chapter 1-3

Anyone acting as an agent without a license is subject to fines up to

$1000

Four elements that are considered in a case of negligence

1.) The existence of a legal duty to act or standard of care. Example in a retail store, it is the owners responsibility to provide a safe environment for the customers on his/her property. Red light, legal duty to stop. 2) The failure to perform a legal duty. Example, in the retail store the owner has a spill on the floor that has not been immediately cleaned up, resulting in a slippery floor. Run a red light. 3) Actual damages or injuries are sustained. Example a customer in the retail store slips on the spill, falls, and breaks his leg. Damage to car. 4) Approximate cause relationship between the negligent act and the resulting damages. Example A customer in the retail store falls and breaks his leg because of the spill on the floor that was neglected by the owner. Running red light causes damage.

Midterm cancellation - over ____ days old. Only done in the following situations:

60 Property insurance - nonpayment of premium, fraudulent claim, an increase in hazard (physical, moral, morale) Auto insurance - nonpayment of premium, fraudulent claim, suspension or revocation of drivers license or registration (unless an exclusion for the driver is added to the policy)

Controlled business law

A PCA must generate at least 25% of their business (based on total written premium) from the general public.

Morale hazard

A characteristic of an insured based on their present actions that display an indifferent or "I don't care attitude "for example an insurance company issues a policy to a homeowner and three months later when the home was inspected the lawn has not been cut, trash is everywhere, and the house is in ill repair. Example snap chatting and driving.

Compensatory damages

A combination of (1) special and (2) general damages in are designed to compensate an individual.

Two types of fire and definitions

A friendly fire is one stays within its boundaries and is under control. For example a fireplace or a candle. A hostile far is one that is out of any boundary and out of control. For example a house on fire.

Managing General Agent (MGA)

A person or corporation with supervisory responsibility for an agency. May perform the following acts for a company: receive and pass on daily reports, receive and be responsible for agency balances, and appoint PCAs. Do not deal with the insuring public and may not sign or execute policies. Must have errors and omissions policing for $250,000 or a bond for $25,000.

Combined single limits

A single limit Applies to both bodily injury and property damage arising from a single accident. Combined Single limits are usually found in commercial auto insurance; also found in homeowners.

Moral hazard

A subjective characteristic of an insured person. it is usually based on past actions that may tend to increase the probability or severity of a loss. For example someone who has a felony record for two counts of arson

Vacancy versus unoccupied

A vacant building is defined as one without tenants or contents. Most policies have a vacancy clause that voids or limits coverage after 60 days of vacancy. An unoccupied building is one without tenants, but contains contents. There's no penalty for an unoccupied building..

Absolute liability

A.k.a. strict liability. Certain activities Impose liability without regard to fall or negligence. Normally involve extra hazardous situations where the person must use a certain standard of care that prevents the possibility of harm to others. Examples of these types of risks are dangerous animals, explosives, aircraft, and intentionally setting fires.

_________ are presumed to be a representative of the insurance company. _________ represent the policyholder in any dispute.

Agents, brokers

Liquidated demand

All policies insuring real property (dwellings or buildings) contain this clause. It agrees to pay full policy limits, regardless of ACV, in the event of a total loss by fire to the insured's real property. This only applies to real property (structure) not personal property (content).

Tort

Any wrongful act committed by one party against another, other than a crime or breach of contract.

General liner or Personal Lines - Property Casualty Agent (PCA)

Authorized to write, sign, execute and deliver policies. Only a _____ can bind a company on a risk or sign a colicky. All policies must be signed by a resident ____. Must have appointment by insurance company to be active. Can appoint sirs to bind policies for them.

Punitive damages

Awarded in instances of gross negligence and are intended to punish the wrongdoer for their reckless disregard for the safety of others.

Limited Lines license. Used by

Banks, rental car agencies, ticket agents selling life and health, job protection, agricultural, prepaid legal and credit life insurance.

Non-resident agent

Can write business in Texas if it is counter-signed by a resident PCA. Can share commissions with PCA. May not solicits business in Texas or act as a PCA. If this occurs, license can be suspended. Must be licensed in home state. No exam, just application and fees

Ensuing loss

Caused by a peril after, or as a result of, an initial peril. (Fire damage following an earthquake)

Types of rates

Class, judgment

An insurance company is prohibited from non-renewing a policy for the following reasons:

Company no longer writes auto insurance for certain groups of drivers, company no longer writes insurance in a particular geographical area, an agent withdraws from an agency, A single loss accident

Indirect loss is also known as

Consequential loss

Fair Credit Reporting Act

Created by congress. In place to protect consumer's right to privacy. Consumer must be informed if denied credit, insurance or employment as a result of info in a credit report. Must be given name and address of the reporting agency. Has the right to obtain a copy of report so they may refute any info they feel is incorrect.

