Chapter 2, Chapter 3, Chapter 1, Chapter 4, Chapter 5, Chapter 6, Chapter 7, Chapter 8, Chapter 9, Chapter 10, Chapter 11, Chapter 12, Chapter 13, Chapter 14, Chapter 15
Who may bring a civil action in the appropriate United States district court against any person engaging in conduct constituting an offense under Section 1033?
Attorney general Only the attorney general is authorized to bring an action against those who "tamper with insurance regulatory proceedings."
Agreement to Indemnify the Municipality
An obligation to indemnify a municipality, except in connection with work for a municipality.
Morale Hazard
Attitude that increases the probability of a loss. Example: Indifference or carelessness of leaving one's house or vehicle unlocked.
Specific Limit
Insures a single item of property for a single limit of insurance. For example, a fire policy insures one dwelling for $100,000.
Scheduled Limit
Insures one or more items of property on a single policy and the amount of insurance applying to each item is shown on a schedule. For example, one farm policy insures a home for $100,000 and a barn for $200,000.
Blanket Limit
Insures property located at more than one location OR more than one type of property at the same location OR both. For example, the $1 million blanket limit applies to two separate buildings at two separate locations, as well as the business personal property contained in each building.
Fraud
Intentional deception of the truth in order to induce another to part with something of value or to surrender a legal right. Contains 5 elements: False statement made intentionally and that pertains to a material fact Disregard for the victim Victim believes the false statement Victim makes a decision and/or acts based on the belief in, or reliance upon, the false statement The victim's decision and/or action results in harm
Part A Exclusions Liability coverage is not provided for any insured who:
Intentionally causes bodily injury or property damage. Causes property damage to property he or she owns or is transporting. Causes property damage to property rented to, used by, or in the care of that insured. An exception exists for damage to a residence or private garage—this is the care, custody, or control exclusion. Is responsible for causing bodily injury to an employee (of that insured) during the course of employment by that insured. Owns or is operating a vehicle while it's being used as public or livery conveyance (meaning it has been hired out to the general public). A vehicle used in a share-the-expense car pool is not considered a public or livery conveyance. Is employed or engaged in the business of selling, repairing, servicing, storing, road testing or parking motor vehicles. An exception exists if the vehicle is being used by an insured, a family member, or a partner or employee of these. For example, Mary's son is a mechanic. If he's test-driving Mary's car and crashes it, the exception to the exclusion applies—meaning he has coverage. However, if his co-worker crashes Mary's car, the exception doesn't apply because the co-worker is not related to Mary, nor is he her partner or employee. Is using a vehicle while employed or engaging in business. However, a coverage giveback applies to private passenger autos, pickups, vans, and owned trailers used with such vehicles. Is using a vehicle without the reasonable belief that he or she is entitled to drive it. Family members always have a reasonable belief of entitlement to drive a "your covered auto" under this coverage.
Which form provides coverage for a loss that takes place during the policy period and is not required to be reported within a certain time frame? Claims-Made Form CGL Special Coverage Form Occurrence Form
Occurrence Form
Commercial General Liability Coverage Forms The Commercial General Liability Coverage Part of the Commercial Package Policy is available in two forms of coverage:
Occurrence Form Claims-Made Form The forms are identical in all respects, except for the way coverage is activated, or triggered.
Causes of Loss Forms
There are three Causes of Loss forms available to specify the perils covered under the property coverage parts of the policy. More than one Causes of Loss Form may be attached to the coverage part with different causes applying to different locations or classes of property. Most exclusions in the commercial property policy are found in the causes of loss form.
Reasonable Expectations Doctrine
What a reasonable and prudent policy owner would expect; the reasonable expectations of policyowners are honored by the Courts although the strict terms of the policy may not support these expectations.
Case Reserve Method
A loss reserve established for each claim, when reported.
Loss Ratio Method
A loss reserve formula based upon the expected losses for a particular class or line.
Direct Loss
A loss that causes direct damage to property without an intervening cause.
Indirect Loss or Consequential Loss
A loss that is not the direct result of a peril.
The self-insured retention in the Umbrella policy is described as which of the following? Primary coverage A method of cost-sharing An Endorsement Excess coverage
A method of cost-sharing
Schedule Rating
A method of rating property and liability risks by using charges and credits to modify a class rate based on the nature of the particular risk being rated.
Mutual Insurance Company
A mutual company is owned by policyholders (who may be referred to as members). A Board of Trustees or Directors directs the company operations and is elected by policyholders. Policyholders receive non-taxable dividends as a return of unused premium when declared by the directors. Dividends are not guaranteed. Mutual insurers typically issue Participating policies.
Advertisement
A notice broadcast or published to the general public or specific market segments about the insured's goods, products, or services to attract customers or supporters.
Right to Recover Payment
If the insurance company makes a claim payment, the person on behalf of whom payment was made must assign its rights to recover damages from another party to the insurance company. If a claimant recovers from another party after the insurer has made payment, that claimant must reimburse the insurance company.
Part D Appraisal
If the insured and the insurance company are unable to agree about the amount of a loss, either party may demand an appraisal. Each party selects, and pays for, its own appraiser. The appraisers prepare separate appraisals of the actual cash value and amount of loss. If they fail to agree, they select an umpire to whom they submit their differences. If any two of the three parties agree, that decision is binding. The insured and insurer share the expenses of the umpire and appraisal.
Collapse
"Collapse" is defined as the abrupt falling down or caving in of a building, or any portion of a building, but only if it cannot be occupied for its current intended purpose. If a building, or any portion of a building, is in danger of falling down or caving in — or if it's standing, it is NOT in a state of collapse. Under the DP-2 and DP-3 forms, coverage is provided for direct physical loss to covered property involving collapse of a building, or any part of a building, but only if the cause of loss is: any of the Coverage C named perils; hidden decay; hidden insect or vermin damage; weight of contents, equipment, animals or people; weight of rain which collects on the roof; and use of defective materials or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling, or renovation. Collapse does not include settling, cracking, shrinking, bulging, or expansion. This coverage does not increase the limit of insurance and is NOT provided by the DP-1.
What is the limit of coverage for business personal property away from the premises under the Business and Personal Property coverage form? $5,000 $10,000 $15,000 $1,000
$10,000
Hazard
A specific condition that increases the probability, likliehood, or severity of a loss from a peril.
Section II Additional Coverages includes Damage to Property of Others for what limit of insurance?
$1000
The Landlord's Furnishings endorsement provides up to $ _______ of coverage.
$2,500 **This endorsement provides up to $2,500 coverage for appliances, carpeting and household furnishings in a rental apartment located in the residence premises.
All of the following special limits of Coverage C are correct, except: $2,500 for theft of firearms $1,500 for a trailer not used with watercraft $2,500 for business property away from premises $200 for money
$2,500 for business property away from premises ** Coverage C provides $500 for loss of business property away from premises.
The Water Back Up and Sump Discharge or Overflow endorsement provides how much coverage for damaged property?
$5,000
Time Element Coverage Forms
*Business Income and Extra Expense Forms *Business income form *Extra Expense Coverage form
Coverage B - Other Structures The policy covers other structures on the residence premises that are set apart from the dwelling by a clear space. Structures connected to the dwelling by only a fence or utility line are considered set apart, for example, sheds, detached garages, built-in pools. No coverage is provided under Coverage B for 4 types of property:
-Land, including land on which the other structures are located. -Other structures rented or held for rental to anyone who isn't a tenant of the dwelling, unless the other structure is used solely as a private garage. -Other structures from which any "business" is conducted. -Other structures used to store business property that is owned by someone other than an insured or a tenant of the dwelling. ** This insurance limit is 10% of the Coverage A limit of liability, does not reduce the Coverage A limit of liability, and may be increased by endorsement.
Parol Evidence Rule
A written contract may not be altered without the written consent of both parties.
Newly Acquired Auto Any of the following types of vehicles for which the insured becomes the owner during the policy period:
1. A private passenger auto 2. A pickup or van, for which no other insurance policy provides coverage, if the auto: ----Has a gross vehicle weight of 10,000 pounds or less. ----Is not used for delivery or transportation of goods and materials, unless such use is incidental to the insured's business of installing, maintaining, or repairing furnishings or equipment, For example, if the insured is a plumber; he may use his pickup or van for the transportation of his tools. 2. For all coverages EXCEPT Part D - Coverage for Damage to your Auto, coverage begins on the date the named insured becomes the owner. ----If newly acquired auto is an additional vehicle, the insured must report to the insurer within 14 days. ----A replacement auto for another with all coverages except collision and comprehensive (other than collision) is covered for liability and medical payments for the remainder of the policy period, even if the insured does not report the replacement. 3. Under Part D, Coverage for Damage to your Auto automatic coverage begins on the date the named insured becomes the legal owner of the vehicle. ----The insured must report the newly acquired auto to the insurer for coverage to continue. If the insured doesn't report as required, coverage ends after either 4 or 14 days. ----If the Declarations page indicates that either Collision or Other than Collision coverage applies to at least one vehicle, the insured has 14 days to report for either coverage to apply. Automatic coverage ends after 14 days if the insured doesn't report. ----If the Declarations page indicates that NO Collision or Other than Collision coverage applies to at least one vehicle, the insured has 4 days to report for coverage to apply. Automatic coverage ends after 4 days if the insured doesn't report. notes
Coverage D - Loss of Use Three types of coverage are provided under Coverage D and all are for indirect, or consequential, loss. The limit of insurance appearing on the declarations for Coverage D is the total limit payable for all three types of coverage provided. For example, a wildfire burns near the insured's home. If direct damage from the wildfire occurs to the residence premises, Additional Living Expense and Fair Rental Value coverages are triggered. If direct damage from wildfire occurs to the named insured's neighbors, and a civil authority evacuates the named insured, Civil Authority Prohibits Use coverage is triggered. What are the three types : Additional Living Expenses Fair Rental Value Civil Authority Prohibits Use
1. Additional Living Expense If a property loss covered by Section I of the policy makes the residence premises unfit to live in, the policy pays for any necessary increase in living expenses incurred by the named insured to maintain the household's normal standard of living. Payment is made for the shortest time necessary to repair or replace the damage. If the insured must relocate permanently, payment will be made for the shortest time it takes the insured to settle at the new location. 2. Fair Rental Value If a property loss covered by Section I of the policy makes that part of the residence premises rented to others unfit to live in, the policy pays for the fair rental value of such premises—less any continuing expenses—while it's unfit to live in. Payment is for the shortest time required to repair or replace the rented portion of the premises. 3. Civil Authority Prohibits Use If a civil authority prohibits the named insured from using the residence premises as a result of direct damage to neighboring premises by a peril insured against under the homeowners policy, the policy pays losses under Additional Living Expense and/or Fair Rental Value for no more than two weeks. Loss and expenses due to the cancellation of a lease or agreement are NOT covered. Limits of Coverage - The automatic limits of insurance for Coverage D vary by the homeowners form of coverage: -30% of Coverage A for forms HO-2, HO-3, and HO-5 -30% of Coverage C for form HO-4 -50% of Coverage C for form HO-6 -10% of Coverage A for form HO-8
Your Covered Auto If a vehicle meets any of the following four definitions, it is a "your covered auto."
