Gale Encyclopedia Of American Law 3Rd Edition Volume 5 P46 pot

Under chapter 123, section 16, of the Massachusetts General Laws Anno-tated, the court may order a person found not guilty by reason of insanity an insanity acquittee to be hospitalized

Is There a Need for the Insanity Defense?

Though the insanity defense is rarely

invoked in criminal trials, it

remains a controversial issue Legislators

and the public generally question the

need for the defense after aDEFENDANTin

a highly publicizedMURDERcase is found

not guilty by reason of insanity For

example, when John Hinckley

success-fully used the defense after shooting

PresidentRONALD REAGAN to impress the

actress Jodie Foster, there was a public

outcry Legal and medical commentators

have divided opinions about the need for

the insanity defense

Those who wish to retain it note that

48 of the 50 states have some type of

insanity defense This, they claim, is

evidence of the need for such a defense

The public is given a distorted view of

who uses the defense and how it is

employed In fact about one percent of

criminal defendants invoke the defense

More important, criminals rarely “beat

the rap” byPLEADINGinsanity When an

insanity defense is employed, it means

the defendant admits committing the

criminal behavior and is now seeking a

not guiltyVERDICTon the basis of his state

of mind If the jury does not agree, the

defendant will be convicted, and

gener-ally will serve a longer sentence than will

someone convicted of the same crime

who has not pleaded insanity

Juries find for only about 20 percent

of the defendants who plead insanity

Even this figure does not reflect the

reality that many insanity pleas are the

result of PLEA bargains, which indicates

that prosecutors agree that such pleas are

sometimes appropriate

Finally, the fact that most highly

publicized cases involve murder disguises

the true demographics: 60 to 70 percent

of insanity pleas are for crimes other than

murder They range from ASSAULT to

shoplifting

All these myths have led to the belief that criminals can avoid punishment by claiming insanity The truth is that the insanity defense is a risky one at best

Apart from combating these myths, advocates of the insanity defense contend that a fundamental principle ofCRIMINAL LAW is at stake The insanity defense is rooted in the belief that conviction and punishment are justified only if the defendant deserves them The basic precondition for punishment is that the person who committed the criminal behavior must have responsibility as a moral agent When a person is so mentally disturbed that her irrationality

or compulsion is impossible to control, that person lacks responsibility as a moral agent It would be unfair to punish

a person in such an extreme condition

Based on this argument, proponents

of the insanity defense do not support its application to a person who willingly consumes a powerful hallucinogen and then commits a criminal act Nor would they allow its application to a person who is able to control a mental disorder through medication but fails

to do so But they do support the de-fense for a person who unwittingly consumes hallucinogens and then com-mits a crime

Some opponents attack the insanity defense for confusing psychiatric and legal concepts, in the process under-mining the moral integrity of the law

Both sides agree that the word insane is a legal, not medical, term It is too simplistic to describe a severely mentally ill person merely as insane, and the vast majority of people with a mental illness would be judged sane if current legal tests for insanity were applied The legal tests for insanity, moreover, require that a defendant’s mental condition become so impaired that the fact finder

may conclude the person has lost his or her free will Because free will is not

a concept that can be explained in medical terms, it may be impossible for a psychiatrist to determine if the mental impairment affected the defen-dant’s capacity for voluntary choice Without a way to measure insanity, it makes no sense to let prosecution and defense psychiatrists spar over the issue

A jury’s decision based on psychiatrists’ opinions may be grounded on unreliable evidence

Another major argument against the insanity defense challenges its supposed moral basis Critics contend that modern criminal law is concerned more with the consequences of crime and less with moral imperatives If a person commits a criminal act, that person should be convicted Mental illness can be taken into consideration at the time of sen-tencing This line of reasoning supports laws that several states have adopted, which abolish the insanity defense and replace it with a new verdict of guilty but insane This verdict carries a criminal penalty It allows the judge to determine the length of imprisonment, which occurs in a hospital prison, and shifts the burden to the defendant to prove he

is no longer dangerous or mentally ill in order to be released

Finally, critics argue that the insanity plea is a rich person’s defense Only wealthy defendants can retain high-priced psychiatric experts Persons repre-sented by public defenders are usually afforded a psychiatric examination for the defense, but they may not get the same quality of exam, nor are they typically able to hire more than one examiner Because a two-tiered criminal justice system is morally repugnant, critics contend that the insanity defense must be abolished

