Policy Provisions and Contract Law

One driver makes a left turn on a red light and is hit by another driver who is speeding through the intersection. The driver who was making an illegal turn is found to be 80% guilty of the accident, while the speeding driver is 20% at fault. According to the principle of comparative negligence that is applied in auto accident claims, how much will the speeding driver be able to collect on the claim?

80%

An insured owns a building that is valued at 400,000. To comply with 80% coinsurance provision of his insurance policy, how much should he insure the property for?

80% of the property's replacement cost or more

Which of these is defined as the maximum limit on f coverage available under a liability policy during a policy year, regardless of of the number of claims that may be made or the number of accidents that may occur?

Aggregate limit

With respect to the business of insurance, a hazard is

Any condition or exposure that increases the possibility of loss.

Which of the following describes contributory negligence

Any degree of negligence by the injured party may bar recovery

Insurance interest in a property policy must be proven

At the time of loss

An insured owns several buildings, each at a different location and insured on a separate policy. What type of coverage does the insured have?

Blanket

In property and casualty insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of the loss above this limit?

Coinsurance

Liability imposed on one party as a result of the actions of another person is known as

Comparative negligence

Which term includes damage where the insured peril was the promise cause of loss

Direct loss

What is the purpose of the Constance clause found in property insurance policies?

Encourage the insured to insure the property closer to its full value

Which of the following is used in the formula for calculating the actual cash value of a property?

Fair market value

Replacement cost is defined as

Full replacement of property at its current cost, new and without reduction for depreciation.

What type of compensatory damages will pay for pain and suffering and disfigurement?

General (General compensatory damages are for intangible elements that cannot be specifically measured in terms of dollars.)

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?

Indemnity

All of the following are factors in the determination of actually cash value EXCEPT

Insurance premium paid

Which of the following coverages in dwelling and homeowners policies is for indirect losses?

Loss of use

Which of the following does the term proximate cause refer to

Negligence that leads to an injury

What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?

Open peril policy

An insured has a liability policy that sets the amount for all claims that arise from a single incident at $50,000. Which type of liability does the insured's policy have?

Per occurrence

An insured is driving her car through a residential area when she loses control and crashes into a neighbor's front porch. The neighbor, who was sitting on the porch, is injured. The insured's liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does the insured have?

Per occurrence

What is the purpose of the Constance clause found in property insurance policies

Prevent insureds from profiting from a loss

A situation in which a person can only lose or have no change represents

Pure risk

The risk of loss may be classified as

Pure risk and speculative risk

In property insurance actual cash value is defined as which of the following

Replacement cost at the time of the loss, less depreciation

In case of a loss, the indemnity provision in insurance policies

Restores an insured person to the same financial state as before the loss

An insured own several buildings, each at a different location and insured on a separate policy. What type of coverage does the insured have?

Specific

A property insurance policy that is not subject to any coinsurance requirements but has a set amount of insurance scheduled for the property would use what loss valuation method

Stated amount

When the amount of insurance written in a property policy is not subject to any Constance provision and that amount is paid in the event of a covered loss, the coverage is said to be written as

Stated amount

The legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as

Subrogation

Robbery is

Taking of property by use of force, violence, or fear.

Peril is most easily defined as

The cause of loss insured against

All of the following statements concerning coinsurance are true except

The coinsurance formula will also be applied to total losses.

Which of the following best describes negligence

The failure to use reasonable and prudent care

In commercial crime insurance, what is the term that includes both burglary and robbery?

Theft

What type of liability would a person who owns wild animals have?

absolute

A policy that insures all property at multiple locations for a single amount is referred to as

blanket

What is the legal defense that can be used in most states in which proportionate damages may be awarded when both the plaintiff and defendant were negligent

comparative negligence

Which of the following is a statutory defense

comparative negligence

A beauty parlor burns to the ground. What type of loss is this to the owner?

direct

Negligence is defined as

failure to give reasonable care

Events or conditions that increase the chances of an insured loss occurring are referred to as

hazards

An additional loss that results from a direct loss of property is called a/an

indirect loss

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become

larger

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?

law of large numbers

Which of the following is the basis for a claim against an insurance policy?

loss

Most insurance policies exclude losses by

mysterious disappearance

A tornado that destroys a property would be an example of what?

peril

The causes of loss insured against in an insurance policy are known as

perils

Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages?

special

What are the two types of compensatory damages?

special and general

An insured's 9-year-old son threw a ball, accidentally breaking a neighbor's plate glass window. The insured was found legally liable for the cost of replacing the window. This is an example of

vicarious liability