Insurance Law Commons^™

Enterprise Without Entities, Andrew Verstein

Michigan Law Review

Scholars and practicing lawyers alike consider legal entities to be essential. Who can imagine running a large business without using a business organization, such as a corporation or partnership? This Article challenges conventional wisdom by showing that vast enterprises—with millions of customers paying trillions of dollars—often operate without any meaningful use of entities.

This Article introduces the reciprocal exchange, a type of insurance company that operates without any meaningful use of a legal entity. Instead of obtaining insurance from a common nexus of contract, customers directly insure one another through a dense web of bilateral agreements. While often overlooked or …

Outsourcing Regulation: How Insurance Reduces Moral Hazard, Omri Ben-Shahar, Kyle D. Logue

Michigan Law Review

This Article explores the potential value of insurance as a substitute for government regulation of safety. Successful regulation of behavior requires information in setting standards, licensing conduct, verifying outcomes, and assessing remedies. In various areas, the private insurance sector has technological advantages in collecting and administering the information relevant to setting standards and could outperform the government in creating incentives for optimal behavior. We explore several areas that are regulated more by private insurance than by government. In those areas, the role of the law diminishes to the administration of simple rules of absolute liability or no liability, and affected …

Offsetting Risks, Ariel Porat

Michigan Law Review

Under prevailing tort law, an injurer who must choose between Course of Action A, which creates a risk of 500 (there is a probability of .1 that a harm of 5000 will result), and Course of Action B, which creates a risk of 400 (there is a probability of.] that a harm of 4000 will result), and who negligently opts for the former will be held liable for the entire harm of 5000 that materializes. This full liability forces the injurer to pay damages that are five times higher than would be necessary to internalize the risk of 100 that …

Private Insurance As A Solution To The Driver-Guest Dilemm, Harvey R. Friedman

Michigan Law Review

The duty of the driver of an automobile to his nonpaying passenger, and liability arising from the breach of that duty, has long presented a troublesome area of litigation for the courts and the parties involved. Application of standards unsuited for the peculiar risks of automotive transportation has produced inadequate compensation in some cases and excessive recoveries in others. Meanwhile, trial calendars are overcrowded with personal injury litigation, and insurance companies must bear the awards of sympathetic juries and those resulting from collusion between passenger and driver. The over-all expense of this method of determination of liability, far too little …

Concurrent Causation In Insurance Contracts, William Conant Brewer Jr.

Michigan Law Review

A great deal of work and thought has been devoted to concurrent causation problems in the field of torts. Less attention has been paid to the insurance cases, and no serious effort has been made to formulate the separate rules applicable to them. It is the thesis of this article that concurrent causation problems which arise under an insurance contract must be handled somewhat differently from those which arise in connection with tort litigation, and that the tendency to borrow rules of law from the larger tort field and apply them to the smaller volume of insurance cases can only …

Green: Traffic Victims. Tort Law And Insurance, Spencer L. Kimball

Michigan Law Review

A Review of Traffic Victims. Tort Law and Insurance. By Leon Green.

Insurance - Settlement - Extent Of Insurer's Liability For Wrongful Refusal To Settle When Subsequent Judgment Exceeds Policy Limits, Michael B. Lewiston

Michigan Law Review

The insured, while driving a borrowed truck, injured plaintiff and his wife. Defendant, insurer on a policy which contained liability limits of $10,000 per person and $20,000 per accident, was notified of the accident but refused to defend the subsequent suit against the insured on the ground that plaintiff's claim was not covered by the policy. Defendant refused an offer to settle the claim for $4,000 solely on the basis of its belief as to coverage, though it was aware that the insured was financially unable to effect his own settlement. A judgment of $25,000 for a plaintiff and $1,250 …

Liability Insurance - Cooperation Clause - Failure Of Cooperation Absent A Finding Of Prejudice, Edward B. Stulberg S.Ed.

Michigan Law Review

Plaintiff insurance company sought a declaratory judgment absolving it from obligation on an automobile liability insurance policy on the ground that there had been a breach of the cooperation clause. Johnston, the insured, was the driver of a car involved in an accident in Crawford County, Kansas, giving rise to substantial claims by defendant Elliott. At the request of Elliott's attorney, Johnston traveled from his home in Kansas to submit to service of process in Missouri. When plaintiff questioned this behavior, Johnston lied, denying that collusion had prompted his appearance in Missouri. On appeal from summary judgment for plaintiff company, …

Atomic Energy - Indemnity Legislation - Anderson Amendments To The Atomic Energy Act Of 1954, Dudley H. Chapman S.Ed.

