A private school agrees, in exchange for a yearly fee, to refund tuition if a student is hospitalized for 30 consecutive days or more during the school year. Under CIC §22, this arrangement is best characterized as:
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Why A is correct
Under CIC §22, insurance is a contract whereby one party undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event. Here the school promises to reimburse the family's tuition loss if a contingent and unknown event — a 30-day hospitalization — occurs. That is an indemnity promise triggered by an uncertain event, so the arrangement falls within the statutory definition of insurance and may be subject to insurance regulation. Neither the school's educational character nor the label attached to the fee changes the statutory test, which looks to the substance of the promise.
Why the other options are wrong
- B) Charging a fee does not make an arrangement insurance; the defining feature under Section 22 is the promise to indemnify against a contingent or unknown event.
- C) Section 22 focuses on the substance of the contract, not the occupation of the issuing party; an educational institution can be an insurer for these purposes.
- D) A tuition refund paid when hospitalization occurs is an indemnity against a loss, not merely a discount on services.
Memory hook
Call it a refund, a plan, or a perk — if it pays on a contingency, Section 22 calls it insurance.