CHAPTER 23 Personal Property, Bailments, and Insurance

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CHAPTER 23Personal Property, Bailments, and
Insurance
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Learning Objectives

• What is real property? What is personal
  property?
• What are the three elements necessary for an
  effective gift? How else can property be
  acquired?
• What are the three elements for an effective
  bailment? What are the basic rights and duties
  of the bailee? The Bailor?
• What is an insurable interest? When must an
  insurable interest existat the time the
  insurance policy is obtained, at the time the
  loss occurs, or both?
• What clauses are typically included in insurance
  contracts?

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Introduction

• Definition Property consists of legally
  protected rights and interests a person has in
  anything with an ascertainable value that is
  subject to ownership.
• Difference Between Real and Personal Property.
• Ownership rights in each.
• Acquiring Ownership of Personal Property.
• Laws Governing Mislaid, Lost, or Abandoned
  Property.

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Property Ownership

• Property ownership is viewed as a bundle of
  rights, including the
• Right to possess.
• Right to sell.
• Right to give.
• Right to lease.
• Right to destroy.

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Fee Simple

• Owns the entire bundle of rights.
• Fee simple gives the owner the maximum possible
  estate or right of ownership of real property,
  continuing forever.
• Chapter 37 will deal with realty estates.

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Concurrent Ownership

• Tenancy in common (Fig. 1). A and B own an
  undivided interest in the property. Upon Bs
  death interest passes to Bs heir, C.

Joint Tenancy (Fig. 2). A and B own an undivided
interest in property but, upon Bs death, Bs
interest passes to A, the surviving joint tenant.
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Concurrent Ownership

• Tenancy by the Entirety (not common)
• Usually between husband and wife.
• Community Property (limited of states)
• Property acquired by couple during their marriage
  is owned as an undivided ½ interest in property
  (real and personal).

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Acquiring Ownership of Personal Property

• Possession.
• Capture of wild animals (wild animals belong to
  no one).
• Finding of abandoned property.
• Adverse Possession.
• Production.
• Writers, inventors, manufacturers, and others who
  produce personal property acquire title to it.

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Gifts

• Voluntary transfer of property ownership from
  Donor (owner) to Donee (recipient) for no
  consideration.
• Three types
• Intervivoswhile donor is living.
• Causa Mortis -- made by donor in contemplation
  of imminent death.
• Testamentary after death, by will/inheritance.

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Gifts

• Three requirements for valid gift
• Deliveryactual or constructive (symbolic, such
  as keys to car).
• Donor must give up complete control or dominion.
  Delivery by a 3rd party is OK.
• In re Estate of Piper (1984).
• Donative intent on the part of the donor
• Acceptance by the Donee.

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Acquiring Ownership of Personal Property

• Will or Inheritance.
• Accession.
• Someone adds value to a piece of personal
  property by use of either labor or materials.
• Confusion.
• Commingling so that a persons personal property
  cannot be distinguished from anothers.
• Fungible goods consists of identical particles
  such as oil or grain.

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Mislaid, Lost or Abandoned Property

• Mislaid Property Voluntary placed somewhere,
  then inadvertently forgotten. Finder is steward
  for true owner.
• Lost Property Involuntarily left. Property
  owner acquires title against whole world, except
  for true owner. Finder must return to true owner
  or be liable for conversion.
• Abandoned Property Discarded by true owner with
  no intention of recovering. Acquires title
  against all the world, including the original
  owner.

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Bailments

• A bailment is formed by the delivery of personal
  property, without transfer of title, by one
  person (Bailor) to another (Bailee), usually
  under an agreement for a particular purpose.
• The property must be returned by the Bailee to
  the Bailor, or a third party as directed by the
  Bailor, in the same or better condition.

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Elements of a Bailment

• Personal Property. (Tangible or Intangible--but
  not persons or realty.)
• Delivery of Possession.
• Bailee given exclusive control or possession.
• May be actual or constructive.
• Bailee must knowingly accept (Bailee must intend
  to exercise control over chattel).
• Bailment Agreement.
• Express or Implied.

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Ordinary Bailments

• Bailment for the sole benefit of the Bailor
• A gratuitous Bailment Bailee owes Bailor a low
  duty of care, liable only for gross negligence.
• Bailment for the sole benefit of the Bailee
• Bailee owes Bailor a high duty of care and is
  liable for even slight negligence.
• Mutual Benefit Bailment most common.
• Each party owes the other a reasonable duty of
  care.