438 INSANITY DEFENSE

The detention of an insanity acquittee is

limited by law The acquittee must be allowed

periodic review in the mental institution, to

determine whether continued treatment is

necessary In addition, a hospital facility may

not hold an insanity acquittee indefinitely

merely because the acquittee has an antisocial

personality (Foucha v Louisiana, 504 U.S 71,

112 S Ct 1780, 118 L Ed 2d 437[1992])

The procedural framework in Massachusetts

illustrates the consequences that come with

the insanity defense Under chapter 123, section

16, of the Massachusetts General Laws

Anno-tated, the court may order a person found not

guilty by reason of insanity (an insanity

acquittee) to be hospitalized for 40 days for

observation and examination During this

period, the district attorney or the

superinten-dent of the mental hospital may petition the

court to have the insanity acquittee committed

to the hospital If the judge orders the

commitment, the acquittee is placed in the

hospital for six months

After the first six months have expired,

the commitment is reviewed again, and then

once a year thereafter If the superintendent of

the mental health facility moves to discharge the acquittee, the district attorney must respond with any objections within 30 days

of notice from the superintendent The mental health facility is authorized to restrict the movement of criminal defendants and insanity acquittees, so a commitment is tantamount to incarceration

Defendants’ Rights

WhenPLEADINGinsanity, a defendant might not want to present the best possible image at trial

In Riggins v Nevada, 504 U.S 127, 112 S Ct

1810, 118 L Ed 2d 479 (1992), defendant David Riggins was charged with robbing and murdering Las Vegas resident Paul Wade After being taken into custody, Riggins complained that he was hearing voices in his head and that

he was having trouble sleeping A psychiatrist at the jail prescribed 100 milligrams per day of Mellaril, an antipsychotic drug By the time of trial, the psychiatrist was prescribing 800 milligrams per day of Mellaril

Just before trial, Riggins’s attorney moved the court to suspend administration of the Mellaril Riggins was pleading not guilty by

Colin Ferguson

C

B

olin Ferguson was convicted in March 1995 for

crimes associated with a massacre in Long

Island, New York, on December 7, 1993 Ferguson

killed six persons and injured nineteen after

opening fire with an automatic pistol on a crowded

commuter train

Ferguson’s trial was marked with controversy

He discharged his court-appointed attorneys, who

believed him mentally incompetent to stand trial,

and was allowed by the judge to act as his own

attorney He dropped the insanity defense prepared

by his attorneys and argued that a mysterious

gunman had committed the shootings

His bizarre courtroom behavior appeared to

contradict the judge’s conclusion that Ferguson

was competent to stand trial Though many

witnesses identified Ferguson as the gunman, he

insisted a white man had taken the gun from his bag while he slept, shot the passengers, and then escaped, leaving Ferguson, who is black, to take the blame During the trial he asserted that he had been charged with ninety-three counts only because the crime occurred in 1993

Attorneys Ronald L Kuby and William M

Kunstler, whom Ferguson had discharged, had asked the judge before trial to find that Ferguson’s paranoia and delusional state made him

mental-ly incompetent to stand trial Yet Ferguson refused to be examined by either prosecution

or defense psychiatrists, believing he was not insane The judge allowed Ferguson to stand trial, believing he could understand the nature of the charges against him and could assist in his own defense

INSANITY DEFENSE 439

reason of insanity, and his attorney wanted the jury to see Riggins in his natural state

According to one psychiatrist, Dr Jack Jurasky, Riggins“would most likely regress to a manifest psychosis and become extremely difficult to manage” if he were taken off Mellaril

The court denied the motion, and Riggins was convicted and sentenced to death The Nevada Supreme Court affirmed Riggins’s convictions and death sentence On appeal to the U.S Supreme Court, the convictions were reversed According to the high court, Nevada had violated Riggins’s due process rights under the Sixth and Fourteenth Amendments In the absence of evidence that the treatment was medically appropriate and essential for Riggins’s own safety or the safety of others, and without

an exploration of less intrusive alternatives, the trial court had erred by denying Riggins’s liberty interest in freedom from antipsychotic drugs

According to the court, the administration

of the Mellaril jeopardized a number of Riggins’s trial rights Not only was it possible that the Mellaril had affected Riggins’s outward appearance, and thus his defense, but the high daily dosage of Mellaril also might have affected Riggins’s testimony, his ability to communicate with his attorney, and his ability to follow the proceedings Although the defense had been allowed to present expert testimony on the nature of Riggins’s mental condition, the Court concluded that the compromise of Riggins’s trial rights was reversible error