1. Any vehicle shown in the Declarations 2. A newly acquired auto 3. Any trailer that the insured owns 4. Any auto or "trailer" the named insured doesn't own while being used as a temporary substitute for any other vehicle described in this definition, which is out of the normal use because of: Breakdown Repair Servicing Loss Destruction A temporary substitute is NOT a "your covered auto" under Part D - Coverage for Damage to your Auto.
acronym DICE What it is and what its used for
1. Declarations 2. Insuring Agreement 3. Conditions 4. Exclusions
The Section II exclusions fall into 4 distinct categories: Name them:
1. Exclusions that apply to Section II - Coverages E and F and the Additional Coverages 2. Exclusions that only apply to Coverage E - Personal Liability and Coverage F - Medical Payments to Others 3. Exclusions that only apply to Coverage E - Personal Liability 4. Exclusions that apply only to Coverage F - Medical Payments to Others
Three types of hazards:
1. Physical Hazard - A physical condition that increases the probability of loss; use, condition, or occupancy of property. Example: Flammable material stored near a furnace. 2. Moral Hazard - Dishonest tendencies that increase the probability of a loss; certain characteristics and behaviors of people. Example: An insured burns down his/her own house to collect the insurance payout. 3. Morale Hazard - Attitude that increases the probability of a loss. Example: Indifference or carelessness of leaving one's house or vehicle unlocked.
Under the builders risk coverage form, the insured's building materials and supplies used for construction are covered if they are located within how many feet of its premises?
100 100 feet is a customary coverage limit on many property policies. just think 100 feet, 100% possibility it may be covered. Beyond that distance not covered.
An in sured with split liability limits of 100/300/100 is at fault in an automobile accident. The other automobile sustains $6,500 in property damages as well as two occupants having bodily injury, claiming $150,000 each. What is the most insurance will pay to each occupant?
100,000 The policy has a per person limit of $100,00.
Under Part D, Within how many days must an insured report the purchase of a new vehicle that is replacing an existing vehicle covered by collision coverage?
14 If a vehicle covered by Part D coverages is replaced by a new car with the same coverage, the policy will automatically extend coverage for 14 days.
Non-resident relatives
2 or more persons related by blood, marriage, or adoption who reside in separate households. This includes a ward or foster child.
If an insurer non-renews an insured's policy for underwriting reasons, what is the minimum number of days' notice to the insured? 45 60 20 30 Part F
20
A related, full-time student away at school and under what age is considered an insured on the Homeowner policy?
24
How much can be paid under the Business and Personal Property Coverage Form for debris removal due to a covered loss? 25% of the loss $5,000 15% of Coverage A $1,000
25% of the loss
The automatic limit for Coverage D - Fair Rental Value is what percentage of Coverage A under an HO-3, Special Form?
30 **The automatic limit for Coverage D for the HO-2, HO-3, and HO-5 is 30% of Coverage A and 10% of Coverage A for the HO-8.
A building is considered vacant unless what percentage of the building's total square footage is rented or used to conduct customary operations? 10% 26% 31% 20%
31%
A single-family dwelling may purchase up to what amount of flood insurance in the NFIP's Emergency program?
35,000
A Medical Payments claim will be paid by the insurer within how many months from the date of the occurrence? ** Part B
36
The limit of insurance for the Other Coverage Trees, Shrubs, and Other Plants is provided at which percentage of the Coverage A limit?
5% ** This coverage is also in addition to the Coverage A limit.
The amount of insurance provided for Coverage C is what percentage of Coverage A on a HO-3, Special Form?
50%
A private passenger auto includes a leased vehicle as long as the lease contract is continuous for how many months duration?
6
Coverage A - Dwelling does not cover vandalism and malicious mischief if the dwelling has been vacant for how many days?
60
The Builder's Risk Coverage form automatically ends at the earliest of all of the following, except: Property is abandoned Policy expires Property is sold 60 days after construction is complete
60 days after construction is complete
In order to be considered a single occurrence, the Earthquake endorsement covers all earth movement that occurs within what time period?
72 hours
n the Business Income Coverage Form, Period of Restoration begins _______ after the time of loss. 72 hours 86 years 100 months 55 days
72 hours
Which of the following boats is covered under the Watercraft Liability endorsement?
A 20-foot sail boat **This endorsement covers sail boats with or without power, and property damage or bodily injury arising out of the ownership, maintenance, use, loading, or unloading of the described watercraft.
Yacht Policy
A Yacht policy is designed for larger vessels, many of which have crew members. Larger vessels are normally insured under the complete package of yacht coverages, which includes in addition to Hull Insurance, Protection and Indemnity and Medical Payments. A "Lay Up Warranty" applies when the insured boat is in storage and allows for a return of premium due to the reduced risk of the boat not being used when laid up. If the insured operates the yacht during the lay-up period (or lives on it), no coverage is provided. Each yacht policy contains a navigation territory that states where the boat will be navigated, such as on inland lakes and waterways. The insured does NOT have coverage if the boat is navigated outside the designated territory. If the insured wishes to change or broaden the navigation territory, the insurer must issue an endorsement. In addition to providing property and liability coverage, a yacht policy also offers the following coverages: --Protection and indemnity coverage for the insured's legal liability for bodily injury and damage to property of others. --Personal property coverage for property on the yacht. --Coverage for fuel spills, commercial towing, and dinghies.
Frame
A building that has a roof, floor, and supports of combustible material, usually wood, and combustible interior walls.
Short Rate Cancellation
A cancellation of insurance that incurs a financial penalty. Sometimes when the insured cancels the policy before its expiration date, a short-rate cancellation is issued. The insurer retains a portion of the unearned premium to cover costs.
Flat Cancellation
A cancellation of insurance that is retroactive to the effective date of the policy. No coverage is provided and the insurer must refund the policy premium paid by the insured.
Claims-Made Form
A claims-made form provides coverage for losses that take place after the retroactive date and before the end of the policy period, and for which claims are made during the policy period or an extended reporting period. The Claims-Made Form offers the same coverage as an Occurrence Form, but is the preferred form of coverage for insurers issuing coverage on risks that have the potential to generate claims long after an occurrence that caused injury or damage. Provisions that are unique to the Claims-Made Form include: Retroactive Date A date specified in the Declarations, after which an occurrence must take place to be covered. If an occurrence takes place before the retroactive date, it's not covered, even if a claim is made during the policy period. The retroactive date may be the policy's effective date or any date in the past that the insurer agrees to, such as the effective date of the first claims-made policy issued to the insured.
Part C An uninsured motor vehicle is any of the following, except: A vehicle insured by an insolvent insurance company A vehicle that does not have insurance A vehicle with liability limits less than the state requirement A company car
A company car
Risk definition
A condition where the chance, likelihood, probability or potential for a loss exists; Uncertainty concerning a loss.
Elevator Maintenance Agreement
A contract agreement where the elevator maintenance company assumes the liability pertaining to the operation of the elevator from the business or building owner where the elevator operates.
Valued Contract
A contract that pays a stated amount in the event of a loss (most insurance policies are NOT valued contracts unless they are endorsed).
Hold Harmless Agreement
A contractual agreement that transfers the liability of one party to another party; it is used by landlords, contractors, and others as a way to avoid or reduce risk.
Application
A document submitted by an applicant to an insurer that provides information needed for the insurer to underwrite a risk; becomes part of the insurance contract. Most applications require statements on the application to be true to the best knowledge and belief of the applicant.
Misrepresentations
A false statement contained in the application; usually does not void coverage or the policy. If material to the issuance of coverage, meaning the insurer would not have issued coverage had the misrepresentation not been made, coverage does not apply. In some cases, a material misrepresentation may void the policy.
National Flood Insurance Program (NFIP)
A federal program that enables certain property owners to purchase flood insurance. The Federal Insurance Administration administers the program under the Federal Emergency Management Agency (FEMA). The federal government makes payment for, or subsidizes, all flood losses. Flood policies are available from participating private insurers who participate in the Write Your Own (WYO) Program, and directly from the NFIP. Agents do not have authority to bind coverage with the NFIP, but all licensed agents and brokers may write flood insurance with the NFIP. Communities in flood-prone areas must have established an approved flood control program in order to participate in the NFIP and are called participating communities. If a property owner lives in a community that is not a participating community, the property owner CANNOT purchase flood insurance, regardless of the degree of flood risk. Flood policies provide protection for direct loss to insured property such as a dwelling and its contents. Flood is defined as a general and temporary condition of partial or complete inundation of land. The land MUST be normally dry land and the flood must involve: -2 or more acres of the insured's land, OR the insured's entire piece of property AND an adjacent piece of property -The inundation of land may be the result of: Overflow of inland or tidal waters, such as a tidal wave generated by a hurricane Unusual and rapid accumulation or runoff of surface waters Mudflow caused by accumulation of water Collapse or destabilization of land along a shoreline resulting from erosion or the effect of waves or water currents exceeding normal, cyclical levels Dwellings eligible for coverage must have 2 or more rigid outside walls, a fully secured roof, and be affixed on a permanent foundation. Coverage is available for both the building and personal property, however, NO coverage is provided for personal property in basements. Exclusions include personal property located in basements, loss of profits, loss of access to property, business interruption, additional living expenses, ordinance or law, earth movement, theft, fire, explosion, wind, freezing, and damage to lawns, trees, shrubs, plants and growing crops. The NFIP also does not cover money, securities, livestock, wharves, piers, bridges, docks and other structures on or entirely over water.
the following penalties apply, If a person engaged in the business of insurance whose activities affect interstate commerce willfully embezzles, misappropriates funds/property, knowingly and with the intent to deceive makes a false material statement or purposely overstates the security of an insurer:
A fine of no more than $50,000, imprisonment for up to 10 years, or both If the violation jeopardized the safety and soundness of an insurer and was a significant cause of the insurer being placed in conservation, rehabilitation, or liquidation by an appropriate court, imprisonment can be for up to 15 years If the amount embezzled or misappropriated does not exceed $5,000, violators will be fined up to $50,000 or imprisoned for up to 1 year, or both
Hostile Fire
A fire that burns outside its intended boundaries, or becomes uncontrollable. Examples of a hostile fire include a wildfire or a fire that damages a home when a spark from a fire in the fireplace ignites a piece of furniture.
Friendly Fire
A fire that was intentionally set and stays within its intended boundaries (e.g., a fireplace) and results in smoke damage to the inside of a fireplace. Property insurance does not cover damage from a friendly fire.
Tabular Method
A loss reserve based upon the estimated length of an insured's or claimant's life or expected disability.
Binder
A legal agreement issued by an insurance company or a producer that provides temporary proof of insurance until the insurer is able to issue an insurance policy. Binders are issued for specific time periods (maximum of 60 days) and automatically end when the policy is issued. Binders contain the name of the insurer, the amount and type of insurance, and the perils insured against.
The Insurance Contract Define and breakdown
A legal contract purchased to indemnify the insured against a loss, damage, or liability arising from an unexpected event. The exchange of a relatively small and definite expense for the risk of loss that, if it occurs, may be large or small. A contract designed to transfer risk from the insured to the insurer.
Broker
A licensed individual who negotiates insurance contracts with insurers, on behalf of the applicant. A broker represents the applicant or insured's interests, not the insurer, and thus does not have legal authority to bind the insurer. A broker's license is not applicable in all states.
Average Value Method
A loss reserve established based on average settlements of particular claim types.
Conditions Limit of Liability
A per occurrence limit applies to losses covered under Coverage E - Personal Liability and a per person limit applies to losses covered under Coverage F - Medical Payments to Others.
The Automatic Increase in Insurance endorsement typically increases Coverages A and B by which of the following?
A percentage designated on the endorsement
Producer
A person or agency appointed by an insurance company to represent it and to present policies on its behalf.
Bailee
A person or any organization to which property has been entrusted, usually for repairs, servicing or storage. Because bailees are legally responsible for property in their care, property insurance policies specifically exclude coverage for property in the care of a bailee.
Additional Insured(s)
A person or organization not ordinarily protected by a policy but which, through the addition of an endorsement to the policy, is granted status as an insured. Under a liability policy, an additional insured is often a party to an indemnification or hold harmless agreement.
Insured
A person or organization protected by an insurance contract.
Bailor
A person or organization that entrusts property to a bailee.
All of the following are insured under the CGL, except: A person participating in an athletic event A stockholder A partner A volunteer worker acting on behalf of the insured
A person participating in an athletic event
Family Member
A person related to the named insured by blood, marriage, or adoption who is a resident of the named insured's household. A family member includes a ward or foster child.
