AINS 21 A9 Self Made Qs

What is the purpose of a conditions section??

- A policy's conditions section clarifies the insurer's and insured's duties, rights, and options. - May be in a policy's conditions section - The insured must comply with conditions for a policy to cover a loss. The insurer is obligated to perform its promise only if the insured has fulfilled its contractual duties as specified in the policy conditions.

What is an insurance contract?

- An insurance contract, called a policy, is an agreement between the insurer and the insured. - An insurance policy must meet the same requirements as any other valid contract, which is a legally enforceable agreement between two or more parties. - If a dispute arises between the parties to a contract, a court will enforce only valid contracts. The validity of a contract depends on four essential elements.

What is claims-made coverage coverage do?

- Claims-made coverage is sometimes used to insure businesses that face certain types of liability loss exposures, such as medical malpractice, professional liability, or liability for especially hazardous products. - Under such a liability policy, the covered event must occur on or after a specified date (called a retroactive date) and before the end of the policy period.

What is the financial consequence of a reduction in property value (direct loss) ?

- If the property is not restored, it is not worth as much after the loss as it was before. - Homeowners policies and commercial property policies both provide coverage against direct physical loss to covered property by a covered cause of loss.

Depending on the type of liability insurance policy, coverage is usually "triggered" by either of these situations:

- Injury or damage that occurs during the policy period (in an occurrence basis policy) - Claims made (submitted) during the policy period (in a claims-made policy)

What is property damage for Liability policies?

- Property damage includes physical injury to tangible property and loss of use of tangible property, whether or not it is physically injured. (data is not tangible) - Includes both direct losses and time element (or indirect) losses sustained by the claimant.

What are miscellaneous provision?

- Provisions that do not qualify strictly as declarations, definitions, insuring agreements, conditions, or exclusions. - May deal with the relationship between the insured and the insurer or may help establish procedures for implementing the policy. - May affect coverage but do not have the force of conditions. - If the insured does not follow procedures specified in miscellaneous provisions, the insurer typically still must fulfill its contractual promises.

How is an insurance policy a Conditional Contract ?

- The parties have to perform only under certain conditions (if covered loss occurs or not - insured duty to inform, insurer duty to indemnify) - The promise exists, even if the insurer's performance is not required during the policy period.

How do Valuation provisions affect amounts of recovery?

- Valuation provisions are used to set a value on covered property. - (replacement cost and actual cash value & agreed value)

What is the financial consequence of lost income?

- lost income, often referred to as time element losses or indirect losses. - The longer a property is unusable, the greater the time element loss. - Business income insurance protects a business from income lost because of a covered direct loss to its building or personal property. - Coverage is provided for the reduction in the organization's net income that results from damage by a covered cause of loss to the property at the insured's location. - Homeowners policies also provide coverage for lost income. When a covered cause of loss damages the part of a residence that an insured rents or holds for rental to others, "fair rental value" coverage in the homeowners policy indemnifies the insured for the loss of rental income until the rented portion of the residence is restored to livable condition.

What are the Four Essential Elements of a Contract?

1. Agreement (offer and acceptance) 2. Capacity to contract 3. Consideration 4. Legal purpose If a court cannot confirm the presence of all four elements, it will not enforce the contract.

How do Settlement options affect amounts of recovery?

An insurer generally has these three settlement options when settling a loss: - Paying the value (as determined by the valuation provision) of the lost or damaged property - Paying the cost to repair or replace the property (if repair or replacement is possible) - Repairing, rebuilding, or replacing the property with other property of like kind and quality instead of paying money

What are the 3 types of auto physical damage coverage ?

Collision coverage Other than collision coverage (or comprehensive coverage) Specified causes of loss coverage.

What is the most serious case of loss to autos?

Collision. Insurance against collision costs considerably more than insurance against all other auto physical damage perils combined. Collision coverage is not included with other than collision coverage or specified causes of loss coverage and must be purchased as a separate coverage.

Common policy provisions fall within these six categories:

Declarations Definitions Insuring agreements Conditions Exclusions Miscellaneous provisions

What is the effect of declarations on coverage?

Outlines who and what is covered. When and where the coverage applies

What kind of contracts are most property and liability insurance policies?

contracts of indemnity.

How is an insurance policy a Contract of Adhesion ?

