State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Under California Insurance Code Section 22, insurance is a contract whereby one party undertakes to indemnify another against loss, damage, or:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 22 defines insurance as a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event. The three objects of indemnification are loss, damage, and liability, and the triggering event must be contingent or unknown. This statutory definition is the foundation of every California insurance contract, including accident and health policies, because it ties coverage to uncertain events that can financially harm the insured.
Why the other options are wrong
- B) The insured cannot submit arbitrary expenses; only covered losses arising from contingent or unknown events within the policy's scope are indemnified.
- C) Stock market losses are speculative risks offering a chance of gain, so they fall outside the definition of insurance as indemnification against contingent loss.
- D) Losses already paid by another insurer are subject to coordination of benefits and do not create an independent indemnity obligation under the definition.
Memory hook
Section 22's trio: loss, damage, liability — all triggered by a maybe, never a certainty.