Volunteer Worker
A person who is not an employee of the insured, but who donates his/her work and acts at the direction of the insured. A volunteer worker is not paid a fee, salary, or other compensation by the insured for work performed for the insured.
Physical Hazard
A physical condition that increases the probability of loss; use, condition, or occupancy of property. Example: Flammable material stored near a furnace.
Endorsement
A policy form that alters or adds to the provisions of a property and casualty insurance contract.
Valued Policy
A policy that states the value of property as the amount shown on the Declarations page and will pay that full face value in the event of a total loss, regardless of the actual cash value.
Concurrent Causation
A principle holding that when two perils simultaneously cause a loss (i.e., they are both considered the proximate cause of loss), the insurer must pay the loss even if one of the perils is excluded by the policy.
Residual Markets
A private coverage source of last resort for businesses and individuals who have been rejected by voluntary market insurers. A Joint Underwriting Association or Joint Reinsurance Pool requires insurers writing specific coverage lines in a given state to assume the profits/losses accruing their share of the total voluntary market premiums written in that state. Risk Sharing Plan - Insurers agree to apportion among themselves those risks that are unable to obtain insurance through normal channels. Coverage is typically written as workers' compensation personal auto liability or property insurance on real property.
Products Exposure
A product, as defined by the CGL policy, means any goods or products that are manufactured, sold, handled, distributed, or disposed by the insured and others conducting business under the insured's name. Real property, such as buildings and land, are not considered a product. Goods and merchandise are not typically considered a product until after their sale by the insured and once they leave the insured's premises. Not only does this exposure leave a business vulnerable to legal liability for defects in product design or manufacture, it also leaves a business exposed to liability for the failure to warn or explain with respect to its products. Examples of products exposures include: -A restaurant customer who contracts food poisoning after eating spoiled fish; and -A man who suffers an eye injury after the pen he's using explodes. Coverage applies to bodily injury or property damage the product causes, but not to loss to the product itself, and the injury or damages must occur away from the premises the insured owns or rents. Example An aircraft manufacturer builds an aircraft altimeter that fails and causes an aircraft to crash.
Loss Valuation
A property policy pays for losses to property based on the valuation method contained in the policy or chosen by the insured in an endorsement added to the policy.
Unoccupancy
A property that contains personal property but has no occupants.
Pro Rata Cancellation
A proportionate cancellation of insurance that refunds premium to the insured based on the precise number of days coverage was in effect. The earned premium is the premium charged and retained by the insurer for the number of days coverage was in place; the unearned premium is the premium refunded to the insured for the number of days coverage was not in place.
Coinsurance
A provision contained in most policies insuring commercial property, and is used to encourage the insured to purchase and maintain insurance to value, and to establish the basis of payment in the event the insured fails to maintain a specified percentage of that value. The higher the coinsurance percentage the insured agrees to purchase, the lower the rate that the insured pays for the insurance. Coinsurance applies only in the event of a partial loss, as total losses typically are paid in accordance with the Valued Policy Law.
Vacancy
A provision in a property policy that eliminates or limits coverage for buildings that don't contain sufficient personal property to support intended occupancy or use.
Inherent Vice
A quality within property that causes it to damage or destroy itself. Examples include rust, rot and the fading of paint. Inherent vice is not covered by a property policy.
Experience Rating
A rate based on the policyholder's actual loss history when compared to the loss history of similar risks.
Class Rating
A rate charged to a group of policyholders who have similar exposures and experience.
Individual Rating
A rate used for a policyholder because a large enough pool of similar risks is not available to any other type of rate. It is primarily used for commercial and specialty risks because of the number of unique variables involved.
Loss Cost Rating
A rating organization provides insurers with the portion of a rate that does not include provisions for expenses or profit. The expense and profit components to develop the final rate must be added by individual insurers based upon their projections Loss cost rating is used on risks for which the insurer may not have enough data to develop the rate, other than for expenses and profit
Reciprocal Insurance Company
A reciprocal insurance company is a group-owned insurer whose main activity is risk sharing. They are unincorporated, and formed by individuals, firms, and business corporations that exchange insurance on one another. Each member is known as a subscriber. Each subscriber assumes a part of the risk of all other subscribers. If premiums collected are insufficient to pay losses, an assessment of additional premium can be made. The exchange of insurance is affected through an Attorney-In-Fact.
Law of Agency
A relationship between two or more parties where one party (the agent or producer) acts on behalf of the other party, known as the principal or insurer. The agent or producer binds the actions and words of the principal.
Open Competition
A state relies on competition between insurers to produce fair and adequate rates.
Stock Insurance Company
A stock company is owned by stockholders or shareholders. Directors and officers direct the company operations and are elected by stockholders. Stockholders receive taxable corporate dividends as a return of profit when declared by the Directors. Dividends are not guaranteed. Traditionally, stock insurers issue Non-Participating policies
Accident
A sudden, unforeseen, unintended, and unplanned event from which loss or damage results.
Business means:
A trade, profession, or occupation engaged in on a full-time, part-time, or occasional basis. Any other activity engaged in for money or other compensation, EXCEPT: -Volunteer activities for which no compensation is received other than expense reimbursement. -Home daycare services for which no compensation is received other than the mutual exchange of day care services. -Rendering home daycare services to a relative of an insured. -Any other activity not described above for which no insured receives more than $2,000 in compensation during the 12 months before the current policy term.
Voidable Contract
A valid contract that for reasons satisfactory to a court, may be set aside by one of the parties. An example is an insurer may void or revoke coverage for misrepresentation or fraud.
Stated Value
A valuation method that states the value of a particular property on the declarations page, but provides for the insurer to pay the lesser of the stated value or ACV of the property following a loss.
Trailer
A vehicle designed to be pulled by a private passenger auto or a pickup or van. Trailer also includes a farm wagon or farm implement while it's being towed by a private passenger auto pickup, or van.
Trailer
A vehicle designed to be pulled by a private passenger auto, pickup, or van
Newly acquired auto
A vehicle for which the insured becomes the owner during the policy period and may be a replacement or additional vehicle
Part C Insuring Agreement (continued) The following types of vehicles are NOT included in the definition of "uninsured motor vehicle":
A vehicle that's owned by the named insured or a family member OR a vehicle that's furnished or available for the regular use of the named insured or a family member, such as a company car. A vehicle that is owned or operated by someone who is self-insured, unless the owner or operator is or becomes insolvent. A vehicle owned by any government agency. A vehicle that operates on rails or crawler treads, such as a train or piece of mobile equipment like a bulldozer. A vehicle designed mainly for use off public roads, such as a snowmobile or ATV. A vehicle permanently located for use as a residence, such as a motor home or trailer in a campground.
Foreign Insurer
An insurer not organized under the laws of this state, but in one of the other states or jurisdictions within the United States, whether or not it is admitted to do business in the state or jurisdiction. The district of Columbia or territory including PortoRico.
Alien Insurer
An insurer organized under the laws of any jurisdiction outside of the United States, whether or not it is admitted to do business in this state.
Which of the following is covered under Part C - Uninsured Motorist Coverage? A family member is struck by an insured vehicle Accident was caused by a hit-and-run driver The insured is also covered by Workers' Compensation Punitive damages awarded for the insured
Accident was caused by a hit-and-run driver
Sort the following occurrences into Additional Coverages or Exclusions Occurrences: Losses resulting from earthquake, landslides, or mudslides Water damage resulting from a flood, surface water, overflow of a body of water, or sewer back-up Power failure taking place off the residence premises Coverage for the abrupt falling down or caving in of a building that cannot be occupied for its intended purpose after the collapse Coverage for a loss that arises out of any act committed by the insured with the intent to cause a loss Reasonable expenses for the removal of debris of covered property if a covered loss occurs Reasonable costs incurred by the named insured to protect covered property damaged by a covered peril against further damage Loss to covered property by any cause while being removed from a premises endangered by a peril insured against
Additional Coverages: Coverage for the abrupt falling down or caving in of a building that cannot be occupied for its intended purpose after the collapse Reasonable expenses for the removal of debris of covered property if a covered loss occurs Loss to covered property by any cause while being removed from a premises endangered by a peril insured against Reasonable costs incurred by the named insured to protect covered property damaged by a covered peril against further damage Exclusions: Coverage for a loss that arises out of any act committed by the insured with the intent to cause a loss Power failure taking place off the residence premises Water damage resulting from a flood, surface water, overflow of a body of water, or sewer back-up Losses resulting from earthquake, landslides, or mudslides
Additional Coverages
Additional coverages are automatically included in property policies without an additional premium. The type of additional coverages depends upon the type of policy. Additional coverages are paid in addition to those stated in the insuring agreement and include debris removal, collapse, and fire department service charges.
Appraisal
Addresses disputes about the amount of a loss. If the insurance company and insured cannot agree on the amount of a loss, either party may request an appraisal. Each party selects its own appraiser and the appraisers select an umpire. Agreement by any two parties settles the loss. Each party pays the cost of its own appraiser and shares the costs of the umpire and the appraisal. Appraisal is a dispute resolution method and is not used to determine whether the policy provides coverage for a loss.
Nonrenewal
Addresses the requirements of the insurer if it elects not to renew a policy.
Domestic Insurer
An insurer organized under the laws of this state, whether or not it is admitted to do business in this state.
Subrogation
After an insurer pays a loss, it is granted the insured's rights to seek recovery from the party responsible for the loss. For example, if Bob is legally responsible for injuring Sue in a car accident, Sue's insurance company may seek reimbursement from Bob for the claim payments it made to Sue.
Career Agency System
Agents are recruited, trained and supervised by either a managing employee or General Agent who is contracted with the insurance company.
The _______ is the most the policy will pay for the sum of all the losses occurring within a policy period.
Aggregate
Insurable Interest What policies are included
All Policies: Insurable interest must exist in every enforceable insurance contract. Depending upon the contract, it must exist at the time of application or at the time of loss. Requires the potential for an insured to suffer financial or economic hardship in the event of a loss. Life & Health Policies: Insurable interest must exist at the time of application, but not at the time of loss. Coverage is determined based on the possibility of an economic or financial loss due to an accident, sickness, or death of the insured. The amount of insurance that may be purchased varies based on the type of coverage. In some cases, no coverage limit apply. Property: Insurable interest must exist at the time of the loss. Property ownership (or mortgage or lien) is evidence of insurable interest. Casualty: Insurable interest must exist at the time of the loss. Insurable interest usually results from property or contract rights and potential legal liability.
Supplementary Payments - Coverages A and B Supplementary Payments apply only to Coverages A and B, are paid in addition to any applicable limit of liability, and include:
All claim-related expenses incurred by the insurance company The cost of bail bonds, up to $250 The cost of bonds to release attachments All reasonable expenses incurred by the insured, at the insurer's request, including actual loss of earnings up to $250 per day to the insured for time off from work All court costs taxed against the insured in a suit Payments for prejudgment interest, which is the amount of interest that accrues on a judgment from the time of the accident or loss until the insurer makes payment or offers to make payment Payments for post-judgment interest, which is the amount of interest that accrues on a judgment after it's entered and before the insurer has paid or offered to pay Supplementary payments do NOT reduce the limits of insurance provided by the policy
Eligibility
All homeowners forms, with the exception of the Contents Broad Form (HO-4) and Unit-owners Form (HO-6), require the named insured to be the owner/occupant of the insured dwelling. The dwelling must be the principal residence of the named insured, and incidental business occupancies such as offices, studios, and schools are permitted. The Contents Broad Form (HO-4) and Unit-owners Form (HO-6) are written to insure the personal property and personal liability of the named insured who does not own the building in which he/she lives. The HO-4 is designed for tenants of residential units (i.e., dwellings and apartment units) and provides no coverage for buildings and other structures. The HO-6 is designed for the owners and tenants of condominium or cooperative units. Coverage is provided for the portion of the building the named insured owns (or is responsible for insuring), personal property, and personal liability. Eligible residential dwellings are those containing one to four residential units and no more than 2 roomers or boarders per family. Dwellings under construction, and that will be the primary residence of the named insured upon completion of construction, are also eligible for coverage.