- "take it or leave it." - one party (the insured) must adhere to the agreement as written by the other party (the insurer). - If a dispute arises between the insurer and the insured about the meaning of certain words or phrases in the policy, the insured and the insurer are not on an equal basis. If the policy wording is ambiguous, a court will generally apply the interpretation that favors the insured.

In commercial insurance, What is considered a building?

- A permanent structure with walls and a roof is usually called a building. - Outdoor structures such as carports, antenna towers, and swimming pools are not considered buildings, but they can also be insured. - May include additions that are either completed or under construction, as well as materials and supplies used for constructing the additions. - Permanently installed fixtures, machinery, and equipment are also included as part of the building.

Are buildings and personal property insured on the same policy?

- Although buildings and personal property can be insured with the same policy, they are usually treated as separate coverage items. - Commercial property insurance policies usually refer to the contents of buildings as business personal property, which includes personal property of the insured located in or on the building described in the declarations, such as furniture, equipment, and stock.

What is an endorsement in the policies structure?

- An endorsement adds to or modifies an insurance policy. - An endorsement may be a few words handwritten into a policy, or it may be a separate document of one or more pages that is attached to the policy. - If the policy and the endorsement contain conflicting terms, the endorsement takes precedence. - Agreements between an insurer and insured, particularly handwritten alterations, tend to reflect true intent more accurately

No insurance policy can reasonably cover all loss exposures. The exclusions in liability insurance policies generally follow these broad guidelines:

- Avoid covering uninsurable losses (war) - Avoid insuring losses that occur because of illegal activities - Eliminate duplicate coverage provided by policies specifically designed to address particular exposures. - Eliminate coverage that most insureds do not need. - Eliminate coverage for exposures that require specialized coverages and underwriting. - Keep premiums reasonable.

What are the 3 different levels of coverage for personal and commercial property insurance policies on buildings and personal property ?

- Basic form - broad form - special form - Basic form covers about one dozen named perils (fire and lightning, windstorm, hail, aircraft, vehicle damage, riot and civil commotion, explosion, smoke, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action) - Broad form adds several perils to those covered by basic form (falling objects; weight of snow, ice, or sleet; and sudden and accidental leakage of water from a plumbing system) - Special form covers all causes of loss that are not specifically excluded

How are insurance policies contracts of utmost good faith?

- Because insurance involves a promise, it requires complete honesty and disclosure of all relevant facts from both parties. - insurer & insured are expected to be ethical - The insured has a right to rely on the insurer to fulfill its promises. - An insurer that acts in bad faith could face serious penalties under the law. - The insurer also has a right to expect that the insured will act in good faith. - An insurer could be released from a contract because of concealment or misrepresentation by the insured regarding a material fact.

For a contract to be enforceable, all parties must have capacity to contract. In other words, each party must have the legal capacity to make the agreement binding. Individuals are generally considered to be competent and able to enter into legally enforceable contracts,

- Being insane or otherwise mentally incompetent - Being under the influence of drugs or alcohol - Being a minor (person not yet of legal age) ( unless auto - law varies by state)

What might the covered locations policy provision say?

- Buildings are covered at the fixed location stated in the policy (though some attached property may be removed for repair) - Some property insurance policies cover personal property that may not remain at a fixed location (homeowners cover property of the insured while it is anywhere in the world/Auto insurance provides coverage in United States, its territories) - Commercial property insurance policies are more restrictive (provide coverage for the insured's business personal property in the building or within 100 feet of it, or specify territory & price range)

What is an important difference between named perils and open perils coverage?

- Burden of proof - with named, he burden of proof is on the insured; with open, it is on the insurer. - With a named perils policy, for coverage to apply, the insured must prove that the loss was caused by a covered cause of loss. - With an open perils policy, if a loss to covered property occurs, it is initially assumed that coverage applies. However, coverage may be denied if the insurer can prove that the loss was caused by an excluded cause of loss.

Why are Medical Payments also a covered cost?

- Can help avoid larger liability claims. - If a homeowners policy includes $1,000 of medical payments coverage, for example, a neighbor injured on the insured's property can receive emergency medical treatment up to that amount without having to sue the insured to recover the cost. - In homeowners policies, this coverage is called "medical payments to others" and does not cover injuries to an insured or regular residents of his or her household. - In personal auto policies, medical payments coverage does cover an insured's injuries, up to a specified limit.