Uses and Abuses

Victims of abuse often allege temporary insanity in defending their own violent behav-ior For example, in 1994, Virginia resident Lorena Bobbitt, charged with severing her husband’s penis with a knife, was acquitted

ofASSAULTcharges on the ground of temporary insanity At trial, Bobbitt testified that her husband had abused her physically and emotionally

Critics complain that the insanity defense

is abused by defense attorneys, who use it to free the perpetrators of deliberate criminal acts However, 95 percent of all persons found not guilty by reason of insanity are detained

in hospitals, and in practice, the insanity defense is rarely invoked and rarely successful

The insanity defense is used by defendants in

only one percent of all felony cases, and it results in acquittal in only one-quarter of those cases

Psychopaths and Sociopaths

When most people hear about the insanity defense, they automatically assume that it can

be used applied to people commonly referred

to as psychopaths and sociopaths While tradi-tionally there has been a small degree of difference between these two classifications, the American Psychiatric Association’s most recent Diagnostic and Statistical Manual— Fourth Edition (“DSM-IV”) groups sociopathy and psychopathy under the heading“antisocial personality disorder.” The DSM-IV lays out a limited and concise set of diagnostic criteria on which to base the diagnosis of antisocial personality disorder

According to the DSM-IV, antisocial per-sonality disorder is characterized by pervasive pattern of disregard for, and violation of, the rights of others occurring since age 18, as indicated by three (or more) of the following: (1) failure to conform to social norms with respect to lawful behaviors as indicated by repeatedly performing acts that are grounds for arrest; (2) deceitfulness, as indicated by repeated lying, use of aliases, or conning others for personal profit or pleasure; (3) impulsivity or failure to plan ahead; (4) irritability and aggressiveness, as indicated by repeated physical fights or assaults; (5) reckless disregard for safety of self or others; (6) consistent irrespon-sibility, as indicated by repeated failure to sustain consistent work behavior or to honor financial obligations; or (7) lack of remorse, as indicated by being indifferent to, or rationaliz-ing, having hurt, mistreated, or stolen from another

However it is defined, many in the legal community doubt whether the insanity defense covers this kind of behavior at all The ALI’s Model Penal Code test of insanity states that

“the terms mental disease or defect do not include an abnormality that is manifested only

by repeated criminal or otherwise antisocial conduct.” In other words, the criteria laid down

by the DSM-IV for antisocial personality disorder would not allow for a claim of insanity under the Model Penal Code, the most widely used insanity test, or in other insanity tests used

by states Thus, sociopaths and psychopaths, while perceived as insane by most people, could

440 INSANITY DEFENSE

likely not use the insanity defense as a defense in

a court of law

For this reason, most celebrated serial killers

such as John Wayne Gacy and Ted Bundy, as

well as persons whose mental stability seems to

be of a questionable nature, such as Ted

Kaczynski, have seen their insanity pleas fail or

have never used the defense In fact, in recent

years, Hinckley and Bobbitt are among the few

celebrated cases who have used the defense

successfully For criminals with antisocial

per-sonality disorder, the insanityPLEAsimply does

not apply

FURTHER READINGS

American Psychiatric Association 1994 Diagnostic and

Statistical Manual of Mental Disorders—Fourth Edition.

Washington D.C.: American Psychiatric Press

Bing, Jonathan L 1996 “Protecting the Mentally Retarded

from Capital Punishment: State Efforts since Penry and

Recommendations for the Future ” New York University

Review of Law and Social Change 22.

Campbell, Emily 1990 “The Psychopath and the Definition

of ‘Mental Disease or Defect’ Under the Model Penal

Code Test of Insanity: A Question of Psychology or a

Question of Law? ” Nebraska Law Review 69

Ellickson, Robert C 1996 “Controlling Chronic

Miscon-duct in City Spaces: Of Panhandlers, Skid Rows, and

Public-Space Zoning ” Yale Law Journal 105.

Giorgi-Guarnieri, Deborah, et al 2002 “Practice Guideline;

Forensic Psychiatric Evaluation of Defendants Raising

the Insanity Defense ” Journal of the American Academy

of Psychiatry and the Law 30 (June).

Kuby, Ronald L., and William M Kunstler 1995 “So Crazy

He Thinks He Is Sane: The Colin Ferguson Trial and

the Competency Standard.” Cornell Journal of Law and

Public Policy 5.

LaFond, John Q., and Mary L Durham 1992 Back to

the Asylum: The Future of Mental Health Law and

Policy in the United States New York: Oxford Univ.

Press.