Parts of a policy. Keyword, list

Decides Declarations, exclusions, conditions, insuring agreement, definitions, endorsement, supplemental

Intervening cause

Defined as an independent cause of injury or damage that intervenes between the original wrongful act or omission and produces a result would not have otherwise followed. For example red light wreck then lamp post falls on car

Underwriting function

Defined as hazard recognition and evaluation, risk selection, pricing and determination of policy terms and conditions.

Definitions

Describes key terms so the average policyholder will have a clearer understanding when reading the policy. This prevents ambiguity in the policy.

Contribution by shares. Definition, formula

Each policy pays equal amounts until the loss is paid or the limits are exhausted. Policy you are trying to find/2

Risk manager. Def. not a ___ and cannot _____.

Evaluates risk for another person or company and advises them on how to reduce their losses and exposures to risk. Agent, collect commission.

The casualty portion of an insurance policy protects the policyholder:

For injuries or damages policyholder is legally liable for. If you own a home you would also want protection in case your neighbor gets hurt or your neighbors property is damaged due to your negligence. It is this instance you could be held liable for damages done to others. The _____________ _________________ of your homeowners policy will protect you for this type of risk. No deductible. The insured can never be liable to them self - cannot file bodily injury etc.

Surplus Lines

High risk or unusual. Ex. 5 DUIs, Beyonce's voice. Surplus lines agent must hold surplus license. To apply for surplus license, must already have PCA, MGA or both.

Conversion of money

If an agent embezzled an insured's policy premium or keeps a premium refund that is owed to an insured, the agen'ts license may be suspended or revoked.

Misrepresentation or fraud in obtaining a license

If an agent lies or attempts to hide something about their past in order to obtain their license, the license application may be denied or the license will be suspended.

Liberalization

If the TDI revises the policy to provide broader coverage without extra charges, the insured will automatically benefit from the broader coverage.

Insuring agreement

Includes the promise to pay for covered claims and describes coverages

Types of PCAs

Individual, partnership, corporation

Insurable interest

Insured must have a financial interest (ownership either full or partial) in the subject of the insurance. ___________ must exist at the time of the loss for the insurance to apply.

Adjusters

Issued a temporary license good for one year. Must complete 40-hour licensing prep course and pass state exam. Must be licensed to adjust claims.

Willful violation

Knowingly breaking an insurance law.

Vicarious liability

Liability that is imposed on one party as a result of the actions of another. for example parents are responsible for the actions of their children

Insurance Service Representative (ISR)

Licensed representative of a PCA who only performs assigned duties within the office of a PCA. On outside solicitation. May only represent one PCA at a time. May bind coverage with PCA's permission. Paid salary with option for commission or bonus. Ex. Sales

Twisting

Making a misleading comparison of policies to induce an insured to change policies. Ex. Implying our policy has something extra when it's already included in their current policy.

General damages

May be awarded for damages that cannot be specifically itemized, such as pain and suffering.

Special damages

May be awarded to compensate the victim for itemized losses, such as medical bills, loss of earnings, and property damage.

PCA - Corporation

May be issued if corporation is organized under Texas law and located in Texas. Only one officer or director must be licensed as a ______. Anyone selling insurance must be licensed. Shareholders do not have to be licensed. Must demonstrate financial responsibility by holding an Errors and Omissions policy of $250,000 or a bond of $25,000.

PCA partnership

Must license the company and one partner. All employees actively selling insurance must be licensed.

Abandonment

On partial losses of property that can be repaired, the insurance company will not accept the damaged property in return for the full insured value. The company will only pay the amount to repair the property. Insurance indemnifies the insured for the actual loss only.

Additional insureds

Other persons covered on the policy. They are not specifically named Emily at it Vindora snow. They are not added to the policy. Just saying they live in the house and are driving age but not driving the car.

Types of hazards

Physical, moral, morale

Rebating

Promising an insured something of value if the policy is purchased, i.e. a portion of the commision.

Insureds duties after a loss

Proof of loss must be submitted within 91 days, if the loss is a theft, the insured must notify the police, inform the insurer of the details of the loss, all interest in the property, and the existence of any other insurance, complete assigned a sworn statement to the insurer - Geico uses recorded statements, protect property from further damage after a loss.

