Property & Casualty Insurance- Ohio

Ben Graham purchases a $100,000 commercial fire policy. The value of his building is $150,000 and the policy contains an 80% co-insurance clause. After suffering a $12,000 loss, the insurer will pay

$10,000. Rationale-The co-insurance formula is (Did / Should) x Loss, or (100,000 / [0.80 x 150,000]) x 12,000; (100,00 / 120,000) x 12,000 = 9,999.999 The insurer will pay $10,000.

The insured has a one million-dollar personal umbrella policy with a retention limit of $1000. The insured suffers a $15,000 loss that is excluded by the underlying policy, but not the umbrella. How much of this loss would be paid under the umbrella?

$14,000

Jayne has a specified peril policy covering her home. The perils covered include damage caused by fire, lightning, removal, and explosion. Her home is insured for $80,000 with a $500 deductible. After suffering a $16,000 lightning loss, what will Jayne's policy pay?

$15,500 Rationale-The peril causing the damage is covered by the policy; therefore, after the $500 deductible, Jayne will receive $15,500.

The fine and/or penalty for transacting insurance without a license is

$25 to $500 and 6 months in jail.

You have a DP-3 covering a home that has a replacement value of $100,000. You carry $60,000 of insurance. Following a loss, you determine that it would cost $12,000 to replace the damaged portion of the home. How much could the insured collect, assuming the ACV of the loss is $6,000?

$9,000 Rationale-If the replacement of the home is $100,000, the co-insurance provision requires that the insured carry at least 80% of that amount, or $80,000. In order to determine the amount of payment, you must divide the amount the insured did carry ($60,000) by the amount the insured should have carried ($80,000), then multiply that by the amount of the loss ($12,000). This will result in a $9,000 payment. The ACV of the loss ($6,000) is worthless information for this question.

Mary has 38 hours of continuing education (CE) completed for her current CE compliance period. How much of this work will roll forward to her next compliance period?

12 hours.

A dwelling is insured for $60,000 and its contents for $30,000. According to the DP-1, what part of the insurance may the insured have applied to rental value coverage?

20% of the coverage on the dwelling

The DP-1 covers 11 named perils; the DP-2 covers how many more perils?

4 Rationale-The DP-2 is still a named peril policy. It covers all the perils of the DP-1 plus 4 more.

Under the Limited fungi, wet or dry rot or bacteria coverage endorsement (HO 04 42) the maximum payable for damaged property is

5,000.

Errors & Omissions

A Professional Liability coverage that protects the insured against liability for committing an error or omission in performance of professional duties.

Theft

A type of crime loss that occurs when property is shoplifted from a department store.

Slipping on spilled milk in the store is not an example of

Absolute Liability. Rationale-Slipping on spilled milk will require proof of negligence on the part of the store. The other three are all areas of absolute liability where the requirement to prove negligence is minimal or not necessary at all, especially when it comes to the actions of your minor children or pets.

Los Lobos insurance company is incorporated in Mexico, they write some business in the United States. In each state, Los Lobos would be referred to as a/an:

Alien insurer Rationale-An alien insurer is one whose main home office is outside of the United States.

Peril

Anything that can cause a loss

Hazard

Anything that increases the likelihood or the severity of a loss

HO-1

Basic (not used anymore)

HO-2

Broad (similar to DP-2)

Rules have to be followed in order for an insurance contract to work. This is an example of a

Conditional Contract. Rationale-Insurance contracts are "conditional" meaning that rules of conduct need to be adhered to in order to make it work. Think "C" for conditional, "C" for conduct.

HO Coverage C

Contents (Section I)

Policy

Contract between insurer & insured

Tiffany buys a policy and is not happy with the claim denial based on the wording. She feels the language is vague. The court agrees with her and awards her coverage. This is an example of a

Contract of Adhesion. Rationale-Since the insurer writes the policy and the insured has little or no makeup in the wording. The insured must accept it as is. If the language is vague or unclear, the courts will always side with the party that did not write the contract. This is the Doctrine of Adhesion.

What does the Risk Management Acronym C.A.R.T.S. mean?

Control (reduce) Avoid Retain Transfer Share

HO Coverage A

Dwelling (Section I)

Liability coverage could be worldwide, but most coverage is subject to a coverage territory, like Mexico. Is it True or False?

False Rationale-Mexico is outside the coverage territory. Canada is a part of the coverage territory including the U.S.

True or False, Aviation carriers providing coverage for Drones will base the insurability on Flying radius?

False Rationale-The flying radius is not an underwriting concern when covering a Drone operation.

True or False, strict liability is a common defense against negligence accusation.

False. Rationale-Strict liability is not a defense against a negligence accusation.

True or False, after a covered loss, the insurer may pay the difference between the cost new and the actual cash value.

False. Rationale-The insurer should make the insured whole again. The company cannot offer the difference between the replacement cost and the cash value.

