General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
An insurer refuses to pay a covered hospital bill, and an agent who sold the policy negligently misrepresented its benefits. The insurer's refusal gives rise to a:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The insurer's failure to pay a covered benefit is a breach of the insurance contract - the promise to pay upon a covered loss was not performed. The agent's negligent misstatement of benefits is a separate civil wrong (negligent misrepresentation), which sounds in tort. Different wrongs, different parties, and different legal theories can therefore coexist in the same fact pattern.
Why the other options are wrong
- B) The unpaid claim is squarely a contract issue; torts are not the exclusive route.
- C) Criminal prosecution is brought by government authorities for crimes, not by a policyowner for a coverage dispute.
- D) Premium refunds are not an automatic remedy for every claim dispute; the remedy is enforcement of the policy promise.
Memory hook
Nonpayment = broken promise (contract). Misstatement = broken duty (tort).