Other Than Life (OTL) Practice Exam

Assignment of an insurance policy is automatic when:

1. B buys A's seasonal residence

2. B is appointed as trustee in bankruptcy after A goes bankrupt following a major investment

3. A sells his house to his cousin B

4. An insurance policy is personal and therefore never be assigned to anybody

The correct answer is: B is appointed as trustee in bankruptcy after A goes bankrupt following a major investment

The automatic assignment of an insurance policy occurs in the context of bankruptcy proceedings. When A goes bankrupt and B is appointed as a trustee in bankruptcy, B assumes the rights to manage A's assets, including any insurance policies that A may have. This assignment happens automatically as part of the process where the trustee steps in to handle A's financial affairs and ensure fair distribution to creditors. In bankruptcy, debts and assets are typically managed through legal proceedings, and the rights to any insurance benefits associated with A's policies are part of the estate to settle claims against A. This legal framework allows the trustee to act on behalf of the bankrupt individual, which includes the ability to manage or assign any insurance policies that were held by A. The other scenarios do not involve a legal mechanism that results in an automatic assignment. The sale of property does not inherently transfer insurance policies unless explicitly mentioned, and the notion that an insurance policy is personal indicates it cannot be assigned at will. Thus, the context of bankruptcy is the pivotal reason why automatic assignment occurs in this specific circumstance.