P&C Lessons III

If the policy has been in force for more than six months but less than one year, the insurer may nonrenew only after

12 months.

Farm Property—Farm Dwellings, Appurtenant Structures, and Household Personal Property Coverage Form (Coverages A, B, C, D)

FP 00 12

A PAP usually does not have a grace period for payment of the premium. However, some insurers may provide a

grace period and some states may require it

In addition to covering liability, the BAP can cover

physical damage to vehicles that the insured owns or hires.

Farms have residential as well as commercial risks. Therefore, the ISO farm forms combine homeowners coverage with

property and liability coverage.

The PAP allows cancellations under

three provisions.

Homeowners ('00) Policy (ISO Forms) Special Provisions—Texas (HO 01 42) The Special Provisions—Texas Endorsement (HO 01 42) must be attached to all homeowners policies issued in Texas. This endorsement provides the following:

"Accidental Discharge or Overflow of Water or Steam" is amended to allow coverage for mold, fungus, or wet rot. The "Ordinance or Law" coverage is amended to include Texas Windstorm Insurance Association coverage. The exclusion for fungi or microbes is added. "Duties After Loss" is amended to impose certain duties on the insured after loss, including the duty to send proof of loss within 91 days. "Duties After Loss" require the insurer to acknowledge receipt of a claim within 15 days. "Loss Settlement" and "Loss to Pair or Set" are amended to stipulate that jewelry losses are settled at replacement cost. "Suit Against Us" is amended to allow actions to be brought within two years and one day after the cause of action began. "Loss Payment" is amended to stipulate that the insurer must make payment within five business days of notifying the insured of intent to pay the claim. The claims deadlines are extended for an additional 15 days if a claim results from a weather-related catastrophe or major natural disaster.

Flood Insurance Pollution Damage The general property form also pays up to

$10,000 for damage caused by pollutants to covered property if the discharge or seepage of the pollutants is caused by or is the result of flooding. This $10,000 limit is part of, rather than in addition to, the limits of insurance on building and personal property. This coverage does not include the cost of testing for, nor the monitoring of, pollutants unless required by law.

An eligible surplus lines insurer must maintain capital and surplus of at least

$15 million.

The Texas Personal Injury Protection endorsement would provide all of the following benefits EXCEPT:

$15,000 in burial expenses The Texas personal injury protection endorsement provides benefits for necessary medical and funeral service expenses, 80 percent of an insured's loss of income from employment, and expenses incurred for obtaining services to maintain a household that the insured would normally have performed (provided the insured was not working).

Regina rents a car while her car is undergoing repairs. Unless an endorsement changes the limits, Regina's personal auto policy (PAP) will cover her auto rental expenses up to:

$20 per day with a $600 maximum Transportation expenses are covered up to $20 per day, up to a maximum of $600. An endorsement can be added to provide higher limits.

Farm Property—Other Farm Provisions Form—Additional Coverages, Conditions, Definitions (FP 00 90) Limit of Insurance The most the insurer will pay for a loss in any one occurrence is the lesser of

(a) the applicable limit of insurance listed in the declarations, or (b) the applicable special limit of insurance designated in the applicable coverage forms

Farm Liability Coverage Form (FL 00 20) Coverage Exclusions Bodily injury and property damage liability (Coverage H) is subject to numerous exclusions which are subject to various circumstances and exceptions that are beyond the scope of this course (see chart).

1) Expected or intended injury No coverage if the bodily injury or property damage was expected or intended by the insured. A key exception pertains to bodily injury resulting from the use of reasonable force to protect persons or property. 2) Contractual liability No coverage for losses for which the insured is obligated to pay damages due to the assumption of liability in a contract or agreement. Limited contractual liability can be added by endorsement. 3) Pollution Subject to some exceptions, no coverage for losses arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants. 4) Release or discharge from aircraft No coverage for losses caused by any substance, such as pesticides, released or discharged from an aircraft. Losses from crop dusting activities, for example, would not be covered. Broader coverage can be added via endorsement. 5) Aircraft, motor vehicle, motorized bicycle, or tricycle No coverage for losses arising from aircraft, motor vehicle, motorized bicycle, or tricycle owned or operated by or rented or loaned to any insured. No coverage applies to any vicarious liability arising out of a loss due to these types of properties. 6) Watercraft No coverage for losses involving watercraft. Coverage for smaller or shorter watercraft is provided by exception.

PAP The second cancellation provision gives the insurer the right to cancel the policy. If the named insured fails to pay the premium, the insurer can cancel at any time. It just needs to give the insured at least

10 days' notice of its intent to cancel. Some states extend this notice period to 15 or 20 days. The 10 days' notice is also required when the insurer wants to cancel the policy for any other reason during the first 60 days a policy is in effect. Some states require that the insurer give 15, 30, 45, or even 60 days' advance notice of the cancellation.

Farm Liability Coverage Form (FL 00 20) Coverage Exclusions 3 Bodily injury and property damage liability (Coverage H) is subject to numerous exclusions which are subject to various circumstances and exceptions that are beyond the scope of this course (see chart).

13) Communicable disease No coverage for losses arising out of the transmission of a communicable disease by an insured. 14) Workers compensation or similar law No coverage for losses arising from any obligation of the insured under a workers compensation, disability benefits, or any similar law. Farmers with employees should consider the purchase of a workers compensation policy. 15) Employers liability No coverage for bodily injury sustained by any employee (other than a residence employee under some circumstances) as a consequence of bodily injury to that employee. One key exception is bodily injury that the insured has assumed under an insured contract. 16) Building or structure under construction No coverage for bodily injury occurring on any premises on which a building or structure is being constructed, with a few exceptions. 17) Bodily injury to an insured No coverage for bodily injury to the named insured or any other insured. (Liability insurance covers injuries to "the other guy," not the insured.) 18) Damage to property owned by the insured No coverage for property damage to property the named insured owns, rents, sells, gives away, loans, or occupies. There is no coverage for personal property in the care, custody, or control of the insured.

Farm Liability Coverage Form (FL 00 20) Coverage Exclusions 4 Bodily injury and property damage liability (Coverage H) is subject to numerous exclusions which are subject to various circumstances and exceptions that are beyond the scope of this course (see chart).

13) Communicable disease No coverage for losses arising out of the transmission of a communicable disease by an insured. 14) Workers compensation or similar law No coverage for losses arising from any obligation of the insured under a workers compensation, disability benefits, or any similar law. Farmers with employees should consider the purchase of a workers compensation policy. 15) Employers liability No coverage for bodily injury sustained by any employee (other than a residence employee under some circumstances) as a consequence of bodily injury to that employee. One key exception is bodily injury that the insured has assumed under an insured contract. 16) Building or structure under construction No coverage for bodily injury occurring on any premises on which a building or structure is being constructed, with a few exceptions. 17) Bodily injury to an insured No coverage for bodily injury to the named insured or any other insured. (Liability insurance covers injuries to "the other guy," not the insured.) 18) Damage to property owned by the insured No coverage for property damage to property the named insured owns, rents, sells, gives away, loans, or occupies. There is no coverage for personal property in the care, custody, or control of the insured.

The Special Provisions—Texas Endorsement (HO 01 42) must be attached to all homeowners policies issued in Texas. "Duties After Loss" require the insurer to acknowledge receipt of a claim within

15 days.

Financial responsibility and compulsory liability laws require motor vehicle owners to have insurance as well as certain minimum liability limits of coverage. These limits vary by state and are specified per person, per damage, and per accident. Some are expressed as a single limit that combines the sum of the per-accident bodily injury limit with the per-accident property damage limit. Some states require limits as low as

15/30/5—that is, $15,000 per person and $30,000 per accident for bodily injury and $5,000 per accident for property damage. Other states require limits of 50/100/25. Prudent consumers usually buy higher limits.

The Farm Property—Farm Personal Property Coverage Form (Coverages E, F) covers

16 types of scheduled farm personal property subject to dollar limits for each type. It also covers unscheduled farm personal property subject to dollar limits.

Farm Liability Coverage Form (FL 00 20) Coverage Exclusions 5 Bodily injury and property damage liability (Coverage H) is subject to numerous exclusions which are subject to various circumstances and exceptions that are beyond the scope of this course (see chart).

24) Controlled substances No coverage for losses arising out of the illegal use, sale, manufacture, delivery, transfer, or possession by any person of a controlled substance. 25) Personal injury No coverage for bodily injury arising out of personal injury e.g., false arrest, wrongful eviction, and oral or written publication of false material). Note: Personal injury is covered under Coverage I. 26) Distribution of material in violation of statutes No coverage for losses arising out of any action or omission that violates any statutes related to the sending, transmitting, communicating, or distribution of materials, such as the Telephone Consumer Protection Act. 27) War No coverage for losses arising from war.

Farm Property—Other Farm Provisions Form—Additional Coverages, Conditions, Definitions (FP 00 90) This common provisions form eliminates the need to repeat some fundamental provisions in every coverage form. The FP 00 90 form contains:

6 additional coverages 11 loss conditions 6 general conditions 13 definitions a limit of insurance section a deductible section

Farm Liability Coverage Form (FL 00 20) Coverage Exclusions 2 Bodily injury and property damage liability (Coverage H) is subject to numerous exclusions which are subject to various circumstances and exceptions that are beyond the scope of this course (see chart).

7) Mobile equipment No coverage for losses arising from the transportation of "mobile equipment" by a motor vehicle owned, rented, or operated by an insured. Expanded coverage for mobile equipment can be added via the commercial auto policy or by endorsement to the farm liability coverage form. 8) Use of livestock or other animals No coverage for losses arising out of the use of any livestock or other animals in practice or participation for a prearranged racing, speed, or strength contest or prearranged stunting activity. In addition, there's no coverage for any loss involving livestock that provides rides to any person for a fee or in connection with a charitable function. Specialized coverage via endorsement is available for this loss exposure. 9) Business pursuits No coverage for losses arising out of a "business" engaged in by an insured. "Business" means a trade, profession, or occupation, other than farming or customized farming, which is engaged in for monetary purposes. 10) Custom farming No coverage for losses arising out of the insured's performance or failure to perform "custom farming" (i.e., the performance of specific planting, harvesting, or related farming operations by an insured at a farm that is not an "insured location"). Coverage for this exposure can be added via endorsement. 11) Professional services No coverage for losses arising out of the rendering, or failure to render, professional services. A separate professional liability policy is needed. 12) Rental of premises and ownership or control of premises No coverage for losses arising in connection with any location (other than an "insured location") that is rented to, or owned or controlled by, the insured. In addition, no coverage applies to the rental or holding for rental of an "insured location." Some exceptions apply to this exclusion.

The Texas Personal Injury Protection endorsement would provide all of the following benefits

80 percent of an insured's loss of income from employment necessary medical expenses expenses incurred to pay someone to maintain a household

Flood insurance is essentially a single-peril policy. Therefore, the definition of flood is critical. The term "flood" is defined by the NFIP Standard Flood Insurance Policy to mean one of the following:

A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is the insured's property) from: 1. Overflow of inland or tidal waters; 2. Unusual and rapid accumulation or runoff of surface waters from any source; 3. Mudflow. Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as we've defined it.

Farm Liability Coverage Form (FL 00 20) Definitions "Bodily injury" is defined as bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time. "Property damage" is defined as measurable physical damage to tangible property. It also includes the loss of use of tangible property that is not physically damaged. All such loss of use will be deemed to happen at the time of the occurrence that caused it. Example

A large fire loss on a farmer's property results in the temporary closing of a road, resulting in a loss of business suffered by a gas station down the road. "Loss of use" in the farmer's liability policy covers the gas station owner's suit to recover lost revenue even though the station's property was not physically damaged.

In the few states that offer choice no-fault insurance plans, policyholders can choose whether their auto coverage will be on a no-fault basis:

A policyholder who chooses no-fault coverage pays a lower premium but has limited rights to recover under tort law for certain types of auto injuries. A policyholder who does not choose no-fault coverage pays a higher premium but retains all rights to seek compensation from an at-fault party.

Coverage Extensions and Additions

Additional acquired livestock-Coverage E only-Covers additional livestock for up to 30 days from acquisition. Thirty-day additional limit on borrowed or rented farm machinery, vehicles, or equipment (added in the 2003 edition)-Coverage E only-Any applicable limit specified on the declarations for this type of equipment is increased by $10,000 for borrowed or rented equipment. Farm products in the open—coverage against certain causes of loss-Coverage F only-Pays up to 10 percent of the limit of insurance listed in the declarations for farm personal property to cover certain farm products.

Ocean Marine- Hull insurance Deductible (or Deductible Average Clause) Deductibles are common when property is insured, and hull insurance is no exception. Here, too, archaic language is used: the deductible clause may be called a "deductible average clause" "average" means a partial loss a partial loss sustained by a specified cargo or vessel is a "particular average" Example

An ocean marine policy covering a specified vessel or its cargo may have a deductible average clause that excludes coverage for partial losses amounting to less than 3 percent of the policy's limit of insurance. The actual wording in the clause might then read free of particular average average under 3 percent, which is deductible."

The out-of-state coverage provision automatically increases a

PAP's liability coverage to match the minimum requirements of a state that the insured vehicle enters when that state requires higher liability coverage limits than the insured's PAP usually provides.

Martha plans to drive her car into Mexico for a vacation. Her agent adds the limited Mexico coverage endorsement to Martha's personal auto policy (PAP). What else must Martha do to be fully insured in Mexico?