If a case goes to court, the claimant may be awarded two types of damages:

- Compensatory damages and punitive damages (exemplary damages). - Most liability insurance policies do not state whether punitive damages are covered. - Some states do not permit insurers to pay punitive damages because the punishment is viewed as less effective if the responsible party does not personally pay the required damages. - Insurers will pay punitive damages if allowed by the state and not excluded by the policy.

Why must a contract have legal purpose?

- Contract is illegal if its purpose is against the law or against public policy (as defined by the courts) - Most insurance policies do not involve a question of legality. - Courts will refuse to enforce any insurance policy that is illegal or that tends to injure the public welfare. - Can't insure illegally owned property/goods. - No insurance contract will remain valid if the wrongful conduct of the insured causes the operation of the contract to violate public policy. (insured can't collect money from arson they committed)

How do Deductibles affect amounts of recovery?

- Deductibles encourage the insured to try to prevent losses because the insured will bear a part of any loss. - Also enables the insurer to reduce premiums. - Deductibles enable people to purchase coverage for serious losses at a reasonable price without unnecessarily involving the insurer in small losses.

An exclusion can serve one or more of these purposes:

- Eliminate coverage for uninsurable loss exposures - Assist in managing moral hazards - Assist in managing morale hazards - Reduce the likelihood of coverage duplications - Eliminate coverages that the typical insured does not need - Eliminate coverages requiring special treatment - Assist in keeping premiums reasonable

How do policy limits affect amounts of recovery for liability?

- Help an insurer measure the extent of its obligation. - Liability insurance limits are generally round numbers such as $100,000, $500,000, or $1 million and can be expressed in different ways, such as an each person limit, each occurrence limit, or aggregate limit. - Separate limits for bodily injury and property damage liability coverage are known as split limits. - A single limit applies to any combination of bodily injury and property damage liability claims arising from the same occurrence.

Property insurance policies often provide coverage for property that is owned by someone other than the insured. What does this vary for homeowners/commercial/auto?

- Homeowners policies provide coverage for the personal property of others, such as guests or employees, while the property is in the insured's home. - Commercial property policies generally include limited coverage for the personal effects of officers, partners, and employees as well as for the personal property of others while it is in the care, custody, or control of the insured. - The personal auto policy provides coverage for damage to a borrowed auto if the owner of the borrowed auto does not have physical damage coverage.

Depending on the type and variety of coverages a customer seeks, a policy can be a single document (self-contained), or it may require a combination of documents to include all the agreements between the insured and the insurer (modular). When might it be self contained or modular?

- If the customer seeks coverage that is common to a large number of insureds, the insurer may choose to offer a self-contained policy. (personal auto) - If the customer seeks a variety of coverages that may not be common to a large number of insureds, the insurer may choose to offer a modular policy to tailor a policy to an insured's specific needs.

Why is an insurer's duty to defend insureds against liability claims often more important than its duty to pay damage ?

- If the defense is successful, the court may award no damages or a smaller amount of damages. - Most courts in the United States interpret the insurer's duty to defend as requiring the insurer to pay the costs of defending an insured against any claim or lawsuit, even those without a legitimate basis, whenever a claimant's allegations (if proved) would be covered under the policy. - The insurer's duty to defend implies that the insurer will retain the attorneys and pay their fees and expenses. - The insurer is also responsible for the costs of investigation, legal research, expert witness fees, and similar costs incurred in preparing and presenting the case.

What is Personal and Advertising Injury for Liability policies?

- In liability insurance policies, personal injury usually refers to a specific group of intentional torts - Personal injury offenses and are either excluded from coverage or are covered separately. - Advertising injury, which is covered by most CGL policies, typically includes libel and slander; publication of material that constitutes an invasion of privacy; misappropriation of advertising ideas or business style; and infringement of copyright, trade dress, or slogan. - Personal injury offenses and advertising injury offenses overlap somewhat so CGL policies include both personal and advertising injury in the same insuring agreement to avoid duplication of coverage. - Coverage for personal injury liability (but not advertising injury) also can be added by endorsement to a homeowners policy.

How is an insurance policy a Contract Involving Fortuitous Events and the Exchange of Unequal Amounts ?

- Insurance contracts involve an exchange of money for protection upon fortuitous events. - Its unequal because the insured could pay 1k and never have an accident (never receive anything) but the insured could have a huge accident greater that the 1k premium so the insurer pays more. - This doesn't mean insureds who have no losses do not get their money's worth or that insureds involved in major accidents profit from the insurance. - The premium for a particular policy should reflect the insured's share of estimated losses that the insurer must pay. The policy premium reflects the insured's proportionate share of the total amount the insurer expects to pay to honor its agreements with all insureds having similar policies.