Six types of licenses we are primarily concerned with that deal with Property and Casualty Insurance:

Property & Casualty Agent (PCA) Insurance Service Representative (ISR) Managing General Agent (MGA) Risk Manager Adjuster Surplus Lines

Replacement cost

Provides for coverage on the basis of full replacement cost without a deduction for depreciation. The property must actually be replaced. Example car seat

The property portion of the insurance policy protects the following:

Real property - land, buildings, and other property attached to it. For example walls, cabinets, carpets. Personal property - contents of a dwelling or an auto. For example clothes, shoes, electronics.

Rates. How established? State insurance laws prohibit rates which:

Reflect the price of insurance for each unit of exposure. By using statistics based on prior losses it costs to determine how much each unit of exposure (car, home, etc.) will cost the insurance company. Are excessive to consumers, inadequate to insurers, or unfairly discriminatory to consumers.

Agents are presumed to be a _______ of the __________. Brokers represent the _________ in any dispute.

Representative, insurance company. Policy holder.

Extended coverage perils. Acronym and list.

Rev CH Shaw. Riot explosion vehicle civil commotion hail smoke hurricane airplane windstorm

Split limits

Separate limits apply to bodily injury and property damage. In addition bodily injury is subject to per person maximums as well as per occurrence Maximums. These types of limits are use for personal auto policies.

PCA who holds surplus license can ____________. MGA who holds surplus license must __________.

Solicit business directly from the public. Originate their business through another licensed PCA

Individual PCA

Solicits business directly from the public and must be sponsored by an insurance company.

The TDI defines an agent as anyone who performs any of the following tasks:

Solicits insurance Takes or transmits an application for insurance. Receives or delivers a policy Examines or inspects a risk Collects or transmits any premium for insurance. Adjusts a claim on behalf of an insurance company. First five - policy/agent side - Pca , isr Last - claims side - csr, ad

Restoration/non-reduction of limits

Some contacts may include a clause stating if there's a fire loss or other covered loss, the policy will respond and the policy limit will be reduced by the amount of the loss. The policy limits will then automatically be increased as repairs are made. Thus, there is a not a reduction of limits due to the prior loss.

Physical hazard

Something that can be seen, touched or felt that increases the probability or severity of loss. For example storing gasoline next to a workstation that uses a blowtorch.

Types of limits of liability

Split limits, combined single limits, aggregate limit.

2 situations where a person may take actions requiring a PCA license without actually having one - list and define

Survivors: Temporary license - upon the death of a PCA the surviving spouse and children may continue to share in the profits of the agency (receive commissions) without obtaining a license. They cannot write new business, but the law recognizes their right to the continued income. Emergency PCA license - in the event of the death or disability of a property and casualty agent, the TDI may issue an emergency PCA for a period of 90 days to an individual who will conduct the business of the agency. This license may be renewed for one additional 90-day period.

Binder

Temporary written evidence of coverage is in effect and is issued at the time of the sale. Should always include the name of the company to insure losses are assigned to the Proper company. Usually valid for 30 days but maybe valid as long is 60 days. During the period underwriters review the application credit reports motor vehicle reports etc. to determine in if actual policy will be issued. Should never be backdated or used for short-term coverage.

Actual damages generally refer to: (3)

The amount of reduction in the value of the insurance property caused by an insured peril. The amount sought through an insurance claim. The amount paid on behalf of an insured under insurance contract.

Deductible

The amount of the loss you're agreeing to retain

Assumption of risk

The doctrine known as _________ means that a person may not recover from an injury received when he voluntarily exposes him/herself to a known and present danger. For example a racecar driver.

The difference between an accident versus an occurrence is

The duration of the event. An accident is a single event, normally sudden and unexpected in nature. An occurrence is a single event that can occur over a period of time. For example Worker's Comp. an occurrence can be an accident. An accident is an occurrence.

Negligence definition

The failure to exercise the standard of care required by law to protect others from harm.

Specific insurance

The form of insurance that most personal policy holders are familiar with. This is when there is one object insured under one policy.

The property portion of the insurance policy protects

The insured for direct losses to the property they own. For instance, if you own a home you would want insurance for that property, in case of a fire

Aggregate limit

The maximum amount that would be paid out during a policy term for all the damages arising out of one or more occurrences. Aggregate limits are only found in commercial lines of insurance. Has a maximum per occurrence and a maximum per policy term called the aggregate limit.

