Deck 17: Personal Property: Bailment and Insurance

Question 1

Meena gave a widget to Speedy Fixit Inc for repairs.She assumed,without much thought that the repairs would be done by Speedy itself.In fact,Speedy sent the widget to Niagra Repairs Ltd to have the work done.The widget was lost while it was in the possession of Niagra.If Meena agreed to a sub-bailment,she may be allowed to subsequently sue Niagra for the loss.

Answer 1

True

Question 2

In determining whether or not a chattel has become affixed,a court is usually most influenced by the value of the chattel.

Answer 2

False

Question 3

Boyd lost a diamond ring in the lobby of a hotel.Carmel,a guest at the hotel,found it.Both Carmel and the hotel claim the right to possess the ring.If Boyd cannot be located,a court would probably favour Carmel over the hotel.

Answer 3

True

Question 4

A person may have an insurable interest in a piece of property even if they do not own that property.

Question 5

Trans-Geo Inc is a business that operates in a number of different ways.Most commonly,however,it moves goods for customers from one part of the country to another.It necessarily will be considered a common carrier whenever it does so.

Question 6

Tara operates a small computer design business.Her primary asset is her computer system,which she bought four years ago for $10 000.She bought property insurance with respect to that machine.Tara's computer was recently stolen.Her insurance policy covers loss by theft and the insurance company admits that it must pay a benefit to Tara.The concept of indemnification necessarily means that Tara will receive either $10 000 or the price of a new computer that is at least as good as her old computer was when it was new.

Question 7

Chiko has possession of a ring.He is entitled to keep it if

A)he bought it from a thief in the honest belief that the thief was the true owner.
B)he found the ring while trespassing on private property.
C)he stole it.
D)he found it on public property and the true owner cannot be located.
E)he received it as a gift,but only if the person who gave it to him had previously acquired it by purchase.

Question 8

Taj borrowed a widget from Dhanna.Even though the relationship was a bailment,rather than a sale,both Taj and Dhanna may be required to exercise "reasonable care" in some sense.

Question 9

A court has determined that Geo-Trans Ltd is a common carrier.Because of that special status,the Canada Transport Commission will prevent Geo-Trans Ltd from inserting any exclusion clauses into the contracts that it uses with its customers.

Question 10

The distinction between real property and personal property consists of the fact that real property can never be physically picked up and moved from place to place,and personal property can always be physically picked up and moved from place to place.

Question 11

Which of the following statements is TRUE?

A)Chattels are a type of real property.
B)Real property can be touched,while personal property consists of things,like debts,that cannot be touched.
C)"Chose in possession" is another name for personal property,just as "chose in action" is another name for real property.
D)All forms of property are tangible.
E)Real property is immoveable.

Question 12

Alameda owned a painting.The painting was totally destroyed in a fire.The law will say that he lost his property rights in the painting even if he has first party insurance.

Question 13

Kalinda parked her car on Dev's land.In deciding whether the parties have created a licence,rather than a bailment,a court would look exclusively at the price (if any)that Dev charged Kalinda.If the price was above market value,a bailment was created.Otherwise,a licence was created.

Question 14

Which of the following things does Hannah own?

A)A bicycle that she bought last year but abandoned by the side of a road yesterday.
B)A fox that runs wild on a piece of land that she owns.
C)A set of kitchen cupboards that she purchased and installed in an apartment that she rents.
D)A litter of puppies that was created when her Great Dane,Jake,impregnated a poodle who lives next door.
E)A coat that she received as a gift from her former friend,George,who now insists that,since the friendship is over,ownership must return to him.

Question 15

The word "bailment" is derived from words that mean "to pay for the release" in French.

Question 16

A bailee is always entitled to exercise a right of sale if a bailor does not pay a price associated with a bailment relationship.

Question 17

Veda owned a diamond necklace.She entered into an insurance contract for coverage of the necklace.Under the terms of that contract,she was required to pay $500 per month.After Veda paid the premium for two months,the necklace was stolen.Her insurance policy covers loss by theft and the insurance company admits that it must pay a benefit to her.That policy,however,contains a "deductible." This means that the benefit that Veda is entitled to receive from the insurance company will be reduced by the amount that she actually paid as premiums: $1000.