Buy liability insurance through a licensed Mexican insurer. The endorsed policy provides only excess coverage over primary Mexican insurance, and the insured is required to purchase Mexican liability insurance, which is typically available at the U.S.-Mexico border.

Two additional coverages are included in FP 00 13:

Cost of restoring farm operations records-Pays up to $2,000 to cover the costs of researching, replacing, or restoring lost information on farm operations; no deductible applies to this additional coverage. Extra expense-Pays up to the limit specified in the declarations for extra expenses incurred to resume farming operations interrupted by a covered loss; no deductible applies to extra expense coverage.

Farm Property—Farm Dwellings, Appurtenant Structures, and Household Personal Property Coverage Form (FP 00 12) This form addresses a farm owner's residential (i.e., non-farm business) property exposures. Like homeowners forms, this policy provides:

Coverage A—the dwelling Coverage B—other private structures appurtenant to dwellings Coverage C—household personal property Coverage D—loss of use

Damien moves to another state, so his insurer issues a different personal auto policy. Damien notices that it has a personal injury protection endorsement that his former policy did not have. What is the purpose of this endorsement?

It adds no-fault coverage that is available or required in the new home state. In states where no-fault insurance is available, the policy is modified by adding a personal injury protection endorsement.

Coverage Extensions and Additions Form FP 00 12 includes four coverage extensions. In all cases, the coverages are part of the policy's maximum insurance limits (i.e., they do not add to the overall coverage limit).

Coverage Extension Description Trees, shrubs, plants, and lawns-Pays up to $500 for any one damaged tree, shrub, plant, or lawn, subject to certain restrictions. Insured's household personal property away from insured location- Extends Coverage C to the insured's household personal property at any insured's residence away from the insured location. Nonfarming refrigerated products- Pays up to $500 for loss to contents of a freezer or refrigerator due to interruption of electrical services or mechanical breakdown of refrigeration system. Building additions and alterations- Limited to 10 percent of the Coverage C limit, this covers building additions, alterations, improvements, and installations paid for by the insured.

Farm Property—Farm Personal Property Coverage Form (FP 00 13) This form includes two built-in coverages:

Coverage E—scheduled farm personal property Coverage F—unscheduled farm personal property

Farm Property—Barns, Outbuildings, and Other Farm Structures Coverage Form (FP 00 14) Form FP 00 14 applies to farm buildings. One feature of building coverage is the availability of replacement cost coverage. This form includes one built-in coverage:

Coverage G—barns, outbuildings, and other farm structures

Farm Liability Coverage Form (FL 00 20) This standard farm liability form provides three basic coverages against claims arising from the policyholder's insured locations, farming operations and products, and the insureds' personal activities, all on an occurrence basis:

Coverage H—bodily injury and property damage Coverage I—personal injury and advertising injury Coverage J—medical payments

Which of the following correctly compares benefits and premiums of a flood insurance policy purchased directly from the National Flood Insurance Program (NFIP) and one purchased through a private insurer?

Coverage and premiums are the same from either source. Whether the NFIP or a write-your-own (WYO) insurer issues the policy, the coverage and premium are identical.

What effect does the Texas changes endorsement have on a commercial general liability policy issued in Texas?

It excludes employees' criminal acts from coverage. The Texas changes endorsement modifies the commercial general liability policy to exclude criminal acts from coverage.

Farm Livestock Coverage (FP 00 40) Coverage Extensions and Additions Four additional coverages are included in FP 00 40, along with one coverage extension:

Damage to property removed for safekeeping-Pays for loss to covered property damaged by any cause during or up to 30 days after its removal from the building endangered by a covered peril. Debris removal-Pays for named insured's expense to remove debris of covered property damaged by a covered peril (subject to limits). Extra expense-Pays up to the limit specified in the declarations for extra expenses incurred to resume farming operations interrupted by a covered loss; no deductible applies to this coverage. Fire department service charge-Pays for fire department service charges incurred, but no coverage if the property is located within the limits of the city or protection district furnishing the fire department response; no deductible applies to this coverage. Livestock in the custody of a common or contract carrier-Coverage is extended to apply to livestock while in the custody of a common or contract carrier, for up to a total of $1,000; higher limits are also available.

Nelson is the president of his company and has a company car. He does not have a personal auto policy because he does not own another vehicle. Which endorsement to his company's business auto policy (BAP) will protect him when he uses another vehicle?

Drive Other Car-Broadened Coverage for Named Individuals The Drive Other Car endorsement is useful for those whose only vehicle is a company car. It is excess coverage when the individual drives an auto that is borrowed or hired for personal use.

Farm Inland Marine Coverage Forms There are two inland marine coverage forms designed for farms:

Mobile Agricultural Machinery and Equipment Coverage Form (FP 00 30) Livestock Coverage Form (FP 00 40).

A personal auto insurance policy (PAP) typically has a six-month or one-year policy term. At the end of the term, the policy expires. The insurer usually renews the policy and the policyholder pays the premium to continue the coverage. The policy uses these terms:

Expiration occurs at the end of the policy term. Renewal occurs when the insurer continues the coverage under an expiring policy for another policy term. The policyholder will pay a premium to renew the policy, which might differ from the premium paid for the expiring policy. Termination is the ending of the policy coverage through cancellation, expiration, or nonrenewal. Cancellation occurs when the insurer or the policyholder terminates coverage during the policy year when it would otherwise continue until the policy expires. The party initiating the cancellation must provide the non-canceling party with written notice of its intentions.

Farm Property—Farm Personal Property Coverage Form (Coverages E, F)

FP 00 13

Farm Property—Barns, Outbuildings, and Other Farm Structures Coverage Forms (Coverage G)

FP 00 14

Farm Property—Other Farm Provisions Form—Additional Coverages, Conditions, Definitions

FP 00 90

Causes of Loss Form—Farm Property

FP 10 60

Which of the following activities is covered under the basic farm liability coverage form (FL 00 20)?

Farmer operates a mower mounted on his tractor in his own hay field. Although the farm liability coverage form contains an exclusion for mobile equipment, that applies only to the transportation of mobile equipment by a motor vehicle. No coverage is provided for losses due to custom farming, aircraft discharge (crop dusting), or use of livestock to provide rides for a fee or in connection with a charitable function.

Riley's coupe is insured with a personal auto policy that includes liability, uninsured motorists, and other-than-collision coverages. He buys a new sedan and wants collision coverage on it. Which statement is true about this coverage?

He must notify the insurer about the newly acquired sedan within four days. Because Riley's coupe does not have collision coverage, he must report the newly acquired sedan to his insurer within four days of its acquisition to get collision coverage for it.

Which individual would need to be licensed as a surplus lines agent?

Henry, who negotiates and binds surplus lines contracts Only Henry would need to be licensed as a surplus lines agent since he is actively engaged in soliciting, negotiating, and binding surplus lines contracts.

The nonrenewal provision in the PAP requires the insurer to notify the named insured at least 20 days before the policy expires if the insurer intends to nonrenew coverage. This ability to nonrenew coverage depends on how long the policy has been in effect:

If the policy has been in force for less than six months, the insurer can nonrenew only after the first six months. If the policy has been in force for six months or longer but less than one year, the insurer can nonrenew only at the end of the first year. If the policy has been in force for one year or longer, the insurer can nonrenew at each anniversary of the policy's original effective date.

For a building to be insurable under a regular flood insurance policy, which of the following conditions must be met?

It must have at least two rigid walls. For a building to be insurable under a flood policy, it must have two or more rigid walls, a fully secured permanently attached roof, resist floatation, and at least 51 percent of the property must be above ground. Being located in an SFHA is a key reason for owning flood insurance.

Tyler accompanies Janelle while she visits their employer's customers. Janelle's company car has liability coverage under their employer's business auto policy (BAP). She crashes into a lamppost and Tyler is injured. He sues Janelle for his injuries. How will the BAP treat his lawsuit?

It will not cover the loss because of the fellow employee exclusion. The BAP's fellow employee exclusion precludes coverage for bodily injury to an employee arising out of and in the course of a fellow employee's employment.

The declarations include six items:

Item One—Named Insured, Form of Business, Item Two—Schedule of Coverages and Covered Autos, Item Three—Schedule of Owned Autos, Item Four—Schedule of Hired or Borrowed Auto Coverage and Premiums, Item Five—Schedule for Non-Ownership Liability, and Item Six—Schedule for Gross Receipts or Mileage Rating.

Nonrenewal provision Example .

John's PAP took effect on January 1. His insurer cannot refuse to renew it before July 1, and only after giving at least 20 days' advance notice. Cindy's PAP took effect on January 1. In August, her insurer decides not to renew the policy. It must continue the policy until the following January 1, and only after giving at least 20 days' advance notice. Sandy's PAP took effect two years ago on January 1. Her insurer must continue the policy until the following January 1, and only after giving at least 20 days' advance notice. Almost all states have state-specific endorsements that vary these nonrenewal provisions. Some states also require advance notice if there is a significant change in rates or coverage

Lillian is unemployed and has only enough auto insurance to comply with her state's compulsory insurance law. She is responsible for an accident in another state that requires higher limits. What protection, if any, does her personal auto policy (PAP) provide?

Lillian's liability limits are automatically increased to comply with the other state's requirements. The PAP's out-of-state coverage automatically increases the insured's liability coverage, if necessary, to comply with the laws of a state in which the insured vehicle is driven.

Some buildings (and their contents) are ineligible for flood insurance coverage, including: buildings that are constructed or altered in a way that places them in violation of floodplain management laws container-type structures, such as gas or chemical container tanks and brick kilns buildings constructed entirely over water, if they were built or substantially improved after October 1, 1982:

NOTE: Structures that were built or last improved before October 1, 1982, are grandfathered and remain eligible for coverage. buildings in which 50 percent or more of the structure, including machinery and equipment which are part of the building, is below ground level: NOTE: If the ground level has been artificially raised around the building to serve as insulation, an exception is made as long as the lowest part of the building structure is at or above BFE. boat repair docks: NOTE: Boathouses are eligible, under limited circumstances. greenhouses (unless the structure has at least two rigid walls and a roof)

No-fault laws vary from state to state:

Nine states have compulsory no-fault laws that limit a claimant's right to sue for damages. Nine jurisdictions (including the District of Columbia) add a few benefits, usually for medical expenses and income loss. Three states, referred to as choice states, let the insured choose either a no-fault option or a tort option.

Coverage F—Unscheduled Farm Personal Property Excluded Property

Nineteen types of property are not covered under Coverage F. Examples include non-farm household or personal property utilized in a dwelling, animals other than livestock, poultry, racehorses, fences, and irrigation equipment.

Michel was unemployed and driving without auto insurance when he struck Norma's car, injuring her. Norma has a personal auto policy. No-fault insurance laws do not apply. How will Norma's medical bills most likely be paid?

Norma's uninsured motorists coverage will pay the bills. Uninsured motorists coverage protects insureds from financially irresponsible drivers who do not have auto liability insurance and cannot compensate those they injure in an accident.

Reason for PAP cancellation Insurer cancels for nonpayment of premium or within 60 days of policy's effective date

Notice Requirement At least 10 days (15 or 20 days in some states)

Reason for PAP cancellation Insurer cancels for reason other than nonpayment of premium within 60 days of the policy's effective date

Notice Requirement At least 20 days

Reason for PAP cancellation Insurer cancels beyond 60 days of policy's effective date or after renewal for nonpayment of premium suspension or revocation of driver's license material misrepresentation

Notice Requirement Nonpayment: At least 10 days Driver's license revocation or suspension, material misrepresentation: At least 20 days

A personal auto insurance policy (PAP) typically has a six-month or one-year policy term. At the end of the term, the policy expires. The insurer usually renews the policy and the policyholder pays the premium to continue the coverage. The policy uses these terms: cont

Notice is a party's announcement that a policy is being canceled or nonrenewed. When the insurer cancels, a personal auto policy requires that written notice be mailed or delivered to the named insured. When the policyholder cancels, written notice must be given to the insurer. Nonrenewal occurs when the insurer ends coverage on the policy's expiration date. Nonrenewal may also refer to the policyholder's decision to not renew coverage with the insurer. Automatic termination happens at the end of the policy period when the policyholder does not renew a policy and does not pay the renewal premium when it is due. The Insurance Services Office, Inc. (ISO) personal auto policy (PAP) states that the policy automatically terminates when the named insured obtains other insurance on a covered auto. Then the policy automatically terminates when the other policy becomes effective so that the insured never has more than one policy in effect for the same vehicle. Grounds is the rationale for an insurer's decision to cancel or nonrenew a policy. Almost all states have their own endorsements that modify these cancellation provisions. A state law usually makes the provisions in the standard policy or endorsements more favorable for consumers.

Reason for PAP cancellation Insured returns policy during policy period or give notice to insurer

Notice requirement None; cancellation takes effect per notice to insurer

Coverage Limits Regardless of a property's total insurable value, the maximum available flood coverage limits for a standard flood policy are shown in the chart.

One- to four-family structure $250,000 One- to four-family home contents $100,000 Other residential structures $250,000 Other residential contents $100,000 Business structure $500,000 Business contents $500,000 Renter contents $100,000

Commercial ('10) Auto Policy (ISO Forms) Texas Changes (CA 01 96) The mandatory Texas Changes endorsement (CA 01 96) amends commercial automobile policies as follows:

Physical damage coverage is amended to exclude destruction or confiscation by government or civil authorities. The deductible is waived when glass is repaired rather than replaced. An exclusion for federal and state seizure is added as provided by the Texas Controlled Substance Act. Claims-handling provisions are added to changes in conditions.

