Question

François has a DP-3 policy on his home, which covers him from most losses on an open-peril basis. He likes to collect old films, many of which are recorded on Safety Film (cellulose acetate). The problem is that cellulose acetate film gradually breaks down over time and will eventually "self destruct." The films are uninsurable for gradual breakdown under the DP-3 policy because:

A. they are extremely flammable.
B. they have depreciated to have no actual cash value.
C. damage caused by an inherent vice is excluded.
D. they are essentially food products.

Answer 1

Cellulose acetate film is subject to 'inherent vice,' a natural deterioration process, which makes it uninsurable for gradual breakdown under the DP-3 policy due to the policy's exclusion of coverage for inherent defects. The correct option is B.

Step-by-step explanation:

François has a DP-3 policy on his home, which covers him from most losses on an open-peril basis. The films in his old film collection are recorded on Safety Film (cellulose acetate) and are uninsurable for gradual breakdown under the DP-3 policy.

The cellulose acetate film is subject to an inherent defect of gradual breakdown, which is known as "inherent vice." Because of this inherent vice, the films are predisposed to self-destruct over time without any external cause.

In the insurance world, an inherent vice, which is the natural tendency of an item to deteriorate because of the fundamental qualities of the item itself, is a common exclusion from coverage.

The deterioration of the cellulose acetate film falls under this exclusion, and therefore, these films are uninsurable for gradual breakdown under Francois's policy. The correct option is B.