Question 18

Rose and Caradoc were romantically involved for several years.During that time,she gave a necklace to him.The couple had a terrible fight and broke up.Because he no longer wanted anything to do with Rose,Caradoc threw the necklace into a garbage can that was located in the main hall of a railway station.That station is owned by the Regional Transport Authority (RTA).Francis saw the necklace in the garbage and took it home with him.All four parties now claim the right to possession of the necklace.Which of the following statements is most likely TRUE?

A)Rose is entitled to the necklace as long as she paid for it initially.
B)Francis is entitled to the necklace as long as he intended to exercise control over it.
C)RTA is entitled to the necklace as long as the garbage can was located on its property.
D)Caradoc is entitled to the necklace as long as he has honestly changed his mind and truly does want possession of it.
E)The necklace is co-owned by two of the parties.

Question 19

What is the difference between a chose in action and a chose in possession?

A)A chose in action always pertains to land,but a chose in possession does not.
B)A chose in action is a living thing,such as a plant,whereas a chose in possession is a non-living thing,like a diamond or a book.
C)A chose in action can only be enforced through legal proceedings,whereas a chose in possession can be enforced by lawful physical force.
D)Canadian law recognizes choses in possession but not choses in action.
E)A chose in action is a thing that can be moved,while a chose in possession is a thing that must remain in one place.

Question 20

Kiran placed a widget with Laila under the terms of a bailment.The widget was lost while it was in Laila's possession.The burden of proof may shift,so that Laila is required to prove that the loss was not her fault,even if she was not a common carrier.

Question 21

Darcy received a widget from Rachel under a bailment.The widget was damaged while it was in his possession.As a result,Rachel has sued Darcy.Which of the following statements is TRUE with respect to Darcy's liability?

A)If the bailment was for Rachel's benefit,Darcy cannot be held liable.
B)Darcy will be treated as an insurer if the bailment was both gratuitous and for his benefit.
C)Once Rachel proves that the widget was damaged while in Darcy's possession,the burden of proof necessarily will shift.
D)If the burden of proof shifts to Darcy,he cannot possibly avoid liability by merely proving that he exercised reasonable care.
E)If Darcy is a common carrier,then he may be relieved of liability if the damage was caused by an act of God.

Question 22

The word "chattel," as used in the text,

A)applies to tangible forms of real property.
B)refers to a thing that cannot be held under a bailment.
C)applies to the rights represented by the cheque but not to the cheque itself.
D)refers to things that are affixed to land and that consequently are owned by the person who owns the land.
E)is derived from the root word for "cattle."

Question 23

Tamika rented a warehouse from Lester.During the life of the lease,she attached shelves along the interior walls.The lease has expired.Each party claims to own the shelves,which are still in place.In deciding the case,a judge would be MOST influenced by

A)the extent to which the shelves were attached to the walls (for instance,whether they were merely resting against the walls or whether they were bolted in).
B)the fact that the terms of the lease gave ownership or rights to one party regarding trade fixtures,even though the lease has expired in the sense that Tamika is no longer entitled to possession of the premises.
C)the value of the shelves,as compared to the value of the land.
D)the fact that Tamika genuinely wants to use the shelves in another warehouse.
E)the fact that Lester's next tenant will want to use the shelves.

Question 24

Chasya rented a widget from Alec.During the rental period,the widget was involved in an accident.Which of the following statements is TRUE?

A)The parties' rights with respect to the accident are probably governed by the Sale of Goods Act.
B)Since the transaction was not intended to transfer title,Alec could not have been required to warn Chasya with respect to the use of the widget.
C)If the widget was damaged during the accident,Chasya necessarily will be treated as an insurer.
D)If the accident was caused by the fact that the widget was defective,Chasya may be entitled to recover damages for personal injuries that she suffered during the accident,but only if Alec actually knew of the defect before providing Chasya with possession of the widget.
E)If Alec sues for the damage done to the widget,the court may shift the burden of proof by requiring Chaysa to prove that the damage was not her fault.

Question 25

A bailment relationship was created between Vijay and Amanda.It was intended to last for two weeks.That period has expired.Amanda now claims that she is entitled to exercise a lien.Which of the following statements is TRUE?