Legal Action Against Insurer
All parties must comply with policy provisions before any suit may be brought against the insurer. Also, no one has the right to enjoin the insurance company as a party to any action against an insured.
Four Elements of a Legal Contract 2. Legal Purpose
All parties to a contract must enter it for a legal purpose, public policy cannot be violated by a legal contract. All parties to a contract must enter it in good faith.
Four Elements of a Legal Contract 1. Competent Parties
All parties to a contract. Insurer and Insured must have legal capacity to enter into a contract. Those without legal capacity include: Minors - The insurer may be held responsible for its obligations, however, in most cases a minor cannot enter into a contract. Exceptions do exist, such as for the purchase of auto insurance. The mentally incompetent or incapacitated. Persons under influence of drugs or alcohol.
Open Peril (Special Form
All-Risk),This type of property coverage provides insurance for all causes of loss that are not specifically excluded under the policy. Typical exclusions in an "open perils" policy are flood and earthquake.
Property Not Covered
Although most classes of property may be insured on the Building and Personal Property Coverage Form, certain classes of property are not covered. They are either uninsurable or must be insured separately. Types of property not covered on the Building and Personal Property Coverage Form include: Accounts, bills, currency, food stamps, or other evidences of debt, money, notes, and securities are not covered Animals, unless they are owned by others and boarded by the named insured OR owned by the insured when they are "stock" and inside buildings Autos held for sale, including cars, trucks, motorcycles, motor homes, etc. Bridges, roadways, sidewalks, patios, and other paved surfaces Contraband, stolen property, or property used in the course of illegal transportation or trade The cost of excavations, grading, backfilling, or filling The foundations of buildings, structures, machinery, or boilers if the foundations are below the lowest basement floor or the surface of the ground if there is no basement Land, including land on which covered buildings and structures are located, water, growing crops, and lawns Personal property while it is being transported in the air or on water Bulkheads, pilings, piers, wharves, or docks Property insured by this policy under another coverage part, or property specifically insured on another policy Retaining walls that are not part of a building and underground pipes, flues, and drains Electronic data, including information, facts, and computer programs and the cost to replace or restore such information Vehicles and self-propelled machines, including aircraft and watercraft, if they're licensed for use on public roads OR are operated principally away from the described premises Property manufactured, processed, or warehoused by the insured Rowboats and canoes out of water at the described location Motorized vehicles that are not autos and are held for sale by the insured When outside of buildings: grain, hay, straw, other crops; fences, radio and TV antennas and their wiring, masts or towers; trees, shrubs, or plants that are not "stock"
The limit of liability is the most paid by the insurer regardless of all of the following, except: Number of vehicles involved Number of insureds Amount of surcharges to be applied to policy Premiums shown **Part A
Amount of surcharges to be applied to policy
Risk Sharing Plan
Insurers agree to apportion among themselves those risks that are unable to obtain insurance through normal channels.
Admitted vs. Nonadmitted
An Admitted (Authorized) insurer is authorized by this State's Commissioner of Insurance to do business in this State. It has received a Certificate of Authority to do business in this State. A Non-admitted (Unauthorized) insurer has either applied for authorization to do business in this state and was declined or they have not applied. They are not authorized to transact insurance in this state. The domicile does not impact whether an insurer may be admitted to do business in this State. Surplus and Excess lines insurance can be placed through non-admitted carriers.
Occurrence
An accident includes continuous or repeated exposure to the same general harmful conditions.
Occurrence
An accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Premium Assumptions
An adequate premium must be charged for the risk based on the same factors used in evaluating the risk. Premium rates are considered inadequate when they do not cover projected losses and expenses; rates must not be excessive or unfairly discriminatory.
Independent Agency
An agent or agency that enters into agency agreements with more than one insurer. It may represent an unlimited number of insurers. Agency retains ownership of the business written. An independent contractor that is paid a commission and covers the cost of agency operations.
Indemnity Contract
An agreement to pay on behalf of another party under specified circumstances, such as when a loss occurs.
Void Contract
An agreement without legal effect because it was made illegally or it was declared void by the courts because it doesn't contain all the elements of a legal contract.
Automatic Increase in Insurance Endorsement (DP 04 11) ** requires the payment of additional premium **
An automatic pro rata increase in the Coverage A and B limits of insurance is applied by the percentage shown on the endorsement. This endorsement is used to help offset inflation and may also be referred to as the Inflation Guard Endorsement. The increases are calculated per day, and will increase the dwelling coverage, as well as the premium, annually when the policy renews. If a loss occurs throughout the year, coverage is based on a pro-rated basis. ***A dwelling policy is issued January 1 with a dwelling coverage limit (Coverage A) of $200,000. The policy has an Automatic Increase/Inflation Guard endorsement for 5%. If a loss occurs 6 months later, the amount of coverage is now $205,000. The annual increase would be $10,000 for the year, therefore, the increase for 6 months is $5,000. When the policy renews, the increased dwelling coverage becomes $210,000 and the 5% inflation protection will be based on the increased limit (not $200,000) for the following year.
Residence Employee means:
An employee of, or leased under an agreement to, an insured, whose duties are related to the maintenance or use of the residence premises. These duties include household and domestic services, such as those of a gardener or nanny. A person who performs similar duties elsewhere that are not related to any business of the insured, such as a person hired to paint the insured's house, as long as the insured doesn't own a business that paints houses.
Adverse Selection
An imbalance created when risks that are more prone to losses than the average (standard) risk are the only risks seeking insurance within a specific marketplace. For example, only those living in earthquake-prone areas seek to buy earthquake insurance. High-risk exposures tend to seek or continue insurance at a higher participation rate than the average risk exposures do.
"A" Rating or Judgment Rating
An individual rate that doesn't use loss history as a component and that is derived largely from the underwriter's evaluation and best judgment the risk poses to the insurer.
All of the following are covered by Coverage F - Medical Payments to Others, except: An injury to another person caused by a residence employee while mowing the lawn An injury to the insured while mowing the lawn A guest is injured while visiting the insured at home A neighbor's injury caused by an insured's activity
An injury to the insured while mowing the lawn
Reinsurance Companies
An insurance company that assumes all or a portion of a risk for a primary or ceding insurance company; reinsurance transfers risk among insurance companies. The insurer originating the application is the primary or ceding company. The insurer sharing in the risk is the reinsurance company. Consumer inquiries must originate with the ceding company, which then obtains reinsurance.
Premises and Operations Exposure
An insured business conducts its operations both at its own premises and elsewhere. For example, an accountant conducts operations at his or her office and also away from the office when visiting clients, the bank, the post office, networking events, etc. If a business, or anyone acting on its behalf, causes bodily injury or property damage, the business may be considered legally liable for such injury or damage. CGL coverage is provided for the insured's legal liability for bodily injury or property damage arising out of the insured's premises or the insured's operations. Covered occurrences must take place during the policy period and within the coverage territory.
Part C Exclusions Coverage is NOT provided when any insured sustains bodily injury under the following circumstances:
An insured or family member is injured when occupying, or struck by, a vehicle owned by the named insured or a family member and the vehicle is not insured by this policy. An insured or a legal representative settles an Uninsured Motorists Bodily Injury Liability claim and that settlement impairs the insurance company's ability to recover payments made to any insured. An insured is occupying a "your covered auto" while it is being used as a public or livery conveyance. An insured is using a vehicle without a reasonable belief that he or she is entitled to drive it. Family members always have a reasonable belief of entitlement to drive a "your covered auto" under this coverage. While insured by workers' compensation or disability insurance. No payment will be made under this coverage for injuries that might benefit any insurer, or self-insurer, under any workers' compensation or disability benefits law. This means that if workers' compensation or disability insurance is in place, that coverage must pay before this coverage applies. If the insured is legally responsible for punitive or exemplary damages, this coverage does not apply.
Part D Exclusions No coverage is provided for:
An insured vehicle being used as a public or livery conveyance. The exclusion does not apply to a share-the-expense car pool. Damage solely a result of wear and tear, freezing, equipment breakdown, or road damage to tires. These are all maintenance issues and are excluded under other types of property insurance. Losses due to war or nuclear hazard. Electronic equipment, unless it's permanently installed in the vehicle. Examples of electronic equipment include radios, stereos, tape decks, CD systems, navigation systems, Internet access systems, computers, telephones, televisions, two-way mobile radios, scanners, and CB radios. Tapes, records, disks, or other media used with electronic equipment. A total loss to Your Covered Auto due to destruction or confiscation or non-owned auto by government or civil authorities. A trailer, camper, or motor home if it isn't shown on the Declarations, unless the vehicle is a non-owned trailer, or is acquired during the policy period and the insured reports the purchase within 14 days. A non-owned auto when used by the insured or a family member who doesn't have a belief of entitlement to use the non-owned auto. Loss to radar and laser detection devices and equipment. Custom furnishings and equipment in any pickup/van. Custom furnishings and equipment include special carpeting and insulation, furniture or bars, height-extending roofs, and custom murals, paintings, decals, and graphics. The following items are not considered custom furnishings or equipment: any cap, bedliner, or cover in or upon any pickup. A non-owned auto being used in the auto business. Any auto when located at a racing facility for organized racing. Under Part D if either state law or the rental agreement prevent the rental car company from recovering damages from the insured. Many insurers automatically cover a rental vehicle with the same coverage as the insured has on his/her own personal auto policy. If the insured only has liability coverage on a personal auto policy and rents a car for vacation, the rental car is not fully insured by the insured's PAP. The insured will need to fill this gap by buying the rental agency's insurance or upgrading his or her own policy.
Supplemental Extended Reporting Period (SERP)
An optional reporting period of unlimited duration may be purchased by endorsement if requested within 60 days of the end of the policy term. The SERP isn't available for purchase after 60 days beyond policy expiration. The SERP covers claims arising from occurrences that took place after the retroactive date and before the end of the policy term, regardless of when the claim is made. Cost may be up to 200% of the CGL's annual premium. Premium for this optional coverage is a one-time charge and is fully earned at issuance. The SERP can't be cancelled and no refunds are made.
Temporary substitute
Any auto or trailer that is non-owned while being used in place of an insured vehicle which not available because of breakdown, repair, servicing, loss, or destruction
Changes
Any changes to the policy must be made in writing by the insurer.
Insurable Events
Any event, past or present, that may cause loss, or damage, or create legal liability on the part of an insured.
Excess Insurance
Any form of insurance coverage that provides protection against certain perils or causes of loss ONLY after loss or damage exceeds a stated amount or the limits stated in specific policies or self-insurance. Excess insurance may be written over primary, excess, or umbrella insurance.
Your Product
Any goods or products (other than real property) that are manufactured, sold, handled, distributed, or disposed of by the named insured, others trading under the named insured's name, or a person or organization whose business the named insured has acquired.
Part D Insuring Agreement (continued) The policy defines non-owned auto as:
Any private passenger auto, pickup, van, or trailer not owned by, furnished, or available for the regular use of the named insured or a family member, while being used by the named insured or a family member. Any auto or trailer being used as a temporary substitute for the covered auto, while the covered auto is out of normal use due to: Breakdown Repair Servicing Loss Destruction
Primary Insurance
Any type of coverage that responds to a loss before all other coverage responds.
Declared auto
Any vehicle shown in the Declarations
Fair Credit Reporting Act (15 USC 1681-1681d) The applicant has the right to review the report. Applicant Challenge ? Inaccuracies? Disallowed Information? The Insurer is not responsible for correcting inaccuracies on any reports. However...?