Michigan Law Review

The Anderson Amendments were enacted to encourage private industry to enter the atomic energy field by removing the risk of excessive liability for a major nuclear reactor disaster. Such a disaster could result in liability far in excess of available insurance coverage. The solution provided by the new legislation has three aspects: (1) After private financial protection, geared to the amount of available insurance, is obtained by a person licensed by the Atomic Energy Commission, (2) the Commission will execute an agreement to indemnify (not insure) the licensee and "any other person who may be liable for public liability" to …

Insurance - Recovery - Delay Of Insurance Company In Rejecting Application For Insurance, Harry D. Krause S.Ed.

Michigan Law Review

Plaintiff, designated as beneficiary by deceased life insurance applicant, sued defendant life insurance company in assumpsit. Deceased, a combat pilot in the Korean War, had applied for one of defendant's policies, passed the medical examination, and made several premium payments on the policy. After the applicant was killed in combat defendant refused payment, contending that it had never accepted the risk but that it had responded to the application with a counter offer containing an aviation waiver. Because of ·the applicant's frequent change of address and his early death this proposal had never been communicated to him. On appeal from …

Insurance-Meaning Of 'War" In Insurance Policies, Richard W. Young S.Ed.

Michigan Law Review

In June 1950, United States military forces in Korea embarked upon an engagement that has been variously described as "war," "police action," "hostilities," and "defense against aggression." No declaration of war was made by Congress nor was a state of war proclaimed by the Chief Executive or our Communist adversaries. This unprecedented commitment of military forces in response to the recommendation of an international organization was consummated by unilateral Presidential action, with Congress only impliedly ratifying the step taken by enacting laws appropriating additional funds for the support of the armed forces in Korea. The ill-defined character of the conflict …

Insurance - Recovery - Land Contract Purchaser Allowed Recovery On Both Vendee's And Vendor's Policies In Excess Of Loss, Jerome K. Walsh, Jr.

Michigan Law Review

An owner of realty entered into a contract to sell the land to the plaintiff. The vendor then took out fire insurance on his interest in the amount of $6,000 and the plaintiff obtained a policy covering his interest in the sum of $12,000, with a "three-fourths value" clause. Before performance of the contract and transfer of title, a fire occurred which caused $12,000 damage to the property. After the plaintiff paid the full contract price and took title to the property, he demanded and received an assignment of the claim under the vendor's policy. Plaintiff then brought suit on …

Insurance - Subrogation - Group Hospital Service Organization, Douglas Peck

Michigan Law Review

Plaintiff, a non-profit hospital service organization, furnished services to defendant, a member of the organization injured in an automobile accident. Defendant thereafter entered into a settlement with the third party whose negligence had caused the accident and executed a release which included the hospital bill. Plaintiff then filed a bill in equity against defendant and the third party, claiming that on common law principles of subrogation it was entitled to recover from defendant all sums received by the defendant in settlement for the hospital services and from the third party the cost of the hospital services made necessary by the …

Federal Courts-Use Of A Cross-Claim Under Rule 13(G) Of The Federal Rules Of Civil Procedure, Rex Eames S.Ed.

Michigan Law Review

Under an ordinary automobile insurance policy, P insurance company promised to defend and indemnify Harvey for any suit arising from an accident involving his use of the insured truck. Collier sued Harvey in a state court alleging injuries due to the negligent use of the insured truck by two Harvey employees. Before judgment thereon, P, incorporated under the laws of Wisconsin, sued Harvey and Collier, citizens of Oklahoma, in the federal court. P sought a declaratory judgment on the grounds that (a) at the time of the accident the employees were under the control and supervision of the City …

Insurance-Insurable Interest-Joint Adventurers, Alan P. Goldstein S. Ed.

