rev. Statute 626.9541(1)(g) prohibits:
 “Knowingly making or permitting unfair discrimination between
individuals of the same actuarially supportable class and equal
expectation of life, in the rates charged for a life insurance or annuity
contract, in the dividends or other benefits payable thereon, or in any
other term or condition of such contract.”
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“knowingly making or permitting unfair discrimination between
individuals of the same actuarially supportable class, as determined at
the time of initial issuance of the coverage, and essentially the same
hazard, in the amount of premium, policy fees, or rates charged for a
policy or contract of accident, disability, or health insurance, in the
benefits payable thereunder, in the terms or conditions of such contract,
or in any other matter.”
Conflicts of Law
o Conflicts of Law: body of legal principles used to determine the appropriate law
to apply to a litigated case when more than one state is involved.
o Tort Conflicts Rule: Typically, law of the state of injury applies
o Contracts Conflicts Rule: most states us the “center of gravity rule,” applying the
law of the state with the most significant relationship to the case. HOWEVER:
business and individuals may contract around this default rule and agree on
which state’s law will apply if a dispute arises under the contract.
 Forum selection clause or choice of law clause (insurance)
Federal District Courts – Insurance Disputes (1 question)
o District Courts: the trial courts of the federal system. There are District Court
Judges and often Magistrate Judges
o Criminal Actions: have original jurisdiction over all federal crimes; the accused is
entitled to trial by jury in the state and district where the crime is committed.
o Civil Actions: Diversity Jurisdiction or Federal Question Jurisdiction – District
courts have jurisdiction ONLY when the matter in controversy involves either
diversity of citizenship that meets jurisdictional amount (more than $75,000) or
involves a FEDERAL QUESTION.
o Diversity Jurisdiction: suits between citizens of different states, a citizen of a
state and a citizen of a foreign country, and/or a state and a citizen of another
state and the amount in controversy exceeds $75,000.
o Defendant’s Right to Removal: where diversity jurisdiction exists, the defendant
has a right to “remove” the case from state to federal court. The burden would
then shift to the Plaintiff to “remand” the case back to the state court.
 State courts more unpredictable than federal courts
o Corporations and Diversity Jurisdiction: a corporation is considered both a
“citizen” of the state where it is incorporated and the state in which it has its
principal place of business.
o Federal Question Jurisdiction: no jurisdictional amount. Federal question cases
involve cases arising out of the U.S. Constitution or federal laws or tort cases
involving citizens and officers/agents of the federal government.
Resolution of Insurance Cases Prior to Trial (2 questions)
o Motion to Dismiss: filed by the defendant on basis that Plaintiff’s Complaint
does not allege facts sufficient to set forth a cause of action.
o Motions to Dismiss are typically filed on the basis that the Complaint/Petition
does not state a claim upon which relief can be granted, but also can be filed on
the basis that the Court lacks jurisdiction, or the statute of limitations period has
expired.
o Res Judicata: not a motion, but a doctrine that bars parties to a lawsuit on which
final judgement has been rendered from brining a second lawsuit on the same
claim or on related transactions.
o Collateral Estoppel (Issue Preclusion): not a motion, but a doctrine that bars
parties from relitigating on issue on which a court has already ruled, even if the
second lawsuit differs significantly from the first.
o Law of the Case: not a motion, but a judicial policy doctrine in which rulings
made by a trial court and not challenged on appeal become the “law of the case”
(i.e. the same trial court follows the prior trial court’s ruling on the same issue)
o Motion for Summary Judgement: summary judgement is granted if a genuine
issue of material fact does not remain and the moving party is entitled to
judgement as a matter of law. Evidence outside the pleadings CAN and OFTEN is
presented at a hearing (i.e. Affidavits, Exhibits, etc.)
 After discovery occurs
 Later than motion to dismiss
 motion of dismissal (insurance companies love)
 difficult to get
 case does not proceed to trial
 plaintiff or defendant can apply for summary judgement
 judges typically find a way to avoid this
 hypo: you are risk manager for an org. you host a 5k and make
participants to sign a liability waiver. If a participant gets injured and files
a lawsuit, summary judgement likely
 3 other miscellaneous questions
Contracts Part 1 – Elements of a Contract (8 questions)
 Elements and Key Terms
o Elements of a Contract: 1) Agreement (Offer and Acceptance); 2) Consideration;
3) Legal Capacity; and 4) Legal purpose consistent with law and sound public
policy.
o Bilateral Contract: promise for a promise
 Example: Tony promise to paint Jay’s garage, and Jay promise to pay
Tony $500 for the painting of the garage
o Unilateral Contract: promise for performance
 Example: Jay promises to pay $500 if Tony paints the garage. The
contract is formed when Tony starts painting the garage.
 Contests, Lotteries, and Prizes:
 If a person complies with the rules of the contest – such as by
submitting the right lottery number at the right place and time – a
unilateral contract is formed. The org. offering the prize is then
bound to a contract to perform as promised in the offer. If the
person fails to comply with the contest rules, however, no binding
contract is formed.
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Law of Offers (2 questions)
o Offer: definite proposal or undertaking made by one person (offeror) to another
(offeree) which manifests a willingness to enter into a bargain.
o Requirements for an offer:
 1) Present Intention to Contract: language of present commitment is
necessary for an offer
 2) Definite Terms: the more definite the terms, the more likely it is an
offer. In most cases, the terms must include the parties, subject matter,
price, quantity, and time of performance.
 3) Communication to Offeree: the offeror must communicate the offer,
in an intended manner, to the offeree.
o Requirements of an Offer – Present Intention to Contract
 Rule: an offer must include words of PRESENT COMMITMENT OR
UNDERTAKING. Offer must be distinguished from most general
advertisements, social invitations, and “offers” made in excitement.
 as a general rule, advertisements are NOT offers, unless the offer
contains definite promise of something in exchange for something else
and confers a power of acceptance upon a specified person or a class of
persons.