Applicant Challenge - Credit reporting agency must reinvestigate within 6 months, if the applicant challenges accuracy. Inaccuracies - Agency must forward to applicant inaccurate information given out within previous 2 years. Disallowed Information - Report must not include lawsuits over 7 years old or bankruptcies over 10 years old. The Insurer is not responsible for correcting inaccuracies on any reports. However, if an applicant is denied coverage because of inaccurate information, they are entitled to certain rights.
Violent Crime Control and Law Enforcement Act of 1994 (18 USC 1033, 1034) Insurance license applicants and producers:
Applicants who have been convicted of a felony must apply for Consent to Work in the business of insurance—prior to applying for an insurance license Producers must apply for consent in their resident state Officers and employees must apply for consent in the state where their home office is located Prohibited persons (convicted felons) must apply for consent in order to discover if they are permitted or prohibited from the insurance business Reciprocity - If consent is granted by any state, other states must allow the applicant to work in their states as well Consent Withdrawal - If conditions of consent are not continually met, the consent may be withdrawn
Which of the following does not apply to the Other Coverage Glass or Safety Glazing Material? May be settled on a replacement cost basis No coverage applies if a dwelling is vacant for 60 consecutive days before the loss Applies to all Dwelling forms Covers glass that is part of a covered structure
Applies to all Dwelling forms
If the insured does not agree with the insurer's decision regarding a claim, what process helps decide the outcome?
Arbitration
Law of Large Numbers
As the number of units in a group increases, the more likely it is to predict a particular outcome.
Claims Department
Assists the policyholder in the event of a loss.
The claims-made liability form provides coverage from a date that precedes the policy. Which of the following defines that date?
Retroactive date
Which of the following statements about the Personal Jewelry Floater is correct? An appraisal of the item is optional Automatic coverage for newly acquired items is only provided for 30 days Coverage is written on a replacement cost basis The Pair and Sets Clause does not apply
Automatic coverage for newly acquired items is only provided for 30 days
Which of the following is NOT true of coinsurance? A The higher the coinsurance percentage purchased, the lower the rate the insured pays B It applies in the event of total loss C It encourages the insured to maintain insurance to value D It is a common policy provision
B It applies in the event of total loss
A ____________vehicle is a covered vehicle when Your Covered Auto is being repaired due to a covered loss.
Temporary substitue
A person who takes possession of another person's property in order to repair it is called?
Bailee
Bankruptcy of an Insured
Bankruptcy or insolvency of an insured does not relieve the insurer of its obligations under the policy.
Bankruptcy
Bankruptcy or insolvency of an insured does not relieve the insurer of its obligations under the policy. If the insured declares bankruptcy, the insurer must still comply with all obligations of the policy.
Breach of Trust
Based on fiduciary relationship of parties and the wrongful acts violating the relationship
Broad Theft Coverage Endorsement (DP 04 72) Includes Broad Theft Coverage Limited Theft Coverage
Because none of the dwelling forms include theft coverage, one of two endorsements must be used if the named insured wishes to have coverage for the peril of theft. The Broad Theft Coverage endorsement may be added to any of the dwelling forms IF the described location is owner occupied. If the dwelling is tenant occupied, the Limited Theft Coverage endorsement must be used.
Personal Liability Supplement
Because the dwelling forms only provide property coverage, if personal liability coverage is desired, coverage must be secured under another policy or an endorsement must be attached to the dwelling policy. The Personal Liability endorsement contains its own Definitions section and provides Coverage L - Personal Liability and Coverage M - Medical Payments to Others. Personal liability coverage applies to claims made or suits brought against an insured for damages because of bodily injury or property damage caused by an occurrence to which the policy applies. Payment will be made up to the limit of liability appearing on the declarations for which an insured is legally liable. Coverage is also provided for defense in addition to the limits of liability. Medical Payments to Others coverage applies to claims for the necessary medical expenses incurred or medically ascertained within 3 years from the date of an accident causing bodily injury to which the policy applies. Medical expenses are reasonable charges for medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, and funeral services Coverage does NOT apply to expenses incurred by the named insured or regular residents of the named insured's household, except for residence employees Coverage applying to others must arise out of injury to a person on an insured location with the insured's permission, or to persons off an insured location if the injury is caused by the activities of an insured or residence employee while in the course of employment by the insured. Also covered are injuries to persons caused by an animal owned by, or in the care of, an insured; or that arise out of conditions on an insured location or ways immediately adjoining it. The endorsement also provides additional coverages for claim expenses, first aid expenses, and damage to the property of others. Exclusions include: Expected or intended injury Business Professional services War Communicable disease Sexual molestation Corporal punishment Physical or mental abuse Controlled substance
Merchant Marine Act of 1920 (the Jones Act)
Because workers' compensation laws do not apply to seamen, the Jones Act allows insured seamen to make claims for injuries suffered during the course of employment. It also regulates maritime commerce in U.S. waters, transportation of cargo, and the rights of seamen.
Bodily Injury
Bodily harm, sickness, or disease, including death that results.
Contract of Utmost Good Faith
Both parties bargain in good faith when forming and entering into the contract. The two parties rely upon the statements and promises of the other and assume no attempt to conceal or deceive has been made.
Conditional Contract
Both parties must perform certain duties and follow rules of conduct to make the contract enforceable. The insurer must pay claims if the insured has complied with all the policy's terms and conditions.
Which of the following is not a peril covered by personal injury? Wrongful eviction Breach of contract Libel Malicious prosecution
Breach of contract
A Liberalization Clause serves which of the following purposes?
Broadened coverage applies automatically to all policies without a premium charge
The Condominium Association Coverage Form is used in place of which coverage form when insuring a condo building insured by the association? Condominium HO-6 policy Building and Personal Property Coverage form Dwelling property Homeowner Policy
Building and Personal Property Coverage form
Masonry Noncombustible
Buildings with exterior walls of masonry (not less than 4 inches thick) or made of fire-resistive construction with a rating of not less than one hour and noncombustible floors and roofs.
Joisted Masonry
Buildings with exterior walls of masonry or fire-resistive construction rated for not less than one hour and with combustible floors and roofs.
Covered Property Business Personal Property owned by the insured
Business Personal Property owned by the insured - Some business personal property is only insured if it is located in or on a building described on the Declarations OR within 100 feet of it (i.e., in the open or inside a vehicle). Covered business personal property includes: Furniture and fixtures - Such as office furniture and shelving. Machinery and equipment - Such as refrigerators and telephone systems. Stock - Merchandise held in storage or for sale, raw materials, and supplies used for packing or shipping such stock. Any other personal property owned by the named insured and used in the named insured's business. Tenants' improvements or betterments made to the part of a building occupied, but not owned, by the named insured. Leased personal property for which the named insured has a contractual obligation to insure, unless insured elsewhere on the policy.
Time Element Coverage Forms Business Income Form
Business income is the net income (profit or loss before income taxes) that would have been earned had the covered loss not occurred PLUS normal, ongoing operating expenses, including payroll. Extra expense is the necessary expenses incurred by the insured during the "period of restoration" that would not have been incurred had the covered loss not occurred. The Period of Restoration begins 72 hours after the time of loss, and ends on the earlier of the date when the property should be repaired or rebuilt with reasonable speed, or the date when business is resumed at a new permanent location. Three forms of business income coverage exist: Business Income and Extra Expense Coverage Form Business Income Without Extra Expense Coverage Form Extra Expense Coverage Form Coinsurance applies to Business Income coverage and if, at the time of loss, the limit of insurance shown on the declarations fails to meet the coinsurance percentage shown on the Declarations, a loss penalty will apply. The coinsurance provision may be suspended if the Optional Coverage, Agreed Value, is purchased. Coverage is subject to the causes of loss forms applying to the forms of commercial property coverage attached to the policy. If the direct cause of a property loss is NOT covered by the cause of loss form attached to the Building and Personal Property Coverage Form or the Builders Risk Coverage Form, then NO business income or extra expense coverage will apply.
Each of the following is a direct loss, except: A Cracked windshield B Broken pipe water damage C Loss of income D Fire damage
C
Which of the following is not eligible for coverage under a Fair Access to Insurance Requirements program? Farm property Homeowner Uninsured dwelling property Rental dwelling
Farm property
Other Insurance
Coverage may be written as primary or as excess. When written on a primary basis and other collectible primary insurance is also available, the loss is shared either on a contribution basis or by limit of liability.
Which of the following is not a duty of the insured if the insured's vehicle is damaged when it hit a tree? Promptly notify the insurance company Submit to a physical exam Submit a proof of loss Call the police *Part E
Call the police
All of the following are types of property NOT covered under Coverage C - Personal Property, except: Canoes Motor vehicles A dog Credit cards or fund transfer cards
Canoes
The property coverage of a BOP includes which of the following?
Carpeting that is permanently installed inside the building. Carpeting attached to the building is part of the building.
Loss Reserves include 4 methods Name them:
Case Reserve Method, Average Value Method, Loss Ratio Method, Tabular Method
Which of the following is an example of risk retention?
Choosing a $1,000 deductible Risk retention involves the insured personally assuming all or a portion of a loss.
Section II - Additional Coverages The following coverages are provided and payments are made in addition to the limit of liability appearing on the declarations. Name them:
Claim Expenses ( Supplementary Payments) First Aid Expenses Damage to Property of Others Loss Assessment
Duties in the Event of Occurrence
Claim, or Suit,The insured must see that the insurer is notified as soon as practicable, in writing, of an occurrence or an offense that may result in a claim. The notice should include when and where the occurrence or offense took place, the names and addresses of injured persons and witnesses, and the nature of any injury or damage.
The _______ Limit of liability applies to bodily injury, property damages, or both.
Combined Single
Four Elements of a Legal Contract
Competent parties, Legal Purpose, Agreement, Consideration
Covered Property Building or structure described in the Declarations, including:
Completed additions; outdoor fixtures; and permanently installed fixtures, machinery, and equipment. For example, a print shop that owns four commercial printers that are affixed to the cement floor would insure the printers as building items rather than items of business personal property. Personal property owned by the named insured and used to service and maintain the insured buildings, structures, and premises. Lawn mowing and snow removal equipment not otherwise excluded fall into this category of business personal property. Also included are materials and supplies of the business that are on the premises or within 100 feet of the premises. If the named insured is making an addition to an insured building or structure, or conducting alterations or repairs on an insured building or structure, the materials, equipment, supplies, and temporary structures used in connection with these activities are insured as building items if they are located on the described location or within 100 feet of it.
Which of the following legal liability exposures is covered if bodily injury or property damage is caused by the insured's negligent or faulty work? Premises and Operations Products Completed operations Contingent liability
Completed operations
if a covered loss occurs, the insured must provide proof of loss, and the insurer must respond within a specified time period following the loss. This is because insurance contracts are which type of contract?
Conditional In the conditional section of the policy, the insured signs the application and agrees to do certain things, including signing of proof of loss. Following a loss the insured must complete and sign a proof of loss. This is a policy condition making the contract "conditional".
The duties and obligations of the insured are found under what part of the insurance policy?
Conditions
All of the following is covered under Coverage B - Other Structures, except: Swimming pool Construction materials Storage building Shed
Construction materials
Which of the following legal liability exposures is covered if a business employs an independent contractor? Premises and Operations Completed operations Products Contingent liability
Contingent liability
Sidetrack Agreement (Hold Harmless Agreement)
Contract between a railroad and a business the railroad may service. Under this agreement, the business holds the railroad harmless if an accident occurs while the railroad is using the sidetrack to deliver goods to the business.
Which of the following is a common law defense used by the insured when the injured party is partially responsible for his own injuries? Absolute liability Proximate cause Contributory negligence Comparative negligence
Contributory negligence
An attached carport is covered under which of the following coverages?
