National University of Modern Languages Lahore: Assignment# 3 Subject
National University of Modern Languages Lahore: Assignment# 3 Subject
Lahore
Assignment# 3
Subject
Insurance and Risk Management
Topic
Jeff Case Application
Submitted to
Ma’am Hania
Submitted by
Momna Amjad
Roll No#
L-1217
M.com (4)-M
Date:23/12/2020
Case Application
Jeff is a book dealer who purchased a building from Richard. Jeff obtained a loan from the
Gateway Bank to purchase the building, which held a mortgage on the building. Jeff planned to
store his inventory of books in the building. He also planned to use part of the building for a fast-
food restaurant. When Jeff applied for property insurance on the building, he did not tell the
agent about the fast-food restaurant because premiums would be substantially higher. Eight
months after the policy was issued, a fire occurred in the restaurant that caused substantial
damage to the building.
1. Jeff
Jeff has an insurable interest in the building at the time of loss because during the losses
events, Jeff has the ownership of property and in a position to suffer financial loss. In other
words, Jeff would lose financially if a loss occurs.
2. Richard
Richard doesn’t have any insurable interest of the building because at the time of losses, the
property is owned by Jeff. It can be insurable interest if Richard is the owner of the building
at the time of losses and suffer financial loss because of the substantial damage to the
property.
3. Gateway Bank
Gateway Bank has an insurable interest of the property because of the mortgaged building
serves as a collateral for the loan. The insurable interest has the exact amount like the unpaid
balance of the loan.
b. Richard told Jeff he could save money by taking over Richard’s insurance
instead of purchasing a new policy. Can Richard validly assign his
existing property insurance policy to Jeff without notifying the insurer?
Explain your answer.
Richard does not have an insurable interest in the building at the time of loss because he is
no longer owner of the building. He also has no legal liability or contractual rights
connected to the loss of the building.
c. Could Jeff’s insurer deny coverage for the fire loss based on a material
concealment? Explain your answer.
Yes, Jeff’s insurer can deny the coverage for the fire loss. Concealment is the act of hiding
or not putting forward any relevant fact in front of the insurer that needs to be revealed. An
insurance contract is backed with good faith between the insurer and the insured and all
materials facts create base for a strong insurance contract. Hence, concealment may lead to
risk for the insurer. Material concealment means deliberate hiding, non-disclosure or
suppression of a material fact or circumstance which one is legally bound to reveal with
intent to deceive or defraud in a contractual arrangement. The legal effect of material
concealment is the contract is voidable at the insurer’s option.