First named insured definition, they are the only ones who can:

The only person or entity named first on the declarations page. Request cancellation, make changes to the policy, receive notice of cancellation or non-renewal, be held responsible for payment of premium

Loss ratio definition, formula

The percent of premiums used to pay claims. Money paid out for claims divided by money brought in for premiums

Contribution by limits. Definition, formula, a.k.a.

The policies will share the loss based on the ratio of each policy's limits to the total available limits. Limit you are trying to find/total limits available X loss. Also referred to as pro rata liability.

Coinsurance. Definition, formula

The purpose of is to encourage the insured to carry an adequate amount of insurance in relation to the value of the property. In most policies the amount required before there is a penalty is 80% of the property value. If the amount of the insurance is not equal to 80% of the property value, the insured becomes partially responsible for losses that occur. In other words the policyholder becomes a of the property. Amount carried/amount required X loss = insurance payment. Does not apply to auto.

Endorsement

The section of the policy allows the policyholder and the insured to customize the policy by attaching forms that will become a part of the policy itself. (Adding or deleting insureds, perils, property, etc.)

Pro rata distribution

The way the money is disbursed when a loss occurs at more than one location covered in a blanket policy. One policy limit, have to prorate between properties.

Class (rates)

These are rates that apply to all members of a wide group of consumers having similar exposures. For example young drivers versus older drivers. Since the risks are similar these judgment rates can be developed using to statistics. Typical for auto policies.

Judgment (rates)

These are rates that are partially or exclusively based on judgment. They are developed when there are no distinguishable classes that are similar enough to establish rates based on statistics. For example surplus lines, singer's voice. Nothing to compare to.

Loss payable clause

This form is sent to the lien or mortgage holder to verify that insurance is in force on a specific piece of property for specific coverages. If the policy cancels, notification must be sent to the financial institution.

Functional replacement cost

This occurs when the property becomes obsolete due to its design because of technological advances. It provides for replacement cost valuation on partial losses or market value if the property is not replaced, or the cost to replace the property with the closest equivalent available. Example replacing a cassette player with a CD player.

Decorations

This page is what most policyholder see first, and are familiar with. This part of the contract specifies the following: insureds name and address, policy period, Amounts of insurance, insurers name and address, premium, list of coverages. The who and what that are being insured.

Supplemental

This section of the policy (also called additional coverages) adds coverage for special features covered by the policy. (Defense costs for liability claims)

Conditions

This section of the policy establishes certain "rules" concerning cancellation, dispute resolution, other insurance, and other rights of both parties to the policy.

Exclusions

This section of the policy is necessary to narrow the scope of coverage to that which is intended by the policy.

Actual cash value

Today's replacement cost minus depreciation

Contributory negligence

Under _____________ ________________ laws, a person cannot recover from the other party if that person contributed in anyway to the accident. For example a motorist turns without signaling and is around it. Each party would pursue damages through their own insurance company. Virginia is a _____________ ________________ state.

Blanket policy

When a single amount of insurance covers multiple properties. Normally found in commercial policies. Whena loss occurs at more than one location covered in a blanket policy, the way in which the money is disbursed is called pro-rats distribution.

No benefit to Bailee

When an insureds property is damaged while in the custody of someone else (Bailee), this clause prevents the other party from benefiting from the insurance and preserves the insurers right to subrogate against the Bailee if they are responsible for causing the loss. For example if a dry cleaner damages your clothes, they cannot be paid for the damages.

Proximate cause

Where there is an on a broken connection between the peril and the loss without the intervention of a new independent cause.

Named or specified perils policy

Will list perils thar the company will protect the property against. If it insured has a named perils policy and a particular cause of loss is not stated on the policy, there is no coverage for that loss. The insured has the burden of proof to show that the loss was the result of a covered pause of loss.

Specific exclusions to basic perils

Windstorm - "wind driven rain exclusion "there must be a hole in the building (roof or window)before the insurance company will cover rain damage because otherwise you let the rain in. Vehicle - cannot normally be driven by the insured or family member unless otherwise stated.

Statue of limitations

With the majority of policies and coverages is two years and one day. This means that any legal action must be brought against insurers within this timeframe. If a lawsuit is filed this is does not apply.

Comparative negligence

_____________ ________________ laws permit the injured person to recover damages even though he/she contributed to the accident. He/she may recover damages from the other party as long as his/her negligence is 49% or less. Texas is a _____________ _________________ state.

Open or all risk policy

covers the insured property against all causes of loss, unless the cause of loss is specifically excluded. Virtually all policies exclude certain perils such as flood, war, and nuclear hazard. The insurer has burden of proof to show that the loss was a result of an excluded cause of loss.

Named insured

the person or entity named in the policy declarations