Automatic Termination If the insurer renews the policy, the provision for automatic termination applies. The named insured may reject the insurer's offer to renew the policy by simply not paying the premium. Then the policy terminates at the end of the policy period. Automatic termination lets coverage end without the need to ask the insurer in writing to cancel the policy or to require the insurer's notice of cancellation or nonrenewal. Example

Pinnacle Insurance sends a renewal notice to Bill, the named insured, two months before his personal auto policy expires. If Bill does not want to renew the policy, he simply ignores the notice. The provision also addresses replacement insurance. It prevents duplicate insurance on the same vehicle, which could increase the moral hazard. If the named insured buys another PAP on the same vehicle, coverage from the first policy automatically ends when the replacement policy takes effect.

Coverage Extensions and Additions Two coverage extensions are included in FP 00 14:

Private power and light poles Pays up to $1,000 for loss to these items. New construction Pays up to $100,000 for damage to new, permanent farm structures at the insured location; includes materials and supplies used in this construction.

Coverage Extensions and Additions Like the FP 00 12 coverage form, the farm personal property form includes coverage extensions and additional coverages. Special limits and restrictions may apply, as described on the declarations page.

Property in a common or contract carrier's possession-Coverage E and Coverage F-Coverage applies for up to $1,000 for each of these two coverages. Higher limits are available if specified on the declarations page. Covered property away from the insured location-Coverage E only- Coverage is 25 percent of the limit of insurance shown on the declarations for miscellaneous equipment and to 10 percent of the limit of insurance shown on the declarations for other types of property. Replacement machinery, vehicles, and equipment newly purchased- Coverage E only-Pays up to $75,000 for replacement equipment plus the corresponding limit shown in the declarations for individually scheduled items. Additional machinery, vehicles, and equipment newly purchased- Coverage E only- Pays up to $100,000 for newly purchased equipment; this limit is included within the limit of insurance stipulated in the declarations.

A few additional coverages are included in FP 00 12:

Removal of fallen trees- Pays up to $1,000 in any one loss regardless of the number of trees affected; a sublimit of $500 per tree applies. Credit cards and electronic fund transfer cards or other access devices, forgery, counterfeit currency- Pays up to $500 for losses arising from any of these devices or causes; no deductible applies to this coverage. Water damage- If open perils coverage applies under Coverages A and B, pays for tearing out and replacing part of a building to repair a leak. Grave markers- Pays up to $5,000 (ACV) for damage to grave markers or mausoleums, on or away from the insured location, by a covered peril.

The National Flood Insurance Program Now administered by the Federal Emergency Management Agency (FEMA), the NFIP was created in 1968 with two purposes in mind:

Share the risks of flood losses through a single insurance program covering the entire country. Reduce flood damage by restricting development in floodplains.

Farm Livestock Coverage (FP 00 40) Otherwise, the most payable is the applicable limit shown on the declarations. Coverage for the farm animals is subject to the deductible listed in the declarations. Example Bill owns ten dairy cows, which range in value from $1,500 to $3,000, and has blanket coverage under the farm livestock coverage form, with a total aggregate limit of $25,000. An animal with an actual cash value of $1,800 died when it was struck by lightning. How much did the insurer pay for this loss?

Since it would pay the lesser of these three amounts, Bill's insurer paid $1,800 for this loss. If the cow's ACV was $2,100, the insurer would pay the per-animal limit of $2,000, as this would be the lesser of the three amounts. In this example, the third option ($3,000) is not applicable as it exceeds the per-animal limit.

In effect, the NFIP coinsurance requirement is the lesser of 80 percent of the property's value or the maximum coverage limit (see chart). Example

Single unit residential home #1 in a community's floodplain has a replacement cost of $600,000. The maximum coverage limit ($250,000) is less than the 80 percent coinsurance amount ($480,000), so as long as the coverage on this house is $250,000 there is no coinsurance penalty. Single unit residential home #2 in the same floodplain has a replacement cost of $200,000. The 80 percent coinsurance amount ($160,000) is less than the maximum coverage limit ($250,000), so the insured must buy at least $160,000 of coverage to avoid a coinsurance penalty.

Sometimes, a ship captain must jettison a portion of the ship's cargo to save the ship and the rest of the cargo. Maritime law requires that all parties participating in a venture share the loss when one party's goods are sacrificed to save the venture. Losses incurred for the common good of the ship are called general average losses. Salvage charges are expenses paid to third-party "salvors" (including other ships) who render assistance in saving property that was exposed to loss. Example her ship.

Suppose a heavily loaded cargo ship is in distress and one party's cargo is thrown overboard to lighten the load and thereby save the ship. All other parties—the shipowner and the owners of other cargo—will share in this loss, along with the owner of the cargo that was jettisoned. Each party's share is based on its portion of the total value of the venture, and each party's insurance company pays its share of the general average loss. If another ship provided help to the ship in distress, the ship in distress may be obligated to pay salvage expenses to that ot

Commercial General Liability ('07) Policy (ISO Forms) Texas Changes (CG 01 03)

The Texas Changes endorsement modifies the commercial general liability policy to exclude criminal acts from coverage.

Janine buys a new car and a personal auto policy to insure it. However, she forgets to cancel the policy she already owns. How will the insurers treat this situation?

The automatic termination provision in her first policy will terminate the policy on the effective date of the replacement policy. The automatic termination provision, which prevents duplicate coverage on the same vehicle, will automatically terminate coverage in the original policy on the effective date of the replacement policy.

Texas Changes—Conditions Requiring Notice (CG 31 07)

The conditions requiring notice endorsement is mandatory for all commercial general liability policies. It states that any policy requirements for the insured to provide notice of claims of occurrences will not stop coverage. In other words, payment will be made if an insured is legally liable for injuries or damage occurring during a policy period, even if a claim is not filed on time.

Dwelling ('02) Policy (ISO Forms) Special Provisions—Texas (DP 01 42) The Special Provision—Texas Endorsement (DP 01 42) must be attached to all dwelling policies issued in Texas. Its main provisions include:

The coverage for ordinance or law is amended to include Texas Windstorm Insurance coverage. The intentional loss exclusion excludes additional named insureds, even if they did not contribute to the loss (except those who filed a policy report and cooperated with law enforcement). An exclusion for fungi or microbes is added. Jewelry losses are settled at replacement cost. Actions can be brought against the insurer within two years and one day of the cause of action. The insured must give immediate notice to the insurer or the agent as well as a signed proof of loss within 91 days of a covered loss. he insurer is required to make payment within five business days of notifying the insured that it will pay the claim.

Farm Property—Other Farm Provisions Form—Additional Coverages, Conditions, Definitions (FP 00 90) General Conditions There are six general conditions in this form:

The coverage is void if the insured engages in fraud or misrepresents a material fact. Any neglect or act of a person besides the named insured that is beyond the insured's control will not negate the insurance. The standard liberalization provision applies. The mortgage clause applies. The standard no benefit to bailee provision applies. Only losses occurring during the policy period are covered.

Deductibility Liability Insurance (CG 03 00)

The deductibility liability insurance endorsement allows the insured to choose a deductible on either a per-claim or a per-occurrence basis. If the insurer pays any part or all of the deductible in order to settle a claim or lawsuit, the insured must reimburse the insurer for the deductible paid.

Texas Changes—Employment-Related Practices Exclusion (CG 26 39)

The employment-related practices exclusion endorsement excludes coverage for bodily injury arising out of the termination or refusal to hire an employee or from other employment-related practices such as demotion, evaluation, reassignment, discipline, defamation, harassment, or discrimination directed at that person.

Texas Changes - Farm Property (FP 01 42) The Texas Changes endorsement makes the following changes to the farm policy:

The fire department service charge additional coverage is deleted. The "Legal Action Against Us" condition is amended so that actions must be brought within two years and one day from the date the cause of action accrues. The insured must send proof of loss within 91 days after a request by the insurer. A residential community property clause is added, which states that the policy remains in force, irrespective of divorce or changes of ownership, unless excluded by endorsement. The "Pair, Sets or Parts Loss" condition is amended to stipulate that jewelry losses will be settled at replacement cost. The intentional loss exclusion is amended to exclude losses or damages arising out of acts the insured commits or conspires to commit in order to cause a loss.

Texas Uninsured/Underinsured Motorists Coverage (CA 21 09) The Texas uninsured/underinsured motorists coverage endorsement requires the insurer to pay damages that an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle. A $250 deductible may be imposed. The conditions of the policy are changed as follows: bitrated.

The insured is required to promptly notify the police if a hit-and-run driver is involved. The insured must promptly send the insurer copies of any legal papers if a lawsuit is brought. The insured must take reasonable steps after the loss to protect the covered auto and its equipment from further loss and must notify the insurer of any tentative settlements. The insurer maintains a right of subrogation against the insured. The endorsement also adds an arbitration provision stating that any disagreement between the insurer and the insured may be ar

Compulsory insurance laws are superior to financial responsibility laws because they give the public more protection from loss. However, they do not completely shield innocent victims from irresponsible drivers because:

The law prescribes only a minimum amount of liability insurance, so some accident victims may not be fully compensated for their loss. Some owners do not register their vehicles to avoid the cost of liability insurance. Others buy liability insurance only to register the vehicle and then allow coverage to lapse. Insurance may not be able to protect victims of accidents with hit-and-run drivers, drivers whose insurer is insolvent, and out-of-state drivers.

Farm Inland Marine Conditions

The livestock coverage form includes essentially the same inland marine conditions as the mobile agricultural machinery and equipment coverage form.

Personal and Commercial Auto Policies Personal ('05) Auto Policy (ISO Forms) Amendments of Policy Provisions—Texas (PP 01 50) The Amendment of Policy Provisions Texas Endorsement (PP 01 50) must be attached to all personal automobile policies issued in Texas. Its major provisions include:

The medical payments coverage prohibits duplicate payments for the same element of loss and allows payments to be assigned to a physician or other health-care provider. The "Coverage to Your Auto" section is amended to exclude coverage if an automobile is destroyed or confiscated by the government or civil authorities. The limit of liability provision under "Coverage for Damage to Your Auto" is expanded to prohibit duplicate payments for the same element of loss and to provide for assignment of payments. The payment of loss provision is amended so that the deductible for loss to glass will be waived if the glass is repaired rather than replaced, and both parties agree. The cancelation and nonrenewal provisions are amended to comply with Texas law. The payment of first-party claims provision requires insurers to comply with Texas law by acknowledging receipt of a claim within 15 days. The notice of settlement of liability claims provision requires insurers to give an insured 10 days' notice if they receive an offer to compromise or settle a claim against the insured and 30 days' notice of a claim settlement.

Farm Inland Marine Coverage Forms Compared to the location-specific farm insurance policies previously discussed, inland marine forms generally provide broader off-premises coverage. Example

The mobile agricultural machinery coverage form (FP 00 30) can provide coverage for a contract farmer with a variety of farm equipment who works for several farmers in a given area and moves his equipment from farm to farm.

Texas Changes - Farm Liability (FL 01 05) This endorsement changes the standard ISO farm policy coverage to comply with Texas law as follows:

The terms "Expected or Intended Injury" and "Communicable Disease" are redefined. Coverage is excluded for sexual molestation, corporal punishment, or physical or mental abuse. The insured must provide proof of loss within 90 days after a loss occurs under "Additional Coverage—Damage to Property of Others."

Farm Livestock Coverage (FP 00 40)

This form provides coverage for certain types of farm animals.

Almost all states require insurers to offer uninsured motorists coverage. In states that do not require it, insurers usually offer it. At this time, insurers must provide

UM/UIM coverage—and policyholders must buy it—in 17 states. In six other jurisdictions, UM coverage is mandatory, but UIM coverage is not.

Flood Insurance Deductibles Deductibles apply separately to building coverage and contents coverage:

Under the emergency program a $2,000 deductible applies. Under the standard program, the deductibles available on residential buildings and contents range from $1,000 to $5,000. Deductibles up to $50,000 are available on nonresidential buildings and contents.

Temporary substitute autos or trailers that the named insured does not own—while used under certain conditions in place of a vehicle listed in the declarations—are

also covered autos.

Ocean Marine Cargo and Freight Insurance The goods carried on a ship are referred to as cargo. Oceangoing cargo is susceptible to the same perils and hazards that affect ships. Cargo is also subject to loss by theft, water damage, and damage in handling.

While freight is sometimes used to mean "cargo," in shipping terms it means the charges assessed for carrying the cargo. Key Point Most cargo policies state that the value of covered property includes any prepaid, advanced, or guaranteed freight charges.

Coverage G—Barns, Outbuildings, and Other Farm Structures Loss Conditions This form includes several important loss conditions:

With respect to fences, corrals, and related items, the amount payable is the proportion that the applicable limits bear to the value of that property. Property (except for improvements and betterments) is normally settled on an actual cash value basis. Improvement and betterment losses are settled on an actual cash value basis, if the repair or replacement is performed at the insured's expense within 12 months after the loss. Concerning glass losses, the insurer will settle on the basis of the cost to replace damaged glass with safety glazing material, if required by law.

The limit of liability is expressed as a limit for bodily injury compensation per person. It includes

amounts payable for medical care, loss of services, or death due to bodily injury to one person in any single auto accident.

Flood insurance Residential Condominium Building Association Form Eligibility This residential condominium building association policy (RCBAP) is issued to residential condominium associations on behalf of the association and its unit owners. Available only in NFIP regular program communities, the form provides building coverage. Key Point

With the RCBAP form, residential condominium buildings with 75 percent or more of their total floor area in residential units are eligible for coverage of commonly owned contents (e.g., lobby furniture).