Coverage A Coverage A - Dwelling includes structures attached to the dwelling, such as a carport, attached garage, breezeway, or deck.
Identify under which coverage part of a homeowners policy the following items would be covered Items: Installed carpeting Home computer Swimming Pool Tile floors Fireplace Furniture Detached garage Money Fence
Coverage A: Installed carpeting Tile floors Fireplace Coverage B: Swimming Pool Detached garage Fence Coverage C: Money Home computer Furniture
Dwelling Coverages Coverage A: Coverage B: Coverage C: Coverage D: Coverage E:
Coverage A: Dwelling Coverage B: Other Structures Coverage C: Personal Property Coverage D: Fair Rental Value Coverage E: Additional Living Expenses
Coverage B - Other Structures
Coverage B applies to other structures on the described location if they are separated or detached from the dwelling by clear space, a fence, or a utility line. Examples include a detached garage, shed, pool, and an outdoor storage building. No coverage is provided for structures rented to others who were not a tenant of the dwelling before residing in the other structure. An exception applies if the structure is rented solely as a private garage. As with Coverage A, coverage is NOT provided for land. No coverage is provided for other structures used in whole or in part for commercial, manufacturing, or farming purposes. However, if other structures used for such purposes only store property owned solely by the named insured or a tenant of the dwelling, coverage will apply provided the property doesn't include any gaseous or liquid fuel located other than in a vehicle's fuel tank. The Coverage B limit of insurance is up to 10% of the Coverage A limit and is automatically provided under each of the dwelling forms. In the case of a DP-1, this limit does not increase the amount of insurance provided by Coverage A. The DP-2 and DP-3 forms provide additional insurance. *** The Coverage A limit on an insured dwelling is $100,000. In a DP-1, a detached garage would be covered for up to $10,000; however, the most the policy would pay for loss to both the dwelling and garage is $100,000. Under the DP-2 and DP-3 forms, the garage would be covered for up to $10,000 and this would be in addition to the $100,000 of coverage provided for the dwelling. ******* Neither Coverage A nor B insure damage caused by wind, hail, ice, snow, or sleet damage to outdoor radio and television antennas and aerials, including their lead-in-wiring.
Which coverage pays for the loss of rents due to direct loss to the dwelling from a covered peril?
Coverage D - Fair rental Value
Coverage D - Fair Rental Value
Coverage D provides insurance for indirect losses that occur as a result of direct losses to property insured under Coverages A, B, or C that are covered by the policy. The policy pays the fair rental value of that part of the described location that is rented to others, or held for rental to others, at the time of a loss IF the rental unit is unfit for its normal use because of a direct loss covered by the policy. Payment will be made for the shortest time necessary to repair the damaged portion of the dwelling that's normally held for rental. A deduction is made for any continuing expenses — meaning expenses that would continue without regard to whether the unit can be occupied (e.g., electric bills or the mortgage payment). If a civil authority prevents the insured from using the dwelling because a neighboring location was directly damaged by peril that is insured by the insured's policy, the fair rental value will be paid for no more than 2 weeks. Cancellation of a lease is not covered. The Coverage D limit of insurance is up to 20% of the Coverage A limit and is automatically provided under each of the dwelling forms. In the case of a DP-1, this limit does not increase the amount of insurance provided by Coverage A. The DP-2 and DP-3 forms provide additional insurance.
Part D - Coverage for Damage to Your Auto
Coverage Part D of the personal auto policy addresses coverage for damage to the insured's auto, also known as physical damage coverage. Part D provides first-party property damage coverage for the insured's covered autos and also provides some coverage for non-owned vehicles being operated or used by the insured and family members.
Coverage C - Personal Property
Coverage applies to household and personal property usual to the occupancy as a dwelling if it is owned by the insured or by members of the insured's family who reside with the insured. Loss due to vandalism and malicious mischief is covered even if the property has been vacant for 60 days or more. Coverage only applies while insured property is located at the described location. After a loss and at the insured's request, Coverage C will also apply to personal property of a guest or servant while located on the described location. Personal property of a tenant or boarder is not covered. Coverage also automatically applies to personal property the insured removes from the location to a newly acquired principal residence for 30 days or until policy expiration, whichever occurs sooner. Otherwise, coverage is not provided for personal property located off the described location. Property not covered includes: Accounts, bank notes, coins, and currency Birds, animals, and fish Aircraft and watercraft other than rowboats or canoes Motor vehicles other than those used to service the described location or to assist the handicapped Hovercraft Data, including books of account, drawings, paper records, computers, and their equipment Credit cards, funds transfer cards, and other access devices Water or steam Grave markers As a coverage giveback, the insured may use up to 10% of the Coverage C limit of insurance for loss caused by an insured peril to covered property anywhere in the world.
Coverage A - Dwelling
Coverage applies to the dwelling described in the declarations, used principally for residential purposes, including structures attached to the dwelling, such as an attached garage, carport, breezeway or deck. Coverage also includes materials and supplies on or next to the described location used to construct, alter, or repair the dwelling or other structures at the described location. Unless otherwise covered in the policy, building equipment and outdoor equipment used to service the described location is considered part of the dwelling IF such property is located on the described location. No coverage applies to land, including land on which the dwelling is located. The Coverage A limit of insurance appears on the declarations as a specific limit. It is chosen by the named insured at the time coverage is applied for and should represent the dwelling's replacement value.
Exclusions Only Applying to Coverage F - Medical Payments to Others
Coverage does not apply to bodily injury: To a residence employee if the bodily injury occurs off an insured location AND NOT in the course of the residence employee's employment by the insured. To any person who is eligible to receive benefits voluntarily provided or required by law under any workers' compensation, occupational disease law, or non-occupational disability law. From any nuclear reaction, nuclear radiation, or radioactive contamination—regardless of how caused. To any person other than a residence employee of an insured who regularly resides on any part of the insured location. This includes roommates and tenants as well as any insured.
Earthquake Endorsement
Coverage for a loss caused by earthquake, including land shock waves or tremors before, during, or after a volcanic eruption, is provided to property insured under Coverage A (Dwelling), B (Other Structures), and C (Personal Property). A single earthquake is defined as 1 or more earthquake shocks that occur within a 72-hour period. The coverage does not cover loss resulting from flood of any nature, or the cost of filling land. A deductible that is a percentage of Coverage A (Dwelling) or Coverage C (Personal Property), whichever is greater, is included.
DP-3 (Special Form)
Coverage for the dwelling and other structures is provided on an open perils basis, meaning coverage is provided for all causes of loss except for those perils specifically excluded. In addition to the policy's General Exclusions, the DP-3 specifically excludes the following losses under Coverages A and B: Collapse, except for coverage provided by Other Coverages. Freezing, thawing, or weight of water or ice on patios, fences, swimming pools, foundations, piers, docks, retaining walls, etc. Theft of property not part of a covered building or structure. Theft in or to a dwelling or structure under construction. Wind, hail, ice, snow, or sleet to outdoor radio and TV antennas and aerials, trees, shrubs, plants, and lawns. Vandalism and malicious mischief, theft or attempted theft, and any ensuing loss if the dwelling has been vacant for more than 60 consecutive days immediately before a loss. Constant or repeated seepage or leakage of water or steam over a period of time from within a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or household appliance - these systems and appliances do NOT include sumps, sump pumps, mold, fungus, or wet rot unless resulting from accidental discharge or overflow of water or steam and is hidden from view. Any of the following: wear and tear; deterioration; mechanical breakdown; smog, rust, or corrosion; smoke from agricultural smudging or industrial operations; pollution; settling, cracking, bulging, or expansion of foundation, walls, floors, pavement, or patios; and birds, vermin, rodents, insects, or domestic animals. Theft of property that is part of the dwelling or other structures is covered as long as the dwelling or other structures have not been vacant for more than 60 days. Theft of contents is still excluded unless coverage has been added by an endorsement. Personal property is covered for the Broad Form (DP-2) named perils. Losses to the dwelling and other structures are paid on a replacement cost basis, and losses to personal property contents are paid on an actual cash value basis to the insured.
Product Recall
Coverage is excluded when the product, work, or property is withdrawn or recalled from the market, or from use, by a person or organization because of a known or suspected defect, deficiency, inadequacy, or dangerous condition. In addition to the loss of use being excluded, the withdrawal, recall, inspection, repair, replacement, adjustment, removal, or disposal of the insured's product, work, or any impaired property is also excluded. This is sometimes called the Sistership Exclusion.
Peak Season Limit of Insurance (CP 12 30)
Coverage is provided for a specified increase in the business personal property limit of insurance during a designated period of time, such as the Christmas shopping season. The insured chooses the property for which the value will be increased, the amount of the insurance, and the applicable time period.
Property removed
Coverage is provided for loss to covered property by any cause while being removed from a premises endangered by a peril insured against. Coverage applies for no more than 30 days while removed. For example, if a wildfire threatens the insured's home and property is removed, loss to the removed property that is caused by flood or earthquake would be covered during the first 30 days the property is removed. However, if flood threatened the insured's home, coverage wouldn't apply because the endangering peril is not a peril insured against.
Collapse
Coverage is provided for the abrupt falling down or caving in of a building, or a portion of a building, if the building cannot be occupied for its intended purpose after the collapse. -Direct physical loss from collapse must be caused by a Coverage C named peril, hidden decay, hidden insect or vermin damage, weight of contents, equipment, animals, people, the weight of rain collecting on a roof, or the use of defective materials or construction methods. -The policy does not cover collapse of awnings, fences, patios, swimming pools, underground pipes, cesspools, etc., unless damage is the direct result of the collapse. -This coverage does not increase the limit of insurance that applies to the damaged property.
Trees, Shrubs, and Plants
Coverage is provided for trees, shrubs, plants, or lawns on the residence premises for the following perils: fire or lightning, explosion, riot or civil commotion, aircraft, vehicles not owned or operated by a resident of the residence premises, vandalism or malicious mischief, and theft. Coverage is NOT provided for any other peril, including windstorm or hail. The limit of insurance is up to 5% of the Coverage A limit of liability and applies to all trees, shrubs, plants, or lawns. The most paid for loss to any one tree, shrub, or plant is $500. This limit is additional insurance. No coverage is provided for property grown for "business" purposes.
Glass or Safety Glazing Material
Coverage is provided for: -The breakage of glass or safety glazing material that is part of a covered building, storm door, or storm window, including loss caused by earth movement. -Direct physical loss to covered property caused solely by the pieces, fragments, or splinters of broken glass or safety glazing material. NO coverage is provided for loss occurring on the residence premises if the dwelling was vacant for more than 60 consecutive days before the loss, except coverage is provided for loss caused by earthquake. This coverage does not increase the limit of insurance that applies to the damaged property.
Spoilage (CP 04 40)
Coverage is provided on perishable property in the care, custody, or control of the insured at the insured premises. This endorsement includes losses due to breakdown, contamination and power outage. *Breakdown or contamination includes changes in temperature or humidity as the result of mechanical failure of refrigeration, cooling, or humidity-control equipment at the insured location. *Power outage includes changes in temperature or humidity as the result of interruption of electrical power either on or off the insured premises.