A)Amanda was probably the bailor.
B)A lien can exist only if it was created by statute.
C)If Amanda is entitled to enforce a lien,she is also entitled to exercise a right of sale.
D)A lien does not exist if the goods were legitimately returned to their owner at the end of the bailment.
E)Amanda must be a common carrier.

Question 26

Chinthaka received a widget from Melissa.A true bailment was created if

A)he stole it from her.
B)he rented it from her.
C)he found it after she misplaced it.
D)she gave it to him as a gift.
E)she sold it to him.

Question 27

Rohan created a bailment by providing goods to Hi-way Transport Co (HTC),which is a common carrier.The goods were damaged during the bailment.Which of the following statements is TRUE?

A)The bailor is treated as an insurer.
B)HTC may be held liable only if there is proof that it was at fault.
C)Given the nature of the parties' relationship,HTC cannot be protected by an exclusion clause.
D)HTC cannot be considered a common carrier if it occasionally turns away business because it lacks space.
E)If Rohan's goods are covered by first party insurance,his insurer may eventually be entitled to receive money from HTC.

Question 28

Pan-Canada Delivery Inc is a common carrier.It accidentally damaged an expensive shipment of goods.Nevertheless,it cannot possibly be held liable if

A)it exercised as much care as possible.
B)the damage was caused by a rainstorm.
C)the shipping contract contains a clause that says that "liability will not be imposed for lost goods,whether or not the loss was caused by the carrier's carelessness or fault" and no more.
D)the goods were damaged by an inherent vice.
E)the shipper provided consideration in exchange for Pan-Canada's services.

Question 29

Which of the following statements is TRUE with respect to property insurance?

A)A benefit paid by an insurer to an insured is called a premium.
B)Property insurance is called third party coverage if one person buys insurance with respect to property that is owned by another person.
C)Property insurance is called first party coverage only if the insurer sold the policy to a human being,rather than a corporation.
D)A benefit may be paid under a property insurance policy even if the insured is entitled to sue a third party for causing the loss or damage in question.
E)Property insurance is available for real property,but not personal property.

Question 30

Sandor bought property insurance from Athena Insurance Corp five years ago.A dispute has arisen between the parties regarding the duty of utmost good faith.That most likely means that

A)the policy may be invalid if Sandor was not entirely candid with the insurer when he bought the policy.
B)special rules apply because the policy was purchased with respect to sacred religious objects.
C)Athena Insurance Corp denies that it received a cheque for the payment of Sandor's annual premium.
D)Sandor is not entitled to receive a benefit for loss that did not occur.
E)Athena Insurance Corp is not really an insurance company.

Question 31

Gamma Ltd owns a widget.It purchased property insurance from Atlantic Insurance Co.The widget was recently destroyed by a fire.It was worth $75 000,and it will cost that much to replace it.Both parties agree that that loss falls within the terms of the policy.Nevertheless,a dispute has arisen regarding a $5000 deductible.That most likely means that

A)Gamma Ltd failed to pay a premium worth $5000.
B)Atlantic Insurance Co claims that the fire was caused by a third party and that Gamma Ltd must sue that third party in tort instead of claiming a benefit under the policy.
C)Atlantic Insurance Co claims that Gamma Ltd is entitled to receive $70 000.
D)if Atlantic Insurance Co sues a third party in tort for causing the fire that destroyed the widget,the costs of that litigation will be deducted from the benefit that Gamma Ltd is entitled to receive.
E)the benefit that Gamma Ltd is entitled to receive under the policy will be reduced to the extent that the widget can be sold for scrap material.

Question 32

A bailment was created between Owen and Padma.The bailment involved the storage of a widget for 12 months.The price for storage was $1000 per month.At the end of the year,only $5000 had been paid in total.The widget was worth $10 000.It was sold for that amount under a lien and right of sale.Ignoring the costs associated with the enforcement of the lien and the right of sale,when the sale proceeds are distributed,the bailor will be entitled to receive

A)$1000.
B)$3000.
C)$7000.
D)$10 000.
E)$12 000.

Question 33

If property is lost or damaged during a bailment,the burden of proof may shift.Which of the following statements is TRUE with respect to that rule?