Private insurers that sell National Flood Insurance Program policies on their own "paper" participate in the:

Write-Your-Own (WYO) program Private insurers may participate in the NFIP's Write-Your-Own (WYO) program.

NFIP flood policies are issued by private insurers that participate in NFIP's

Write-Your-Own (WYO) program. WYO participating insurers write the coverage on their own "paper," but the coverage is 100 percent reinsured by the NFIP.

Carmella's personal auto policy describes some coverages for vehicles that are not included in the policy's definition of "your covered auto." Which vehicle is included in this definition?

a boat trailer that she tows behind her truck An owned trailer that is designed to be pulled behind a private passenger auto is within the definition of "your covered auto."

Business auto insurance may also be part of

a commercial package policy that includes other coverage forms.

Farm Livestock Coverage (FP 00 40) Excluded Property Property not covered includes livestock in the custody of:

a common or contract carrier public stockyards, sales barns, or sales yards slaughterhouses or packing plants

Hull insurance is similar to collision insurance on an auto. It protects a shipowner against

a covered loss to the vessel itself, but not its cargo.

The PAP consists of three major parts—

a declarations page, the personal auto coverage form, and any applicable endorsements that amend various policy provisions.

For coverage to apply, the flood must be

a general condition that covers two or more acres of normally dry land area or two or more properties (at least one of which is the insured's property).

Grace Period The PAP does not offer a grace period for payment of the premium. Once the insurer has billed the insured to renew the policy, the insured can either renew the policy by paying the premium or let the policy lapse by not paying the premium. In practice, however, if the policy does lapse, some insurers provide

a grace period or mail a lapse notice after the insured fails to pay the premium. State law may also require a grace period for any premium due except the first. This period may be seven days or more. Cancellation or nonrenewal of a policy after the grace period takes effect on the date the notice of cancellation or nonrenewal is mailed to the policyholder.

Farm Livestock Coverage (FP 00 40) Coverage The policy pays for a loss or damage to livestock by a named peril. Covered animals may be scheduled, or coverage may be written on a blanket basis. Livestock includes most types of four-legged farm animals; it does not include fowl (e.g., chickens and turkeys). If coverage is written on a blanket basis, it is subject to

a limit of insurance per animal (based on actual cash value) and an aggregate limit per class, and is subject to an 80 percent coinsurance provision.

Any deductible that applies to auto physical damage coverage is shown in the policy declarations. The other-than-collision coverage often has

a lower deductible than the collision coverage.

Flood Insurance Coinsurance The NFIP has an unusual 80 percent coinsurance provision. Because full insurance to replacement cost value is not available for buildings valued over the NFIP coverage limits, the NFIP's coinsurance provision is modified in a way that essentially eliminates any coinsurance penalty for

a policyholder who has purchased the maximum available limit.

Similar to collision insurance in an auto policy, hull insurance protects

a shipowner against a covered loss to the vessel itself, but not its cargo.

A personal auto policy (PAP) is usually issued for

a six-month or one-year term.

Farm Property—Farm Dwellings, Appurtenant Structures, and Household Personal Property Coverage Form (FP 00 12) Coverage A—Dwellings ISO defines "dwelling" as a building used primarily for family residential purposes and owned by the named insured. Coverage on the dwelling includes not only the house or mobile home, but also attached structures, as well as materials intended for use in building or renovating the dwelling or attached structures. Outdoor antennas and satellite dishes attached to a covered dwelling are subject to

a sublimit of $1,000 in the current 2003 form. The valuation provision for the dwelling is like that found in ISO homeowners forms. As long as the 80 percent coinsurance requirement is met, valuation is based on replacement cost basis. Key Point A building used in agricultural operations, such as a barn, is not considered a "dwelling."

A surplus lines agent or agency holds

a surplus lines license issued by the Department of Insurance and obtains insurance contracts from surplus lines insurers.

Farm Property—Farm Dwellings, Appurtenant Structures, and Household Personal Property Coverage Form (FP 00 12) Coverage C—Household Personal Property This insurance covers household personal property used only for family (i.e., non-farm business) purposes. Losses are covered on an ________________. Key Point Coverages A, B, and C of the Farm Dwelling policy do not cover property related to the insured owner's farming operations.

actual cash value (ACV) basis. This form includes special limits of insurance for certain properties, such as money, jewelry, furs, and firearms, that are also similar to those contained in a homeowners form. Noncovered properties, such as aircraft parts and animals, are the same as those found in a homeowners form.

Aftermarket parts are not manufactured by the original equipment manufacturer (OEM) that built the car. Many parts that are often damaged in accidents—such as fenders, hoods, and door panels—are available from aftermarket suppliers who compete with OEMs. This helps reduce the cost of repairs and auto insurance. Many aftermarket parts are made by the same factories that make OEM parts. The PAP's physical damage coverage limits recovery to the

actual cash value of the vehicle or the amount necessary to repair or replace damaged property with other property of like kind and quality, with adjustments for depreciation and betterment.

Ocean Marine Cargo Insurance Total Losses Total loss refers to the complete loss of the insured cargo (a likely scenario if a ship sinks). There are two types of total loss:

actual total loss—The property is entirely lost or so badly damaged that it has no remaining value. constructive total loss—It would cost more to salvage the cargo than what the salvaged cargo would be worth. When a cargo insurance policy provides "total loss only" coverage, coverage is limited to situations in which cargo is a total loss as a result of a covered peril.

The FL 00 20 form also includes

additional coverages, a "limits of insurance" section, farm liability conditions, and definitions.

Farm Property—Farm Dwellings, Appurtenant Structures, and Household Personal Property Coverage Form (FP 00 12) Coverage D—Loss of Use To help the insured maintain his or her current standard of living, this form covers the insured'sCoverage D—Loss of Use To help the insured maintain his or her current standard of living, this form covers the insured's

additional living expenses if he or she has to vacate the home due to a covered loss. Like its counterpart in the homeowners form, this form covers not only additional living expenses, such as hotels and restaurant food, but fair rental value and forced evacuation due to civil authority. No deductible applies to loss of use coverage.

Pamela lives in a state with a financial responsibility law. When will she be required to prove she has auto liability insurance?

after it is involved in a serious traffic violation or accident. Financial responsibility laws require motor vehicle owners to furnish evidence of financial responsibility (usually by providing proof of insurance) after a serious traffic violation or accident.

State regulations affect auto insurance in a variety of ways:

aftermarket crash parts regulation residency statements arbitration notice of rental car coverage constructive total loss claims

Coverages and premium rates are set by FEMA and are the same regardless of what

agent or insurer issues the policy

Flood insurance- Covered Personal Property (Coverage B) Personal property also includes these covered items:

air-conditioning units—portable or window units carpets clothes washers and dryers food freezers (other than walk-in freezers) and frozen food ovens, portable dishwashers, and microwave ovens cookout grills, outdoor equipment, and furniture stored inside the insured building (RCBAP and general property form only)

Mobile Agricultural Machinery and Equipment Coverage Form (FP 00 30) Coverage Coverage is provided on an open perils basis, subject to a long list of exclusions. Certain property is not covered under this form, including:

aircraft, watercraft, automobiles, trucks, motorcycles, and trailers barn cleaners, boilers, bulk milk tanks, pasteurizers, or any permanent fixtures attached to or within a building cotton pickers, harvester-thresher combines, and four-wheelers not specifically declared and described with a limit of insurance for each item irrigation equipment contraband items or property in the course of illegal transportation or trade

In the past, ISO included

all property coverages and causes of loss in a single form. Beginning with the 1998 revision, these coverages are now addressed in separate forms.

The Causes of Loss Form—Farm Property covers

basic, broad, and special causes of loss.

Today, mortgage lenders require flood insurance on property in___________ Key Point While flood-related property losses are not covered under residential and commercial property policies, they are generally covered under personal auto policies and inland marine policies ("floaters").

an SFHA and recommend it for property in moderate- and low-risk zones. To accommodate this critical need, the National Flood Insurance Program (NFIP) makes flood coverage available on residential and commercial buildings and personal property, even in areas at high risk of flooding.

An occurrence is defined as

an accident that is sudden and definite as to time and place, but may also arise from repeated exposure to the same harmful condition.

The Mobile Agricultural Machinery and Equipment Coverage Form provides coverage on

an open perils basis for direct physical loss or damage.

Personal Property Replacement Cost Loss Settlement—Texas (HO 23 04) The personal property replacement cost loss settlement endorsement for Texas states that the policy will reimburse covered losses on a replacement cost basis rather than at their actual cash value. Certain property is not eligible for being replaced at replacement cost, including:

antiques, fine arts, and paintings memorabilia, souvenirs, and collectors' items articles not maintained in good or workable condition articles that are outdated or obsolete and are stored or not being used The policy will instead provide coverage for loss of these items at actual cash value (but not more than the amount required to repair or replace the property)

In the PAP liability section, an "insured" is the named insured or

any resident family member when using any auto; anyone using the covered auto; anyone who may be liable for acts or omissions arising from the use of the covered auto; and anyone who may be liable for acts or omissions arising out of the use of any auto by the named insured or a covered family member.

Flood Insurance General Property Form Eligibility The general property form, available with both the NFIP regular and emergency programs, provides building and contents coverage for residential buildings with five or more units and certain types of nonresidential properties. Eligible residential properties include:

apartment buildings residential cooperative buildings dormitories assisted-living facilities hotels, motels, tourist homes, and rooming houses that have more than four units where the normal guest occupancy is six months or more

Flood Insurance - Covered Personal Property Coverage on these types of personal property is subject to a sublimit of $2,500 per occurrence:

artwork, photographs, collectibles, and memorabilia furs and articles containing fur jewelry, watches, precious or semiprecious stones, and articles made of precious metals personal property used in a business (not applicable to RCBAP and general property form) rare books Antiques are covered only for their functional value since their true worth can be difficult to ascertain.

The insurer may refuse to renew a PAP with

at least 20 days' written notice to the insured.

The vehicle listed in the PAP's declarations page as a covered auto must have been owned or leased by the named insured for

at least six months.

No-fault auto insurance reduces the cost of

auto liability coverage, bodily injury liability, and related litigation costs. It is an effective way to compensate persons involved in auto accidents.

Eliza's car is insured with a personal auto policy that includes liability, collision, and other-than-collision coverages. She buys a pickup truck. What coverage, if any, will the PAP provide for the truck?

automatic liability coverage if she reports the newly acquired vehicle to the insurer within 14 days. Because the truck is an additional vehicle, it has automatic liability coverage immediately. Eliza must notify the insurer within 14 days to add the truck to her policy.

Additional Coverages Covered Building Property (Coverage A) Coverage on building property (Coverage A) includes additions and extensions attached to the building by means of a common wall, stairway, walkway, or roof. It also includes attached fixtures, machinery, and equipment within the building including this partial list of covered items:

awnings, canopies, and blinds built-in dishwashers, garbage disposals, microwave ovens, and walk-in freezers wallpaper, paneling, and carpet permanently installed over unfinished flooring central air conditioners, furnaces, and hot water heaters fire sprinkler systems and plumbing apparatus outdoor antennas and aerials attached to buildings light fixtures, permanently installed cabinets, cupboards, and bookcases elevator equipment pumps and their operating machinery specified appliances and fixtures installed in units within the building

Coverage G—Barns, Outbuildings, and Other Farm Structures This form provides coverage for seven types of structures:

barns, outbuildings, and other farm structures silos described in the declarations portable buildings and portable structures fences (other than field and pasture fences), corrals, pens, and feed racks outdoor radio and TV equipment, antennas, and towers permanent improvements and betterments to the described buildings building materials and supplies used in building or repairing farm buildings or structures and kept adjacent to the insured location

Causes of Loss Form—Farm Property (FP 10 60) This form lists all the causes of loss (perils) that could apply to farm property. The policy's declarations page indicates the perils actually covered for each type of property. This form details the three sets of covered causes of loss—

basic, broad, and special.

Nelly wants to be licensed as a surplus lines agent in Texas. Which action is she not required to take to receive a license?

be appointed by at least two authorized insurers in Texas To obtain a surplus lines license, a person must submit an application and licensing fee. An agent's surplus lines license will be canceled if the agent fails to maintain or renew his or her license as a general property and casualty agent or managing general agent.

The Farm Liability Coverage Form provides three coverages on an occurrence basis:

bodily injury and property damage (Coverage H); personal injury and advertising injury (Coverage I); and medical payments (Coverage J).

Which of the following is excluded from coverage by the employment-related practices exclusion endorsement?

bodily injury arising out of disciplining an employee The employment-related practices exclusion endorsement excludes coverage for bodily injury arising out of the termination or refusal to hire an employee or from other employment-related practices such as demotion, evaluation, reassignment, discipline, defamation, harassment, or discrimination directed at that person.

Business auto liability insurance covers the insured for

bodily injury, property damage, or pollution clean-up costs resulting from the ownership, maintenance, or use of a covered auto.

Almost all states require insurers to offer protection from the threats presented by uninsured and underinsured motorists. Uninsured motorists (UM) coverage protects insureds from financially irresponsible drivers who do not have auto liability insurance and cannot pay anyone they injure through their negligence in an auto accident. Uninsured motorists coverage is often coupled with underinsured motorists coverage. Underinsured motorists (UIM) coverage protects against

bodily injury—and in some states, property damage—suffered by an insured in an accident caused by a driver who is not sufficiently insured (the driver's insurance limits are lower than the UM/UIM limits carried by the insured).

