12/2021 OK Insurance Adjuster License Exam

Fraternal Insurer

A non-profit organization that is operated solely for the benefit of its members. It provides its members with social and insurance benefits

Four steps in establishing negligence

1 legal duty owed 2 breach of duty 3 actual damages 4 proximate cause

No benefit to Bailee

A bailee holds property that others have entrusted to them. They don't have the right to collect on another party's property

Moral Hazard

A character defect that causes some people to exaggerate or fabricate losses in order to collect money from an insurance company

Proximate Cause

A continuous chain of events that cause loss or damage that was reasonably foreseeable.

Material Fact

A fact that influences whether insurer accepts risk.

Concealment

A failure to disclose material facts.

Misrepresentation

A false statement about a material fact

Proof of Loss

A formal statement made by insured regarding loss. Contains times and cause of loss, insurable interests, liens, other insurance, and inventory of property

Warranty

A guarantee made by the insured. Breach may void policy

Physical Hazard

A hazard that exists due to the nature of the proximity itself, such as those inherent in the construction, occupancy, and exposure

Agent/Producer

A licensed individual that proposes, quotes, and sells insurance coverage. They are the insurance company representative who sells coverage

Arbitration

A method of settling disputes in a liability loss

Reciprocal Insurer

A non-incorporated association of individuals or businesses, called subscribers that are engaged in cooperative insurance programs. Each policy holder is insured by all other policyholders, and each insures the other. Coverage is exchanged on a reciprocal basis

Contributory Negligence

A person is partially responsible for their own injuries. They can't recover their damages if they contributed to the loss.

Law of Large Numbers

A principle stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss.

Loss

A reduction in Value, Quality, or Quantity measurable in financial terms.

Blanket Coverage

A single amount of insurance for different property or different locations.

What is Insurance

A social financial device for the transfer of risk from an individual to a large group with similar risk

Scheduled limit

A specific amount of insurance on a list of building or property.

Accident

A sudden, accidental, unintended event causing loss or damage. An accident must be identifiable as to time and place

Other Policy Parts

Are not mandatory but included in policy: Definitions -- Explain important terms used throughout the policy Endorsements -- A form attached to add, delete, or change insurance policy

Comparative Negligence

Allows for recovery when both parties contributed to the loss. it is awarded based in the extent of each party's negligence.

Lloyd's of London

An Association that insures specialized risks

Occurrence

An accident, including continuous exposure to the same conditions, which results in injury or damage

Representations

An applicant's written or verbal statement that is true to the best of their knowledge. Statements on applications are generally considered representations

Mutual Companies

An incorporated insurer owned by the insureds that elect the company's management

Stock Companies

An incorporated insurer owned by the stockowners/shareowners that elect the management of the insurer

Aleatory Contract

Based on the exchange of unequal amounts or uncertain events.

Property Losses Include

Building or Structure, and Personal Property

Defamaiton

Circulation of false or malicious critical information to injure a person

Combined Single Limits (CSL)

Combines injury and property amounts per occurrence. Expressed as 100,000

General Damages

Compensate for items such as pain and suffering, and disfigurement.

Deductibles

Condition requiring the insured to retain a specific portion of the loss. Only apply to direct property losses. Apply per occurrence. Insurers use to require the insured to share in the loss. Deductibles can also serve to lower premiums

Replacement Cost Value (RCV)

Cost to repair or replace damaged property without deducting depreciation.

Vacancy

Coverage denied or reduced if building is vacant (no residents or contents) for 60 days. Not the same as property being unoccupied.

D.I.C.E.

D. Declarations I. Insuring Agreement C. Conditions E. Exclusions

Property Damage

Damage, destruction, or loss of tangible property

Pair and Set Clause

Determines Valuation method when one item of a pair or set is lost by either: Repair or replace lost part, or pay the difference in value before and after loss

Contract of Adhesion

Drafted solely by the Insurer (accept or reject) Ambiguity in policy language interpreted in insured's favor

Good Faith

Expected of both the customer and insured. If Customer doesn't, insurer may be released from contract. If insurer doesn't, law may enforce serious penalties.

Hazards

Factors or situations that increase frequency or severity of a loss

Negligence

Failure to act as a reasonable and prudent person would under similar circumstances

Personal Contract

Identities of involved parties is important to insurer

Appraisal

If insured and insurer don't agree on loss value: Either party may demand appraisal, Each party chooses an appraiser and is responsible for their fees, the appraisers select a third party if they cannot agree (fee is split) and Decision between an two of the three parties is binding

Binder

Immediate temporary coverage until policy is issued. May be verbal or written. Cannot exceed 90 days

Special Damages

Include all direct and specific expenses involved. Can I get a receipt.

Personal Injury

Injury of character or emotional well being resulting from: False arrest, detention, imprisonment or malicious prosecution. Libel, slander or Defamation of Character. Invasion of privacy, wrongful entry, or eviction.

Bodily Injury

Injury, sickness, or disease Includes required care, loss of services, loss of wages, and death.

Abandonment

Insured can't give property to insured and demand a total loss payment

Liberalization

Insurer can make changes applying to all existing policies without an endorsement on each. Only applies when coverage is broadened and no extra premium charged

Salvage

Insurer has right to any salvage after paying total loss. Insurer sells or disposes of property to reduce claim cost.

Duty to Defend

Insurer owes defense when a potential covered judgement exists. Some policies obligate insurer to pay all costs including: Premium for required bonds, Reasonable customer expenses, and Any interest on a judgment prior to issuing payment for judgment

Cancellation and Non-renewal

Insurers can only cancel or non-renew after 45 days of coverage or policy renewal for Non payment of premium Material misrepresentation or discovery of fraud Insurance Commissioner determines the policy continuation places the insurer in violation of state insurance laws. Increasing the chance of a loss by: Willful or reckless acts or omissions form the insured A change in the risk, violation of local fire, health, safety, building or construction regulations or ordinances Insured's criminal action such as illegal drug activity.