 Leonard v. Pepsico (1999) COMPARE WITH: Leftkowitz v. Great
Minneapolis Surplus Store (1957) (holding an advertisement was an offer
when the advertisement stated the following: “Saturday 9 AM Sharp, 2
Brand New Fur Coats, Worth to $100, First Come First Served, $1 Each.”
 Price tag is not an offer but an invitation
 Social Invitations are also not offers. If a person receives a social
invitation, and the social event is canceled, then the recipient of the
invitation has no legal remedy.
 Promises made under excitement are also not offers.
 Example (hypothetical): Your car breaks down for the second
time in a week on the way to RMI 4420. You scream “I will sell this
car to anyone for a dollar!” A bystander comes up to you and
hands you one dollar. Is there a contract?
o NO- an excited statement/utterance is not an offer , if a
reasonable person in the bystanders position would have
recognized it merely as a nonbinding utterance.
o Requirements of an Offer – Definite terms
 Rule: Courts require an offer to be reasonably definite. If terms are vague
or impossible to measure with some precision or a major term is absent,
no contract results. In most cases, the terms must include the parties,
subject matter, price, quantity, and time of performance.
 Example (hypothetical): A says to B, “I’ll sell you any quantity of
widgets for $5 each.” B says, “OK I accept.” Since the offer does
not contain details as to the quantity to be contracted for, and
since the acceptance does not fill in this missing term, there is no
contract because of indefiniteness.
 Exception: Requirement Contracts- contracts that deal with one supplier.
For example, Allen’s promise to buy “all steel required” from Anu, a
supplier, is definite enough to enforce.
o Requirements of an Offer – Communication to Offers
 an offer must also be communicated to the offeree. An offeree cannot
accept an offer before knowing about it.
 Example (hypothetical): a newspaper advertisement conveys a
firm offer of “100 to anyone who will enter the 100-yard dash on
July 4 and beats David.” Matt, unaware of the advertisement or
the offer, enters the race and beats David. NO CONTRACT EXISTS
because Matt could not accept an offer of which he had no
knowledge.
 Rule: one cannot agree to a bargain without knowing that it exists.
 Gyabaah v. Rivlab Transportation Crpr. (2013)- Adwoa Gyabaah was hit
by a bus owned by Rivlab Transportation Corporation. Gyabaah filed a
suit in New York state court against the bus company. Rivlab’s insurer
offered to tender the company’s policy limit of $1 million in full
settlement of Gyabaah’s claims. On the advice of her attorney, Jeffrey
Aronsky, Gyabaah signed a release (a contract forfeiting the right to
pursue a legal claim) to obtain the settlement funds. The release,
however, was not sent to Rivlab or its insurer, National Casualty.
Moreover, Gyabaah claimed that she had not decided whether to settle.
Two months later, Gyabaah changed lawyers and changed her mind
about signing the release. Her former attorney, Aronsky, filed a motion to
enforce the release so he could obtain his fees from the settlement
funds. The court DENIED the motion, and Aronsky appealed. The
reviewing court held that there was no binding settlement agreement.
The release was never delivered to Rivlab or its insurer nor was the
acceptance of the settlement offer otherwise communicated to them.
o Termination of Offers
 An offer may be terminated in several ways other than acceptance: 1.
Lapse of Time; 2. Termination by Operation of Law; 3. Rejection by the
Offeree; 4. Revocation by Offeror; and 5. Counter-Offer
 1. Termination by Lapse of Time: if an offer does not stipulate the period
during which it is to continue, it remains open for a reasonable time.
 2. Termination by Operation of Law: can be caused by the 1) death or
adjudicated insanity of either party or 2) destruction of the subject
matter of the offer or 3) illegality that occurs after the offer is made.
 3. Rejection by the Offeree: an offeree may decide to reject the offer – a
rejection terminates it.
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4. Revocation by Offeror: an offeror may revoke the offer at any time
before the offeree accepts – however, if an offeree has already started
partial performance under a unilateral contract, it is irrevocable.
 5. Counter-Offer: an offeree may reject an offer, and propose new termsthus making a counteroffer.
Law of Acceptance (1 question)
o Acceptance: an assent to an offer that occurs when the party to whom an offer
has been made either agrees to the proposal or does what has been proposed.
o Silence? The general rule is that mere silence of the offeree does not amount to
acceptance of an offer. However, there is an exception in the case of previous
dealings between an offeror-offeree where silence has previously constituted
acceptance.
o Communication of acceptance: an offeror is the master of the offer – thus, the
offeror can control the manner (promise or performance) and mode or medium
of acceptance (phone, telegram, mail)
 Example (hypothetical): Tom mails a letter to Ralph stating the terms of
a proposed contract. At the end Tom writes, “you can accept this offer
only by signing on the dotted line below my signature and returning the
contract by express mail.” Ralph immediately sends a fax stating, “I
accept your offer.” There is NO contract because a fax was not an
authorized medium of acceptance.
o When does an acceptance take effect – upon receipt by the offeror, or dispatch
by the offeree?
 Mailbox Rule: if the mail is the authorized medium, the acceptance letter
is effective the moment it is mailed, even if the offeror never receives the
letter of acceptance.
 However, the offeror can work around the mailbox rule by simply stating
in the offer that the acceptance is not effective until it is actually
received.
Law of Consideration (1 question)
o Consideration: bargained-for exchange – it can be a promise for a promise, a
promise for performance, or a promise for a forbearance to act. Both contracting
parties usually incur a legal benefit and a legal detriment. Courts also are only
interested in whether consideration is sufficient, not if it is adequate.
o Three types of insufficient consideration: 1. Past Consideration; 2. Promises to
Perform Existing Obligations (preexisting duties); and 3. Compromise and release
of certain liquidation debts.
 1. Past Consideration: bargained-for exchange is absent where a promise
is giver for a past transaction – thus, past consideration is insufficient.
 Example: Rod gives emergency care to Mike’s adult son while the
son is ill. After Rod gives the emergency care, Mike promises to
pay Rod for his services. Mike’s promise is nonbinding since there
is no bargained-for exchange present.
