Question 1

In Mueller v. Wawanesa Insurance Co. , insurance had been taken out on a house when it was being used as a residential dwelling. The building was occupied by three members of a motorcycle gang. The insurance company was not notified of the change. What was the result when the house was destroyed by fire?

Accepted Answer

The failure to notify the insurance company of the change in occupancy voided the policy, as the new use constituted a material misrepresentation. Therefore, the insurance company was not obligated to pay for the loss.

Question 2

Which of the following is correct with respect to the meaning of an insurable interest?

Accepted Answer

An insurable interest means that the person taking out the insurance contract must be in a position that he will suffer a loss equal to the amount claimed if the insured-against event occurs. Simply stated, the person must be financially affected if the loss occurs.

Question 3

Which one of the following explains the effect of a co-insurance clause?

Accepted Answer

A co-insurance clause requires the insured to share a portion of any loss with the insurer. It specifies the percentage of the property's value that must be insured to avoid a penalty for under-insurance. If the insured decides not to cover the required percentage and suffers a partial loss, the insurer will pay out only a portion of the claim according to the percentage of the property's actual value that was covered. The insured will then be responsible for paying the remaining portion of the loss, based on the percentage that was not covered.

Question 4

Where a person owns a half interest in a house valued at $200,000 and has insurance on that property in the amount of $400,000, if the house burns down, causing a loss of $100,000, how much will that person collect?

Accepted Answer

The person will only collect insurance on their half interest in the property, which is $200,000. Since the loss was $100,000, the person will collect half of that amount, which is $50,000.

Question 5

Which of the following is not an appropriate matter for insurance coverage?

Accepted Answer

Insurance is not typically provided for the wrongful conduct of the insured, such as theft, because it would encourage illegal or unethical behavior. Insurance is meant to cover unforeseen and accidental events, not deliberate actions by the insured.

Question 6

Which of the following is correct with respect to the principle of subrogation as it relates to insurance law?

Accepted Answer

Subrogation refers to the principle that, if an insurance company pays out on a policy, they assume all of the rights of the insured against the person causing the loss. This allows the insurance company to pursue legal action against the responsible party in order to recover the amount they paid out to the insured.

Question 7

Joe entered a store and approached a display of china. He was examining an extremely valuable vase and carelessly dropped it, destroying it. Which of the following is correct with respect to his liability?

Accepted Answer

If the store has insurance coverage, the insurance will pay the store for the loss, but the insurance company can then go after Joe for repayment by suing him for negligence. Joe is responsible for his careless conduct regardless of whether the store has insurance coverage or not. Therefore, options A, B, and D are incorrect. Option C is also incorrect because although Joe is not a party to the insurance contract, he is still liable for his actions.

Question 8

Business interruption insurance is designed to cover which of the following situations?

Accepted Answer

Business interruption insurance is designed to cover losses resulting from interruptions to the normal operation of a business. In option C, the business is destroyed by fire and cannot operate for several months, resulting in a significant loss of revenue. Business interruption insurance would cover the losses incurred during this time. Options A, B, D, and E are not situations that would be covered by business interruption insurance.

Question 9

Which of the following statements does not describe the standard expected of experts?

Accepted Answer

The standard of an expert is not always based on common practice. Rather, an expert is expected to exercise his or her professional judgment to meet the necessary standard, which may not always align with common practice.

Question 10

Although there was no carelessness on the part of Mr. Tam, and although he had no intention of harming anyone, he could still be sued by someone harmed by dangerous substances that escaped from his property. This is an example of what tort or what principle of tort law?

Accepted Answer

This scenario describes strict liability, which is the principle that holds individuals or companies responsible for harm caused by their actions or products, regardless of whether they were negligent or not. In this case, Mr. Tam could be held liable for any harm caused by dangerous substances that escaped from his property, even if he was not aware of the potential danger or did not intend to harm anyone.

Question 11

To win his action in negligence against a professional person, the plaintiff must prove, among other things, that the defendant's conduct was below an acceptable standard of care. Which of the following is the legal standard of care demanded of a professional person?

Accepted Answer

The legal standard of care demanded of a professional person is that he act as may reasonably be expected of the normally skilled professional in that class. This means that the defendant's conduct will be measured against the conduct of other professionals in that industry, and the defendant will be expected to act with the same level of skill and knowledge as his peers. Options B and C are too subjective and do not provide a clear standard to measure the defendant's conduct against. Option D is the standard of care for non-professionals and would not be appropriate for a professional person. Option E is a combination of option A and B, but the requirement of sincerity is unnecessary and not part of the legal standard of care for a professional person.

Question 12

Jack works as a financial-planning consultant for Adco Ltd., a company that provides financial advice to its clients. At a three-martini lunch with Benson, one of Adco's clients, and Carson, a friend of Benson's, Jack mistakenly advised Benson to buy shares of Moose Jaw Mining because he thought that Adco had investigated the prospects of the company. In fact, Adco had investigated Goose Jaw Mining and was recommending it to its clients. As it turned out, Benson ignored Jack's advice but Carson bought a lot of Moose Jaw shares and lost all of his money when the mining operation went broke. Which one of the following statements accurately describes Carson's legal situation?