Punitive Damages

Intended to punish the wrongdoer making an example of them, to discourage others from behaving similarly. Not covered by insurance

Fraud

Intentional deception by misrepresenting material facts resulting in economic harm

Indirect Loss

It is not a direct result of a covered peril. it is as a consequence of or results indirectly from a direct loss.

What is casualty insurance?

It is used interchangeably with liability. Liability is a major component of casualty insurance and pays for third party's financial loss due to insured's negligence, but does not pay for insured's financial loss. It pays for tort liability, which is a civil wrong (not criminal). Includes a duty to defend above and beyond policy limits.

Contract Liability

Liability assumed under contact

Vicarious Liability

Liability imposed upon one party as a result of another's actions. Referred to as liability by association.

Absolute/Strict Liability

Liability without negligence because the activity is inherently dangerous

Insured's Duties in the Event of a Loss

Notify the insurer ASAP Protect property from further damage Notify the police if the loss involves a criminal act, such as theft. Provide a proof of loss within 60 days Separate the damaged property from the undamaged Prepare an inventory of the damaged property Allow the insurer to inspect property before repairing or replacing.

Renewal

Occurs when the insurer offers the insured another term of coverage.

Cancellation/Termination

Occurs when the insurer or insured terminate contract before its normal expiration. Insurer must give 10 days written notice for non-payment If Insurance company initiates, the premium refund is calculated on a pro-rata basis If the insured initiates, the insured may get a refund using a short rate calculation. This is a smaller refund as it includes a penalty percentage.

Non-Renewal

Occurs when the insurer will not continue the policy beyond the expiration date. The insurer must give 30 days written notice for all other reasons including non-renewal.

Conditions

Outlines what the insured must do. Describes some insurer responsibilities.

Assignment

Property and Casualty contracts are personal. Insured Can't assign or transfer to another without the insurer's written consent

Open Peril Coverage

Protects against all risks except those specifically excluded

Declarations

Provides identifying or descriptive information. Personalizes and individualizes the policy. Includes: Named insured and address, the property insured, policy premium, policy term or period, amount of insurance or limits of liability, and any applicable deductibles

Compensatory Damages

Reimburse the claimant only for losses that are sustained. The two types are special and general

Actual Cost Value (ACV)

Replacement cost minus depreciation

Coinsurance

Requires policyholders to carry adequate insurance in property or suffer penalty. Percentages can vary by contract, but 80% is typical

Named Peril Coverage

Specifically identified or named in policy

Split Limits

Splits the bodily injury and property damages amounts per occurrence. Expressed as 25/50/25

Insuring Agreement

States what the insurer promises to do One agreement for the whole policy Each coverage has its own separate agreement

Peril

The actual cause of loss

What Is A Limit Of Insurance

The maximum amount an insurer pays for a loss. Can be applied in three ways:

Aggregate limits

The maximum amount policy pays in any one policy period for all occurrences.

Speculative Risk

The possibility of either gain or loss. Traditional insurance policies cannot be used to these types of risk

Pure Risk

The possibility of loss, gain is not possible.

Indemnity

The process of restoring a customer to their condition prior to the loss. Restore only up to their amount of insurable interest. An insured is not meant to profit.

Subrogation

The pursuit if a responsible party for payment of damages. Insurer must pay on cases where the insured isn't at fault. Insurer has same rights as insured in pursuing payment.

Mortgage Clause

The rights of the mortgagee: Payments made to both insured and mortgagee (Insurable interest) Receives advanced notice of upcoming cancellation or nonrenewal. Can file a claim in the insured's behalf if the loss happens and insured doesn't file a claim. May still collect even if insured doesn't comply with terms and claim denied.

Specified Limit

The specific limit of insurance applied to a building or structure.

Risk

The uncertainty regarding financial loss.

Conditional Contract

There are conditions and rules where both parties must comply

Government Insurers

These insurers meet the insurance needs of individuals and businesses when the private insurance marketplace leaves insurance needs unmet. Examples: terrorism insurance, flood insurance, FDIC

Actuary

They are a mathematician that establishes and determines the rates to be charged for insurance coverage

Adjuster

They are a representative of the insurance company that determines the cause and the amount of the loss

Underwriter

They decides which applicants for insurance are accepted, and which are rejected in order to meet the company's desired financial goals. They evaluate risk

Insurable Interest

This exists when the applicant for insurance stands to suffer a loss or an injury as a result of an event which is to be ensured against

Exclusions

What policy won't do or situations with no coverage

What Makes a Contract Legally Enforceable

You Have Legal Parties You Have Competent Parties You Have Agreement- Both offer and Acceptance Consideration: Insured - Payment or promise to pay Premiums. Insurer - Promise to pay Covered Losses.

Pro Rata

if there is other insurance at time of loss, each policy pays their share of the loss Amount of insurance carried by A Divided by the total amount of insurance on property times the loss amount equals the amount paid by Company A

Property Valuation Methods

located in the policy conditions, the valuation method describes how the property value is determined at the time of loss. There are three common methods

Direct loss

the actual physical loss, destruction, or damage to the property insured.

Morale Hazard

the disposition of some people to be careless or irresponsible because they have insurance

Limit of liability

the maximum insurance pays a third party due to the insured's fault. Payments are made to a third party, not the insured Coverage includes a duty to defend above and beyond the policy limits

Agreed Value

the value of the property agreed upon by both the insurer and the insured at the time of application. Typically, for items that are difficult to replace like artwork, antiques, memorabilia, etc.

Legal Duty Owed

there's a legal duty to take reasonable care to protect rights and property to others