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2. Promises to Perform Existing Obligations (Preexisting Duties): When
one promise is to do what one is already obliged to do or promises to
refrain from what they legally cannot do, then the promisor incurs no
legal document.
 Example: Police officer’s promise to the public to arrest a criminal
is not enforceable because the arrest is the officer’s job.
3. Liquidated vs. Unliquidated Debts (1 question)
o Settlement of Liquidated debts
 Liquidated Debt: a debt where the existence and/or amount is
undisputed.
 Example: Pamela owes Julie a $100 debt. Julie agrees to pay Pamela $50
to settle the debt when due. Under the common law, Julie still has the
right to recover the remaining $50 since the payment of $50 was no legal
detriment to Pamela.
o Settlement of Unliquidated Debts
 Unliquidated Debt: a debt where the existence and/or amount is in
dispute.
 Example: An insurance agent has started an insurance agency here in
Tallahassee and does expert witness work in court cases. The insurance
agent sends the client a bill of $5,000 for professional insurance advising
services, the reasonable value of services. The client disputes the bill.
 The client sends a check for $4,500. The insurance agent accepts the
check. At that point, acceptance of the check relieves the client from any
further liability for the professional services rendered.
 There is mutuality of consideration since the client has given up the right
to dispute billing, and the insurance agent has given up the right to
further collection.
Is There an Enforceable Contract? (1-2 possible questions)
o Example 1: A promises B a gift of $1,000, saying to B, “I believe that it is more
blessed to give than to receive, and it would give me great Christian happiness to
have you accept my gift.” Is there consideration?
 No- promise to make gift is not consideration
o
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Example 2: Maher contracts with the city of Newport to collect garbage.
Although the contract entitles Maher to $137,000 per year for five years, Maher
twice requests an additional $10,000 per year from the city council, because his
operating costs have substantially increased due to an unanticipated spurt of
new dwelling units. After the additional payments are made, a citizen sues to
have the additional payments refunded to the city. Is this modification
enforceable?
 Yes- unforeseen difficulty
2 other miscellaneous questions
Contracts Part II – Statute of Frauds, Contract Interpretation, Third-Party Contractual
Rights and Remedies Damages (8 questions)
Statute of Frauds (4 questions)
 Introduction to Statute of Frauds
o General rule: A verbal contract is just as valid and enforceable as a written
contract. However, some verbal contracts are unenforceable under a law known
as the Statute of Frauds.
o Contracts “Within the Statute of Frauds”- contract that requires written proof. If
written proof is not required, then it is “outside the statute of frauds”. The usual
statute of frauds provision states that “no action shall be brought unless the
agreement, or some memorandum or note thereof, shall be in writing, and
signed by the party to be charged therewith…” All that is required to meet the
“writing requirement” is a note or memorandum that provides written evidence
of the agreement. The writing only needs to contain the names of the parties, a
description of the subject matter, the price, and the general terms of the
agreement.
 Contracts within the Statute of Frauds
o Contracts for the Sale of Land or an Interest in Land: Examples include the sale
of an entire interest in land; contracts involving interests for a person’s lifetime
(life estates), mortgages, easements, and leases in excess of 1 year.
o Contracts That Cannot be Performed Within One Year from the Date of
Making: Ex: D, an insurance company, verbally promises to insure P’s house
against fire for 5 years. P in turn promises to pay the premium within a week. Is
this contract enforceable?
 Yes- since it is possible that the contract be performed in less than a year
o Contracts to Pay Another’s Debt (Surety Contracts): Ex: Father says to auto
dealer concerning a son’s car purchase, “Deliver the car to my son. If he does not
pay for it, then I promise to pay.” The son has the primary obligation for the
debt; the father has the secondary obligation to pay. Note that the son’s promise
is not within the statute of frauds; HOWEVER, the father’s promise is since it is a
secondary obligation.
o Contracts in Consideration of Marriage: A promise for which the consideration is
marriage or a contract in which the consideration is a promise of marriage is
within the Statute of Frauds.
 Example: A offers to marry B. To induce B to accept the offer, A verbally
promises to transfer certain stocks to B. B accepts the offer but changes
her mind prior to the actual marriage ceremony. Both promises to marry,
and A’s promise to transfer the stocks are all within the statute of frauds.
 Question: What about two mutual promises to marry each other?
 Not within the statute of frauds.
o Contracts for the Sale of Goods: Statute applies if the sale of goods involves
$500 or more.
 Exceptions to the Statute of Frauds
o Real Property – Doctrine of Part Performance: Courts will enforce a verbal
contract for the sale of land if, with the seller’s consent, the buyer takes
possession of the land and makes substantial, valuable improvements upon it.
o Sale of Specially Manufactured Goods over $500: this is an exception for
“custom made” goods. The goods have to be specially manufactured for the
buyer and not suitable for sale to others in the ordinary course of the seller’s
business.
Construction and Interpretation of Contracts
 General Rules of Contract Interpretation
o Words are given plain and ordinary meaning.
o Ambiguities are construed against the party who drafted or used the ambiguous
language. (contra proferentum)
o The goal of contract interpretation is to effectuate the parties’ intent.
o Specific provisions prevail over general provisions (Lex specialis derogate legi
generali).
o Handwritten provisions prevail over typewritten provisions, typewritten
provisions prevail over printed provisions, and words prevail over figures.
Breaches of Contract: Remedies and Damages (2 questions – 1 question liquidated damages)
 Material Breach of Contract: violation of a contract that would justify an owner’s
termination and/or damages.
 Compensatory Damages: damages which are intended to give the injured party the
“benefit of the bargain” and to place the injured party in approximately the position he
or she would be if the breaching party had performed the contract.
 Consequential Damages: damages awarded for unique but foreseeable losses that are
indirectly incurred from a breach of contract.
o House is damaged by a tornado, file a claim for the tornado. House gets mold
because it wasn’t fixed. Mold is consequential.