Melville, John D., and David Naimark 2002 “Punishing the

Insane: The Verdict of Guilty but Mentally Ill ” Journal

of the American Academy of Psychiatry and the Law 30

(December): 553 –5.

Morse, Stephen J 1985 “Excusing the Crazy.” Southern

California Law Review 58.

Phillips, Jean K Gilles 2008 “The Insanity of the Mens Rea

Model: Due Process and the Abolition of the Insanity

Defense ” Pace Law Review Spring.

Rogers, Richard, and and Daniel Shuman 2000

Conduct-ing Insanity Evaluations 2d ed New York: Guilford

Press.

Semrau, Stanley, and Judy Gale 2002 Murderous Minds

on Trial: Terrible Tales from a Forensic Psychiatrist’s

Case Book Toronto, Tonawanda, N.Y.: Dundurn

Press.

CROSS REFERENCES

M ’naghten Rule.

INSECURITY CLAUSE Provision in a contract that allows a creditor to make an entire debt come due if there is good reason to believe that the debtor cannot or will not pay

INSIDER

In the context of federal regulation of the purchase and sale of securities, an insider is anyone who has knowledge of facts not available to the general public

Insider information refers to knowledge about the financial status of a company that is obtained before the public obtains it, and which

is usually known only by corporate officials or other insiders The use of insider information in the purchase and sale of stock violates federal

SECURITIESlaw

INSIDER TRADINGentails the purchase and sale

of corporate shares by officers, directors, and stockholders who own more than 10 percent of the stock of a corporation listed on a national exchange (any association that provides facilities for the purchase and sale of securities, such as the New York Stock Exchange) Insider reports detailing such transactions must be sub-mitted monthly to theSECURITIES AND EXCHANGE COMMISSION

INSIDER TRADING Insider trading refers to the illegal practice of a shareholder in a public company who buys or sells stocks in that company as a result of having information unavailable to the general public

Information is key to making money in the STOCK MARKET The U.S stock market is premised on all investors having the same access to information on the performance and activities of corporations Armed with that information, investors can analyze the data and make their choices When corporate insiders and their friends trade stocks based

on information not available to the general public, they gain an immense advantage in the market If the stock in a company is likely to fall when the information does become public, insiders who sell before it becomes public minimize their losses; if the information portends a sharp rise in the stock price, purchasing stock at the current price maximize their profits Because of the unfair advantage

INSIDER TRADING 441

built into insider trading, the federal govern-ment has imposed civil and criminal sanctions

on the practice

The U.S laws against inside training are the toughest in the world State governments took the lead in the nineteenth century against insider training The federal government did not get involved for many years When it did, however, the first law against the practice was established not by Congress, but by the Supreme Court, in the 1909 decision of Strong

v Repide (213 U.S 419, 29 S Ct 521, 53 L Ed

853) In this case, the Court dealt with the sale

of stock in the Philippines Sugar Estates Development Company to one of its directors

The director was negotiating at the same time the purchase of stock from the PLAINTIFF

and the sale of corporate assets to the Philippines government The director took elaborate steps to conceal his efforts from both the plaintiff and the government In the end,

he purchased the stock for about one-tenth of its actual value

The Supreme Court held that based on the facts of this case, “the law would indeed be impotent if the sale could not be SET ASIDE or the DEFENDANT cast in damages for his fraud.” This became known as the special facts or special circumstances rule The rule made clear that while directors generally had no duty to reveal material facts when trading with shareholders, a duty might rise based on the special circumstances and conduct of the director

Congress did become involved after the Wall Street Crash of 1929 and the Great Depression of the 1930s The SECURITIES Ex-change Act of 1934 recognized that modern capitalism required more disclosure of infor-mation about the stock purchases of corporate executives and directors in their companies The act established the SECURITIES AND EXCHANGE COMMISSION (SEC) to oversee publicly traded securities and mandated full disclosure of corporate information to promote a stock market that was fair for all investors The law barred corporate insiders from selling or buying their company’s stock while possessing infor-mation about the stock that was not available to the public

Section 10(b) of the Securities Act makes it unlawful for“any person, directly or indirectly,

by the use of any means or instrumentality of interstate commerce or the mails” to use or employ in the purchase or sale of securities“any manipulative or deceptive device or contriv-ance” in violation of SEC rules and regulations Despite the enactment of this provision, the SEC brought few insider trading cases until the late 1950s In the late 1950s, the SEC enacted Rule 10b-5, which forbade insiders from trading

on material nonpublic information unless they either “disclose or abstain” from trading The rule has been used ever since to prosecute inside traders

