Asked by David Torrez on May 08, 2024
Verified
Jones bought insurance on a house when it was being used as his residential dwelling. He subsequently rented out the building to three members of a motorcycle gang. The insurance company was not notified of the change. What would be the result if the house is destroyed by fire?
A) The failure to notify of the change would void the policy and the insurance company would not have to pay.
B) The failure to notify of the change would void the policy, but the insurance company would still have to cover the loss.
C) The failure to notify of the change was immaterial, because there was no proof that is what caused the fire.
D) The failure to notify of the change was immaterial, because there was no misrepresentation at the time the policy was taken out.
E) The failure to notify of the change resulted in the insured being charged higher premiums.
Motorcycle Gang
An organized group of motorcyclists who may partake in activities ranging from community events to illegal operations.
Insurance Company
An organization that provides insurance policies to subscribers, covering a range of risks in exchange for premiums.
Fire
A rapid oxidation process that generates heat, light, and various reaction products, often used for energy or seen as a risk for damage.
- Comprehend the fundamentals that underlie contracts of insurance, the gathering of claims, and the construal of vague terms in the interest of the insured individual.
Verified Answer
SN
Shauna NadeauMay 15, 2024
Final Answer :
A
Explanation :
The failure to notify the insurance company of a significant change in the use of the property (from residential to rental) could void the policy, as it changes the risk profile that was initially agreed upon. Insurance policies often require policyholders to inform the insurer of any significant changes that could affect the risk being insured against.
Learning Objectives
- Comprehend the fundamentals that underlie contracts of insurance, the gathering of claims, and the construal of vague terms in the interest of the insured individual.