A)If the burden of proof shifts,it moves from the bailor to the bailee.
B)The rule allowing the burden of proof to shift was originally based on the desire to discourage unwarranted lawsuits.
C)The burden of proof shifts only if the bailment involved a common carrier.
D)The burden of proof shifts only if neither party can explain how the property became lost or damaged during the bailment.
E)The usual effect of shifting the burden is to transform the transaction from a rental into a sale.

Question 34

Trans-Man Shipping,which is based in Winnipeg,offered to deliver "anything,anywhere anytime." Rosie entered into a contract with Trans-Man Shipping to send an antique phonograph from Portage La Prairie to Brockville.The phonograph was lost in transit.Rosie claimed the value of the phonograph under a policy that she had purchased from The Pas Insurance Co.Despite the loss,Trans-Man Shipping feels protected from the effects of liability by a policy that it purchased from Brandon Insurance Co.Which of the following statements is most likely TRUE?

A)Trans-Man Shipping can be held liable only if it deliberately or carelessly damages the phonograph.
B)If one insurance company is compelled to pay a benefit,the other could not possibly be compelled to pay a benefit.
C)Rosie purchased a third party insurance policy.
D)Trans-Man Shipping acted as a bailor.
E)The Pas Insurance Company sold a first part insurance policy.

Question 35

The concept of indemnification

A)means that the benefit paid under a policy is always large enough to allow the insured to buy a new piece of property as replacement for the one that was damaged or lost.
B)applies only if the premiums that the insured paid are equal to the value of the property that was lost or damaged.
C)usually leaves the insured with a small profit.
D)is important to the concept of an insurable interest.
E)is relevant to third party coverage but not first party coverage.

Question 36

Which of the following statements is TRUE with respect to sub-bailments?

A)Because of the doctrine of privity,it is possible to have a sub-bailment,but not a sub-sub-bailment.
B)A sub-bailment must be contractual in origin.
C)A sub-bailment can occur with the bailor's implied or express consent.
D)A sub-bailee is always considered an insurer for the purposes of the standard of care.
E)Every person who is a bailor must also be a bailee.

Question 37

Adrienne wanted to place her jewels,which were valued at $100 000,in safe storage while she was on vacation.For that purpose,she gave them to Saul,a jeweler.Since Saul did not actually have safekeeping facilities,he gave Adrienne's jewels to Jeannie.Since Jeannie did not have safekeeping facilities either,she simply placed the jewels in her desk drawer.The jewels were stolen from that drawer by an unknown thief.The evidence indicates that Saul knew that Jeannie did not have proper safekeeping facilities.Adrienne had the jewels fully insured against loss or theft under a policy that she purchased from Rideau Insurance Co.Saul has liability insurance that he bought from Wellington Insurance Ltd,but Jeannie does not have any insurance.The evidence indicates that both Saul and Jeannie acted carelessly.Which of the following statements is most likely TRUE?

A)Adrienne will likely receive $100 000 from Saul and $100 000 from Jeannie.
B)Adrienne will receive $300 000,consisting of $100 000 from Saul,$100 000 from Jeannie,and $100 000 from Rideau Insurance Co.
C)If Saul and Jeannie are both successfully sued,Rideau Insurance Co will be entitled to receive a total of $100 000,entirely from one,or part from each.
D)If Saul and Jeannie are both successfully sued,they both will be personally required to pay $50 000 to Adrienne.
E)If Adrienne claims a benefit under her insurance policy,she will receive $100 000,plus the amount that she paid to Rideau Insurance Co in premiums.

Question 38

Acme Corp owns an expensive widget.Which of the following statements is TRUE?

A)If Acme Corp intentionally abandons the widget,you will be entitled to keep it for yourself only if you take possession of it without actual knowledge that it had been abandoned.
B)If a thief steals the widget and sells it to you,Acme Corp can sue you for the tort of conversion,unless you acted honestly.
C)If Acme Corp loses the widget,and you find it but are unable to determine its true owner,you will be able to sue me for the tort of conversion if I forcibly take it from you.
D)If you take the widget in the reasonable belief that it belongs to you,Acme Corp will not be able to sue you for the tort of conversion.
E)If Acme Corp created the widget,then the widget will not have an owner unless and until someone buys it from the company.

Question 39

The creation of a bailment depends upon proof that

A)the bailee delivered something to the bailor.
B)the bailor was in the business of dealing with the type of goods in question.
C)at least one of the parties owned the property at all times.
D)the parties intended to transfer ownership.
E)the bailor delivered something to the bailee.