Mighty Manufacturing administers the employee benefits plan which includes Health Savings and Health Reimbursement accounts along with a 401K retirement plan. The employer needs

Fiduciary Liability

Surety Bond

Guarantees the performance of a duty. It obligates the surety to hold itself responsible for the performance of a duty by the principal. Includes contract, judicial, public office, license, and permit bonds.

The homeowners form that provides open peril coverage on the dwelling and broad coverage on personal property is the:

HO-3

Retention Limit

In an Umbrella Liability policy, the amount the insured must pay for a loss NOT covered by an underlying policy before the Umbrella will begin to cover losses.

Jack has an auto policy with one company while his son Bill, who lives with him, has coverage with another company. They are riding in Bill's car when struck and injured by an uninsured motorist. Jack makes a claim on his insurance as an insured and on Bill's as a family member riding in Bill's car. Bill's insurer will not permit the UM limit to be added to what Jack can collect on his own UM coverage. This is known as the

Intrafamily Liability Exclusion.

Professional Liability Insurance

Liability arising out of the rendering, or failure to render, services of a professional nature.

HO Coverage D

Loss of Use (Section I)

HO Coverage F

Medical Payments to Others (Section II)

Under the H0-2 policy, is farm buildings covered?

No because none of the homeowner forms will cover farm buildings. That is a commercial risk.

Fire is named as a covered peril on the DP-1 but NOT for damage done by a friendly fire. Is a grease fire in the kitchen considered friendly?

No. Rationale-The grease fire in the kitchen is not friendly. A friendly fire is one that is intentionally set in its intended area.

HO Coverage B

Other Structures (Section I)

Homeowners Policy

Package Policy -Section I Property Deductible $500 per occurrence -Section II Liability No Deductible

HO Coverage E

Personal Liability (Section II)

Rates are always set by

Rates are set by the Insurer. The Superintendent approves rates only does not set rates.

Loss

Reduction in the value of an asset

Insurance

Social device to spread losses

HO-3

Special (similar to DP-3)

Exposure

The amount of risk presented

A building is damaged by fire caused by a third party. The insured will receive payment for the loss from whom?

The insurance company will pay the loss (within the limits of coverage). To the extent that payment had been made under the policy, the insured is required to assign to the insurance company any right of recovery from the responsible party. Rationale-This is known as the right of subrogation

Law of Large Numbers

The larger the group of similar risks; the more predictable the losses of the group will be

Deductible

The portion of a loss considered the responsibility of the insured.

Risk

The possibility/uncertainty of loss

Subrogation

The transfer to the insurance company of the insured's right to collect for damages. After paying a claim, the company stands in the place of the insured in suing the negligent party, thus preventing the insured from collecting twice.

Agent

The ultimate burden of proof to provide evidence that an insurance agent completed continuing education hours rests with the

Misrepresentation

The use of written or oral statements of the insured or insurance company misrepresenting the risk, terms, coverages

Umbrella Policy

This coverage is a popular form of Excess Liability insurance. It provides additional limits, with a combined blanket single limit, over other existing (underlying) liability coverages, such as Commercial General Liability for commercial risks and for personal insurance risks, and the liability sections of the Homeowners and Auto policies.

True or False, about HO-3: Trees, plants, and shrubs are insured up to a limit of $500 per tree, plant, or shrub.

True Rationale-The additional coverage for trees, shrubs, and plants is limited to a maximum of $500 for any one tree, shrub, or plant.

True or False, 60 day All Risk coverage for property removed is not an additional coverage under Section 1 of the HO policy?

True Rationale-The policy will provide 30 days of all risk coverage if property is removed to protect it from damage. Property removal is an additional coverage but not for 60 days

True or False, that an insured who wishes to cancel her insurance policy may cancel the policy at any time.

True Rationale-There is no advance notice required if the insured wants to cancel a policy.

True or False, dispense alcohol, harass employees, misuse employee pension funds are not examples of Professional Liability coverage?

True Rationale-These liability situations are covered in specialty policies like Fiduciary or Employment Practices or Liquor Liability.

An unendorsed liability policy provides coverage for:

Unintentional torts Rationale-Liability policies do not cover criminal and intentional acts. They are designed to cover unintentional torts or wrongs that one commits.

vandalism damage to a five-unit building in the course of construction

What types of loss would be covered by the FAIR plan?

A compliance period consists of how many months?

You have 24 months to complete the 24 hours of required CE courses.

The limits for BI or PD on a liability insurance policy

are used to pay for the claimant's compensatory damages.

What is NOT a method of dealing with risk?

ascertaining it Rationale-Ascertaining the risk is what insurance companies do in order to determine if a risk is insurable. It is not a method for dealing or managing risk.

Intentional damage done to the ship or cargo by the captain or crew is called

barratry Rationale-In ocean marine insurance, the term "barratry" means to intentionally damage the ship, run it aground, abandon it, or damage the cargo.

A property casualty agent frequently has the authority to provide temporary insurance coverage known as a

binder. Rationale-P&C agents appointed by P&C Insurance companies generally are granted more authority. These agents may bind or commit their companies by oral or written agreement. This is a binder.