What are policy provisions?

- Insurance policy statements communicating the terms of the insurer's and insured's coverage agreements. - They describe and clarify the insurance policy's coverage, the types of losses the policy does not cover, and the parties' contractual responsibilities. - Some policy provisions appear in policy sections matching the provision's category, such as a definition located in the policy's definitions section. Other policy provisions may be interspersed throughout the policy.

How do Insurance-to-value provisions affect amounts of recovery?

- It is good risk management for property owners to insure their property for its full value. - Insurers develop property insurance rates on the assumption that all policyholders will insure their property to at least 80 percent of its full value. - Insurers encourage their insureds to buy insurance to value or to insure to a high percentage of the property's value. - The traditional approach to encouraging insurance to value is to include a coinsurance provision in the policy.

What are supplementary payments that are covered costs in liability insurance?

- Liability insurance policies typically include a supplementary payments section describing various expenses that the insurer agrees to pay in addition to liability limits. - Two examples are prejudgment interest, which may accrue between the time of the injury or damage and the time when a court awards a judgment to the claimant, and postjudgment interest, which accrues when an appeal to a higher court delays the payment of the judgment.

What are considered covered activities in liability policy provisions?

- Liability insurance policies use two approaches to defining covered activities: state the specific activity or source of liability covered (auto insurance), or general liability insurance covers all activities or sources of liability that are not specifically excluded (commercial general liability - CGL - the insurer agrees to pay damages "to which this insurance applies.") - In general liability the coverage depends on the exclusions (automobile liability, workers compensation, aircraft liability, watercraft liability, and professional liability) - Exclusions dealing with difficult-to-insure exposures, losses expected or intended by the insured, and loss exposures that would be too costly to insure are also contained in general liability policies (war and nuclear hazards)

What is good to know about Preprinted forms?

- Most insurers use standard preprinted policy forms, because it is not necessary to negotiate new contractual terms for each policy purchased. - Insurance Services Office, Inc. (ISO) and the American Association of Insurance Services (AAIS), develop standardized forms - Sn insurer may develop its own nonstandard, preprinted forms.

How do Defense Cost Provisions affect amounts of recovery for liability?

- Most liability policies place no dollar limit on the defense costs payable by the insurer. - The only limitation is that the insurer is not obligated to provide further defense once the entire policy limit has been paid in settlement or judgment for damages. - Stated differently, defense costs are usually payable in addition to the policy limits, and policy limits include only payment for damages. - Some liability policies place defense costs within the overall policy limit.

How does contract of indemnity work?

- Must restore to pre-loss condition and no further (can't profit) - Property insurance generally pays the amount necessary to repair or replace, policy specificies valuation method - Auto usually uses ACV to determine what is paid (insurer pays ACV-deductible) - Liability insurance pays to 3rd party claimant any amounts up to the policy limit as well as the legal costs associated with that claim. - Won't necessarily pay amount necessary to restore an insured to the same financial position. - Most policies have limits and provisions (ex: only $200 of cash is covered on homeowner) - Contracts have subrogation provisions (The insured cannot collect from both the insurer and the responsible party, if the insured isn't fully indemnified, insurer must pay out of subrogation recovery) - Cannot buy insurance unless that person is in a position to suffer a financial loss. (prevents an insured from collecting more from the insurance than the amount of the loss) - A person cannot buy life insurance on the life of a stranger, hoping to gain if the stranger dies. - Some insurance contracts are not contracts of indemnity but valued policies (insurer just pays up to agreed upon limit)

What is occurence basis coverage do?

- Offers valuable protection for unknown and unforeseen claims from insureds standpoint - For the insurer, however, occurrence basis coverage means that liability claims may surface long after a policy has expired. - Claim submitted after policy period but happened during policy period would still be covered.

What does it mean for the parties to be in agreement?

- One party must make a legitimate offer, and another party must accept the offer. - "mutual assent" - begins when someone who wants to purchase insurance completes an insurance application—an offer to buy insurance. - In a more complicated case, an underwriter may not be willing to meet all the requests of the applicant. For example, an underwriter may insist on a higher deductible than the applicant had requested. Modifications constitute a counteroffer. - Several offers and counteroffers may be made before both parties agree to an exact set of terms. -To be enforceable, the agreement cannot be the result of duress, coercion, fraud, or a mistake. If either party to the contract can prove any of these circumstances, a court could declare the contract to be void.