Question 40

Anna wanted goods moved from Vancouver to Halifax.For that purpose,she gave them to Boris,who operates an independent trucking business.When Boris reached Winnipeg,his truck broke down.To fulfill his contract with Anna,he gave possession of the goods to Carl,with instructions to deliver them to Halifax.The goods were destroyed while they were in Carl's possession.Which of the following statements is TRUE?

A)If Anna did not consent to Carl's possession of the goods,Boris can successfully sue Carl and retain the damages for himself.
B)If Anna consented to Carl's possession of the goods,she can successfully sue him even if he had no way of knowing that the goods belonged to someone other than Boris.
C)If Boris and Carl are both common carriers,Boris will be treated as an insurer,but Carl will not,because only Boris dealt directly with Anna.
D)If the contract between Boris and Carl contained an exclusion clause,there is no way that Anna can be bound by it.
E)Even though he did not own the property,Boris may sue Carl,but if the court awards damages,then Boris must receive that money on behalf of Anna.

Question 41

Which of the following statements is TRUE?

A)Hacker insurance provides protection from losses that may be caused by computer viruses.
B)Business interruption insurance is generally used to hire and train a replacement if a key member of an organization dies unexpectedly.
C)A surety bond generally provides coverage if an employee steals something from a business or its customer.
D)A fidelity bond is generally used to assure a customer that compensation will be available if a project is not completed on schedule.
E)Key person insurance usually applies after the owner of a business or the director of a company is convicted of a crime.

Question 42

Jermaine borrowed Lola's boat for a week.Before handing over possession,Lola stressed that she did not want anyone other than Jermaine to drive the boat.Jermaine agreed to that condition.Shortly before the week was about to end,however,Jermaine allowed Xavier to take the boat on a solo cruise around the lake.In doing so,Jermaine broke his promise to Lola,but he did exercise every precaution.Before handing the boat over to Xavier,Jermaine made sure that Xavier was experienced,competent,and careful.Unfortunately,even though both Jermaine and Xavier exercised reasonable care,the boat was badly damaged in a freak accident.Which of the following statements is TRUE?

A)Xavier is liable to Lola,but Jermaine is not.
B)In order to determine liability,a judge would consider,in part,whether there was a licence or a bailment arrangement between Jermaine and Lola.
C)Like all sub-bailees,Xavier is strictly liable for any damage done to the property.
D)Xavier is entitled to use the defence of jus tertium.
E)Neither Jermaine or Xavier can be held liable if Lola was paid a price in exchange for allowing Jermaine to use the boat.

Question 43

Inez is going on a one-month trip to Europe.Because she generally parks her car on the street,she asks her brother,Edgar,if she can park her car on his driveway.She gives him her keys to store,but tells him under no circumstances is he to drive the car.She lets him know that she will be there to pick it up as soon as she gets back.A judge would find that Inez has most likely created

A)a bailment.
B)a consignment.
C)a contract.
D)a license.
E)a lease.

Question 44

Acme Moving Inc contractually agreed to move Jed's property from Vancouver to Halifax.When the property arrived in Halifax,it was badly damaged.Jed has sued Acme,claiming compensation for his loss.Acme believes,however,that it has an effective defence to that claim.Jed disagrees.Which of the following statements is TRUE?

A)The defence of "inherent vice" will apply only if Jed's property was something like heroin that is illegal to possess.
B)Because of the potential for abuse,Acme may rely upon a contractual clause that reduces liability,but not a contractual clause that entirely eliminates liability
C)Acme may not be held liable Jed's property was damaged by an "act of God" and Acme was a common carrier.
D)The concept of "shipper's fault" means that Acme cannot escape liability if it deliberately damaged Jed's property.
E)Acme cannot possibly avoid liability on the basis of a defence because,for policy reasons,companies in its position are absolutely liable for any damage that they cause.

Question 45

A cat continually comes to Xavier's back door,so he decides to keep it.Which of the following is true?

A)If the cat belongs to someone else,Xavier has no property rights.
B)Xavier has property rights as long as the cat doesn't have any tags.
C)If the cat belongs to someone else,Xavier has rights over the cat effective against everyone but the original owner.
D)Xavier has rights over the cat under the rule of finders keepers,losers weepers.
E)Xavier cannot have property rights over a living thing.