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Rights and Duties of the Bailee

• Right To Possess.
• Bailee may acquire or use property temporarily.
  Title does not pass.
• Right to Use Bailed Property.
• Rights of Compensation.
• Reimbursed for costs or services as provided in
  the agreement.
• Right to Limit Liability.
• Duty to Return bailed property in same condition
  to Bailor. Bailee may liable for conversion
  and/or negligence.
• Sunbelt Cranes Construction and Hauling, Inc. v.
  Gulf Coast Erectors, Inc. (2002).

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Rights and Duties of the Bailor

• Right to have property protected and used as
  agreed.
• Right to have property back at end of bailment
  with service or repair done properly.
• Right to have the Bailee not convert.
• Right to not be bound to limitation of liability
  unless Bailor knows.
• Duty to Provide safe goods
• Mutual Benefit Bailment free from known or
  hidden defects Sole Benefit of Bailee notify
  if any known defect.

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Special Types of Bailments

• Common Carriers
• Publicly licenses to provide transportation
  services to general public.
• Common Carriers are strictly liable for damages
  except if the damages caused by
• An act of God.
• An act of the public enemy.
• An order of the public authority.
• An act of the shipper.
• The inherent nature of the goods.
• Shippers loss.
• Connecting Carriers.

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Warehouses and Innkeepers

• Warehouses
• Owe duty of reasonable care.
• Cant exculpate, can limit.
• Innkeepers
• Owe duty of strict liability, modified by state
  statutes if innkeeper provides safe and notifies
  guests.
• If parking area provided and innkeeper accepts
  bailment, then may be liable.

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Insurance

• Insurance is a contractual arrangement for
  transferring and allocating risk.
• Risk.
• Prediction concerning potential loss based on
  known and unknown factors.
• Risk Management.
• Involves the transfer of certain risks from the
  individual to the insurance company by a
  contractual agreement.
• Classifications of Insurance.
• Omni Berkshire Corp. v. Wells Fargo N.A. (2004).

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Insurance Terminology

• Policy (Insurance contract).
• Premium is the consideration to be paid to the
  insurer.
• Underwriter (usually an insurance company).
• Broker v. Agent.

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Insurable Interest

• A person can insure anything in which he or she
  has an insurable interest.
• Types of insurable interest
• Life.
• Property.

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The Insurance Contract

• Governed by the general principles of contract
  law, and regulated by the state.
• Application is an offer, which insurance company
  can either reject or accept.
• Acceptance sometimes conditional.
• Need consideration.
• Parties need capacity.

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The Insurance Contract

• Application For Insurance.
• Effective Date.
• Provisions and Clauses.
• Interpreting Provisions of an Insurance.
  Contract.
• Cancellation.
• Basic Duties and Rights.
• Defenses Against Payment.

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Application

• Filled in application attached to the policy and
  made a part of the contract.
• Misstatements or misrepresentation can void a
  policy, specially if company can show it would
  not have issued policy if it had known the facts.

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Effective Date

• Broker is agent for the applicant.
• Agent is agent for the insurance company. He can
  issue a binder, if some consideration is paid,
  which will immediately bind the insurance
  company, depending on certain conditions being
  met.
• Parties may agree contract will not be effective
  until policy is issued and delivered or sent to
  applicant.
• Parties may agree policy will be binding, not be
  effective, until first premium paid, or physical
  exam passed.

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Provisions and Clauses

• Provisions Mandated by Statute.
• Incontestability Clauses.
• Coinsurance Clauses.
• Appraisal and Arbitration Clauses.
• Multiple Insurance Coverage.
• Antilapse Clauses.

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Incontestability Clauses

• State statutes sometimes provide that once a life
  or health insurance policy has been in force for
  a specified length of time, the insurer cannot
  contest statements made in the application.

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Coinsurance Clauses

• If owner insures her property for at least 80 of
  its value, owner will be able to recover up to
  the face value of the policy.
• If owner insures for less than 80, owner will be
  responsible for a proportionate share of the loss.

Amount of insurance recovery
Coinsurance percentage
percentage (80) x Property value
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Appraisal and Arbitration Clauses

• If insurer and insured cannot agree on value of
  property, an appraisal can be demanded.
• Contract may also provide for arbitration.

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Cancellation and Good Faith

• Cancellation.
• Insured can cancel policy at any time, and the
  insurer can cancel according to terms of policy.
• Insurer must give written notice of cancellation.
• Good Faith Obligations.

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Defenses Against Payment

• Insurance company can raise any of the defenses
  that would be valid in any ordinary action or
  contract
• Fraud, misrepresentation.
• Not if information given was optional.
• Not incorrect statement of age.
• Concurrent causation doctrine.