Why might workers comp & no fault auto insurance documents be included?

- Policies providing workers compensation insurance or auto no-fault insurance are among those that provide benefits required by state statutes. - The insurance policy usually does not contain the relevant statutes but incorporates them by reference. - Like National Council on Compensation Insurance (NCCI) contains the following statement instead of detailing the types and amounts of benefits payable: We will pay promptly when due the benefits required of you by the workers compensation law

What are some common items on the declarations page?

- Policy number - Policy inception and expiration dates - Insurer's name - Producer's name - Named insured (policyholder's name) - Named insured's mailing address - Physical address and description of covered property - or operations - Numbers and edition dates of all attached forms and endorsements - Dollar amounts of applicable policy limits - Dollar amounts of applicable deductibles - Names of persons or organizations whose additional interests the policy covers (such as mortgagees, loss payees, or additional insureds) - Premium amount - Any optional coverages the applicant has chosen

How do provisions include covered cause of loss?

- Property Insurance policies may list their covered causes of loss - named perils policies - usually also list the causes of loss that are excluded from coverage. - There are also special form or open perils policies which cover all causes of loss except those that the policy specifically excludes. -Examples of covered causes of loss include fire, lightning, windstorm, hail, and theft.

What might be some excluded causes of loss?

- Some perils that affect many people at the same time (generally considered uninsurable because the losses would be so great the insurance business couldn't handle it) - Losses from catastrophes like war and nuclear hazard are generally excluded - Most coverage on buildings and personal property at fixed locations exclude coverage for earthquake and flood losses. - Insurers are generally unwilling to provide coverage for a loss that is certain to occur - some flooding is predictable - Exclude loss from inherent vice and latent defect, as well as wear and tear and other maintenance perils (certain to occur over time or they are avoidable through regular maintenance and care)

What is the consideration element of a contract?

- Something of value given by each party to a contract. (tangible or performance or promise of performance). - If no loss occurs, the insurer is still fulfilling its promise to provide financial protection even though it does not pay a claim. - In insurance contracts, two types of consideration are involved: insured's consideration is the payment of (or the promise to pay) the premium & insurer's consideration is its promise to pay claims for covered losses.

What is CPP ?

- The ISO commercial package policy (CPP) is an example of a modular policy because it combines different coverage parts to meet the insured's particular needs. - Commercial insureds' needs can vary, depending on the type of business insured. - Each ISO-type CPP begins with two component documents: a set of common policy conditions and common declarations. - Adding the necessary forms to make up the coverage parts that meet the insured's needs completes the policy. - In most cases, a separate declarations page is included for each coverage part contained in the CPP.

Why is an insurance application a part of the policy?

- The application documented request for coverage) contains information about the insured and the loss exposures presented to the insurer. - The insurer keeps the completed application in order to preserve the insured's representations. - Misleading or false representations in an application can be grounds for denying a claim. - Some state statutes require that any written application become part of the policy for some types of insurance.

Are most claims settled in court?

- The claim is most often settled out of court. - Generally, out-of-court settlements, with the insurer paying the claimant on behalf of the insured, are attractive to both sides because they resolve cases quickly, spare the parties financial and emotional costs, and eliminate uncertainty about the outcome of a claim. - In exchange for payment, the third party signs a release.

How is an insurance policy a nontransferable contract ?

- The identities of the persons or organizations insured are important to the insurer, because it has the right to select those applicants with whom it is willing to enter into contractual agreements. - An insured may not freely transfer the policy to some other party (a practice called "assignment"). - Most insurance policies contain a provision that requires the insurer's written permission before an insured can transfer a policy to another party.

Commercial liability policies also cover the named insured and certain others, depending on their relationship to the named insured. For example, one provision usually contained in a CGL policy defines others who may be covered because of their business relationship to the named insured and the circumstances under which they are covered. The parties who are insureds under this provision include these:

- The named insured's employees and volunteer workers - Real estate managers for the named insured - Any organization that is newly acquired or formed by the named insured for up to a certain number of days after it is acquired or formed

The liability coverage of a typical homeowners policy applies to the named insured and these persons:

- The named insured's spouse, if the spouse is a resident in the household - Relatives of the named insured or spouse, if the relatives reside in the household - Full-time students who were residents before moving out to attend school, if under twenty-four and a relative or under twenty-one and in the care of an insured