Uninsured motorists (UM) coverage is often combined with underinsured motorists (UIM) coverage. UIM coverage protects against

bodily injury—and in some states, property damage—suffered by an insured when an accident is caused by a motorist whose policy's limits of liability are lower than the insured's UM/UIM limits.

The business auto policy (BAP) may include all of the following

business auto coverage form common policy conditions form business auto declarations Though the coverages of the BAP can be modified with endorsements, they are not combined with personal auto insurance. The BAP can be part of a commercial package policy that includes other coverage forms.

Which part of the business auto policy (BAP) contains information the applicant provided to tailor the coverage for the applicant's needs?

business auto declarations Most of the information in the business auto declarations reflects information the applicant provided in the insurance application. The BAP uses this information to tailor coverage to meet the particular needs of the insured.

The BAP may be a stand-alone policy that includes

business auto declarations, the business auto coverage form, the common policy conditions form, and the nuclear energy liability exclusion endorsement.

Businesses and other organizations are often insured under a

business auto policy (BAP).

Al's farm does not produce enough income to support his family, so he supplements his farming income by working as a carpenter. Which exclusion in Al's farm liability coverage form precludes coverage for any loss resulting from his carpentry activities?

business pursuits No coverage applies to losses arising out of non-farming business pursuits engaged in by the insured.

Vito's farm does not produce enough income to support his family, so he works as a self-employed handyman during the winter months. Which exclusion in Vito's farm liability coverage form precludes coverage for any loss resulting from his side business as a carpenter?

business pursuits The business pursuits exclusion precludes coverage for a loss arising out of a trade (other than the insured's occupation) that is engaged in for monetary purposes, such as an insured's side business as a handyman.

After a PAP has been in effect for at least 60 days or has been renewed, the insurer can

cancel it only for nonpayment of premium, for suspension or revocation of the insured's driver's license, or because the policy was obtained through material misrepresentation.

The Livestock Coverage Form covers

certain types of farm animals on a scheduled or blanket basis. Loss is defined as the death or destruction of livestock.

Farm insurance policies combine homeowners insurance coverage with commercial property and liability coverage. Coverage is provided by

combining separate forms that are typically written together.

The Farm Property—Other Farm Provisions Form—Additional Coverages, Conditions, Definitions contains

common provisions that eliminate the need to repeat some fundamental provisions in every coverage form while adding six coverages.

Eligibility for coverage under the flood insurance policy forms is affected by a

community's participation in the national flood insurance program and by the type and location of the building, structure, or contents to be insured.

The definition of covered auto is amended to mean an auto:

owned or leased by the insured used as a temporary substitute for an owned covered auto that has been withdrawn from normal use because of its breakdown, repair, servicing, loss, or destruction

XL Imports' shipment sustained water damage because it had been packed in a leaky container that was transported on the ship's deck. Although the cargo could be salvaged, it would cost more to dry it out than what the cargo was worth. According to the insurer, what is this cargo considered?

constructive total loss A constructive total loss involves a situation in which it would cost more to salvage the cargo than what the salvaged cargo would be worth.

Due to the catastrophic nature of a major flood, standard residential and commercial property policies exclude__________ In any given year, properties in special flood hazard areas (SFHA, sometimes called a base flood zone or simply floodplain) have a 1 percent chance of being flooded. In other words, a community's floodplain is at risk of flooding, on average, once every 100 years. In fact, the terms floodplain and 100-year flood zone are used interchangeably.

coverage for flood losses. Unfortunately, the risk of destructive flooding is greater than many realize.

Flood Insurance Covered Personal Property (Coverage B) Personal property (Coverage B) covers property owned by the named insured or household family members. It applies only to personal property that is inside the fully enclosed building described in the application. It also covers, at the insured's option, property owned by guests or servants. If the insured is a tenant, improvements to the building made or acquired at that tenant's expense are

covered under the personal property coverage. However, this coverage is subject to a maximum of 10 percent of the personal property coverage limit. If the insured is a condominium unit owner (not an association), up to 10 percent of the personal property coverage limit can be applied to cover losses to interior walls, floors, and ceilings that are not covered under a policy issued to the condominium association.

Ocean Marine - Hull Insurance While hull insurance is generally regarded as a type of property insurance, it also includes a collision liability clause known as the running down clause. This clause protects the insured against loss to another ship or its cargo resulting from a collision. Certain limitations apply:

covers property damage only; it provides no bodily injury liability coverage does not cover liability for damage to piers, wharves, and other structures does not cover the cost of removing obstructions to navigation that the collision may have caused

A constructive total loss occurs when the cost of repairing damaged property exceeds the property's pre-loss value. A damaged auto is considered to be a constructive total loss if the estimated cost of repairs is 75 to 80 percent of the vehicle's actual cash value. When a vehicle is declared a constructive total loss, the insurer pays the insured owner the vehicle's

current actual cash value, plus tax, minus the applicable deductible. The insurer then sells the vehicle as salvage to recover some of the payment it made to it insured. However, the insured may prefer to keep the vehicle despite its damage and have it repaired. Then the insurer may sell the salvage to the insured by deducting the value of the vehicle from the insurance payment to the insured. Example Laura's 10-year-old coupe is damaged on the highway when it is struck from behind by a speeding vehicle. Though the coupe remains mechanically sound, the body panels are damaged and are no longer properly aligned. She accepts the insurer's payment for the salvaged coupe and uses it to make the necessary repairs using aftermarket body parts.

The personal auto policy's physical damage coverage insures for

damage or theft to the named insured's auto caused by collision and other perils. These coverages are called "collision" and "other than collision."

All of these expenses are covered as property damage by a business auto policy (BAP)?

damage to a structure caused by a covered auto repairs to a covered auto damaged in a collision lease of a substitute vehicle while a covered auto is repaired

Flood Insurance Other Coverages (Coverage C) Coverage C addresses the need for coverage for:

debris removal expenses expenses of removing property to safety sandbagging expenses condominium loss assessments (dwelling form only) pollution damage (general property form only)

Farm Property—Other Farm Provisions Form—Additional Coverages, Conditions, Definitions (FP 00 90) Additional Coverages There are six additional coverages under this form (each with special conditions or exceptions):

debris removal if a covered peril causes the loss reasonable repair costs to protect covered property from further damage damage to property that was removed for safekeeping from a building endangered by a covered peril fire department service charges the insured assumes through a contract with a fire department collapse pollutant cleanup and removal

The insurer pays the cost of

defending its insured against covered claims.

Uninsured motorists (UM) coverage protects insureds from drivers who

do not have auto liability insurance and who do not have the financial means to compensate those they injure through their negligence in an auto accident.

All of the following are covered under one of the causes of loss forms:

drowning of livestock falling objects bovine flu

NFIP has three standard coverage forms: Eligibility for coverage under these forms is affected by the type and location of the building, structure, or contents to be insured.

dwelling form general property form residential condominium building association policy (RCBAP) form

The three standard flood insurance policy coverage forms are the

dwelling form, general property form, and residential condominium building association policy (RCBAP) form.

Farm Livestock Coverage (FP 00 40) Exclusions The livestock coverage form is subject to eight common excluded perils:

earth movement, including landslide, mine subsidence, and earth sinking governmental action intentional loss nuclear hazard utility services neglect war and military action water, including mudslide, water backup from a sewer or drain, underground water, and waterborne materials

Broad Causes of Loss The broad causes of loss form includes all the perils found under the basic causes of loss, plus about a dozen additional named perils (most of which have restrictions) including:

electrocution or accidental shooting of covered livestock attacks on covered livestock by dogs or wild animals drowning of covered livestock from external causes loading/unloading accidents involving livestock breakage of glass weight of ice, snow, or sleet freezing or burning of a plumbing, heating, air-conditioning, or sprinkler system sudden and accidental damage from artificially generated electrical current

Common Eligibility Requirements Regardless of the type of policy form, all flood policies have common

eligibility requirements for property and contents to be insurable.

Flood Insurance Mobile Homes Manufactured ("mobile") homes are

eligible buildings. Since October 1, 1982, the home must be affixed to a permanent foundation and anchored if it is located in an SFHA.

Community Participation and Eligibility For its residents to be eligible for flood coverage, a community must participate in the NFIP program. A community's participation in the NFIP is based on its flood insurance rate map (FIRM), which identifies all of the flood hazard zones in the community. Community participation in NFIP is a two-level process:

emergency flood insurance program—As soon as the community's SFHA is identified, all properties in that base flood zone become eligible for flood insurance at emergency program rates, subject to certain coverage limits: The purchase of flood insurance is required with federally regulated loans on property located in an SFHA. regular flood insurance program—Once all flood hazard zones in a community are identified, homeowners and renters in low- and moderate-risk zones can buy flood insurance.

Salvage charges are

expenses paid to third-party "salvors" (which may be other ships in the area) that render assistance in saving property exposed to loss.

Personal injury is defined as harm to another party arising out of one or more of the following offenses:

false arrest, detention, or imprisonment malicious prosecution wrongful eviction

The Farm Property—Barns, Outbuildings, and Other Farm Structures Coverage Form (Coverage G) covers

farm buildings. Coverage can be based on actual cash value or replacement cost.

The Farm Property-Barns, Outbuildings and Other Farm Structures Coverage Form (FP 00 14) can cover all the following types of structures, EXCEPT:

field or pasture fences Field or pasture fences are among the types of property this form does not cover.

Proof of Insurance Compulsory liability insurance laws require a vehicle owner to furnish proof of financial responsibility to register the auto or comply with a state inspection. Failure to do so can result in

fines, loss of vehicle registration, impoundment of the vehicle, or jail time. Insurance companies provide each policyholder with a certificate of insurance or similar document for each auto listed in the policy. This is proof of insurance.

Farm Livestock Coverage (FP 00 40) Covered Perils Tailored to fit livestock, covered (named) perils include the following (many of which have special conditions, restrictions, or exceptions described in the policy):

fire, lightning, and smoke windstorm or hail explosion (e.g., furnace, alcohol stills, steam boilers, water pipes, etc.) riot or civil commotion (including acts of striking employees while occupying the described premises) aircraft or vehicle collision theft and vandalism flood, including tidal waves, tsunamis, and storm surge

Causes of Loss Form—Farm Property (FP 10 60) Basic Causes of Loss Like the standard commercial property forms, the "basic" causes of loss form covers only a limited number of named perils, most of which have restrictions. Common perils include:

fire, lightning, explosion, or smoke windstorm or hail riot or civil commotion vandalism or theft sinkhole collapse volcanic action collision causing damage to covered farm machinery, death of covered livestock, or damage to other farm personal property earthquake or flood loss to livestock

In some states, benefits from no-fault coverages are added by law to auto liability insurance without limiting an injured party's right to sue. Under these "add-on" no-fault laws,

first-party benefits (e.g., medical expenses, lost wages, funeral expenses, and other economic losses) are paid without regard to fault. Medical payments coverage does not pay for lost income.

Enrique and Troy live in a fraternity house. Because they often share their cars, they each have keys to the other's car. Troy has a personal auto policy (PAP), but Enrique is uninsured. Troy has an accident while driving Enrique's car. For whom will Troy's PAP provide liability coverage?

for Troy but not for Enrique Troy's PAP will protect him because he was driving a nonowned vehicle with the owner's permission.

Other-than-collision coverage is a

form of open perils protection for damage to a covered auto from perils other than collision. The policy lists perils that are considered "other than collision."

Brady wants to ship his products to a foreign port. The ship carrying the cargo will require Brady to pay a charge, known in marine insurance terms as:

freight In marine terminology, "freight" is the charge for carrying goods.

Individuals who engage in the following activities and do not receive commissions are not required to be licensed as surplus lines agents:

full-time clerical and administrative services, including taking information from clients, receiving premiums, and giving clients marketing materials such as invoices and evidences of coverage contacting clients to obtain or confirm information needed to process applications underwriting or pricing an insurance policy contacting clients, insureds, agents, or insurers to gather and transmit information regarding claims and losses

Flood Insurance Cost of compliance coverage does not apply to:

garages or carports property located in communities participating in the emergency program structures insured under a group flood insurance policy condominium association assessments loss of value of the remaining undamaged portion of a building demolished in compliance with floodplain management laws increased costs resulting from enforcement of any laws other than floodplain management laws

The driver's door on Misty's roadster was damaged in an auto accident. Her insurer wants to have the damage repaired with non-original equipment manufacturer parts. The state law is most likely to require the insurer to do all of the following

get Misty's consent to use non-OEM parts ensure that the parts identity their manufacturer disclose the use of non-OEM parts to Misty Many states require that OEM parts carry permanent identification and that the insurer disclose and get the consumer's consent to the use of non-OEM parts.

Many states require that aftermarket parts bear sufficient information to identify their manufacturer. Many states require the insurer to disclose in writing when a repair estimate is based on the use of aftermarket parts of like kind and quality and not on parts made by the original manufacturer. Some states require the insurer to

get the consumer's consent before authorizing repairs using aftermarket parts. The insurer may also be required to let the consumer choose OEM parts instead, if the consumer is willing to pay the difference in cost.

If the insurer finds that the named insured did not actually qualify for the insurance, the insurer has 60 days to uncover this information after the policy takes effect. But if the policy has been in effect for more than 60 days, and the insurer wants to cancel the policy for any reason other than nonpayment of premium, the insurer must

give at least the required number of days' notice. Some states impose additional restrictions on cancellation during this initial 60-day period.