What damages awarded to the injured person are covered by liability insurance?

both general and special damages Rationale-General and special damages are meant to compensate the injured party for injuries. This will indemnify the injured party, and is therefore covered by insurance.

The two additional coverages provided by Broad and Special dwelling forms are

building collapse and damage to lawns, trees, and plants

Hazard- Morale

careless client/ no pride of ownership

Under the Ohio Assigned Risk Plan, premium rates are determined by the

company accepting the risk. Rationale-The individual carrier will determine the premium charged to the individual.

Hazard- Moral

dishonest client/ intentional damage

A claims made policy form would be best exemplified by the

doctor's professional liability policy. Rationale-Professional liability policies, such as medical malpractice and errors and omissions, are always sold on a "claims made" form.

The HO-8 is a homeowners form intended for what exposure?

dwellings with a great difference between market value and replacement cost

What most closely defines an element of insurable risk?

economic hardship Rationale-In order for a risk to be insurable, its potential loss must be measurable and uncertain, the risk must belong to a large group of similar risks, and losses must cause the insured an economic hardship.

Banks, credit unions, and other financial institutions would purchase what in case of mismanagement of funds?

fiduciary liability

Beth is very concerned that the insurance company will not properly cover her ring that once belonged to her grandmother. Which loss settlement would cause this to happen?

functional replacement cost Rationale-Functional replacement is designed to put a ring back on her finger but it might not look or be the same. The other choices are three ways of saying the same thing and would help her get the correct value for the ring.

The home daycare endorsement

is a "buy back" of an exclusion that states home daycare is not covered for personal liability because it is considered a business pursuit.

A promotional or advertising item, or meal valued at $50 or less is not valuable consideration or inducement if

it is not tied to the purchase of insurance.

Under the provisions and conditions of a dwelling fire policy, an insurance company could suspend coverage if the insured were to

leave the house vacant from January 1 to April 15.

The acceptability guidelines for watercraft are based mainly on the

length of the boat and the waters navigated.

The amount of losses paid out in comparison to the premiums received is referred to as

loss ratio. Rationale-The percentage of claims paid out to the premiums received is known as the loss ratio. If a company collects 1,000,000 in premiums and pays out 700,000 in claims, 70% of the premiums received are paying claims, so the loss ratio is 70%

Hazard- Physical

material or structural part of risk

What is NOT a type of manageable hazard?

mental. Rationale-There is no "mental" hazard in insurance. Hazards in insurance are physical, moral, and morale.

An insurance company deciding to terminate an insured's coverage after the policy has reached the end of its term is exercising its right of

non-renewal.

What is the deductible approved by the Ohio Mine Subsidence Association?

not less than $250 or more than $500

A driver swerves to avoid a pedestrian and strikes a parked auto. The proximate cause of this loss would involve the

pedestrian. Rationale-A proximate cause is an "unbroken chain of events." The pedestrian caused you to swerve, which in turn caused you to hit the parked car.

Anything that can cause a loss best describes a

peril.

Torts involving such things as libel, slander, wrongful eviction, defamation of character, etc., are covered under the homeowners policy by utilizing what endorsement?

personal injury Rationale-Personal injury covers libel, slander, false arrest, wrongful eviction, and defamation. The other three answers are nonsense terms.

An insurer can refuse to provide mine subsidence coverage on a structure if

previous mine subsidence damage has not been repaired.

What action must an insured take after experiencing a property loss?

protect the property from further damage

On Ocean Marine insurance what would cover maritime liability?

protection and indemnity

What best describes the scheduled personal property endorsement or the separate policy called a Personal Articles Floater?

provides very broad "all risk" coverage for scheduled property

Insurers participating in the "Write your Own" program for flood insurance are required to

remit premiums received over claims paid to the US Treasury

What loss settlement option violates the theory of indemnity?

replacement cost. Rationale-If the insurance company replaces your old property with new, then you have not been indemnified, you have been made better after the loss than you were before it happened.

A condition imposed upon an insured stating that he may NOT leave damaged property to the insurance company is known as

the Abandonment Clause. Rationale-If you have a property claim, you must stick around and help settle it. If your car is damaged in an accident and can be repaired, you cannot hand the keys to the insurer and demand a total loss.

An insured wishes to purchase insurance that would protect her in the event that her personal liability limits are exhausted. As her agent, you would suggest she purchase a(n)

umbrella liability policy. Rationale-An umbrella is an excess liability policy designed to pay after the primary liability policy is exhausted.

The term "risk" may be defined as the

uncertainty of financial loss.

What is covered under mine subsidence?

underground mining

Making or permitting any inequalities in premium rates charged to individuals of the same class best describes

unfair discrimination.

No people present and no property in the building is an example of

vacancy.

What requires that, in a case of total loss to an insured building, the amount stated in the policy declarations is the amount that will be paid in full?

valued policy law