Michigan Law Review

Plaintiff and the deceased were operating an airplane commercially. Plaintiff had purchased the plane, and was paying the deceased $25 per week plus half of the profits of the venture. The deceased acted as pilot, and was instrumental in obtaining business. Plaintiff took out insurance on the plane, and also on the life of the deceased, although their only relationship was through the joint venture. The plane was wrecked and the deceased was killed while on company business. The claim for the plane was paid, but the defendant refused to pay on the life insurance policy, claiming that the plaintiff …

Judgments - Declaratory Judgments - Action For Declaration Of Noinliability Under Insurance Policy, Arthur M. Hoffeins

Michigan Law Review

Plaintiff insurance company sought a declaratory judgment that the person to whom its insured had transferred his automobile was not protected by the policy for damages caused to others, such transfer without the consent of the plaintiff being contrary to the terms of the policy. Held, that since by statute the insurer was made directly liable to the injured party, plaintiff was not entitled to a declaration of noncoverage, since it could not isolate one defense and try it in advance, leaving undecided issues involving the negligence of the person to whom the automobile was transferred. New Amsterdam Casualty …

Insurance - Conditional Vendor's Insurance - Effect Of Repair By Or Restoration To The Vendee Or Sub-Vendee, Michigan Law Review

Michigan Law Review

Plaintiff, a Minnesota corporation, purchased the vendor's interest in an automobile sold under a conditional sales contract. The defendant insured the plaintiff against direct loss or damage to the automobile by collision and/or upset. The vendee, without plaintiff's knowledge or consent, sold the car to a sub-vendee who drove it to Texas, became involved in an accident, and sold the wreckage to a resident of Texas who purchased in good faith. The car was rebuilt and resold. Plaintiff sued for the loss caused by the collision. Held, plaintiff may recover even though the car was repaired by others prior …

Insurance - Right Of Insurer Against An Insured Who Has Released The Tortfeasor After Receiving Payment From The Insurer, James A. Lee

Michigan Law Review

Plaintiff insured the defendant against loss on his car due to collision, paid its liability when the defendant's car was damaged by a third party, and took an assignment of plaintiff's claim against the third party to that extent. Defendant then released the third party from liability and plaintiff brought this action to recover the amount paid to the defendant. Held, plaintiff could recover from defendant only for the loss it had sustained by the release, and since plaintiff had failed to prove it could have recovered anything from defendant, it had shown no cause of action. Century Ins. …

Insurance - Automobile Insurance - "Passengers For Consideration", Jacob L. Keidan

Michigan Law Review

In an action upon an automobile liability insurance policy, defendant sought to avoid liability by proof of voluntary payments made to the insured by the plaintiff subsequent to the beginning of the trip. It was held that since no agreement for payment was made prior to the trip the insured was not then carrying "passengers for consideration" within the meaning of the clause contained in the policy for the purpose of protecting the insurer against such use of the vehicle. Reed v. Bloom, (D. C. Okla. 1936) 15 F. Supp. 600.

Insurance - Concept Of Indemnity As Limiting Recovery On Fire Insurance Policies

Michigan Law Review

In the case of Savarese v. Ohio Farmers' Insurance Co. the New York Court of Appeals recently held that a mortgagee, insured against fire loss under a standard mortgagee clause inserted in the policy of the owner, could recover on the policy despite the fact that the owner had gratuitously completely restored the premises after the fire. The court reasoned that to deny recovery would be to permit an act of the owner (mortgagor) to defeat the rights of the mortgagee, in contravention of the terms of the mortgagee clause; also that while a mortgagee has an insurable interest only …

Insurance - Estoppel - Parol Evidence Rule

Michigan Law Review

The plaintiff sued on a fire policy. The insurer defended on the ground that plaintiff had violated a condition of the policy which provided that there would be no liability if loss occurred while the property was encumbered by a chattel mortgage, unless the company's written consent thereto was endorsed on the policy. Plaintiff sought to estop the defendant as to this defense because of insurer's agent's assurances, given before and after the issuance of the policy, that the policy would permit him to encumber the goods. Held, defendant's demurrer to plaintiff's replication should be sustained because of plaintiff's …

Recent Important Decisions, Michigan Law Review

Michigan Law Review

Admiralty - Workmen's Compensation - Is a Hydroplane a Vessel? - Claimant was employed in the care and management of a hydroplane which was moored in navigable waters. The hydroplane began to drag anchor and drift toward the beach, where it was in danger of being wrecked. Claimant waded into the water and was struck by the propeller. Held, claimant is not entitled to compensation under the Workmen's Compensation Law, since a hydroplane while on navigable waters is a vessel, and therefore the jurisdiction of the admiralty excludes that of the State Industrial Commission. Reinhardt v. Newport Flying Service Corp. …