Accepted Answer

Jack, as a financial-planning consultant, owed a duty of care to his clients to provide accurate and informed advice. In this case, he breached that duty by providing incorrect advice. Carson, as someone who relied on Jack's advice, could potentially bring a claim against him for negligent misrepresentation. However, Carson would need to establish that he suffered a loss as a result of Jack's advice and that he relied on that advice in making his investment decision. The fact that Jack was drinking during the lunch would not excuse him from liability, as he still had a duty to provide accurate advice regardless of his personal capacity. Benson cannot be held liable as he did not give the advice, and there was no contractual relationship between him and Carson.

Question 13

In Heitsman v. Canadian Premier Life Insurance Co., an insurance company denied coverage on the basis of an ambiguous exclusion of liability clause. What did the Court find?

Accepted Answer

The Court applied the contra proferentum rule, which dictates that ambiguous clauses in a contract should be interpreted narrowly against the party that drafted the clause. Therefore, the exclusion of liability clause was interpreted narrowly in favour of the insured.

Question 14

To have the schools valued for insurance purposes, a school district hired a firm of surveyors to give them a statement of value. To prepare the report, the surveyors took the relevant measurements, which were then given to a statistical tabulating company that does the calculations based on the measurements. Surveyors always use the services of such tabulating companies. An error was made in the calculations, so the surveyor's report was wrong. Therefore, the buildings were under-insured. When one of the school buildings was destroyed by fire, the school district did not get sufficient funds from the insurance company to rebuild the school. On these facts, which of the following is true? (Assume that the school district has the ability to sue and be sued in court.)

Accepted Answer

The school district can pursue a claim for negligent misstatement against the statistical tabulating company, as the error in the calculations led to under-insurance and subsequent economic loss. The school district may also potentially have a claim against the surveyors for professional negligence in subcontracting the calculation work, but this is not mentioned as a choice in the question. Option A (nuisance) and Option B (Small Claims Court) are not relevant in this scenario. Option E (statistical tabulating company cannot be sued) is incorrect as they can be sued for negligent misstatement causing economic loss.

Question 15

In which one of the following would Joe be able to collect the entire amount of insurance claimed?

Accepted Answer

The answer of In which one of the following would...

Question 16

In Walton v. General Accident Insurance Co. of Canada, the home the Waltons lived in was destroyed by fire. The Saskatchewan Court of Appeal found that the Waltons had no legal or equitable right to the property. What was the result?

Accepted Answer

The court found that the Waltons had no legal or equitable right to the property, meaning they did not have an insurable interest. Therefore, they had no right to payment from the insurance company.

Question 17

An employee prepared an appraisal of a property for his real-estate development company. The employee had been told that the appraisal would be used by the company to attract a potential investor, Mr. Jones, for the company's client, Mr. Lee. Because the appraiser carelessly forgot to check the recent changes in the zoning by-laws, the appraisal was not accurate. Mr. Jones was misled about the value of the land and suffered a financial loss of $20,000. On these facts, which of the following is true?

Accepted Answer

To succeed in an action against the appraiser, Mr. Jones must establish the elements of the tort of negligence. This involves proving that the appraiser owed him a duty of care, that the appraiser breach that duty by failing to exercise reasonable care, that Mr. Jones suffered a loss that was foreseeable as a result of the breach, and that Mr. Jones relied on the information provided by the appraiser. The fact that the appraisal was prepared for the employer company does not preclude an action in negligence against the appraiser individually. The other answer choices are incorrect.

Question 18

In Hodgkinson v. Simms, an accountant advised a client to invest in a real estate development while also acting for the developers. What did the Supreme Court of Canada find?

Accepted Answer

The Supreme Court of Canada found that the presence of loyalty, trust and confidence were the identifying features of a fiduciary relationship and, in this case, the accountant's actions on behalf of both the client and the developers imposed a fiduciary duty towards the client. The court emphasized that a fiduciary relationship could arise in commercial circumstances, such as those found in this case.

Question 19

Sumanthra, an accountant, prepared financial statements for ZeeTech Ltd. A cutting edge technology company, ZeeTech was actively seeking private investment in order to finance a new electronics device. Despite the fact that Sumanthra followed Generally Accepted Accounting Principles (GAAP), the statements she prepared were misleading. Arif and Alena, both potential investors, relied on the statements Sumanthra had prepared. As a result of their reliance, Arif and Alena both invested in ZeeTech and lost a considerable sum of money. Independently, Arif and Alena decided to sue Sumanthra for their financial loss. Which of the following is true?

Accepted Answer

Following GAAP does not necessarily mean that financial statements are not misleading. Sumanthra can still be held liable for any financial loss resulting from the misleading statements she prepared, even if she followed GAAP.

Question 20

In which of the following cases is a duty not owed?

Accepted Answer

A duty is generally not owed in situations where a person merely sees another in need of assistance unless there is a special relationship or other legal obligation to act.

Quiz 5: Negligence, Professional Liability, and Insurance Law