 Punitive (Exemplary) Damages: punish a defendant for reckless, malicious or deceitful
conduct.
o Ford Pinto gas tank
 Extracontractual Damages: excess damages and excess-liability damages in insurance
bad faith cases.
 Liquidated Damages Clause: a fixed sum agreed on between the parties of a contract to
be paid as ascertained by the party who breaches the contract.
 Agree before a breach occurs
 Common in construction industry
Third-Party Contractual Rights (1 question)
 Contract Assignments: the transfer of rights or property from one individual entity to
another individual/entity. Assignments are not required to be in writing. However, if an
assignment involves a subject matter covered by the statute of frauds, then the
assignment MUST be in writing to be enforceable.
 Rights Not Assignable:
o Veteran’s disability benefits, government pensions, wages, inheritances, and
workers compensation benefits.
o Personal rights are not assignable. Example: a person who contracts to receive
services of a personal trainer cannot assign a third party the right to those
services.
o When a judgement is pending in a personal injury case, generally the injured
person cannot assign a claim for damages resulting from the injury. HOWEVER, a
final judgement in a personal injury case is assignable, as is the right to sue to
recover for property loss or damage.
Quasi Contracts
 Doctrine of Quasi-Contracts: Quasi-contracts are equitable rather than legal contracts.
Usually, they are imposed to avoid the unjust enrichment of one party at the expense of
another. The doctrine of unjust enrichment is based on the theory that individuals
should not be allowed to profit or enrich themselves inequitable at the expense of
others.
 Example- Seawest Service Association v. Copenhaver (2012): Seawest Services
Association operated a water distribution system that served homes inside a housing
development (full members) and some homes outside the subdivision (limited
members). Both full and limited members paid water bills and assessments for work
performed on the water system when necessary. The Copenhavers purchased a home
outside the housing development. They did not have an express contract with Seawest,
but they paid water bills for eight years and paid one $3,950 assessment for water
system upgrades. After a dispute arose, the Copenhavers refused to pay their water bills
and assessments. Seawest sued. The court found that the Copenhavers had a quasicontract with Seawest and were liable. The Copenhavers had enjoyed the benefits of
the Seawest’s water services and had even paid for them prior to their dispute. In
addition, “the Copenhavers would be unjustly enriched if they could retain benefits
provided by Seawest without paying them.”
Review Questions
1. Kamp E-Kwipment Inc. agrees to sell fifteen pairs of hip boots to the our Lady of 115th
Street Convent for its annual retreat. The contract price is $700, although the
merchandise has a wholesale price of $120. Must the contract be in writing to be
enforceable?
a. Yes- $500+ (wholesale cost irrelevant)
2. Rosebud General Contractor agrees to build a fabulous home, Xanadu, for Charles
Foster Kane in return for $750,000. The contract price includes all materials, which will
have an aggregate value of $200,000. Must the contract comply with the Statute of
Frauds?
a. No- since not stated that it is over a year and can be completed within a year
3. Minnie and Mickey decide to get married. The Etty-Kette Paper Goods Company verbally
agrees to custom-make 350 party hats with Minnie and Mickey’s names printed on
them for the wedding for $675. After Etty-Kette begins to manufacture the hats, Minnie
decides Mickey is a rat, and cancels the wedding. She also tries to cancel the hat
contract. Can Etty-Kette enforce the oral agreement?
a. Yes- custom made goods over 500+ falls within Statute of Frauds
Insurance Contract Principles Part I (8 questions)
Offer and Acceptance in Insurance Contracts
 General Rule: when a potential insured signs an insurance application and that is sent
through the producer to the insurer, that is the offer. The insurance policy issued later is
the acceptance. However, if an insurance applicant submits an application not with the
intention of being bound by the potential insurance coverage but simply to determine
whether the insurer will accept the risk, the application is not an offer. In this case, if the
insurer issues the policy, that is the offer and acceptance of the insured takes place by
the payment of premium.
 The mailing of an acceptance binds an insurance contract at the time of mailing,
WHETHER OR NOT the other party receives it.
 For property and casualty insurance, verbal contracts are as binding as written ones!
o Example: Mary calls her insurance agent and asks to increase the limits on her
homeowner’s policy from $250,000 to $300,000. The agent says, “no worries,
you will receive the revised policy in the mail next week.” If a loss occurs before
Mary receives the policy, the insurer is still bound to the higher limits as the
agent’s verbal promise is binding.
Consideration in Insurance Contracts
 Consideration of Insurer: The insurer’s promise to indemnify or pay on behalf of an
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insured for loss resulting from a covered occurrence.
Consideration of Insured: Premium payment or the promise of premium payment
Casualty and Property Insurance Rule: Prepayment of the premium is NOT a condition
necessary to make the contract valid. If the insured suffers a loss before paying a
premium at the outset of a policy period, an insurer cannot refuse to pay based on lack
of consideration.
Life Insurance Rule: The application of the policy itself provides that the insurance will
not take effect until the purchaser pays the first full premium. The policyholder has no
duty to pay premiums after payment of the first premium, but nonpayment of premiums
can result in forfeiture of policy rights (i.e., the “lapse” of the policy).
Effective Date in Insurance Contracts – Law of Binders (2 questions)
 Insurance Contracts: typically, the policy specifies the effective date and time of the
contract. But sometimes losses occur before the policy is formally issued. What
happens?
 Binder: a temporary written or verbal agreement to provide insurance coverage until a
formal written policy is issued. Typically, binders will extend coverage for 30 days,
pending issuance of the policy.
 Binder: must typically include the following 6 elements.
o 1. An identification of the insured and the insurer.
o 2. If a property insurance binder, a description of the property
o 3. The policy limits payable on loss
o 4. The risks covered
o 5. The time in which coverage attaches under the terms of the binder
o 6. An understanding that subsequent policy terms, conditions, and exclusions are
incorporated in the binder

Note: although a binder is usually evidence of an insurance contract, the insurer can
produce evidence to prove that the parties verbally agreed that the insurance was not
to take effect until a specific condition was met. (condition precedent)
o Example: the parties might have agreed that temporary coverage was not to be
effective until another insurer assumed part of the risk.