Question 46

Zelig owns a widget worth $25 000.He purchased property insurance from Superior Insurance Co.The widget was irreparably damaged as a result of an accident that was caused by Zoe.Zoe has a liability insurance policy from Erie Insurance Co.Which of the following statements is TRUE?

A)Zelig cannot claim a benefit from Superior Insurance Co unless Zoe caused the accident in a way that exposed her to liability in tort.
B)If it is required to pay a benefit of $25 000 to Zelig,Superior Insurance Co can claim the same amount of money from Erie Insurance Co even if Zoe could not be held liable to Zelig for damaging the widget.
C)If Superior Insurance Co sues Zoe,it will do so on the basis of the concept of contribution.
D)The concept of subrogation means that if Zelig successfully sues Zoe in tort,she will be able to claim a benefit from Superior Insurance Co.
E)If Superior Insurance Co pays a benefit to Zelig,it will be entitled to exercise subrogated rights against Zoe.

Question 47

Aziz abandoned a bicycle by the side of the road with the intention of never seeing it again.Brian saw the bike a short time later and took possession of it with the intention of keeping it.When he was not riding it,Brian regularly left the bike on the sidewalk in front of his apartment building.One night while he slept,Celeste took the bike,with the intention of keeping it for herself.A week later,however,Dharma grabbed the bike from out of Celeste's hands.When she complained,Dharma said that since she had stolen the bike,she had no rights in it.Which of the following statements is TRUE?

A)The bike is still owned by Aziz.
B)Brian has the best right to the bike.
C)Dharma has a better right to the bike than does Celeste.
D)Aziz has a better right to the bike than does Celeste.
E)A court would resolve this case by relying upon the maxim of nemo dat quod non habet.

Question 48

As defined in Chapter 17,a "licence" is

A)an obligation to act reasonably.
B)a right to inflict a financial loss upon another party.
C)always granted by a government official.
D)always applies with respect to an interest in land.
E)allows a person to act in a way that otherwise would be considered wrongful.

Question 49

PUG Manufacturing needs to ship steel pipe valves from Regina to Montreal.They contract a common railway carrier.When the goods arrive,half of the valves are damaged.Which of the following is false?

A)The carrier is not liable if PUG did not mark the valves as fragile.
B)The carrier is not liable if the damage was caused by an act of God.
C)The carrier may have limited its liability with an exclusion clause.
D)It is possible that the carrier is fully liable.
E)PUG should have insurance to cover the loss.

Question 50

The phrase "nemo dat quod non habet "

A)applies to real property,but not to personal property.
B)is generally ineffective with respect to money.
C)applies only in equity.
D)is a concept that arises only in insurance law.
E)means that a person who has possession of property under a bailment must use reasonable care.

Question 51

Alan purchased a piece of land from Zirka.He used a cheque to pay for the price.Which of the following statements is TRUE?

A)The piece of paper that Zirka received is a chose in action.
B)The land that Alan purchased is a type of chose in possession.
C)The rights represented by the cheque are a type of intangible property.
D)The rights represented by the cheque are a type of chattel.
E)The land is a chose in action.

Question 52

Naomi owned an inventory of widgets worth $100 000.She purchased $40 000 worth of property insurance from Huron Insurance Co.That policy contained a co-insurance clause that required at least 80 percent coverage.A flood caused extensive damage to Naomi's widgets.Naomi will be entitled to receive a benefit of $20 000 if the flood caused damage worth

A)$20 000.
B)$30 000.
C)$40 000.
D)$60 000.
E)$80 000.

Question 53

Melanie brought a box full of old clothes to Second Hand Duds (SHD).SHD agreed to sell the clothes on consignment.This means that

A)SHD accepted the clothes as payment of a debt that Melanie owed to it.
B)SHD has become a bailor.
C)Melanie will own the clothes until they are sold by SHD to a customer.
D)Melanie must be an employee of SHd.
E)SHD became an owner with a defeasible title.