Which of the following is not required by the Amendment of Policy Provisions Texas Endorsement?

giving the insured at least 60 days' notice when an offer to settle a claim against the insured is received The Amendment of Policy Provisions Texas Endorsement requires insurers to give an insured 10 days' notice if they receive an offer to compromise or settle a claim against the insured and 30 days' notice of a claim settlement.

Coverage E—Scheduled Farm Personal Property Sixteen types of farm property can be scheduled for coverage on the declarations page, which also shows the dollar limit for each type. Each type of property is subject to specified definitions, conditions, limited perils, and sublimits. Coverage is provided on an ACV basis. Property examples include:

grain, threshed seeds, ground feed, silage, and manufactured livestock feed farm products, materials, and supplies specified in the declarations computers and related software used in farm management miscellaneous equipment incidental to the farming operations (e.g., tools and farm equipment), subject to specified exclusions farm machinery and equipment borrowed or rented farm machinery and equipment individually described in the declarations livestock and poultry (other than turkeys) bees, worms, and fish portable buildings and portable structures owned by the named insured

Coverage E—Scheduled Farm Personal Property Excluded Property Noncovered property includes:

growing crops and trees household personal property certain media for electronic data processing permanent fixtures attached to a building, outdoor radio or television equipment, or power and light poles

Building Property Eligibility For a building to be insurable under a flood policy, it must:

have two or more outside rigid walls have a fully secured roof affixed to a permanent location have at least 51 percent of the property, including machinery and equipment which are a part of the building, above ground level: If the ground level has been artificially raised around the building to serve as insulation, more than 50 percent of the structure can be below ground level as long as the lowest part of the building structure is at or above the base flood elevation (BFE). resist flotation, collapse, and sideways motion

Mortgage lenders require flood insurance on property in

high-risk flood zones.

In a state with laws based on traditional fault-based auto liability, bodily injury liability insurance pays for the insured's negligence when others are injured in an auto accident for which the insured is at fault. Accident victims file claims for their losses, the party responsible for the accident is determined, and the insurer of the responsible party pays the claims for covered damages up to the policy's limits of insurance. There are no restrictions on the amount of damages an injured party may claim. Victims may sue the at-fault party for both economic damages (e.g., lost wages) and noneconomic damages (e.g., pain and suffering). In a state with laws based on no-fault auto liability, an insured who is injured recovers damages from

his or her own insurer rather than from another party's insurer. Who is at fault for the loss is irrelevant. The damages to which the injured party is entitled are limited to compensation for economic damages. No-fault auto insurance does not compensate the injured party for general damages, such as pain and suffering.

Flood Insurance Eligible nonresidential properties include:

hotels or motels with normal guest occupancy of less than six months and licensed bed-and-breakfast inns retail shops, restaurants, or other businesses mercantile buildings and nonresidential condominiums grain bins, silos, or other farm buildings agricultural or industrial processing facilities factories and warehouses pool houses, clubhouses, boathouses, or other recreational buildings schools and houses of worship nursing homes detached garages and toolsheds stock, inventory, or other commercial contents

What kind of insurance is the coverage in an ocean marine insurance policy that protects a shipowner against a covered loss to the vessel but not to its cargo?

hull insurance Hull insurance is similar to collision insurance on an auto-it protects a shipowner against a covered loss to the vessel itself (not its cargo).

ocean marine insurance, focusing on two forms of coverages:

hull insurance, which protects a ship's owner against loss to the vessel cargo insurance, which protects an owner of cargo being transported on a ship

For liability coverage to apply under the BAP, the insured's legal liability for damages must arise from bodily injury caused by an accident. The policy defines bodily injury as

illness, sickness, or disease. Bodily injury also includes death resulting from these. The injury must involve actual injury to or sickness of the body. Mental trauma is not within the meaning of bodily injury.

Texas Personal Injury Protection (CA 22 64) #2 PIP benefits are not payable for bodily injury sustained:

in an accident caused intentionally by the insured by the insured while committing a felony by the insured while attempting to elude arrest by a law enforcement official while occupying or when struck by a motor vehicle that is owned by the insured but is not a covered vehicle by a family member while occupying or when struck by a motor vehicle that is owned by a family member but is not a covered vehicle PIP benefits are payable every two weeks within 30 days after proof of claim is received.

An application and fee is required to obtain a surplus lines license. A surplus lines agent's license is valid for two years. A surplus lines agency must notify the Department of the name and Texas surplus lines agent license number of each agent it hires within 30 days. If a surplus lines agent's employment is terminated for any reason, the agency must notify the Department within 30 days. A surplus lines agent doing business as an individual surplus lines agent may be licensed only

in his or her name. A person may not hold more than one surplus lines agent's license. An agent must maintain or renew his or her license as a general property and casualty agent or managing general agent in order to keep the surplus lines license active.

When a covered auto is driven into a state where the financial responsibility laws require higher liability limits than its BAP provides, the limits of its BAP are

increased to meet the state's requirements.

Underinsured motorists (UIM) coverage protects

insureds from those who are not sufficiently insured.

Uninsured motorists (UM) coverage protects

insureds from those who do not have auto liability insurance and cannot compensate those they negligently injure

Personal injury protection (PIP)/no-fault benefits are NOT paid to persons who:

intentionally cause injury commit a felony are under the influence of alcohol or drugs own uninsured vehicles occupy stolen or converted vehicles evade arrest are involved in auto races use a vehicle without the owner's consent are injured due to war or nuclear explosion

Ocean Marine Cargo Insurance Partial Losses As noted earlier, with cargo insurance a partial loss is called a particular average (i.e., one that does not involve the whole venture). With a particular average loss, the cargo owner bears

its own loss (through its cargo insurance policy). This contrasts with general average loss where a loss incurred for the common good is shared by all parties to the venture.

Coverage G—Barns, Outbuildings, and Other Farm Structures Excluded Property Six types of property are not covered under Coverage G:

land water field or pasture fences below ground foundations of buildings or structures pilings, piers, wharves, or docks costs of excavations, grading, or filling

Flood Insurance General Exclusions As a general rule, NFIP flood insurance does not cover:

loss of use of the covered property lost revenue or profits loss from interruption of business or production any loss to property caused directly by earth movement even if the earth movement is caused by flood any increase in the cost of repair or rebuilding that is the result of ordinances regulating construction or repair of buildings, other than as provided in the $30,000 increased cost of compliance coverage

No coverage is provided for

loss of use of the covered property, lost revenue or profits, loss from interruption of business or production, or any other economic loss.

In ocean marine insurance, a partial loss to one party's property is a particular average. This is in contrast to general average losses, which are

losses incurred for the common good that are shared by all parties to the venture.

An eligible surplus lines insurer generally must

maintain capital and surplus of at least $15 million.

Unlike the PAP, the BAP does not include

medical payments and uninsured motorists coverage. These coverages are available by endorsement.

All states require motorists to

meet their financial responsibility for injury and damage caused by ownership or operation of motor vehicles through insurance or some other means

Mobile Agricultural Machinery and Equipment Coverage Form (FP 00 30) This form provides coverage for mobile agricultural machinery equipment. It is an open perils form that provides payment for direct physical loss of or damage to mobile agricultural machinery or equipment on a nonscheduled and/or scheduled basis. "Mobile agricultural machinery and equipment" includes

mobile devices used in everyday farming operations, including accessories and tools and spare parts specifically intended for the maintenance and operation of the mobile devices.

Endorsements can

modify the basic coverages of the BAP.

Compulsory insurance laws are better than financial responsibility laws because they provide

more protection to the public against loss. They both require minimum liability limits of insurance coverage for motorists. These minimum limits vary among states.

Carol has been convicted twice for driving while intoxicated (DWI). Insurers refuse to issue a personal auto policy (PAP) to cover her husband Perry's car unless he is willing to buy a policy with a:

named driver exclusion Through a named driver exclusion, Perry and the insurer agree that Perry's policy provides no coverage while Carol is operating the insured vehicle.

Texas Personal Injury Protection (CA 22 64) The Texas personal injury protection endorsement states PIP benefits will be paid to an insured who suffers bodily injury from a motor vehicle accident. Losses or expenses must be incurred within three years from the date of the accident. PIP benefits include:

necessary medical and funeral service expenses 80 percent of an insured's loss of income from employment expenses incurred for obtaining services to maintain a household that the insured would normally have performed (provided the insured was not working)

Darrel's car is insured by a personal auto policy that includes liability, collision, and other-than-collision coverages. He buys a pickup truck with a 12,000-pound gross vehicle weight. The PAP will provide:

no automatic coverage for the pickup because of its high weight rating The PAP does not provide automatic coverage for trucks with a gross vehicle weight of 10,000 pounds or more.

The third cancellation provision puts tighter restrictions on the insurer after the policy has been in effect for at least 60 days or if it is a renewal or continuation policy. The standard policy provides for three allowable grounds for cancellation:

nonpayment of premium the driver's license of the named insured, a family member, or any driver that customarily uses the covered auto has been suspended or revoked (The suspension must have occurred during the policy period or since the last anniversary of the original effective date if the policy period is other than one year.) the policy was obtained through misrepresentation of a material fact (Thus, if the named insured misrepresents a material fact, the insurer could cancel the policy. A material fact is relevant information that would influence the insurer with respect to its decision to issue the policy and to set the premium.)

The PAP has three additional provisions related to termination:

notice—The insurer can deliver the notice of termination in person rather than mailing it. Proof of mailing is considered proof of notice. Some states may require the notice be delivered by certified or registered mail. premium refunds—When a policy is canceled before its expiration date, the insurer must refund any unearned premium. effective date of cancellation—The effective date for the insurer's cancellation of a policy is stated on the cancellation notice.

A verbal threshold leaves open to interpretation its definition of "serious or permanent" injury. Unscrupulous parties can take advantage of this to commit insurance fraud. For instance, accident victims can

obtain medical testimony that their minor injuries are "serious" so that they can overcome the verbal threshold and sue the other party.

Coverage on nonowned autos is

on an excess basis.

Coverage for personal and advertising injury is

on an offense basis, not on an occurrence basis.

Coverage F—Unscheduled Farm Personal Property Farm personal property includes equipment, supplies, and products used in farming or ranching operations. Each type contains a variety of definitions, conditions, and restrictions. Coverage is provided on an actual cash value basis. There are two categories of unscheduled farm property:

on the insured location—All farm personal property on the insured location is covered, except for items specified under the property not covered subsection. away from the insured location—A wide array of farm personal property is covered away from the insured location, such as grain; livestock (except those in transit or at packing plants); and farm machinery (except while in the custody of a common or contract carrier). This form's coinsurance provision stipulates that the insured must maintain coverage on unscheduled farm personal property of at least 80 percent of its actual cash value. Allowances are made for newly acquired equipment.

The PAP requires the parties to arbitrate their disputes over UM/UIM issues, to determine whether an insured can recover damages and the amount of those damages. The parties submit their dispute to

one or more impartial persons for a final and binding decision. A panel of three experts decides the matter. Each side usually picks one member of the panel, and then these members pick a third. Unless the parties agree otherwise, the arbitration process described in the PAP will take place in the county where the insured lives and local law is applied.

In which of the following communities would the National Flood Insurance Program make flood insurance available?

only in communities that participate in the National Flood Insurance Program

Advertising injury means harm arising out of one or more of the following offenses: __________________________. For these coverages to apply, one or more of the listed offenses needs to be committed during the policy period and must arise out of the named insured's personal activities or out of operations usual or incidental to farming.

oral or written publication that libels or slanders a person or organization, or disparages that other party's goods, products, or services oral or written publication that violates a person's right of privacy use of another party's advertising idea in the named insured's advertisement copyright or slogan infringement

The special form also includes the following nine excluded perils that are common with all property insurance forms:

ordinance or law earth movement government action intentional loss nuclear hazard utility services neglect war and military action water, including flood, mudslide, and related water losses

Write-Your-Own Versus Government Plans While all NFIP policies are fully reinsured by the federal government, almost 95 percent of them are actually issued by private insurers that participate in NFIP's Write-Your-Own (WYO) program. WYO-participating insurers issue flood policies on their __________. Property owners whose insurers do not participate in WYO can buy flood insurance directly from NFIP if their communities participate in the NFIP.

own "paper" (i.e., under their name) and receive an expense allowance for policies written and claims processed. The federal government has full responsibility for covering losses. Homeowners, commercial property owners, and renters desiring flood insurance can obtain this coverage directly through their property insurer if it participates in WYO.

Phoebe rents her home. She loses control of her car on the icy driveway and crashes into the garage door. It will cost $1,000 to repair or replace the door. The property damage liability coverage of Phoebe's personal auto policy will:

pay for the damage Although the PAP does not cover liability for damage to others' property that the insured possesses, it does cover such property when the insured rents a residence or private garage.

Limits of Insurance Like all liability forms, the farm liability form contains two limits—a per occurrence limit and an aggregate limit:

per occurrence limit—the maximum the insurer will pay for a single occurrence, regardless of the number of insureds, claims made, or persons bringing suit aggregate limit—the most the insurer will pay for the sum of damages under Coverages H and I, as well as medical expenses under Coverage J

Coverage I—Personal and Advertising Injury Liability The farm liability coverage form provides coverage for

personal and advertising injury. This coverage contains a host of exclusions.

The BAP provides

physical damage insurance with comprehensive coverage, specified causes of loss coverage, and collision coverage. Towing and labor coverage is also available.

The Farm Liability Coverage Form (FL 00 20) includes all the following basic coverages EXCEPT: pollution liability bodily injury and property damage personal injury and advertising injury medical payments

pollution liability The three basic coverages are bodily injury and property damage (Coverage H), personal and advertising injury (Coverage I), and medical payments (Coverage J).