 *** Binders are typically utilized in the property and casualty insurance area;
conditional receipts typically apply to life insurance policies.
Silence and Delay in Insurance Contracts
 General Rule: A party’s silence or delay constitutes insufficient evidence of acceptance
to form a contract. However, if a prior course of dealings indicate that silence was
acceptance, those prior dealings can determine acceptance.
o Example 1: Gina, a producer, has for many years handled insurance on Mike’s
property under annual policies. At the expiration of a policy, and consistent with
prior dealings, Gina sends Mike a renewal policy and a bill for the premium. This
year, Mike holds the policy for 2 months, remaining silent, and refuses to pay the
premium on demand. Mike would be liable for the premium that accrued before
his rejection, since prior course of dealings gave Gina a reasonable basis for
concluding that silence would constitute acceptance
o Example 2: Gina directs a letter to Mike indicating that “Your homeowners
insurance policy will be renewed for another 3 years unless I hear from you to
the contrary.” Mike does not reply. Because there was no prior course of
dealings indicating that Gina could infer acceptance by silence, continued
coverage does not result here.
 Rule: When an applicant submits an application for coverage to an insurer, and the
insurer fails to act within a reasonable time, the insurer’s silence or delay is not
acceptance. HOWEVER: An insurer can be liable under its contract if it delays action on
an application beyond a reasonable time.
Necessary Terms in Insurance Contracts
 Types of coverage sought: the risks or events covered must be specific, such as fire,
accident, liability or life.
 Object or Premises, If Any, to be Insured: if liability insurance in connection with
ownership of property is involved, the address of the premises must be clear. If a policy
says “my residence” that is NOT specific enough.
 Insured’s Name
 Duration of Coverage
Contractual Duty of Insurer to Defend and Indemnify
 The standard liability insurance policy provides both litigation and liability protection for
an insured. It imposes a duty to defend and a duty to indemnify on the insurer.
 Duty to Defend: insurer’s duty to assume the expense of defending the insured and
lawsuits.
 Duty to indemnify insurer’s duty to pay a final judgement or settle a claim on behalf of
the insured.
 Duty to defend is more expansive than duty to indemnify

“Duty to Settle” Rule: a liability insurer MUST accept a reasonable settlement demand
within the policy’s limits. If the insurer fails to do so, it may be liable for the entire
resulting final judgement, even in the case of a judgement exceeding policy limits.
CGL Policies, D & O Policies, and E & O Policies (3 questions)
 Commercial General Liability Policies (“CGL Policies”): Insure against property damage,
bodily injury and certain torts (typically negligence and not intentional torts).
 Directors and Officers Liability Policies (D & O Policies): insure against claims made
against corporate directors and officers when they are individually named in lawsuits
alleging conduct that arises in the scope and course of their corporation.
 Errors and Omissions Liability Policies (E&O Policies): insure against claims made
against professionals that arise in the scope and course of the professional’s duties.
Insurance Coverage Issues (CGL Policies, D & O Policies, and E & O Policies cont.) (3
questions)
 Commercial General Liability Policies: known as “occurrence” policies; coverage under
the policy is triggered when a claimant sustains damage.
 D&O and E&O Policies: known as “claims-made” or “claims-made-and-reported”
policies; coverage under the policy is triggered when a third-party makes a claim, not
when damage is sustained.
 Rule: An insured is required to give prompt notice of a claim to an insurer. If it fails to do
so, coverage may be denied and the insurer would not be responsible for litigationrelated expenses, court costs, and judgements incurred against an insured.
 Subrule: Under CGL policies, the failure to give notice to an insurer does not defeat
coverage unless the insurer is “substantially prejudiced” by the lateness of notice; but
this “late notice” rule does not apply to D&O and E&O policies!
 CGL policies typically require notice to be given when suit is filed; D&O policies typically
require notice to be given of facts and circumstances that may lead to a claim. “Claim” is
typically defined in the policy as a formal demand for money.
 “Tail Coverage” (Extended reporting Period): allows an insured to report claims under a
D&O or E&O policy if the claim arises outside of the policy period but involves actions
allegedly committed within the policy period.
Nonwaiver Agreements and Reservation of Rights Letters
 Nonwaiver Agreement: Signed agreement of both the insurer and insured indicating
that during the course of the investigation, neither the insurer nor the insured waives
rights under the policy. They are typically used when the claim representative is
concerned about investigating a claim before the insured has substantially complied
with the policy conditions or when there appears to be a specific coverage problem or
defense.
o Bilateral contract
o Example: A claims representative may offer a nonwaiver agreement if an
insured reports a theft of an auto but refuses to make a police report about the
theft

Reservation of Rights Letter: An insurer’s letter that specifies coverage issues and
informs the insured that the insurer is handling a claim with the understanding that the
insurer may later deny coverage should the facts warrant it.
3 other miscellaneous questions
Insurance Contract Principles Part II (4 miscellaneous questions)
Fraudulent Misrepresentations in Insurance Contracts
 Fraud in Insurance Contracts: An insured who is fraudulently induced to make or sign an
insurance application can rescind the contract and recover any premium paid. In
addition, the insurer also has the right to cancel an insurance policy because of fraud by
the insured if the insurer relies upon a misrepresentation or concealment of the insured.
 Fraudulent Misrepresentation: An intentional false statement of a material fact on
which an insurer relies. In addition, a nonintentional misrepresentation may also allow
an insurer to cancel an insurance policy so long as the insurer relies on the
misrepresentation.
o Example: An auto insurance applicant has had 2 speeding tickets during the prior
18 months before submitting his application for insurance. The applicant is asked
whether any driving violations have occurred within the past 3 years.
 If the applicant states, “I remember having one speeding ticket about two years ago,”
this is a misrepresentation, even though it may or may not be intentional.
 If the applicant states, “I’ve never been cited for a moving violation – only a few parking
tickets,” this is also a misrepresentation, and it appears in this case it is probably
intentional.