Despite Rule 10b-5, it is difficult to gather the information necessary to convict someone

of insider trading The SEC monitors all stock trades, looking for suspicious behavior More-over, insider trading can involve more people than just corporate officers The government has prosecuted family members and friends of insiders, as well as journalists who have bought

or sold stock based on their reporting of companies In the current environment, the SEC reviews phone and e-mail records and uses the testimony of informants The maximum penalties for insider trading are ten years in prison and a $1 million fine A corporation that

is found guilty of insider trading may be fined

up to $25 million

Between 2001 and 2006, the SEC brought

300 charges of insider trading against more than

600 individuals The prosecution of executives

of the energy company Enron led to multiple convictions orPLEAbargains between 2002 and

2006 Author and television personality Martha Stewart was accused of trading stocks based on the advice of the corporation’s executive but was ultimately convicted of obstructing justice and lying to investigators She served five months in prison and six months of HOUSE ARREST

FURTHER READINGS Larimore, James N., ed 2008 Securities and Exchange Commission: Programs and Operations New York: Nova Science.

Securities and Exchange Commission Available online at www.sec.gov (accessed July 28, 2009).

Seligman, Joel 2003 The Transformation of Wall Street:

A History of the Securities and Exchange Commission and Modern Corporate Finance 3d ed New York: Aspen.

Western, David 2004 Booms, Bubbles, and Busts in the U.S Stock Market New York: Routledge.

442 INSIDER TRADING

Winer, Kenneth B., and Samuel J Winer 2004 Securities

Enforcement: Counseling & Defense Newark, N.J.:

LexisNexis.

CROSS REFERENCES

Securities and Exchange Commission; Stock; Stock Market.

INSOLVENCY

An incapacity to pay debts upon the date when

they become due in the ordinary course of

business; the condition of an individual whose

property and assets are inadequate to discharge

the person’s debts

INSPECTION

An examination or investigation; the right to see

and duplicate documents, enter land, or make

other such examinations for the purpose of

gathering evidence

The inspection of documents relevant to issues in a lawsuit is an important element of discovery

INSTALLMENT Regular, partial portion of the same debt, paid at successive periods as agreed by a debtor and creditor

An installment loan is designed to be repaid

in certain specified, ordinarily equal amounts over a designated period, such as a year or a number of months

INSTANT Current or present

When composing a legal brief, an attorney might use the phrase the instant case

in reference to the case currently before the

Installment Loan Agreement

PROMISSORY NOTE - INSTALLMENT

(city,state,date) FOR VALUE RECEIVED, we the undersigned,

jointly and severally, promise to pay to the order of (name of lender), (city, state) , the sum of _ ($ ) Dollars with

interest on any unpaid balance from (date) at the rate of percent per annum, and payable in equal successive monthly installments of

Dollars in lawful money of the United States of America, commencing on the day of each and every month thereafter until paid except the

final installment which shall be the balance due on this note

If any installment be not paid when due, the undersigned promise to pay collection charges of per dollar of each overdue installment, or

the actual cost of collection, whichever is greater and the entire amount owing and unpaid hereunder shall at the election of the holder

hereof forthwith become due and payable, and notice of such election is hereby waived

The undersigned promises to pay all reasonable attorney's fees incurred by the holder hereof in enforcing any right or remedy hereunder

All sums remaining unpaid on the agreed or accelerated date of the maturity of the last installment shall thereafter bear interest at the rate

of percent per month The undersigned authorizes the holder to date and complete this note in accordance with the terms of the loan

evidenced hereby, to accept additional co-makers, to release co-makers, to change or extend dates of payment and to grant indulgences all

without notice or affecting the obligations of the undersigned, and hereby waives;

a Presentment, demand, protest, notice of dishonor and the notice of nonpayment;

b The right, if any, to the benefit, or to direct the application of, any security hypothecated to the holder, until all indebtedness of the

maker to the holder, howsoever arising shall have been paid;

c The right to require the holder to proceed against the maker, or to pursue any other remedy in the holder's power;

And agrees that the holder may proceed against any of the undersigned, directly and independently of the maker and that the cessation of

the liability of the maker for any reason other than full payment, or any extension, forbearance, change of rate of interest, acceptance,

release, substitution of security, or any impairment or suspension of the holder's remedies or rights against the maker, shall not in anywise

affect the liability of any of the undersigned hereunder

All obligations of the makers if more than one, shall be joint and several.

A sample installment loan agreement ILLUSTRATION BY GGS CREATIVE RESOURCES REPRODUCED BY PERMISSION OF GALE, A PART OF CENGAGE LEARNING.

