Jennifer and David signed a homeowners insurance application for coverage on their home. They did not divulge that last year their garage burned down after their 16-year-old son left a cigarette burning. The agent sent in the application and a policy was issued. When another fire occurred 2 months after the policy was issued, the company voided the policy because the agent would not have sent in the application if he had known of the prior loss. Which contract principle does this situation describe?

A) Waiver and estoppel.

B) Reasonable expectations.

C) Utmost good faith.

D) Contract of adhesion.

Answer: C

The Insurance Contract

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An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?

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A domestic insurer issuing variable contracts must establish one or more
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The pro rata liability clause is designed to protect the principle of
The two major actions required for a policyholder to comply with the Reinstatement Clause are
Life insurance policies will normally pay for losses arising from
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE
Ambiguities in an insurance policy are always resolved in favor of the
In an insurance contract, the applicant's "consideration" is the
Agents may be found guilty of defamation if they make a false statement that is intended to?
How many pair of glasses in a 12-month period will a vision expense insurance plan cover?
The voluntary relinquishment of a legal right is called
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What documentation grants express authority to an agent?

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An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?

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