Fraudulent Concealment in Insurance Contracts
 Fraudulent Concealment: Intentional failure of an insured to disclose a material fact. To
assert a concealment defense, the insurer must prove 2 things: 1) The insured knew that
the fact concealed was material; and 2) The insured concealed the fact with intent to
defraud.
 What is a “material” fact? Generally, courts find the failure to disclose information to be
material when the omission “prevents the insurer from adequately assessing the risk
involved.” – Methodist Med. Ctr. Of Ill. v. Am. Med. Sec., 38 F.3d 316, 320 (7th Cir. 1994)
 What if there is no question about loss history on an application? Do prior losses or
claims need to be disclosed? Courts generally find this information is not material and
uphold insurance policies, even when insureds fail to reveal prior claims.
 Insurer Duty to Investigate? Generally, courts have found that an insurer has the right to
expect a potential insured to give truthful answers on an application.
 Exception: If an insurer obtains some information from another source outside the
application that may cause it to question the truthfulness of an applicant’s statements,
then courts will generally hold the insurance company has a duty to investigate further.
Representations v. Warranties in Insurance – security camera example
 Representations: refer only to those conditions existing at the time the parties form the
contract. Promises or statements about conditions that will exist after the contract do
not involve representations. Representations are NOT part of the contract itself. Already
have cameras
 Warranties: statements or promises that, if untrue, could render a policy voidable. For a
promise to be a warranty, 2 elements must be met: 1) the parties must have clearly and
“unmistakenly” intended the promise to be a warranty; and 2) the statement must form
a part of the contract itself. Thus, warranties are part of the final insurance contract.
 Whenever possible, courts are more likely to hold statements or promises to be
representations rather than warranties. But if a statement is a warranty, the insurer
does NOT need to prove that statement or promise is materiel in order to avoid the
contract! I will install cameras
Doctrine of Waiver - LEGAL
 Waiver: homeowner makes a claim for water damage to the contents of his basement.
The adjuster instructs the homeowner to make a list of the damaged items, then tells
the homeowner to throw the items out. Under these circumstances, the adjuster’s
instructions result in a knowing waiver of the insurer’s right to inspect the contents,
which are no longer available. The insurer cannot later deny the claim on the basis that
the insured failed to make the contents available for inspection.
 Insurers cannot waive privileges that further public policy: Example: Insurers cannot
waive the requirement that an insured have an insurable interest in the insured
property or life.
 Insurers cannot waive an exclusion of a cause of loss. Example: If an insurance policy
excludes coverage for earthquake damage, the insurer has expressly chosen not to
assume the duty of paying an earthquake loss under the policy. It cannot then waive the
exclusion and assume the duty.
 A producer’s representation that a policy covers something it does not actually cover
does not constitute a waiver. Example: Producer tells an insured that a policy applies
when the insured is driving an employer’s car. In reality, the policy contains a nonowned
automobile clause excluding such coverage. The producer might be liable for the
misrepresentation, but the insurer would not be liable.
Doctrine of Estoppel - EQUITABLE
 Estoppel: a legal principle that prohibits a party from asserting a claim or right is
inconsistent with that party’s past statements or conduct on which another party
has detrimentally relied.
o Equitable in nature
 Example: If a producer states that an endorsement will be added to a policy to
permit a building be unoccupied for certain periods, and the policy issues without
that endorsement, the insurer cannot deny the validity of the intended
endorsement.
 Example: If an insurer’s producer misrepresents questions or falsifies answers in an
application and the insurer issues a policy based on the misleading information, the
insurer cannot deny (is estopped from denying) the truth of the statements.
Doctrine of Election
 Election: The voluntary act of choosing between two alternative rights or privileges.

Example with Insurer: An insurer that treats a contract as valid for the purpose of
collecting premiums cannot treat it as invalid for the purpose of covering a loss.
 Example with Insured: An insurer cancels a life insurance policy including provisions for
the payment of disability benefits. The insured elects to sue the insurer for fraudulent
breach of the contract and receives damages, but not reinstatement of the policy. Later,
the insured attempts to sue to recover disability benefits that would have accrued
before the previous lawsuit had it not been for the insurer’s cancellation of the policy.
The insured would be barred from recovering disability benefits in the second lawsuit
since the insured elected to treat the policy as canceled and demanded damages in the
first lawsuit.
Review Questions
1. An insurance company may deny an insured’s claim if the insured has misrepresented or
concealed:
- A material fact
2. An insurance company determines that inaccurate information has been provided by an
insurance applicant. Which one of the following statements is true concerning whether
the contract is voidable?
- If the information was false and related to a material fact and relied upon
by the insurer, the contract is voidable.
Insurance Contract Principles Part III (9 questions)
Moral Hazard Clauses: “Visible Marks” Clauses and Iron Safe Clauses (2 questions)
 Moral Hazard Clauses: primary purpose is to prevent carelessness by the policy holder,
fraud or collusive action against the insurer.
 “Visible Marks” Clause: often found in policies insuring against theft or burglary from a
locked car, building or other enclosure.
o Visible evidence of burglary or theft necessary
 Typical Definition of Burglary: ‘Burglary’ means the felonious abstraction of insured
property (1) from within the premises by a person making felonious entry therein by
actual force and violence, of which force and violence there are visible marks made by
tools, explosives, electricity or chemicals upon, or physical damage to, the exterior of
the premises at the place of such entry.
