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You are a claims handler for XYZ plc, a UK-based insurer. You are approached
by a policyholder who owns and operates a hotel. An employee of the hotel has
been injured in an accident in the hotel’s kitchen, whilst using an item of kitchen
equipment. The hotel’s Head Chef is concerned that the kitchen equipment was
defective at the time of the accident.
Explain the legal position in respect of the injured employee in relation t o :
(a) A claim against the hotel, referring to statute law and one relevant case. (5)
(b) A claim against the kitchen equipment manufacturer, referring to one relevant case. (5)
You are a claims handler for an insurer who provides household combined
insurance for the owner of a domestic property. The insurance comprises
buildings and contents cover. The owner moves out of the property and rents it
to a close friend. Subsequently, a fire claim has been notified.
You have identified the following facts:
• The property is occupied by the tenant on an unfurnished contract basis. The
insurer finds out that the property owner has never disclosed the change of
occupancy to the i ns ur e r.
• The property owner did not disclose to the insurer his recent dangerous driving
conviction, which occurred during the policy period but before the fire.
• The fire caused a large amount of damage to both the building
and the tenant’s contents. The property owner puts in a claim for
both the building and the tenant’s contents.
(a) Explain with justification the impact of insurable interest on the claim made by the
property owner. Refer to one Relevant case. (12)
(b) Explain with justification the extent to which the facts identified are material and the
effect they may have on
The claim made by the property owner. Refer to three relevant cases. (18)
Question 6 – Learning Outcome 8 (20 marks) (Total wordings required 1,500)
Jack is a farmer who owns greenhouses. He has a property insurance policy which includes
storm cover for his greenhouses. During a storm, two of his greenhouses collapse. The insurer
appoints a loss adjuster who reports that both greenhouses are a total loss. The loss adjuster
also advises that:
• One of the damaged greenhouses had its foundations weakened, during the storm, by storm
water flowing from a
neighbour’s adjacent field. This storm water contributed to the collapse of that particular
greenhouse.
• The other damaged greenhouse collapsed in part due to a defective design, with a specific
exclusion on the
property insurance policy relating to defective design.
Explain how the insurer would deal with the following:
(a) The claim for damage to the greenhouse which had its foundations weakened. Refer to one
relevant case. (10)
(b) The claim for damage to the greenhouse which had defective design. Refer to one relevant
case. (10)
Question 7 – Learning Outcome 9 (20 marks) – Total wordings required 1,500)
Mr and Mrs Hughes own a house which is insured with ATK plc, a UK-based insurer, for
buildings and contents, on
an all-risks basis. There are no warranties on the policy. The sums insured are:
• Building: £300,000
• General contents: £50,000
• Fine art: £17,000 (consisting of one painting)
• Jewellery: £10,000 (consisting of a £5,000 watch and a £5,000 pair of earrings)
A fire totally destroys the building, however, Mr and Mrs Hughes are able to save some of their
contents.
A loss adjuster is appointed by ATK plc to handle the claim made by Mr and Mrs Hughes. The
loss adjuster submits
an initial report, with the following findings:
• The building was insured for its market value, but the estimated rebuild cost is £350,000.
• 10% of the total value of the general contents were rescued. The total value of the general
contents, at the time of
the fire, is calculated to be £75,000.
• The painting was insured on an agreed value basis, based on a valuation completed five years
ago. However, the
market value for paintings by the artist have declined recently and the loss adjuster has
established that the
current market value is £12,000.
• The watch and one of the earrings was saved, with the other earring from the pair destroyed in
the fire.
Explain the basis of indemnity and method of settlement that ATK plc will apply for each of the
following:
(a) Buildings. (5)
(b) General contents. (5)
(c) Fine art. (5)
(d) Jewellery. (5)
Refer to one relevant case for each loss.
Question 8 – Learning Outcome 10 (20 marks) (Total wordings required 1,500)
You are a claims handler for XYZ plc, a UK-based insurer. You have received a number of
claims which you dealt with as follows:
• Payment of £500,000 for personal injury damages to an employee under an employers’ liability
policy, where the injuries were caused by another employee. A payment of £300,000 as a
capital sum under a personal accident policy, held by the injured employee.
• Payment of £1,500 to a household policyholder who is a long-standing customer. The payment
was for water damage caused by the negligence of a plumber, although the loss was not
covered under the policy terms and conditions as the policyholder was in breach of an
unoccupancy clause.
• Payment of £250,000 to a landlord whose building was damaged in a fire. The tenant under
the lease was responsible for reimbursing the landlord for the insurance premiums. It was
established that the tenant accidentally caused the fire.
Explain what rights of recovery are available to XYZ plc in relation to the following payments:
(a) Employers’ liability and personal accident. (10)
(b) Water damage. (5)
(c) Fire damage. (5)
Refer to one relevant case for each payment.
Question 9 – Across more than one Learning Outcome (30 marks) – (Total wordings
required 2,000)
You work for BCD plc, an insurance broker. One of your clients is DEF plc, a food manufacturer.
DEF plc has a commercial combined insurance policy. The following events occur:
• At the entrance to the visitors car park there is a sign with a disclaimer notice repudiating all
liability for injury or damage. A visitor has just been injured in the car park due to an uneven
surface.
• At the premises there are large fuel storage tanks. Recently there has been an escape of fuel
from a storage tank at the premises onto a neighbor’s property. All the tanks were in good
condition and DEF plc were not in any way negligent in the way the fuel was stored.
• Recently there has been an outbreak of food poisoning in members of the public, who have
purchased products directly from DEF plc, and the customers of other food manufacturers to
whom it supplies ingredients. This food poisoning has been traced back to contaminated stock
at DEF plc’s premises.
Explain to DEF plc their legal position in respect of the following:
(a) Injury to the visitor in the car park, referring to statute law and one relevant case. (10)
(b) Damage resulting from the escape of fuel, referring to two relevant cases. (10)
(c) Food poisoning from contaminated stock, referring to statute law and one relevant case. (10)
Question 10 – Across more than one Learning Outcome (30 marks) – (Total wordings
required 2,000)
DFK plc is a long established design and build warehouse Construction Company. DFK plc is
insured by a UK-based insurer, for all its commercial insurances. DFK plc have received
notification of the following three property claims:
• The owner of a warehouse, built by DFK plc ten years ago, has noticed large cracks in its
walls.
• A customer has lodged a claim for financial loss due to delays by DFK plc in the completion of
a warehouse building contract.
• Loss of turnover from a neighboring factory next to a DFK plc construction site, where dust
from construction activity has entered the factory’s air-conditioning system, causing it to break
down.
DFK plc have received notification of the following two personal injury claims:
• The death of a DFK plc employee on one of their construction sites, as a result of the actions
of a sub-contractor.
• A DFK plc employee who witnessed the death has been signed off work, long-term, due to
stress.
(a) Explain with justification the extent of DFK plc’s legal liabilities for each of the three property
claims above. (18)
(b) Explain with justification the extent of DFK plc’s legal liabilities for each of the two personal
injury claims above, referring to two relevant cases. (12)
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