Even property in moderate- to low-risk flood zones are exposed. More than 20 percent of flood losses occur in these lower-risk zones due to:

poor drainage systems rapid accumulation of rainfall snowmelt mudslides

"Perils of the seas" includes all extraordinary weather conditions, unique to ocean shipping that cannot be

prevented by reasonable efforts, that can result in a ship's sinking, stranding, and collision.

A residency statement is a part of the application for new or renewal auto insurance. The applicant's signature affirms that the insured is a resident of the state or, if not, that the insured vehicle is

principally garaged in that state.

The personal auto policy (PAP) combines

property and liability insurance in a single policy for individuals and families.

Most Personal Injury Protection (PIP)/no-fault plans cover bodily injury but not

property damage.

The BAP excludes damage to

property owned or transported by the insured or in the insured's care, custody, or control.

The purpose of underinsured motorists (UIM) coverage is to:

protect insureds from drivers with inadequate limits of auto liability insurance Underinsured motorists coverage protects insureds from drivers who do not have limits of auto liability insurance that are high enough to cover the insured's bodily injury claim.

Collision and other-than-collision coverages are usually

purchased by insureds with newer and more valuable vehicles.

Medical payments coverage extends to

reasonable medical expenses incurred within three years of the accident that causes bodily injury.

Flood Insurance Dwelling Form and RCBAP Form The dwelling form and the residential condominium building association policy (RCBAP) form offer these three methods of settling losses, each used for a different type of property:

replacement cost special loss settlement actual cash value

The personal property replacement cost loss settlement endorsement reimburses covered losses on a

replacement cost basis rather than at their actual cash value

The Farm Property—Farm Dwellings, Appurtenant Structures, and Household Personal Property Coverage Form (Coverages A, B, C, D) covers

residential (nonfarm business) property exposures.

The National Flood Insurance Program (NFIP) makes flood coverage available for

residential and commercial buildings and personal property.

In the regular flood insurance program, a lower-cost preferred risk policy (PRP) is available for

residential properties in low- to moderate-risk flood zones.

Ocean Marine-Hull insurance Premium, Return of Premium, Nonpayment of Premium Like every insurance policy, ocean marine policies have several provisions defining the premium amount and explaining what happens if a premium is not paid or the policy is cancelled before the end of its policy period. If the premium payment is more than 30 days late, the insurer may cancel the policy after providing ten days' notice. If, for any reason, the policy is cancelled or surrendered before the end of its policy period the earned premium is

retained the insurer and the unearned premium is returned to the insured. Key Point If the vessel suffers a total loss, the full annual premium is considered earned by the insurer regardless of when in the policy year the accident occurred.

PAP The first cancellation provision permits the named insured to cancel the policy during the policy period. The insured does so by

returning the policy to the insurer or giving the insurer written notice of the date when cancellation is to take effect. If the insured cancels the policy, the insurer must return any unearned premium

Ocean Marine - Hull Insurance War, Strikes, and Related Exclusions This clause is more than a war exclusion. It also excludes coverage for

riots, strikes, terrorism, vandalism, and a long list of other perils that involve some form of hostility, whether they occur during times of peace or war.

After striking a shoal, the freighter Benita was in danger. The fishing vessel Flossie was in the area and provided assistance. Flossie then billed the Benita to recover its expenses, which marine insurers refer to as:

salvage charges Salvage charges are expenses paid to third-party "salvors" (including other ships) who render assistance in saving property that was exposed to loss.

Ocean Marine- Hull Insurance Assured In an ocean marine policy, the insured party is referred to as the assured. Agreed Value The amount stated in this clause represents the vessel's value as agreed to by the insured and the underwriters. It might or might not be the

same as the limit of insurance entered in the amount insured hereunder clause.

Flood Insurance Sandbagging Expenses If the insured's property is clearly threatened by imminent flooding, up to $1,000 of coverage is provided for:

sandbags (including sand, plastic sheeting, and lumber used in connection with them) fill for temporary levees pumps wood purchased by the insured to save the covered building

The sue and labor clause obligates the assured to

save damaged property from further loss. The insurer agrees to pay the associated costs (in addition to total loss limits in insurance) even if the property becomes a total loss despite the policyholder's efforts.

Ocean Marine -Hull insurance The sue and labor clause obligates the assured to

save damaged property from further loss. The insurer agrees to pay the costs associated with the attempt, even if the property becomes a total loss. The insurer would pay the total loss amount plus the cost of the attempted salvage.

Scheduled Personal Property—Texas (HO 23 03) The scheduled personal property endorsement for Texas provides a separate schedule of insurance for various types of personal property, including jewelry, furs, cameras, musical instruments, silverware, goldware, and pewterware, golfer's equipment, fine arts, postage stamps, and rare and current coins. An insured may choose to

separately insure these items because of the limited coverage they receive under a homeowners policy. Depending on the type of property an insured chooses to insure, losses may be paid on a market value, actual cash value, or repair or replacement cost basis.

The Farm Property-Barns, Outbuildings and Other Farm Structures Coverage Form (FP 00 14) can cover all the following types of structures

silos barns outdoor antennas and antenna towers

Additional Coverages Coverages H and I include supplementary payments and damage to property of others. The supplementary payments are

similar to those in a homeowners insurance policy, such as for defense costs, bail bond costs, and prejudgment interest.

Dwelling Form Eligibility The dwelling form is issued to homeowners, residential renters, and owners of residential buildings containing one to four units. Available with both the NFIP regular and emergency programs, this form provides building and contents coverage for these eligible properties:

single-family, noncondominium residences with incidental occupancy limited to less than 50 percent of the total floor area two- to four-family, noncondominium buildings with incidental occupancy limited to less than 25 percent of the total floor area dwelling units in residential condominium buildings residential townhouses and row houses personal contents in nonresidential buildings

If the policy has been in force for less than six months, the insurer may nonrenew only after

six months.

Perils (Causes of Loss) Ocean marine insurance protects shipowners against perils of the sea. Coined when shipping was done only by wind-powered sailing vessels, "perils of the seas" refer to extraordinary forces of nature (e.g., heavy weather, gale winds, and large waves) that can result in the sinking, stranding, or collision of the vessel. As ships evolved into mechanically powered vessels, additional perils have been added to the list of covered perils. These additional perils (e.g., boiler explosions and mechanical breakdowns) are described in the

so-called Inchmaree clause, named after an incident involving a powered vessel by that name, which lists covered causes of loss beyond the original perils of the sea. Key Point Perils of the sea are distinguished from perils on the sea, which include fire, explosion, etc., that may also occur on land.

The Farm Liability Coverage Form can be a

stand-alone policy or combined with farm property forms to form a package policy.

An auto insurance policy may be required to

state whether it covers collision damage to rental vehicle and the limitations on that coverage.

Farm Property—Farm Dwellings, Appurtenant Structures, and Household Personal Property Coverage Form (FP 00 12) Coverage B—Other Private Structures Appurtenant to Dwellings This coverage is similar to the "other structures" coverage in a homeowners policy. The other structures must be separated by a clear space or attached to the dwelling only via a fence, utility line, or related connection. Coverage B does not apply to

structures used primarily for farming operations. As with the dwelling coverage, outdoor antennas and satellite dishes are subject to a sublimit of $1,000 in the 2003 form.

In a no-fault system, the injured party recovers economic damages from auto accidents from his or her own insurer. Fault is irrelevant when determining whether coverage applies. The insurer of the innocent injured party can then

sue the responsible party's insurer (or the responsible party, if uninsured) to recover the damages the insurer paid to the injured party.

Individuals performing any of the following activities must be licensed as surplus lines agents:

supervising unlicensed staff who perform administrative, clerical, claims, or underwriting functions negotiating, soliciting, procuring, or binding surplus lines insurance contracts for clients or offering advice or explanations of surplus lines insurance products to agents or clients beyond the scope of underwriting policies receiving a commission or compensation based on the volume of surplus lines premiums received from, or as a result of, another person selling or procuring surplus lines insurance policies

A managing underwriter is a

surplus lines agent or agency that has entered into a contract with a surplus lines insurer to provide underwriting authority for the insurer and that obtains its business from a surplus lines agent.

An eligible surplus lines insurer may only provide

surplus lines insurance in an amount that exceeds the amount of insurance that can be obtained from authorized insurers.

Surplus Lines Insurance Surplus Lines [Ins. 981.001 to .004, .057; TAC 15.2 to .6] The Texas Department of Insurance regulates the transaction of

surplus lines insurance in which individuals can obtain coverage from unauthorized insurers when it is difficult to get coverage from authorized insurers.

The business auto policy (BAP) provides the broadest possible liability coverage when what symbol is used for liability?

symbol 1 When symbol 1 is selected, any auto-whether owned, nonowned, hired, or otherwise-is protected by that coverage.

Mollie's business auto policy (BAP) must provide liability coverage for all owned, nonowned, and hired autos and physical damage comprehensive coverage for all owned private passenger autos. The declarations of her business auto policy should have:

symbol 1 for liability coverage and symbol 3 for comprehensive coverage Symbol 1 shows coverage for any auto, and symbol 3 shows coverage for owned private passenger autos.

Farm Liability Coverage Liability coverage for farmers can be provided through

the Farm Liability Coverage Form (FL 00 20). This form may be combined with a declarations page and a common policy conditions form to create a stand-alone policy, or it may be combined with farm property forms to form a package policy.

Conditions and Definitions The conditions section contains ten conditions, such as bankruptcy and duties in the event of a loss, similar to those found in

the ISO farm property coverage forms. The 25 conditions found in this form are similar to those found in the homeowners form and the CGL form.

The Farm Inland Marine Coverage Forms consist of

the Mobile Agricultural Machinery and Equipment Coverage Form and the Livestock Coverage Form.

No deductible applies to

the PAP's liability, medical payments, or uninsured motorists coverage.

Farm Livestock Coverage (FP 00 40) Limits and Deductible The most payable in any one occurrence for any one animal not specifically declared on the declarations is the lesser of:

the actual cash value of the animal; or 120 percent of the total limit of insurance on each class and type, divided by the number of head of that class and type that are owned at the time of the loss; or $2,000

The PAP will pay the lesser of .

the actual cash value of the stolen or damaged property, or the amount required to repair or replace the damaged property with other property of like kind and quality

The limit of insurance for physical damage is the lower of

the actual cash value of the vehicle at the time of the loss, or the cost of repairing or replacing the vehicle with other property of like kind and quality.

Additional covered perils, which include boiler explosions and mechanical breakdowns, are described in

the additional perils or Inchmaree clause.

An agent's surplus lines license will be canceled if

the agent fails to maintain or renew his or her license as a general property and casualty agent or managing general agent.

If the policy has been in force for more than one year, the insurer may nonrenew only on .

the anniversary of the original effective date

UM and UIM coverages do not stack on top of each other; either one or the other applies. An insured driver's UM coverage applies when

the at-fault driver is not covered by insurance. An insured driver's UIM coverage applies when the at-fault driver's insurance coverage is not enough to pay for the insured's loss.

Depending on the jurisdiction, uninsured motorist coverage protects the owner or operator of the insured vehicle when:

the at-fault motorist is not insured the at-fault motorist has coverage limits less than the amounts required by law the at-fault motorist's insurer denies coverage the at-fault motorist's insurer is or becomes insolvent the at-fault motorist's insurer refuses to admit coverage except conditionally or with reservation the accident involves a hit-and-run vehicle whose driver or owner cannot be identified

For underinsured motorists coverage to apply, the accident must involve an auto that is insured, but without enough coverage to pay for the loss. States differ in how they define this. Most consider an underinsured motor vehicle to be one for which either:

the at-fault party's limit of liability insurance is less than the limit of UIM coverage the injured party carries or the injured party's damages are more than the at-fault party's limit of liability insurance

Farm Liability Coverage Form (FL 00 20) Coverage H—Bodily Injury and Property Damage Liability The insuring agreement stipulates that the insurer will pay (up to policy limits) what the insured is legally obligated to pay as damages because of bodily injury or property damage to another party. Coverage only applies if

the bodily injury or property damage occurs during the policy period and was unforeseen by the insured (or an employee of the insured) prior to the policy's effective date.

Regarding the death of livestock, note that communicable disease is not a covered peril under the basic and broad causes of loss forms. It is covered, however, under the special causes of loss form.Special Causes of Loss The special covered causes of loss form is

the broadest coverage available since it is open perils coverage. When describing the policy's coverage, the word "special" on the declarations page means it is an open perils policy.

Ten numerical symbols used in the policy signify the autos or types of autos for which liability coverage applies. Symbol 1 (Any Auto) gives

the broadest possible coverage for liability.

Flood Insurance Property Removal Expenses If it is necessary to move covered personal property to protect it from damage by flood, coverage is provided at

the location to which the property is removed (for up to 45 days). Coverage is also provided (up to $1,000) for the cost to move the property under these circumstances

Flood insurance Replacement Cost The replacement cost valuation method is used with single-family dwellings. Coverage is limited to the lesser of:

the building limit on the declarations page or the replacement cost of the damaged part of the dwelling, with materials of like kind and quality or the necessary amount spent to repair or replace the damaged part of the dwelling for like use The same provisions apply to any eligible property insured under the residential condominium building association policy (RCBAP) form.

In the context of ocean marine insurance, freight is

the charge for carrying goods. It is usually included as part of the insured cargo's value. However, freight coverage is also available separately.

Ocean Marine - Hull Insurance Additional Insurance This "other insurance" provision describes

the circumstances under which additional insurance may be permitted and how it will be handled.