 Lacombe v. Zurich Insurance Company (1968)
 Facts: The plaintiff, a tavern owner, suffered from a theft of the premises at night. That
evening, the plaintiff secured three entrances to the establishment. The back door and
side door were locked from the inside, and the front door was secured by a metal hasp
and large Yale lock. All of the windows were barred. The next morning, the plaintiff
found the lock on the front door was tampered with, and whiskey and a TV set were
missing. The City Police Captain determined it was not an inside job and found no
evidence of breaking into the building – an insurance investigator found no visible signs
of force either.
o The insurance company denied the insurance claim on the basis of the visible
marks clause. Did they win?
o YES, courts ruled in favor of insurance company stating there was not enough
physical evidence of a break-in
 C & J fertilizer v. Allied Mutual Insurance Company (1975)
 Facts: Employees of a fertilizer plant locked all exterior doors to the building on a
Saturday after work. The following Monday, all exterior doors were still locked but the
front office door was unlocked. Chemicals, office and shop equipment were taken from
the premises. While there were tire tread marks visible in the mud in the driveway
leading up to the plexiglass door entrance to the warehouse, there were no visible
marks on the exterior of the building nor was there physical damage to the exterior of
the building.
 While the insurance company denied the plaintiff’s claim on the basis of the visible
marks clause, the Iowa Supreme Court held for the policyholder on appeal.
 “The exclusion in issue, masking as a definition, makes insurer’s obligation to pay turn
on the skill of the burglar, not on the event that the parties bargained for: a bonafide
third party burglary resulting in loss of plaintiff’s chemicals and equipment.” Id. at 177.
 Iron Safe Clauses: Generally found in property insurance policies for business. They
typically require the policyholder to keep inventories, records or books of account in a
place that will be secure from the type of loss insured against. They are also known as
“record warranties”.
 Coppi v. West American Insurance Company (1994)
 Facts: Plaintiff owned a hair stylist business in Nebraska. Cash was taken from the
burglarized safe. The insurer raised the failure of the insured to allegedly keep records
of the cash in the safe as an affirmative defense. Who was the burden of proof- does the
insured have the burden of proving that they kept records, or does the insurer have the
burden that the insured did not keep records?
o Court rules policyholder’s obligation to hold records
 Brooks v. Zulu Social Aid and Pleasure Club (2013)
 Facts: Spectator at Mardi Gras parade was allegedly hit in the face by coconut thrown by
a rider on a float in a Mardi Gras parade. Plaintiffs sued the sponsor of the float as well
as the insurer of the Zulu Social Aid and Pleasure Club organization (Lloyd’s). Lloyd’s was
added later on in the case; at first, Lloyd’s provided counsel to Zulu subject to a
reservation of rights.
 Lloyd’s Policy: Contained an exclusion stating “it is hereby agreed and understood that
there will be no coverage for any coconut thrown in any fashion from anywhere on the
float. Coconuts may be handed from the first layer of the float only.”
 Holding: Louisiana Court of Appeals ruled that a district court granting summary
judgment for Lloyd’s was premature, as Lloyd’s appointed counsel had not conducted
much discovery on Zulu’s behalf up to that point.
Number of Occurrences
 General Rule: Almost all commercial general liability (CGL) policies mention that
coverage must be given to an insured who suffers from “bodily injury” or “property
damage” caused by an “occurrence”
 World Trade Center Properties, LLC v. Hartford Fire Insurance Company (2003)

Facts: In the spring of 2001, Silverstein Properties won a bid on a 99-year lease from the
New York Port Authority for the World Trade Center. In July 2001, Silverstein obtained
primary and excess insurance from around a dozen insurers amounting to $3.5 billion
“per occurrence.”
 On September 11, 2001, only one of the insurers had actually issued a final policy,
leaving many questions as to the binders of each insurer.
 The Second Circuit Court of Appeals denied a summary judgment filed by the Plaintiffs
holding that the meaning of “occurrence” in a Traveler’s binder was sufficiently
ambiguous under New York law. After a jury trial, the case was resolved for $4.6 billion.
o Was 9/11 one occurrence or 2?
o Resulted in $4.6 billion settlement (wanted $3.5 billion per occurrence)
 “Effects” Test: courts utilizing this test determine the number of occurrences by looking
at the effects of the event (how many claims resulted from it)
 “Cause” Test: courts utilizing this test determine the number of occurrences by looking
at the cause of the damages/event.
o Effects test more in favor of insured, cause test more in favor of insurer
 Donegal Mutual Insurance v. Baumhammers (2007)
 Facts: An adult living in his parent’s house shot and killed his neighbor and then set it on
fire. Then, in three other separate incidents, he shot and killed four other individuals
and seriously wounded another within a two-hour period.
 The parents were sued by the personal representatives of the estates of the victims,
alleging failure to provide adequate mental health treatment for their son, failure to
take a handgun away from the son, and failure to notify the authorities their son
possessed a handgun.
 The limits under the liability policy at issue was $300,000 per occurrence. At issue was
the number of occurrences.
 The Pennsylvania Supreme Court stated that: “The Parents’ alleged negligence in failing
to remove [the adult son’s] weapon and/or alerting the authorities as to his dangerous
propensities is the “occurrence” that began the sequence of events that resulted in the
eventual injuries to Plaintiffs. In this case, the fact that there were multiple victims does
not determine the limits of Parents liability coverage, the number of occurrences does.
Although this is a disturbing case with tragic consequences, we are compelled to
conclude that Parents’ alleged negligence constituted but a single “occurrence” for
purposes of coverage under the [insurer’s] insurance policy.”
o Court used “cause” test which resulted in 1 occurrence
o Awarded $300k instead of $1.8 million
Emotional Injury – Bodily Injury
 General Rule: “Bodily Injury” in most general liability policies is defined as “bodily injury
(or bodily harm), sickness or disease.” A question often arises – is emotional injury
covered?
 Generally, most courts have ruled that emotional injuries are not considered “bodily
injuries.”

However, if an emotional injury is accompanied by physical manifestations, then most
courts have held that the emotional injury is a “bodily injury”.
o An accident causes anxiety which causes heart palpitations
Uninsured / Underinsured Motorist Coverage (4 questions)
 Mandatory Coverage with Bodily Injury Liability Coverage: Pursuant to Chapter 627 of
the Florida Statutes, every motor vehicle liability policy which provides bodily injury
liability coverage must include an equal amount of uninsured motorist coverage.
 Exception: an insured can expressly reject UM coverage (but why would someone do
that?)
