BASIC FACT PATTERN. Our friends the Smith Family and its closely held businesses are back with us for more fun and games. To refresh your memory, J \& B Homebuilders ("J \& B") is an Iowa corporation with its principal place of business in Cedar Rapids, Iowa. It is owned by John Smith, who employs a total of six (6) individuals including him. His spouse, Beth Smith, is the Office Manager and performs all of the accounting functions and provides assistance with bids. The other four (4) employees, like John, are framing and finish carpenters who are capable of all residential and building work including remodeling. The following supplemental information represents the insurance coverages issued to the business by Dependable Insurance Company. Bill Best is the insurance agent for J&B and the policies are issued to J \& B through its insurance agent, Best Insurance Agency, Ltd., also located in Cedar Rapids. I. John Smith is friends with the owner of the local Chevrolet automobile dealership. Each of the four (4) carpenter employees is entitled to drive a J \& B owned pickup to, during, and from work since any J \& B employee can be called upon to provide service to a customer. John Smith also drives a Chevrolet pickup to, during, and from work and his spouse, Beth, drives a Chevrolet Equinox to, from, and during work. John Smith is aware that any of these vehicles has the potential to be used by the employee for personal reasons. J \& B has a commercial auto policy (Business Auto Coverage Form) with covered autos liability (Symbols 7, 8, and 9) and occurrence limits of $500,000; auto medical payments, Symbol 7, $5,000 each insured, uninsured motorists and underinsured motorists each with limits of $500,000 per occurrence, Symbol 7, comprehensive, Symbol 7, and collision, Symbol 7, each at actual cash value and a deductible of $500. Answer the following questions: A. A J \& B employee was using his own vehicle for work related activities because the truck furnished to him by J \& B was being serviced. While driving to a job site, the employee caused an automobile accident that injured another motorist and totaled that motorist's vehicle as well as the employee's vehicle. The injured motorist sues the employee and J \& B for bodily injury and property damages suffered. Explain J \& B's and the employee's coverage for these exposures. (5 POINTS) B. An employee driving a J \& B pickup is enroute to a job site on a winter day. The employee loses control of the pickup on an icy road and it overturns, resulting in the destruction of the truck and the equipment and supplies in it. The value of the truck is $50,000; the value of the supplies is $2,500. Explain the coverages available under J \& B's policy, if any. (5 POINTS) C. John and Beth Smith have a teenage son who is not an employee of J \& B. Nonetheless, Beth allows the son to use her Equinox for the son's personal use. While driving the Equinox, the son caused an accident that resulted in $10,000 damage to the Equinox, $3,750 of medical expense to the teenage son, and $7,500 of damage to the automobile involved in the accident. Luckily, the other driver was not injured. What dollar amount for the identified losses, if any, will be paid under the BACF issued to J \& B. and why will it be paid? If the loss will not be covered, explain why. (5 POINTS) D. J \& B's insurance agent suggests that J \& B raise the limits of its uninsured and underinsured motorists coverage from $500,000 to $1,000,000. The cost is $250 annually. John and Beth are tired of making insurance decisions and ask you for advice. What do you tell them? (5 POINTS) E. A J \& B employee allows his son to use J \& B's pickup to move the son's furniture to a new residence. The son loses control of the pickup and it overturns resulting in the destruction of the truck and all of the son's furniture. A new replacement pickup is $65,000; the value of the son's furniture is $2,500. Explain the coverages available under J \& B's BACF policy, if any. (5 POINTS) II. J \& B maintains workers compensation insurance in accordance with lowa statutes and procures employer liability coverage of $100,000 for each bodily injury accident; $100,000 for bodily injury by disease for each employee with $500,000 total limits for disease. J \& B insures its commercial property exposures under a building and personal property coverage form (BPP). J \& B owns a 1-story frame building with protection class 7 which has a limit of insurance at $100,000, a covered causes of loss special form, a co-insurance provision of 100%, and a replacement cost inflation guard of 4%. J \& B insures its business personal property with a limit of $25,000, covered causes of loss special form, and 100% co-insurance. The business personal property is valued at replacement cost. J \& B borrowed $50,000 from Strong Bank to acquire the building and has a line of credit with Strong Bank of $25,000 to replenish business personal property. Accordingly, J \& B granted Strong Bank a mortgage and a security interest in the real and personal property respectively and the policy is endorsed accordingly. J \& B also has an equipment floater covering all of its contractors' equipment with a catastrophe limit of $35,000. The floater has a $500 deductible per occurrence and carries a 100% co-insurance requirement. Answer the following questions: A. J& B's BPP contains the following language: " B (1) We will not pay for loss or damage caused directly or indirectly by any of the following: " j. Virus or bacteria (1) any virus bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. What reasons exist for having this exclusion in the BPP? (10 POINTS) B. Assume that J \& B's building has an actual cash value of $120,000. What is the minimum amount of insurance that must be purchased on J \& B's building on an ACV basis to avoid the co-insurance penalty? (Show your calculation.) What is the purpose of the coinsurance provision and why is it important to J \& B's policy rating structure? (10 POINTS) C. J& B rents a mobile lift for a roof repair job. While using the equipment, the employee damages it. The repair costs exceed the value of purchasing a new mobile lift. The replacement cost is $35,000. Is the loss covered by any insurance policy issued to J \& B? If so, which one(s) and how much will the insurance carrier pay? (10 POINTS) D. A J \& B employee asks an employee of ABC Masonry Company to assist him while installing a structural beam. The masonry employee is killed when the structural beam falls on him. The masonry employee's widow sues J \& B for loss of consortium. Identify and explain the availability of coverage to J&B for this exposure. (10 POINTS) E. Assume CREC's building burns to the ground and the business personal property is completely destroyed. Assume further that Strong Banks's note balance owed to it is now $60,000 and that the replacement cost of the business personal property is now $35,000. Explain Strong Bank's rights under the BOP. (5 POINTS) III. Without question, technology requires insurance companies to alter business practices including underwriting and ratemaking structures. Autonomous motor vehicles incorporate technology that could impact the motor vehicle insurance market for years. Assume that you are in downtown lowa City on a late Saturday evening. You need to get back to your residence. You have an Uber app on your mobile device. You tap it and procure a ride. Your car arrives with no driver. Do you get in the car? How does 3 your decision affect the automobile insurance industry? Explain and defend your position citing common risks facing the automobile insurance industry and how it intends to confront them. (10 POINTS)