The PAP defines "your covered auto" as the vehicles shown in

the declarations, newly acquired autos, owned trailers, and temporary substitute autos.

Flood Insurance General Property Form The general property form uses a single loss valuation method, regardless of the type of property. After applying the deductible, the policy pays the lesser of:

the flood policy's coverage limit or the actual cash value or the amount it would cost to repair or replace the property with material of like kind and quality within a reasonable period of time after the loss occurs

An eligible surplus lines insurer is an unlicensed insurer that is allowed to do business in Texas as a surplus lines insurer. An eligible surplus lines insurer may provide surplus lines insurance if:

the full amount of the insurance cannot be obtained from an authorized insurer to write that type of insurance in Texas the insurance is placed through a surplus lines agent the insurer meets the eligibility requirements for a surplus lines insurer when the contract was entered into and on every anniversary date of the contract

Farm Property—Other Farm Provisions Form—Additional Coverages, Conditions, Definitions (FP 00 90) Loss Conditions There are 11 loss conditions in this form, which identify general requirements of an insured and the insurer on matters such as loss reporting and settlement, property valuation, other insurance, and subrogation. They are generally the same loss conditions found in all property insurance policies (and reviewed earlier in this course). Common examples include:

the insured cannot abandon any property to the insurer if the insured and insurer disagree on the amount of the loss, either may make a written demand for an appraisal the insured must comply with specified duties if there is a loss (e.g., notify the police) the insurer may choose among four options to pay for a covered loss: pay the value of the lost or damaged property pay the cost to repair or replace the damaged property take all or any part of the property at an agreed or appraised amount repair, rebuild, or replace the property with related property of like kind and quality

Under the PAP's liability insuring agreement, the insurer pays damages for bodily injury or property damage that

the insured is legally responsible for in an auto accident.

A PAP can be cancelled by

the insured or the insurer. The insurer must give at least 10 days' notice to the insured.

Regarding the Farm Property-Farm Dwellings, Appurtenant Structure, and Household Personal Property Coverage Form (FP 00 12) policy, what does Coverage C-Household Personal Property of that form cover?

the insured owner's household personal property, but not farming supplies Coverages A, B, and C of the Farm Dwelling (FP 00 12) policy do not cover property related to the insured owner's farming operations.

Ocean Marine-Hull Insurance Adventure The adventure clause requires

the insured to provide the insurer with a detailed description of the voyage, which becomes part of the policy declarations.

The individual named insured endorsement extends personal auto coverage to

the insured's immediate family members under a business auto policy.

Texas Individual Named Insured (CA 99 88) The individual named insured endorsement extends personal auto coverage to

the insured's immediate family members under a business auto policy. Form CA 99 88 must be attached to the policy and provides the named individual with coverage similar to that found in a personal auto policy. Coverage is extended for the use of any auto to family members, subject to certain exclusions

Ocean Marine - Hull Insurance Pilotage and Towage Many ports require that vessels over a specified tonnage have a licensed pilot take the vessel into and out of port. Towage refers to the use of tugboats to maneuver ships in a crowded harbor or a narrow canal. The pilotage and towage clause makes it clear that

the insurer is obligated to pay collision damages related to a pilot's or tugboat's actions only to the extent the vessel owner is deemed liable for the collision.

Homeowners, commercial property owners, and residential and commercial renters can buy this flood coverage under the NFIP directly through

the insurer who writes their other property coverage.

A monetary threshold may also be used to commit fraud. For instance, doctors may inflate their bills so that they exceed the threshold. Then the insured can sue the other party. Some states set the monetary threshold so low that

the medical costs of even a minor injury is often enough to exceed the threshold. No-fault statutes do little to curb litigation in these states.

The BAP limit of insurance is

the most the insurer will pay for all damages resulting from any one accident. This limit applies regardless of the number of covered autos, insureds, claims, or vehicles involved in the accident.

A newly acquired auto is one that

the named insured takes ownership of during the policy term.

The BAP insures

the named insured, the permissive user, and those who are liable for the conduct of the named insured or the permissive user.

Farm Liability Coverage Form (FL 00 20) The form defines "farming" as the operation of an agricultural or aquacultural enterprise, including

the operation of roadside stands, on the farm premises, maintained for the sale of farm products produced primarily by the named insured. Unless otherwise indicated on the declarations, farming does not include mechanized processing operations or retail activity (other than that described above).

Ocean Marine Hull Insurance Claims (General Provisions) This clause describes

the parties' responsibilities in the event of a loss. Among other things, the assured has a duty to report the loss, and the underwriter (insurer) has a right to inspect the damage and have a say in where the vessel will be repaired.

Flood insurance Besides applying at the location described on the declarations page, building property coverage also applies at another location—for up to 45 days—if

the property is moved there to protect it from the imminent danger of flood.

Flood insurance -Debris Removal In addition to covering the cost of removing debris of the insured's covered property, the NFIP's debris removal coverage also pays for

the removal of neighbor's debris on the insured's property. Coverage applies regardless of where the debris is located on the insured's property.

Flood Insurance The special loss settlement method is used with manufactured (mobile) homes or travel trailers serving as the insured's principal residence. For a total loss, coverage is limited to the lesser of:

the replacement cost of the dwelling or 1.5 times the actual cash value of the dwelling or the building limit shown in the declarations For a partial loss, if the insurer determines it is economically feasible to repair the dwelling to its pre-damage condition, the loss will be settled based on the replacement cost provisions.

Ten numerical symbols, labeled 1 through 9 and 19, represent

the standard options for covered auto status.

Farm Liability Coverage Form (FL 00 20) Duty to Defend Liability coverage includes the insurer's right and duty to defend the insured against any suit seeking damages for bodily injury or property damage. This defense must be provided even if

the suit is groundless, false, or fraudulent. However, the policy does not provide a defense for any allegations clearly outside the policy's coverage. The insurer's duty to defend or settle ends when the limit of liability has been exhausted by payment of judgments or settlements.

All the following equipment is used on Mari's farm. Which item could Mari cover under a Mobile Agricultural Machinery and Equipment Coverage Form (FP 00 30)?

the tractor that pulls her hay wagon

Collision is

the upset of the named insured's covered auto or its impact with another vehicle or object.

The Insurance Services Office, Inc. (ISO), personal auto policy (PAP) combines property and liability insurance in a single policy to protect families and individuals. Property insurance protects

the vehicle from loss due to fire or collision. Liability insurance protects the owner or operator if the vehicle is involved in an accident that results in injury or death.

Ocean Marine - Hull Insurance Change of Ownership Coverage ceases if

the vessel's ownership changes. However, if the ship is underway at the time of the change of ownership, coverage termination may be deferred until the ship arrives in port.

Flood insurance coverages and premium rates are set by FEMA, and

they are the same regardless of which insurer issues the policy. Likewise, coverages and premiums are identical whether the flood policy is issued by a WYO-participating insurer or directly through FEMA.

No-fault auto insurance plans reimburse the injured insured for bodily injury but not for property damage. No-fault benefits typically cover medical expenses, rehabilitation expenses, loss of income, loss of household services the injured can no longer provide, death benefits, and funeral expenses. Persons eligible for no-fault benefits include

those who would ordinarily be covered for medical payments coverage (the named insured, the named insured's family members, and passengers of the insured auto) as well as pedestrians struck by the insured auto. (Under the traditional tort system, a pedestrian would be protected by bodily injury liability coverage rather than medical payments coverage. Then the pedestrian would be covered only if the insured was held legally liable for the injury.)

The Texas personal injury protection endorsement states PIP benefits will be paid to an insured who suffers bodily injury from a motor vehicle accident. Losses or expenses must be incurred within

three years from the date of the accident.

Coverage J—Medical Payments The insurer agrees to pay reasonable medical expenses incurred within __________. Key Point An underlying purpose for the Medical Payments coverage is to foster a good relationship between the potential claimant and the insured. Handled appropriately, this coverage can help avoid lawsuits.

three years of an accident that causes bodily injury. This coverage is also subject to a series of exclusions, many of which are similar to those applicable to the bodily injury and property damage liability coverage.

Nine states have compulsory no-fault statutes. These statutes define the limits on an injured party's right to sue under

tort law (i.e., verbal or monetary), and the point at which the right is no longer restricted (i.e., tort threshold).

Ocean Marine Sue and Labor Expenses The sue and labor clause affects cargo as well as hulls. The insurer agrees to pay the associated costs that result from attempts to save damaged property from further loss. The insurer will pay a

total loss plus the insured's share of any salvage charges and awards that might be payable to a salvor, such as a ship that tows a damaged vessel to harbor.

Ocean Marine Cargo Insurance Types of Cargo Losses Valuing an ocean marine cargo insurance loss involves two considerations:

total versus partial losses salvage charges

Which of the following perils is NOT covered under any causes of loss form?

transport of farm personal property Transport of farm personal property is not listed as a covered peril under the basic or broad form and is specifically excluded under the special causes of loss form.

Flood insurance may be written only on a structure with

two or more outside rigid walls and a fully secured roof affixed to a permanent location. Structures must resist flotation, collapse, and sideways motion.

Flood Insurance Loss settlement based on the actual cash value method is used with:

two-, three-, or four-family dwellings detached garages personal property appliances and carpets outdoor equipment, such as awnings and aerials of any type abandoned property on the described location dwellings that are not the insured's principal residence

Flood Insurance- Excluded Property Property not covered under the NFIP Coverage B form include: personal property not inside the fully enclosed building personal property located in, on, or over water recreational vehicles, other than travel trailers that qualify as building property land, lawns, trees, plants, growing crops, and animals paper items such as accounts, bills, evidences of debt, manuscripts, and valuable papers money and securities, bullion, stored value cards, and postage stamps

underground structures and equipment, including wells and septic systems walks, decks, driveways, patios, and other surfaces located away from the exterior walls of the building tanks containing gases or liquids fences, retaining walls, seawalls, bulkheads, wharves, piers, bridges, and docks aircraft, watercraft, and their furnishings and equipment hot tubs and spas (other than bathroom fixtures) and swimming pools buildings and contents made ineligible for flood insurance by the Coastal Barrier Resources Act

Subject to the liability limit per person in an accident, the policy pays

up to a limit for all bodily injury claims from a single accident. A separate property damage limit applies to each accident.

Flood Insurance Contents Eligibility To be eligible for coverage, contents must be located in a fully enclosed building or secured to prevent flotation out of the building. Also eligible for coverage are: vehicles and related equipment, provided they are inside a building at the described location, are not licensed for use on public roads, and are:

used primarily to service the described location, or designed and used to assist handicapped persons contents located inside silos, grain storage buildings, and cisterns commercial contents

The PAP covers traditional car-pooling arrangements or ride-sharing activities. However, transporting passengers for a fee (e.g., a public conveyance or livery service) is

usually excluded.

Ocean Marine Freight Insurance Freight (i.e., charges for carrying goods) is usually prepaid by the shipper, and the shipper loses the

value of the freight if the voyage is not completed. While it is usually included as part of the insured cargo's value, freight insurance is also available as a separate policy.

The PAP recognizes two types of nonowned autos:

vehicles not owned by or not regularly available to the named insured or a family member; and an auto or trailer the named insured does not own but uses as a temporary substitute for a covered auto that cannot be used due to breakdown, repair, servicing, loss, or destruction.

The tort threshold is the minimum degree of injury that, if exceeded, lets the insured sue the at-fault party for noneconomic damages (e.g., pain and suffering). There are two types of tort thresholds:

verbal threshold—This defines the seriousness of injury, such as a "serious or permanent" injury. monetary threshold—This defines the amount of medical costs incurred from the injury. Tort thresholds limit a person's ability to receive compensation for noneconomic damages resulting from bodily injury received in an accident.

All of the following are required by the Amendment of Policy Provisions Texas Endorsement?

waiver of the deductible for loss to glass if it is repaired and both parties agree exclusion of coverage for destruction or confiscation by government or civil authorities prohibition of duplicate payments for the same element of loss

Flood Insurance Increased Cost of Compliance (Coverage D) Through Coverage D, the NFIP flood policy provides up to $30,000 of coverage for increased cost of compliance (i.e., costs resulting from the enforcement of floodplain management ordinances or laws that require elevation, flood proofing, relocation, or demolition of a structure after direct loss by flood). Increased cost of compliance coverage applies only under the following circumstances:

when the cost to repair a flood-damaged structure equals or exceeds 50 percent of its market value, and the state or community is enforcing a substantial damage provision in its floodplain management law, or when the structure has suffered two flood losses (including the current loss) paid by the NFIP program during a ten-year period, the cost of each repair equaled or exceeded 25 percent of the market value of the structure, and the state or community is enforcing a cumulative substantial damage provision or repetitive loss provision in its floodplain management law.

Special Causes of Loss Exclusions As an open perils form, the special causes of loss form lists causes of loss (perils) not covered (rather than those that are covered). There are about 25 noncovered causes of loss available with farm property policies, but only those listed in a policy's declarations apply to that policy. Common causes of loss exclusions (most of which have conditions and exceptions associated with them) include:

windstorm or hail damage to dairy or farm products in the open rain, snow, ice, or sleet damage to personal property in the open freezing, thawing, or pressure or weight of water or ice to specified outside structures explosion, rupture, or bursting of pressurized equipment theft of building materials, inventory shortage, or unexplained disappearance of farm personal property vandalism or glass breakage from a building vacant more than 30 consecutive days transport of farm personal property smoke, vapor, or gas from agricultural smudging or industrial operations certain pollution-related losses