NFIP Eligibility, Limits and Conditions
Coverage is provided on/for: --1- to 4- family dwellings under the (Dwelling Form). --Other residential buildings and non-residential buildings under the General Property Form. --Buildings owned by a residential condominium association under the Residential Condominium Building Association Form (RCBAP). Under FEMA regulations, in order to obtain, renew, or change a federal loan, a property owner must purchase flood insurance if the property is located in a special flood hazard area (SFHA). Two separate programs of coverage are available: the Emergency Program (for communities in the earliest stage of participation in the NFIP) and the Regular Program. Maximum limits of insurance apply to property insured under both programs. 1. The Emergency Program offers a $35,000 maximum amount of coverage on 1- to 4-family dwellings and a maximum $100,000 on other residential and non-residential buildings. The maximum amount of coverage for contents in a single-family dwelling is $10,000 and $100,000 on other residential and non-residential buildings. 2. The Regular Program offers a $250,000 maximum amount of coverage on residential buildings and $500,000 on non-residential buildings. The maximum amount of coverage for contents in a residential building is $100,000 and $500,000 on non-residential buildings. Coverage becomes effective on the 30th calendar day after the applicant completes the application and pays the premium. Property is insured on an actual cash value basis, except 1- to 4-family residences and residential condominiums may be insured on a replacement cost basis. Property removed to protect it from flood is covered for 45 days at other locations. Coverage up to $30,000 applies to the increased cost of compliance with flood plain management ordinances or laws that regulate the repair or rebuilding of property damaged in a flood. Each type of property loss is subject to a deductible. The $500 loss deductible applies separately to the building and to personal property, including any appurtenant structure and debris removal expense. Example A loss that involves damage to both the building and contents would result in a $1,000 deductible (2 x $500 = $1,000).
Personal Jewelry Floater
Coverage may be written on a valued or actual cash value basis. The floater contains a "Pair and Sets Clause". If a covered loss occurs to an item that is part of a set, the value of the remaining item(s) is reduced based on the difference between the value of the total set and the value of each item individually. This is because each item is worth more as a "set" than on its own. For example, if a pair of diamond earrings is valued at $2,000, and a loss occurs to one earring, the value of the pair drops by more than 50%. If one earring by itself is valued at $800, the total loss is $1,200. The "Pair and Sets Clause" specifies the conditions and the policy limit should this type of loss occur. When insuring most items on a floater, the insured must submit an appraisal that documents both a description of the property to be insured and its value. Some insurers require appraisals for all insured items; others only require appraisals for items insured in excess of a certain amount, such as $2,500. An appraisal is usually required at or before the time insurance is bound. Newly acquired items are automatically insured if they are the same class of property already insured by the floater. The limit of coverage is no more than a specific percentage of the value shown on the schedule. Automatic coverage for newly acquired items is only provided for 30 days.
Loss Assessment
Coverage up to $1,000 is provided for the named insured's share of loss assessment charged during the policy period by a corporation or association of property owners. The assessment must be made because of direct loss to property owned collectively by all members AND that was caused by a Peril Insured Against under this policy. This coverage is additional insurance.
Credit Cards, Electronic Fund Transfer Card, Forgery, and Counterfeit Money
Coverage up to $500 is provided for the insured's legal responsibility because of theft or unauthorized use of credit cards, electronic fund transfer cards or access devices issued to an insured. Loss to an insured caused by forgery, alteration of a check or negotiable instrument, or counterfeit money is also covered. Exclusions exist for use of a covered card or device by a resident of the named insured's household, by a person entrusted with a card or access device, the insured's failure to comply with credit card requirements, business use of a card, or the insured's dishonesty. This coverage also includes defense.
Decide whether the following events would be covered by a DP-2 or DP-3, or would be a general exclusion Burglar damage Nuclear hazard Fire War Falling objects Intentional loss Earth movement Lightning Flood Explosion
Covered: Burglar damage Fire Falling objects Lightning Explosion Not Covered: Nuclear hazard Intentional loss Earth movement Flood War
What is the purpose of the Extended Non-Owned Coverage for a Named Individual endorsement? Coverage is extended 25 miles into Mexico Extends coverage for a leased vehicle Covers non-owned vehicles furnished for the insured's regular use Covers an individual who does not own a car
Covers non-owned vehicles furnished for the insured's regular use
Crop, Hail, and Windstorm Insurance
Crop insurance is a specialized policy that protects the insured against reduced yield because of a covered loss to crops before they are harvested.
Which of the following BEST describes a scheduled limit of insurance on a property policy? A Insures multiple items of property on multiple policies B Insures a single item of property on a single policy for a specific limit C Insures a single item of property at a blanket limit D Insures multiple items of property on a single policy
D Insures multiple items of property on a single policy
Actuarial Department
Gather and interpret statistical information used in rate making. An actuary determines the probability of loss and sets premium rates.
Prior Approval
Insurers cannot use rates until approved by the Department of Insurance, or until a specific time period has expired after the filing.
Difference in Conditions (DIC)
DIC insurance requires the use of a special form designed to fill in the coverage gaps contained in a property policy. There is no standard policy form. Coverage is generally written on an open perils basis, excluding losses by perils that are covered under standard property forms (such as fire, lightning, windstorm, hail, etc.). The form does not contain a Coinsurance or Pro Rata Clause, and the form may be written for an amount of insurance different from the limit of insurance provided by the policy it complements. When written to supplement an underlying policy, DIC coverage normally carries a high deductible, such as $10,000 or more. The form is often written to provide coverage in the event of earthquake, flood, collapse, and subsidence.
Which of the following dwelling forms pays for losses to the dwelling on an actual cash value basis?
DP-1
Which of the following dwelling program forms covers the building on an open peril basis?
DP-3 The DP-3 Special form covers the dwelling and other structures on an open peril basis, which covers all perils except the perils specifically excluded.
Nuclear Hazard
Damage is excluded by any nuclear reaction, radiation or radioactive contamination, or a consequence of any of these.
Comparative Negligence
Damages are reduced in proportion to the degree of the claimant's negligence. For example, if the claimant is 5% negligent and the wrongdoer is 95% negligent, the claimant may only recover 95% of damages.
Expense Ratio
Determined by dividing an insurer's Total Operating Expenses by Written Premiums.
Loss Ratio
Determined by dividing the sum of Paid Losses + Loss Reserves by Total Earned Premiums.
Exclusive or Captive Agency System
Deals with the insured through an exclusive or captive agent. Agent represents solely one company or group of companies having common ownership. Insurer retains ownership rights to the business written by the agent. The agent is an employee or a commissioned independent contractor. Insurer may or may not provide office and agency support services.
The Personal Liability endorsement includes each of the following additional coverages, except:
Debris removal
Section I - Additional Coverages Both sections of the homeowners policy provide additional coverages. Under Section I Additional Coverages, a percentage of the applicable Coverage A, B, C, or D limit of liability applies in certain circumstances; in other cases, additional limits of insurance apply. What are they
Debris removal Reasonable Repairs Trees, Shrubs, Plants Fire Department Service Charge Property Removed Credit Cards, Electronic Fund Transfer Card, Forgery and Counterfeit Money Loss Assessment Collapse Glass or Safety Glazing Material Landlord's Furnishings Ordinance or Law Grave Markers
Dishonesty
Deceit, misrepresentation, untruthfulness, falsification
In an insurance policy, where are the terms and phrases clearly describing the extent of coverage located?
Definitions The definitions section of the policy clarifies the meanings of certain terms used in the policy to avoid coverage disputes with respect to the extent of coverage provided by the policy. These words are typically printed in bold, italics, or quotations.
Mobile Home Insurance
Depending upon the insurer, insurance for mobile homes may be insured on a homeowners policy by adding a Mobile Home endorsement. If the insurer doesn't allow the addition of such an endorsement to its homeowners policy, a separate Mobile Homeowners policy must be written. Under ISO (Insurance Services Office) rules, an owner occupied mobile home may be covered under an HO-2 or HO-3 by endorsement. The endorsement amends the definition of Coverage A (Dwelling) to include a mobile home. Tenants of a mobile home may insure their personal property under an HO-4 if the insurer's underwriting guidelines permit.
Motor Carrier Regulatory and Modernization Act (the Motor Carrier Act of 1980)
Deregulated the trucking industry by prohibiting any entity from interfering with a motor carrier's right to set its own rates. Motor carriers and private motor carriers that transport property are required to establish evidence of financial responsibility in the form of insurance, a bond, a guarantee, or qualification as a self-insurer.
Moral Hazard
Dishonest tendencies that increase the probability of a loss; certain characteristics and behaviors of people. Example: An insured burns down his/her own house to collect the insurance payout. An insure committing arsen.
Personal Producing General Agent
Does not recruit career agents. Sells insurance for carriers it is contracted with and maintains its own office and staff.
Domicile refers to? What are the three types?
Domicile refers to the jurisdiction (i.e., state or country) where an insurer is formed or incorporated. There are three types of Insurer domiciles: Domestic Insurer - An insurer organized under the laws of this state, whether or not it is admitted to do business in this state. Foreign Insurer - An insurer not organized under the laws of this state, but in one of the other states or jurisdictions within the United States, whether or not it is admitted to do business in the state or jurisdiction. Alien Insurer - An insurer organized under the laws of any jurisdiction outside of the United States, whether or not it is admitted to do business in this state.
Define all 4 elements: In order for an act or failure to act to be negligent, it must contain 4 elements Duty of Owed Violation of Duty Violation of Duty is Proximate Cause Foreseeable Consequence ** If any of the four elements is absent, an act, or the failure to act, is not considered negligent.
Duty is Owed - Requires the injured party to prove the alleged wrongdoer owed a duty to the injured party or to the public. Violation of Duty - Requires the injured party to prove the alleged wrongdoer not only owed a duty but also violated that duty. Basically, the alleged wrongdoer didn't exhibit reasonable care. Violation of Duty is Proximate Cause - Requires the injured party to prove the alleged wrongdoer's negligent actions or inactions were the proximate cause of actual injuries or damages. Foreseeable Consequence - Requires the injured party to prove the actual injuries or damages were a reasonably foreseeable consequence at the time the negligent action or inaction occurred.
Name the 4 elements
Duty is owed Violation of Duty Violation of Duty is Proximate Cause Foreseeable Consequence
Which of the following is not eligible for the Dwelling Program?
Dwelling is located on farm property
Dwelling Program Eligibility
Dwellings must be used principally for residential dwelling purposes and cannot have more than 4 dwelling units or more than five roomers or boarders. Mobile homes are eligible if they are permanently affixed to a foundation, but only on the Basic Form of coverage (DP-1). Incidental business occupancies, such as schools, studios, and offices, are permitted if the primary use of the dwelling is as a personal residence. Dwellings located on farms are not eligible.
Limits of Liability
Each policy includes a provision that specifies the most it will pay in the event of loss. Certain limits of liability apply to any one loss; other limits apply to the total of all losses that occur within the policy period. In addition, the manner in which limits of liability are designated vary by coverage and policy type. The limit of liability, or limits of insurance, are shown on the policy declarations page and are the most paid by the policy regardless of the number of insureds, claims made, lawsuits filed, or parties making claims or filing lawsuits.
General Exclusions The dwelling forms do not insure for loss caused directly or indirectly by any of the following — regardless of any other cause or event that contributes concurrently or in any sequence to the loss: Earth Movement: Water Damage: Power Failure: Neglect: War: Nuclear Hazard: Intentional Loss: Non-concurrent Exclusion:
Earth Movement - Earthquake, including land shock waves or tremors before, during or after a volcanic eruption; landslide; mudslide or mudflow; subsidence or sinkhole, earth sinking, rising, or shifting. Coverage is excluded whether the earth movement is caused by human, animal, or natural forces. If a direct loss by fire or explosion ensues from earth movement, it is covered. Water Damage - Flood, surface water waves, tidal water, overflow of a body of water, water or waterborne material that backs up through sewers or drains or overflows from a sump or sump pump, water or waterborne material below the surface of the ground — including water that exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool, or other structure (such as basement walls). If a direct loss by fire or explosion results from water damage, it is covered. Power Failure - The failure of power or other utility service if it takes place off the described location. Power failure occurring on the described location is covered. Neglect - The insured's neglect to use all reasonable means to save and preserve property at and after the time of a loss. War - War includes undeclared war, civil war, insurrection, rebellion, revolution, or any warlike act by a military force. The discharge of a nuclear weapon will be deemed a warlike act, even if accidental. War also includes any consequence of the preceding. Nuclear Hazard - Any nuclear reaction, radiation, or radioactive contamination — whether controlled or uncontrolled, except that fire resulting from the nuclear hazard is covered. Intentional Loss - Loss arising out of any act committed by or at the direction of the named insured or any additional insured, with the intent to cause a loss. Coverage is excluded for any insured committing the intentional loss, even those who did not commit or conspire to commit the act that causes the loss. Non-concurrent Exclusions - The following exclusions apply, however, if an ensuing loss is otherwise covered by the policy, it will not be excluded: weather decisions; acts or decisions, including the failure to act or decide, of any person, group, organization, or governmental body; faulty, inadequate, or defective planning, zoning, development, surveying, sighting, design, workmanship, repair, construction, renovation, remodeling, grading, compaction, materials used in repair, and maintenance.