Persons or organizations with an insurable interest in property can include property owners, secured lenders, users of property, and other holders of property. Insurance policies are written to cover these persons and organizations:

- The owner of a building is the named insured on a property insurance policy covering the building. Because the owner does not also occupy the building, typically there is no separate personal property of the owner's to insure at the building location. - A party that owns and occupies a building is the named insured on a policy covering both building and personal property. - A tenant occupies and uses rented space in a building and is therefore the named insured on a property insurance policy covering the tenant's personal property in that rented portion of the building. - A secured lender, the party that provided funds to help finance purchase of an insured property, is usually not a named insured but is listed by name in the declarations (or in an endorsement) as a mortgagee or a loss payee. - A bailee is the named insured on a bailee policy, which covers property of others that is in the bailee's custody.

What is the purpose of the declaration page?

- The purpose of the declarations is to personalize a policy and tailor it to fit a particular policyholder's needs. The declarations contain (declare) information about the insured from the insurance application. They also summarize the coverage provided under the policy, along with other information unique to the policy. - Policy forms or endorsements also may contain information that qualifies as declarations, often in the form of scheduled coverage.

What is the financial consequence of extra expenses?

- The reason a business incurs extra expenses after experiencing a direct property loss is to continue its operations, which may also reduce the business income loss. - Additional living expense coverage in homeowners and other policies covering dwellings is another example of extra expense coverage that applies if a direct loss to a dwelling makes it uninhabitable.

In personal insurance, a residential structure is generally called a dwelling and is usually covered under a homeowners policy. What does a typical policy on a dwelling cover?

- The residence premises which includes structures attached to the dwelling and materials located on or next to it used to construct, alter, or repair the residence premises. - A detached garage is not part of the dwelling. A separate insuring agreement for other structures covers such detached items. - The coverage for the residence premises does not apply to land.

What is bodily injury for Liability policies?

- The standard CGL policy describes " bodily injury" as bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time. - The term includes some things that may not be included in its everyday use. - Sickness and disease are often considered forms of illness that do not involve injury. - Death could be considered the severest form of injury, but unless it is specified in the policy, the applicability of bodily injury liability coverage may be questioned.

What is the purpose of an insuring agreement?

- To state in broad terms the insurer's promises to the insured. A policy providing more than one coverage can have more than one insuring agreement. - Introduces a coverage section, but it also can introduce other policy sections - Broadly states what the insurer agrees to do under the policy, subject to clarification in other parts of the policy, such as the policy definitions.

When might an insurer use a manuscript form?

- When an insurer's preprinted forms do not provide the terms of coverage needed by a particular insured or a small group of insureds, the insurer (or in some cases the insured's broker) may draft a manuscript form to meet the customers' needs. - Because of the limited number of professionals requiring this coverage, insurers typically would not have preprinted forms available for that class of insureds.

How do policy limits affect amounts of recovery?

- dollar amount of coverage - tells the insured the maximum amount of money that can be recovered - allows insurers to keep track of their overall obligations in any one geographic area and because the premium charged is directly related to the policy limit for most property insurance coverages.

Each of these distinguishing characteristics allows the transfer of risk to occur more efficiently. Distinguishing Characteristics of Insurance Policies are:

1. Contract of indemnity 2. Contract of utmost good faith 3. Contract involving fortuitous events and the exchange of unequal amounts 4. Contract of adhesion 5. Conditional contract 6. Nontransferable contract

Insurance policy structure can vary, depending on customer coverage needs. What are the 3 structures?

1. Preprinted and manuscript forms 2. Self-contained and modular policies 3. Endorsements and other related documents Most policies are issued using preprinted forms, but manuscript forms may be used when an insured has coverage needs that preprinted forms do not adequately address. Moreover, all policies can be classified as being either self-contained policies or modular policies. Another important aspect of policy structure is the incorporation of endorsements or other documents into the policy.

What is s floater policy?

A property insurance policy for covering personal property that moves from one place to another is often called a floater because it provides coverage that floats, or moves, with the property as it changes location. Policies covering movable property may have territorial limits such as the U.S. and Canada, or they may provide broader territorial limits such as "anywhere in the world." When insuring satellites or other property sent into outer space, a policy may cover property "anywhere."

Why do insurers, the court system, and society favor out-of-court settlements in general?

Claim costs would soar if insurers had to resolve all liability claims through the courts, and the courts would be overwhelmed with cases and expenses. Society benefits when injured parties receive prompt compensation and when all parties put their legal disputes behind them.