INSTANT 443

court to distinguish it from other cases discussed

INSTIGATE

To incite, stimulate, or induce into action; goad into an unlawful or bad action, such as a crime

The term instigate is used synonymously with abet, which is the intentional encourage-ment or aid of another individual in commit-ting a crime

INSTITUTE

To inaugurate, originate, or establish In civil law,

to direct an individual who was named as heir in

a will to pass over the estate to another designated person, known as the substitute

For example, to institute an action is to commence it by the filing of a complaint

INSTITUTION The commencement or initiation of anything, such as an action An establishment, particularly one that is eleemosynary or public by nature

An institution can be any type of organized corporation or society It may be private and designed for the profit of the individuals composing it, orPUBLICandNONPROFIT

INSTRUCTIONS Directives given by a judge to a jury during a trial prescribing the manner in which the jurors should proceed in deciding the case at bar Jury instructions ordinarily include a statement of the questions of fact for determination by the jury, as well as a statement of the laws applicable to the facts of the case

INSTRUMENT

A formal or legal written document; a document

in writing, such as a deed, lease, bond, contract,

or will A writing that serves as evidence of an individual’s right to collect money, such as a check

INSTRUMENTALITY RULE

A principle of corporate law that permits a court

to disregard the corporate existence of a subsidiary corporation when it is operated solely for the benefit of the parent corporation, which controls

and directs the activities of the subsidiary while asserting the shield of limited liability

The instrumentality rule, also called theALTER EGO doctrine, destroys the corporate immunity from liability when the corporate nature of an organization is a sham that brings about injustice When the rule is applied, the court is considered to pierce the corporate veil

INSURABLE INTEREST

A right, benefit, or advantage arising out of property that is of such nature that it may properly be indemnified

In the law of insurance, the insured must have an interest in the subject matter of his or her policy, or such policy will be void and unenforceable since it will be regarded as a form

of gambling An individual ordinarily has an insurable interest when he or she will obtain some type of financial benefit from the preservation of the subject matter, or will sustain pecuniary loss from its destruction or impairment when the risk insured against occurs

In certain jurisdictions, the INNOCENT PUR-CHASER of a stolen car, who has a right of possession superior to all with the exception of the true owner, has an insurable interest in the automobile This is not the case, however, where an individual knowingly purchases a stolen automobile

Insurable interest is not dependent upon who pays the premiums of the policy In addition, different people can have separate insurable interests in the same subject matter or property

INSURANCE

A contract whereby, for specified consideration, one party undertakes to compensate the other for a loss relating to a particular subject as a result of the occurrence of designated hazards

The normal activities of daily life carry the risk of enormous financial loss Many persons are willing to pay a small amount for tion against certain risks because that protec-tion provides valuable peace of mind The term insurance describes any measure taken for protection against risks When insurance takes the form of a contract in an insurance policy,

it is subject to requirements in statutes,

444 INSTIGATE

Insurance Policy (Motorcycle)

COLONIAL MOTOR CYCLE COVER

The Colonial Insurance Company Ltd (hereinafter referred to as "Colonial") agrees to provide insurance in the Terms and Conditions set

out in this Policy during the period of insurance stated in the Schedule or any subsequent period for which the Company may accept a

premium.

– The proposal form and declaration signed by you the Insured are the basis of and form part of this contract.

– The policy will operate only in Bermuda.

– This Policy is a Contract of Indemnity between Colonial and you the Insured.

– We welcome you as a policyholder of Colonial.

Stamp Duty chargeable on this Policy under the Stamp Duties Act, 1976 will be paid.

NO CLAIMS DISCOUNT

Provided no claim has arisen under this policy during the previous period of insurance your renewal premium will be discounted as follows:

After

1 Claim Free Year 10%

2 Claim Free Years 20%

If only one claim arises in any period of insurance, your No Claim Discount will be reduced to nil.

Your entitlement to No Claims Discount cannot be transferred to anyone else.

The Policy

Definition 'Your Motor Cycle' – The Motor Vehicle described in the Schedule of this Policy.

SECTION 1 – LOSS OR DAMAGE TO YOUR MOTOR CYCLE

Colonial will pay for loss or damage to your motor cycle and its attached accessories and spare parts by:

(a) fire, explosion, malicious damage.