 Class I Insured: Named insured, named insured’s spouse and his/her relatives living in
the same house covered under the UM policy
 Class II Insured: permissive user or passenger in insured vehicle
 Stacking: Class I insureds can stack UM coverage, while Class II cannot.
o Example: If a person has 2 cars, and each vehicle has a bodily injury liability limit
of 100k/300k, a person’s limit can increase to 200k/600k with “stacking”. Not all
states permit stacking, but Florida does.
Applications
 Household/Family Exclusion – State Farm Mutual Automobile Insurance Company v.
Menendez (2011)
 Claims arising from bodily injury to a member of the insured’s household are not
covered
o “that there is no coverage for claims arising from bodily injury to the insured or
to any person residing in the insured's household other than a residence
employee”
 Facts: Grandmother permitted her granddaughter to drive her vehicle. While operating
the vehicle, the granddaughter was in an accident with another vehicle, resulting in
injuries to herself, her parents, and her grandmother. The grandmother filed a
declaratory judgement action against State Farm (the granddaughter’s parents’ insurer),
seeking a determination that their policy provided coverage for damages suffered in the
accident. On appeal, the Florida SC ruled in favor of State Farm, upholding the
household/family exclusion in the automobile policy.
 Phantom/ Hit and Run Drivers
 A “hit and run” accident requires either physical contact with another vehicle OR the
presence of a phantom vehicle. For a phantom vehicle, that vehicle must cause another
vehicle to wreck.
 For a “hit and run” provision in a UM policy to apply, the insured typically has to notify
the insured within 24 hours.
 Does “hit and run” provision of UM coverage apply? For UM to apply, the injuries have
to arise out of the operation, maintenance or use of the uninsured vehicle.
 Cinder block propelled through windshield when an individual operates a vehicle?
o No – operation of vehicle for uninsured not specified
o Allstate Insurance Company v. Bandiera 1987

Steel beam falls off a truck, causing a driver to hit the beam and then the beam hits the
insured’s vehicle?
o Yes- operation of phantom vehicle clear
o Denoia v. Hartford Fire Insurance Company 2003
 A passenger is struck by a large rock thrown through the windshield by an unidentified
person while traveling through an area with high crime?
o No – operation of vehicle by uninsured not clear
o Denbaum v. Allstate Insurance Company 1979
 An operator of a trailer carrying 2 bulls loses control on a highway. The 2 bulls are
released, becoming enraged and start tearing through a yard and damaging property.
The owner of the property flees from the bulls (she is outside of her house when the
incident occurs) and suffers injuries. Underinsured motorist coverage allowed?
o Yeso Carpenter v. Sapp 1990
o “We determine that injury to persons and property immediately adjacent to an
accident scene wherein dangerous animals are released by the impact can
clearly be contemplated as arising from that incident.”
3 miscellaneous questions
Insurance Law and the Sharing Economy (2 miscellaneous questions)
Uber/Lyft and Ridesharing in Florida
 Key Components: HB 221, 2017 Florida Law
 Insurance Requirements When Passenger is Present: Requires Uber/Lyft drivers to have
primary liability coverage of at least $1 million for death, bodily injury, and property
damage.
 Required Background Checks: Uber and Lyft must now perform background checks to
authorize new drivers. An individual is disqualified if the individual:
o 1) Has been convicted of driving under the influence (DUI), reckless driving, or
hit-and-run within the past five years;
o 2) Has been convicted of driving with a suspended or revoked license within the
past three years;
o 3) Is listed on the federal sex offender registry.
o 4) Does not possess a valid driver’s license; or
o 5) Does not possess proof of registration of the vehicle to be used for
ridesharing.
Airbnb and Florida
 Since November 2018, Airbnb has had a policy which does not allow any listings in the
West Bank in the Middle East. This policy affects approximately 200 listings in Israel.
 Fla. Stat. 287.135 – Prohibits the state or any political subdivision in Florida from
entering into contracts with companies that boycott Israel.
 In January 2019, Governor DeSantis signed an executive order which prohibits any state
government employees or contractors of the state from staying at Airbnb properties on
official business. This executive order was lifted in June 2019.
Airbnb and Homeowner’s Insurance
 Is Airbnb a “business pursuit” for purposes of “business pursuits” exclusion?
 Courts generally utilize a two-part test to determine a business pursuit:
o 1) If there is continuity in the insured’s activity?
o 2) Presence of a profit motive.
 Rental Exclusion May Apply – there is an exception if the rental occurs on an “occasional
basis” in some policies.
 State Farm Fire and Casualty Company v. Piazza, 131 P.3d 337 (Wash. Ct. App. 2006)
 More insurers are offering coverage:
 USAA – may offer liability coverage to insureds who “very occasionally” rent a room out;
 Chubb – provides coverage to insureds who earn up to $15,000 year in rental income.
 Allstate – in a number of states, there is an endorsement for homesharing for personal
property coverage for up to $10,000 for an approximate $50/year premium .
Airbnb “Host Guarantee” Program
 Started in 2012: provides up to $1 million coverage for hosts who incur property
damage.
 For property damage claims, a host is required to contact and try to resolve the claim
with the guest within 14 days. If it is unsuccessful, then the host must complete a Host
Guarantee Payment Request Form. Within 30 days, the host must also submit a sworn
proof of loss.
 Any recovery under the “Host Guarantee” program is reduced by collateral sources,
including any payments made by the responsible guest, the security deposit received by
the host, and any indemnity under an applicable insurance policy.
 Exclusions: Does not cover personal injury claims of third persons; loss of currency,
money, or precious metals, notes and securities; fine art; losses due to identity theft.
Airbnb “Host Protection Insurance” Program
 Started in 2015: Provides coverage for personal injury claims by guests and third
persons who are injured on the host’s premises during a booking.
 Provides up to $1 million in coverage per occurrence.
 Exclusions: Intentional acts; loss of earnings; personal and advertising injury; fungi or
bacteria; Chinese drywall; communicable diseases; acts of terrorism; product liability;
pollution; and asbestos, lead and silica.