The CGL policy typically contains two insuring agreements that express the insurer's promise to pay damages on behalf of the insured:

Coverage A: Bodily Injury and Property Damage Liability We agree to pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. Coverage B: Personal and Advertising Injury Liability We agree to pay those sums that the insured becomes legally obligated to pay as damages because of "personal and advertising injury" to which this insurance applies.

What is the definitions provisions and what is the effect on coverage?

Definitions section clarifies ambiguity or bolded words. It may limit of expand coverage based on definition of terms.

A property insurance policy is a contract between the insurer and the named insured, though the named insured is not always the only party that can recover in the event of an insured loss. Who else can?

Depending on the policy terms and conditions, property insurance can protect the insured and sometimes other parties that have an insurable interest in the property and that suffer a financial loss because covered property is lost, damaged, or destroyed.

What other documents can become a part of policy?

Documents that can become part of a policy are the completed application, endorsements, the insurer's bylaws, and relevant statutory terms or provisions.

An insurance policy specifies what property is covered. Covered property is often described broadly and then refined through a series of limitations and exclusions. Are exclusions & limitations the same thing?

Exclusions and limitations are not the same thing; while exclusions eliminate all coverage for excluded property or causes of loss, limitations place a specific dollar limit on specific property that is covered.

How do "Other insurance" provisions affect amounts of recovery?

In some cases, more than one insurance policy provides coverage for the same item of property, which can trigger "other insurance" provisions in either policy. If two or more insurers paid in full for the same loss, the insured could profit from the loss, violating the principle of indemnity. Most policies contain an "other insurance" provision to deal with this potential problem. When more than one policy covers a loss, the amount paid by each policy depends on the allocation procedure specified in the "other insurance" provisions of the policies.

How do "Other Insurance" Provisions affect amounts of recovery for liability?

In some cases, two or more policies may cover the same claim. Liability insurance policies contain "other insurance" provisions to resolve this problem and preserve the principle of indemnity. Several approaches can be used, and the applicable approach depends on the wording of the policies, which, depending in the facts of the situation, usually provides a formula for sharing the cost of damages

What do liability policies typically cover pertaining to injury/damage?

Liability policies typically cover claims for bodily injury and property damage for which the insured is legally liable. Other types of injury may also be covered; for example, the CGL policy also covers personal and advertising injury.

Another aspect of legal capacity is that, in most states, an insurer must be ______________ to do business in that state.

Licensed! If an insurer mistakenly writes an insurance policy in a state where that insurer is not licensed, the insured might later argue that the contract is not valid and demand the return of the premium. This demand would be based on the fact that the insurer did not have the legal capacity to make the agreement.

When a liability claim is covered, an insurer does not necessarily pay the full amount of the judgment awarded. The extent of the insurer's payment depends on these policy provisions:

Policy limits Defense cost provisions "Other insurance" provisions

When covered property is damaged by a covered cause of loss, how much will an insurer pay to an insured with an insurable interest? The answer depends on policy provisions in these categories:

Policy limits Valuation provisions Settlement options Deductibles Insurance-to-value provisions "Other insurance" provisions

Why are bylaws or pertinent statutory provisions included?

Some insurance contracts incorporate the insurer's bylaws or pertinent statutory provisions. For example, mutual and reciprocal insurance policyholders typically have rights and duties associated with managing the insurer's operations; the policy specifies these rights and duties by incorporating corporate documents..

Liability insurance policies typically cover these two types of costs:

The damages that the insured is legally liable to pay The cost of defending the insured against the claim In addition, liability policies commonly cover incidental expenses under the policy's supplementary payments provision and cover medical payments for injured persons, regardless of whether the insured is legally liable.

The insurer's obligations, as stated in the insuring agreement, may include these duties:

To pay covered losses To defend the insured from lawsuits To provide other services to the insured

The insured's obligations, which stem from the policy conditions, include these:

To pay premiums To report losses promptly To provide appropriate documentation for losses To cooperate with the insurer, as in legal proceedings, for example To refrain from jeopardizing an insurer's rights to recover from responsible third parties (subrogate)

If several named insureds are listed in the declarations of a commercial liability policy, a policy provision usually stipulates...

that the first named insured is the insured with whom the insurer has contact for payment of premiums, claim reporting and claim payment, notices of cancellation or nonrenewal, or interim policy changes.