(b) theft,

(c) accidental collision,

(d) any other cause

But Colonial will not pay for:

(a) wear and tear or depreciation,

(b) mechanical or electrical fault or breakdown,

(c) loss of use, cost of alternative transportation

(d) damage to tires by punctures, cuts, bursts or braking,

(e) loss or damage where the driver has been convicted (or a prosecution is pending against the driver) of an offense contrary to

section 35, 35A or 35B of the Road Traffic Act, 1947.

Also see "Compulsory Claims Excess" below.

Towing Costs

Colonial will pay for the reasonable cost of removing your motor cycle to the nearest repairer.

Claim Settlement

Colonial has the option to either:

(a) repair your motor cycle,

(b) replace your motor cycle,

(c) pay in cash the amount of the loss or damage.

N.B Any claim payment will not be for more than the market value of your motor cycle immediately prior to the loss or damage or the

Insured's estimated value whichever is the less The market value is the cost of replacing your motor cycle with another of

similar type, age and condition.

The Insured's estimated value at the inception of the Policy is stated in the Schedule At each renewal of this Policy the Insured's

estimated value is as stated on the Certificate of Insurance Form A issued as evidence of the existence of this Policy as required

by law.

Compulsory Claims Excess

If loss or damage (excluding fire, explosion, malicious damage or theft) covered by this policy occurs you will be responsible, in respect of

each claim, for the amounts specified below:

(a) where the driver is age 26 or over $50.00

(b) where the driver is under age 26 $100.00

If loss or damage caused by theft occurs you will be responsible in respect of each claim for the amount of $200.00.

Except where the Insured's estimated value exceeds $1500 in which case you will be responsible for the amount of $300.00.

[continued]

A sample insurance policy.

INSURANCE 445

A sample insurance

policy (continued). Insurance Policy (Motorcycle)

SECTION 2 – LIABILITY TO THIRD PARTIES Your Liability

Colonial will indemnify you against your legal liability arising out of an accident in connection with your motor cycle for

an amount of up to BD$5,000,000 (Five Million Dollars) in respect of the total claims arising out of any one accident and/or series of accidents arising out of one event (inclusive of Legal Fees; Costs and Expenses as covered by this Policy)

but subject to

a limit of BD$250,000 (Two Hundred and Fifty Thousand Dollars) in respect of liability for damage to property.

However, in the event of Colonial being required to indemnify you for such liability solely because of the requirements of the Motor Car

Insurance (Third Party Risks) Act 1943, then the minimum limits as required of an insurance policy by that Act shall apply.

Other Persons Liability

In the same way, we will indemnify any person permitted by you to drive or use your motor cycle as if they were you provided that the person is not driving or using your vehicle in contravention of any law.

Legal Fees; Costs and Expenses

Colonial will pay all reasonable costs for legal services or any other costs or expenses incurred with our written consent in connection with any incident which might involve legal liability under this policy.

Indemnity to Legal Personal Representatives

In the event of death of any person entitled to indemnity under this section, Colonial will indemnify his/her legal personal representatives.

Liability Not Covered

Colonial will NOT indemnify you for:

(a) liability for damage to your motor cycle or any other property owned by or in the possession of any person claiming indemnity under this section,

(b) liability covered by any other policy, (c) liability for the death of or injury to any person traveling upon or getting on to or off of your motor cycle, (d) ( i i) compensation for damages in respect of judgements delivered or obtained in the first instance otherwise than by a Court of

competent jurisdiction within Bermuda, (ii) cost and expenses of litigation recovered by any claimant from the insured which are not incurred in and recoverable in Bermuda.

Right of Recovery

You will repay to Colonial all sums it must pay because of any law if Colonial would not have been liable for those payments under the Terms of the Policy

SECTION 3 – GENERAL EXCEPTIONS

Colonial will NOT be liable (1) whilst your motor cycle is being driven by (a) you unless you hold a license to drive your motor cycle (b) any other person driving with your permission who does not hold a license to drive your motor cycle

(b) unless the driver has held and is not disqualified from holding or obtaining a license.

(2) whilst your motor cycle is being used otherwise than in accordance with the Limitations as to Use.

Limitations As To Use

Your Motor cycle may be used for social, domestic, and pleasure purposes, and for the Insured's business or profession The Policy does not cover use for hire or reward, racing, pacemaking, reliability trial and speed testing, or use for any purpose in connection with the Motor Trade.

(3) for liability which attaches by virtue of an agreement but would not have attached in the absence of such an agreement.

(4) in respect of loss or destruction of or damage to your motor cycle or any consequential loss or any legal liability directly or indirectly caused or contributed to by or arising from

(a) ionising radiations or contaminations by radioactivity from any nuclear fuel, or from any nuclear waste from the combustion

of nuclear fuel.