Question 54

The concept of an insurable interest

A)is aimed at avoiding moral hazards.
B)prevents an insurance company from selling a policy to anyone other than the owner of a piece of property.
C)creates an important general exception to the general rule of indemnification.
D)is relevant only in cases of co-insurance.
E)was abolished by the Supreme Court of Canada's decision in Kosmopoulos v Constitution Insurance Co.

Question 55

Which of the following statements is TRUE with respect to insurance?

A)First party insurance and third party insurance may both apply to the same set of events.
B)The phrase "third party insurance" refers to the fact that an insurance company used an agent to sell a policy to a customer.
C)The phrase "first party insurance" refers to the fact that the insured party must immediately contact the insurance company after being sued for a type of loss that the insurance policy covers.
D)Liability insurance imposes a duty of utmost good faith on the insured party,but property insurance does not.
E)The phrase "self-insure" refers to the fact that a company has purchased an insurance company that covers all of its employees,rather than requiring those employees to individually insure themselves.

Question 56

Aimee has just received a diamond ring from her husband as a gift.She is worried that while she is at her cottage for the weekend,someone might steal it.She asks her friend,Gladys,to put the ring in her safe,saying that she would give Gladys $100 to hold it for three days.On the weekend,Gladys' house is robbed and the ring is taken.Which of the following is true?

A)Aimee must prove that Gladys was to blame for the loss.
B)Gladys is liable because the bailment creates a guarantee.
C)Gladys will be treated as an insurer if the bailment was both gratuitous and for her benefit.
D)Gladys had a low requirement for the level of care because the bailment was between friends.
E)Gladys would most likely be able to prove that she provided ample care for the ring.

Question 57

Which of the following statements is TRUE with respect to statutory liens that apply in the context of bailments?

A)The legislation provides a lien to every type of bailee,as long as the bailment is not gratuitous.
B)The statutory lien provides a right to retain possession,but not a right of sale.
C)Statutory liens are restricted to "common callings," such as innkeepers and common carriers.
D)If goods are sold under a statutory lien,any money not required to discharge the debt is paid to the bailor.
E)Statutory liens are effective regardless of who has possession of the relevant property.

Question 58

Solace Insurance Company (SIC)sold an insurance policy to Kelly.Because of the occurrence of certain events,the concept of subrogation has become relevant.This most likely means that

A)Kelly breached her obligation of utmost good faith.
B)although SIC is liable to pay for most of the loss,Kelly is required to pay for a small part of that loss.
C)a tortfeasor damaged property that Kelly had insured.
D)Kelly purchased insurance policies,covering the same loss,from at least two different insurance companies.
E)SIC has discovered that Kelly does not have an insurable interest in certain property.

Question 59

Theta Ltd owned a widget worth $50 000.It purchased "full coverage" property insurance from Atlantic Insurance Co.It also bought "full coverage" property insurance from Pacific Insurance Co.The widget was destroyed by a fire.Theta Ltd received a $50 000 benefit from Atlantic Insurance Co.Atlantic Insurance Co has now sued Pacific Insurance Co.The best explanation for that action lies in the concept of

A)subrogation.
B)co-insurance.
C)contribution.
D)deductible.
E)fidelity.

Question 60

Pierce was looking at an open house with a pool.Quincy,the owner,makes the statement,"Well,we'll be taking the pool with us when we go," and the two men laugh.Pierce buys the house.When he moves in,he sees that the pool has been excavated.Which of the following is true?

A)Pierce has rights to the pool because it is a fixture.
B)Quincy has rights to the pool as long as he removed it before he sold the house.
C)Quincy has rights to the pool as long as he reduced the price of the house accordingly.
D)Pierce has no way to recover damages because of the rule of caveat emptor.
E)Quincy did not give up rights to the pool because he did not abandon it.

Question 61

Raja gave a widget to Northwest Storage.Under the terms of the parties' contract,Northwest Storage was required to safely store the widget from October to April,and to then return it to Raja.The widget was in excellent condition when Raja delivered it to Northwest Storage,but it was badly damaged upon its return.A court has held that,on the facts,the burden of proof will be shifted.What does that mean? Which party will the court's decision favour? What is the policy justification for shifting the burden of proof?

Question 62

"Property law,like nature,abhors a vacuum.Consequently,property rights that are lost by one party are always acquired by another party." Is this statement true? Explain your answer by using examples.

