Advanced Policy Provisions

Correct

The answer is A: The insured must recover all $80,000 before the insurer gets anything

Texas applies the made-whole doctrine to equitable subrogation: an insurer is not entitled to subrogation if the insured's loss is greater than what the insured has recovered from the insurer and the at-fault party together (Ortiz v. Great Southern Fire & Casualty Ins. Co., Tex. 1980). Counting the $50,000 the insurer paid, the insured is still $30,000 short of the $80,000 loss, so the first $30,000 recovered from the at-fault driver goes to the insured, and the insurer takes only what is left, up to its $50,000. The doctrine is a default rule, though. When the policy gives the insurer a clear and specific contractual right of subrogation, Texas enforces the contract and the made-whole doctrine does not apply (Fortis Benefits v. Cantu, Tex. 2007), and for health-plan payors Civil Practice and Remedies Code §140.005(d) bars it by statute.

Source: Civil Practice and Remedies Code §140.005(d)

Correct

The answer is C: The insurer has a statutory subrogation right against the third party

Under the Texas Labor Code (Chapter 417), a workers' compensation insurer is subrogated to the injured worker's rights against a third party who is liable for the injury. It can enforce that liability in the worker's name or join the worker's suit. Whatever is recovered first reimburses the insurer for the benefits it has paid, and anything left goes to the worker and counts as an advance against future benefits (§§417.001-.002).

Source: Insurance Code §417.001

Correct

The answer is C: May 2 (60 days before expiration)

Under Texas Insurance Code §551.105, an insurer must mail written notice of nonrenewal of a personal auto policy at least 60 days before the policy expires (30 days was the rule for policies issued or renewed before January 1, 2024). With a July 1 expiration, the notice must be sent by May 2 at the latest. If the insurer misses that date, it must renew the policy at the insured's request.

Source: Insurance Code §551.105

Correct

The answer is A: 10 days

Under Texas Insurance Code §551.104, an insurer may cancel a homeowners policy for nonpayment of premium, a fraudulent claim, an increase in hazard within the insured's control that would raise the premium rate, or a department finding that keeping the policy in force would violate the law. A cancellation on any of these grounds does not take effect until the 10th day after the insurer mails notice to the insured (§551.104(e)), so 10 days is the statutory minimum. A policy form can promise longer notice: the Texas FAIR Plan homeowners policy, for example, gives 30 days for any reason other than nonpayment.

Source: Insurance Code §551.104 · Insurance Code §551.104(e)

Correct

The answer is D: $1,200

When the insurer initiates cancellation, the pro rata method applies. Earned premium for 9 months: $4,800 x (9/12) = $3,600. Unearned premium refund: $4,800 - $3,600 = $1,200. An increase in hazard within the insured's control that would raise the rate is one of the few reasons Texas lets a commercial property insurer cancel after the policy's first 60 days (Insurance Code §551.052(c)(3)), and the insurer must still refund the unearned premium using the pro rata method.

Source: Insurance Code §551.052(c)(3)