Contracts, §2, Fall 2007
Optional writing exerciseNote: this problem is based on a question that appeared on my Spring 1989 exam at the University of Michigan Law School. The problem is intended to take you no more than four hours, not counting any generalized review you may do in preparation for it.
Like the previous writing exercise, this exercise is optional. If you would like the TA's and me to give you feedback on the exercise, you should write up your answer in 500 words or less and e-mail it to me at ak472@columbia.edu. If you send in your assignment by Wednesday, November 21, the TA's will review it and get comments back to you by the end of the next week. You are also welcome to turn it in later, but in that case the TA's do not promise the same prompt and thorough review.
With regard to exam writing technique, please review the guidelines on the exam page. keep in mind that you are writing an essay and so standard methods of organization are appropriate. Make sure to relate your answer to the facts: an answer that focuses only on doctrine or only on the facts will not be effective. Explaining and defending your answer is critical; getting the right answer by itself counts for nothing.
If you feel that you need additional practice in writing concise answers, you may find the following Powerpoint presentation [developed by Prof. Eugene Volokh of UCLA School of Law] to be useful. Of course, concise expression is only one of the skills you need to deploy on an exam, but it is hard to write a top exam without writing concisely.
The market for commercial casualty and liability insurance in the state of Hutchins has undergone substantial dislocation in past months. In particular, the rates for certain lines of insurance, such as product liability, have increased by over 100%, and some types of insurance, such as that covering children's day care, have become unavailable at any price. Various observers have described the industry as being in a state of crisis, the causes of which are a matter of some dispute. Representatives of the insurance industry blame the situation on what they describe as an explosion of tort liability, while consumer advocates attribute recent conditions to mismanagement and anticompetitive collusion by insurance companies.
You are an attorney for the Northwest Casualty Insurance Company, one of the largest liability insurers in the state of Hutchins. Northwest markets its policies primarily but not exclusively to commercial businesses. It is the view of Northwest management that a substantial part of recent cost increases stem from its agents' increased willingness to write policies covering unsound and unprofitable risks. For instance, two of Northwest's ten largest claims in the past year arose from policies that its underwriters would probably have disapproved had they had the opportunity to do so. Moreover, Northwest's fourth largest claim last year (dealing with misuse of hazardous chemicals) arose from an event that was actually excluded by the language of the written policy, but that its agent orally represented in the course of the sales transaction as being covered.
You have been asked to draft contract provisions that would prevent Northwest from being bound by any policy its agents write until Northwest's underwriters have an opportunity to review the policy and consider the desirability of covering the particular risks involved. You have also been asked to draft provisions that would protect Northwest from being bound by oral representations by its agents that go beyond the language of its written policies.
Please write a short memo that sketches out the provisions you recommend, explaining how they will achieve the company's goals, as well as the extent to which they may fall short of these goals. If you believe that the company's goals would be better served through some non-contractual solution [for example, through improved training of sales agents], you should say so and explain why, though this should not form the bulk of your memo.