Question 63

As a result of a bailment,Mitsu has possession of widget that belongs to Chuck.What factors will a court consider in deciding the content of the standard of care that Mitsu must meet while she has possession of the widget?

Question 64

What is subrogation? What is indemnification? How are these two concepts related?

Question 65

Explain the meaning and relevance of "inherent vice."

Question 66

Eleni owns and operates a restaurant.During the winter months,it is inappropriate for diners to bring their coats with them to their table.Eleni therefore provides a place for coats to be placed or hung.Does that arrangement necessarily involve a bailment? Is some other arrangement possible? What is the significance of classifying the arrangement as a bailment,rather than something else? Explain your answer,and identify any additional facts that are required before the question can be conclusively answered.

Question 67

Erin owns and operates a computer design business that employs 20 people.She recently purchased business interruption insurance and key person insurance.What was her likely purpose in doing so?

Question 68

Hedda purchased a combine for her farm worth $80 000,but she could only afford to insure it for $40 000.The insurance has a co-insurance clause requiring coverage for 80% of the value,or $64 000 (meaning Hedda had only purchased 62.5% of the required coverage).An accident causes damage to the combine worth $20,000.How much can Hedda recover?

A)She can recover the full $20 000.
B)She can recover 80% of $20 000 ($16 000).
C)She can recover 62.5% of $20 000 ($12 500).
D)She cannot retrieve any compensation.
E)She can recover $40 000.

Question 69

Pavel found a ring that Jacinta had lost.Does a true bailment exist while the ring is in Pavel's possession? Explain your answer.

Question 70

Katarina is interested in the possibility of establishing a business that delivers goods.She has heard,however,that as a matter of risk management,she should avoid becoming a "common carrier." What is a common carrier? What special risks are associated with being a common carrier? What is the policy justification for those risks?

Question 71

Bonzi found a necklace while staying in a hotel that is owned by Alpha Corp.To whom does the necklace belong? Explain your answer,and identify any additional facts that are required before the issue can be fully resolved.

Question 72

Surinder rented a boat from Aqua Inc.Is the parties' relationship better described as a sale or as a bailment? Explain your answer.

Question 73

Honoria recently tried to buy first party insurance with respect to a diamond ring she did not own.The insurance company refused to sell a policy to her on the basis that she did not have an insurable interest.Explain the insurance company's decision in more detail and identify the policy reason why a person who does not have an insurable interest cannot buy a insurance policy.

Question 74

"The acquisition of personal property always involves the intention of at least two people." Is this statement true? Explain your answer by using examples.

Question 75

Identify and briefly explain three reasons why property insurance very often does not provide full indemnification,in the sense that it does not provide the insured with enough money to buy a replacement for a lost or destroyed piece of property.

Question 76

Kieran owns a factory that burns down because Jefferson is negligent.Kieran is fully insured and is limited to indemnification.Which of the following is true?

A)Kieran can sue Jefferson for negligence.
B)Kieran is not covered because his factory burned down because of a negligent act.
C)Jefferson will not be liable to anyone because the insurance company covers the loss.
D)The insurance company may bring an action against Jefferson.
E)Kieran may be subject to a co-insurance clause.

Question 77

Thekla's tailor shop offers alterations to clothing that customers have already purchased.During a busy season,without telling any of their customers,they begin sending half of the work to Inga's tailor shop in order to ensure they can complete the work.A customer complains that his suit has been ruined because it was improperly altered.The suit had been sent to Inga's shop.Which of the following is true?

A)The customer can sue only Inga's shop because the customer did not expressly consent to the sub-bailment.
B)Thekla's shop can sue Inga's shop.
C)The sub-bailment is not valid because it violates the principle of privity.The customer would have to sign a contract directly with the sub-bailee.
D)Thekla's shop could be liable for conversion if the customer believed the work would be done at Thekla's.
E)A sub-bailee is always considered an insurer for the purposes of the standard of care.

Question 78

Thomas owns a manufacturing system worth $200 000.He purchased $90 000 worth of property insurance from Prairie Insurance Co.That policy contains a co-insurance clause that requires 90 percent coverage.A fire recently damaged Thomas's manufacturing system.How much is Prairie Insurance Co required to pay to him if the fire damage is assessed at $100 000? What if it is assessed at $200 000?