(b) the radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof (c) war, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, civil commotion, rebellion, revolution, insurrection or military or usurped power except where it is necessary to meet the requirements of The Motor Car Insurance (Third Party Risks) Act 1943.

(d) earthquake, flood, (e) riot or civil commotion.

SECTION 4 – GENERAL CONDITIONS

(1) Colonial will only provide the insurance described in this Policy if:

(a) any person claiming indemnity has complied with all its terms, conditions and endorsements.

(b) the declaration and information given in the proposal form, which forms the basis of the contract, is complete and correct [continued]

446 INSURANCE

ADMINISTRATIVE AGENCY regulations, and court

decisions

In an insurance contract, one party, the

insured, pays a specified amount of money,

called a premium, to another party, the insurer

The insurer, in turn, agrees to compensate the

insured for specific future losses The losses

covered are listed in the contract, and the

contract is called a policy

When an insured suffers a loss or damage

that is covered in the policy, the insured can

collect on the proceeds of the policy by filing a

claim, or request for coverage, with the

insur-ance company The company then decides

whether or not to pay the claim The recipient

of any proceeds from the policy is called the beneficiary The beneficiary can be the insured person or other persons designated by the insured

A contract is considered to be insurance if it distributes risk among a large number of persons through an enterprise that is engaged primarily in the business of insurance Warran-ties or service contracts for merchandise, for example, do not constitute insurance They are not issued by insurance companies, and the risk distribution in the transaction is incidental to the purchase of the merchandise Warranties and service contracts are thus exempt from strict insurance laws and regulations

Insurance Policy (Motorcycle)

(2) You and any other person claiming indemnity must take all reasonable steps to:

(a) prevent loss or damage

(b) maintain your motor cycle in an efficient and roadworthy condition.

(3) Colonial must be given free access to examine your motor cycle on requrest.

(4) Colonial may cancel the policy by sending seven days notice by registered letter to your last known address, in which case you will

be entitled to a pro rata refund of premium You may cancel the policy by notifying Colonial and returning the Certificate of Motor

Insurance Provided no claim has arisen during the period of insurance, you shall be entitled to a return of premium less premium

charged at the Company's Short Period rates for the time the policy has been in force.

(5) When an accident, injury, loss, or damage occurs, you must advise Colonial in writing as soon as possible

In addition Colonial must be advised immediately of:

(a) any letter, claim, writ or summons whether civil or criminal received by you or any other person covered by this policy.

(b) any impending prosecution, coroners inquest, or fatal accident inquiry involving any person covered by this policy.

(6) Any person claiming indemnity must:

(a) not admit liability or fault nor promise or offer any compensation without our written consent

(b) give all necessary assistance and information that Colonial may require.

(7) Colonial will be entitled to:

(a) take over and with full discretion conduct the defence settlement or prosecution of any claim in the name of any person

claiming indemnity.

(b) instruct legal representatives of its own choice in any civil or criminal proceedings arising from any event the subject of a claim

under this policy.

(8) If any difference shall arise as to the amount to be paid to you under this policy (liability being otherwise accepted) such

difference shall be referred to an arbitrator to be appointed by the parties in accordance with current statutory provisions Where

any difference is by this Condition to be referred to arbitration, the making of an Award shall be a condition precedent to any right

of action against Colonial.

SECTION 5 – ENDORSEMENTS

These endorsements apply only if referred to by number in the Schedule.

(1) Third Party Only

Section 1 is cancelled

(2) Third Party Fire and Theft

No claim will be paid under Section 1 except for loss or damage caused by:

(a) fire, lightning or explosion

(b) or theft, attempted theft, or as the result of your motor cycle being taken without the consent of the Insured.

(3) Excluding Named Persons from Driving

The policy will not operate whilst your motor cycle is being driven by or is in the charge of any person named in the schedule

against this endorsement number.

(4) Reduction to Third Party Only for Named Drivers

Section 1 of the policy will not operate whilst your motor cycle is being driven by or is in the charge of any person named in the

schedule against this endorsement number.

(5) Named Drivers Only

The policy will not operate whilst your motor cycle is being driven by or is in the charge of any person other than a person named

in the schedule against this endorsement number.

Schedule Attached.

A sample insurance policy (continued) ILLUSTRATION BY GGS CREATIVE RESOURCES REPRODUCED BY PERMISSION OF GALE, A PART OF CENGAGE LEARNING.

INSURANCE 447