Employee
Employee includes a leased worker. A leased worker is a full or part-time employee who has contracted with an employee leasing service (also known as a professional employer organization). Employee does not include a temporary worker. Temporary workers are employees of the supplying company.
Which of the following is attached to the policy to alter or add to the policy provisions?
Endorsement
Components of a Commercial Package Policy
Every CPP includes a Common Policy Declarations and Common Policy Conditions form. These policy sections apply to the entire policy, regardless of the types of coverage written. For example, one client may wish to package Crime and Commercial General Liability coverages; another client may wish to package Inland Marine and Business Auto coverages. Although each client will have different and specific coverage forms, their policies will contain the same common policy declarations and common policy conditions form. The CPP contains four key components explained on the subsequent slides.
Legal Liability Exposures
Every business has certain legal liability exposures that must be covered, most notably the following: Premises and Operations Exposure
Coverage A - Bodily Injury and Property Damage Liability (continued) Exclusions Coverage A doesn't cover bodily injury or property damage arising from:
Expected or Intended Injury - Expected or intended injury is the result of the insured's intention to cause injury. The intentional act is only excluded when the insured should have expected or intended to cause injury. An exception exists for bodily injury resulting from the use of reasonable force to protect persons or property. Contractual Liability - Liability assumed by the insured under a contract with two exceptions: --Liability that would exist whether the contract was in place or not. --A contract that is specifically listed as being covered under the policy. Liquor Liability - This exclusion only applies to insureds who are in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. --Liquor Legal Liability Insurance, or Dram Shop Liability Insurance, is available under a separate policy for businesses who need coverage to fill the coverage gap created by the exclusion. --This exclusion does not apply to a building owner who leases space to a bar. Host Liquor Liability is provided for those who only have incidental exposure. For example, if the insured is an insurance agency and is hosting its annual Christmas party, the exclusion won't apply. However, if the insured is a restaurant that serves alcohol and is hosting its annual Christmas party, the exclusion WILL apply.
Exclusions Applying to Coverages E and F
Expected or intended injury is excluded and applies even if the insured intended a different outcome. For example, the insured intended to hit Bob, but hit Joan instead. An exception exists for the use of reasonable force to protect persons or property. Previous editions of the homeowners policy only gave back coverage for the protection of persons. Coverage is excluded for bodily injury or property damage arising out of, or in connection with, a business conducted from an insured location OR engaged in by any insured, regardless of where the occurrence takes place. The exclusion applies if the insured owns a business or is employed by a business; no distinction is made between the two. Coverage is excluded for bodily injury or property damage arising out of the rendering of or failure to render, professional services. No coverage is provided for bodily injury or property damage arising out of a premises owned, rented by, or rented to others by an insured if the premises isn't an "insured location." No coverage is provided for bodily injury or property damage arising from any type of war, warlike act, or destruction, seizure, or use for a military purpose—including accidental discharge of a nuclear weapon. Bodily injury or property damage arising out of the transmission of a communicable disease by an insured is excluded. Bodily injury and property damage arising out of sexual molestation, corporal punishment, or physical or mental abuse is excluded. Bodily injury or property damage arising out of the use, sale, manufacture, delivery, transfer, or possession of a controlled substance is excluded. An exception to the exclusion exists for the legitimate use of prescription drugs by a person following the orders of a licensed physician. Coverages E and F don't apply to bodily injury sustained while using a watercraft that is: --An inboard motorboat owned by an insured, except while in storage --An inboard motorboat with more than 50 horsepower, rented by an insured --An outboard motorboat with more than 25 horsepower, owned by an insured --Sailing vessels 26 feet or more in length, owned or rented by an insured
The Earth Movement exclusion contains all of the following perils, except: Explosion Earthquake Landslide Mudflow
Explosion
A producer possesses three types of authority - what are they? explain
Expressed - Authority that is written into the producer's agency contract. An example would be the producer's binding authority if written in the contract. Implied - Authority the public assumes the producer has. An example would be the business activities of providing quotes, completing applications and accepting premiums on behalf of the insurer. Apparent - Authority created when the producer exceeds the authority expressed in the agency contract. This occurs when the insurer does nothing to counter the public impression that such authority exists. An example would be the producer's acceptance of premiums on a lapsed policy.
Time Element Coverage Forms Extra Expense Coverage Form
Extra expense means the necessary additional expenses incurred during the period of restoration, and which the insured would not have incurred if there had been no direct physical loss. Examples of such expenses include relocation expenses and costs to equip a temporary location. Extra expense coverage may be purchased without business income coverage by clients that will not suffer a consequential loss of business income after a property loss, but that would incur additional expenses.
A federal regulation called the ______________________ protects consumer privacy.
Fair Credit Reporting Act
Producer's responsibilities to the Insurer consist of:
Fiduciary duty to the insurer in all respects, especially when handling premium funds. Must keep premium funds in a trust account separate from other funds and forward to insurer promptly. Must report any material facts that may affect underwriting. Responsible for soliciting, negotiating, selling, and cancelling the insurance policies with the insurer. Duty to only recommend the purchase of suitable policies.
Each of the following is a typical property insurance policy exclusion, except: A Fire B Neglect C Ordinance or Law D Flood
Fire
The Common Policy Conditions in commercial property insurance include all of the following, except: Transfer of Rights and Duties Changes Fire Department Service Charge Inspections and Surveys
Fire Department Service Charge
Which of the following is correct about Difference in Conditions (DIC) Insurance? Flood is a peril that can be covered by this policy It is written on a standard form similar to the property form Fire and lightning are typical covered perils The Coinsurance Clause is included on all policies
Flood is a peril that can be covered by this policy
Exclusions Only Applying to Coverage E - Personal Liability
For any loss assessment, except as provided under the Additional Coverage, Loss Assessment. Under any contract entered into by an insured. Exceptions exist if the contract is a written contract that relates directly to the ownership, maintenance, or use of an insured location or the liability of others is assumed by the named insured prior to an occurrence. Property damage to property owned by an insured. Property damage to property rented to, occupied by, used by, or in the care of an insured. This is the care, custody, or control exclusion and an exception exists for property damage caused by the perils of fire, smoke, or explosion. Keep in mind that the Additional Coverage, Damage to Property of Others, provides $1,000 of coverage on a replacement cost basis to minimize this exclusion. Bodily injury to anyone eligible to receive benefits from any workers' compensation, occupational disease law, or non-occupational disability law. Bodily injury or property damage for which an insured is covered under any nuclear energy liability policy. Bodily injury to the named insured or any insured.
Covered Property Personal Property of Others
For coverage to apply, the property must be in the care, custody, or control of the named insured AND be located in or on a building shown on the Declarations, in the open (or in a vehicle) within 100 feet of the described premises. Any claim payment will be made only to the owner of the insured property.
Which of the following is an insurance company that is organized under the laws of a different state within the United States?
Foreign
Producer's responsibilities to insurance Applicant or Insured consist of:
Forward premiums to insurer on a timely basis. Seek and gain knowledge of the applicant's insurance needs. Review and evaluate the applicant's current insurance coverage, limits and risks. Serve the best interests of the applicant or insured, although producers represent the insurer. Recommend coverage that best protects the insured from possible loss and NOT the most profitable coverage from the perspective of the producer.
Fraud and False Statements (Fraudulent Insurance Act)
Fraud always involves a false statement and deceit; it can be either a criminal or civil crime. Federal laws prohibit the commission of fraud. In 2001, the NAIC adopted model legislation for the prevention and enforcement of insurance fraud. Subsequently, each of the states enacted its own Fraudulent Insurance Act. A fraudulent act involves a misstatement of material fact by a person who knows or believes that statement to be false. The statement is made to another person who relies on its accuracy to make a decision or to act and is subsequently harmed by relying on the deliberately false statement. State fraudulent insurance acts do not modify the privacy of any individual; they protect producers, brokers, and insurers in the event fraudulent information is provided by consumers. Insurance applications and claim forms must contain a disclosure about how false statements and fraud will be treated by the insurer. A sample warning is, "Any person who knowingly presents false or fraudulent information on an insurance application or claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison." If a person engaged in the business of insurance whose activities affect interstate commerce willfully embezzles, misappropriates funds/property, knowingly and with the intent to deceive makes a false material statement or purposely overstates the security of an insurer, the following penalties apply: A fine of no more than $50,000, imprisonment for up to 10 years, or both If the violation jeopardized the safety and soundness of an insurer and was a significant cause of the insurer being placed in conservation, rehabilitation, or liquidation by an appropriate court, imprisonment can be for up to 15 years If the amount embezzled or misappropriated does not exceed $5,000, violators will be fined up to $50,000 or imprisoned for up to 1 year, or both
Which of the following is not considered a product liability exposure? Product consumed by a person at a restaurant Goods stored on the insured premises Product distributed to customers Goods manufactured and sold to customers
Goods stored on the insured premises
Which of the following is a Section I exclusion in the Homeowners policy? Property removed Debris removal Governmental action Loss assessment
Governmental action **Governmental action is the destruction, confiscation, or seizure of covered property by order of the government and is excluded in the Homeowners policy.
All of the following are federal workers compensation laws EXCEPT the
Gramm-Leach-Bliley Act Federal workers' compensation laws include the Federal Employers Liability Act, the Longshore and Harbor Workers' Compensation Act, and the Jones Act.
An owner of a condominium unit would purchase which Homeowner form?
HO-6, Unit-owners Form
The following risks is considered a peril or a hazard? Icy parking lot, Arson, Bungee jumping, Smoking
Hazard
The duties required of an injured person seeking coverage under Medical Payments to Others include all of the following, except: Cooperate with the insurer Submit to a physical exam by the insurer's physician Promptly notify the insurer of any notice or demand Help the insurer in settling the claim
Help the insurer in settling the claim
Strict Liability Applies to Products
If a claimant can prove that a product caused the injury, the manufacturer will be held liable whether or not the product was defective. Liability may be asserted even in the absence of negligence. For example, the manufacturer of a dangerous product is always legally liable if the product causes injury or damage.
Which of the following is NOT an exclusion in the CGL policy? Insured's Work Host Liquor Liability for those with incidental exposure Impaired Products Insured's Product
Host Liquor Liability for those with incidental exposure
Under a commercial package policy, the common policy declaration page shows the who, what, when, where and
How much remember the four W's and add in the premium cost. These elements comprise the declarations page.
Power Failure
If the failure of power or utility services takes place off the residence premises, this exclusion applies. However, if the failure of power or utility services takes place on the residence premises and is caused by a Peril Insured Against, it doesn't apply.
Part D No Benefit to Bailee
If a bailment relationship exists with respect to the covered vehicle, the policy will not make payment for the benefit of anyone who had care, custody, or control of the covered auto. For example, if the insured's vehicle was in the repair shop for servicing and the mechanic damaged the vehicle, this policy wouldn't make payment; the repair shop's insurance would have to pay because of its legal liability as a bailee.
Extended Reporting Period (Tail Coverage)
If a claims-made policy isn't renewed or replaced, the claims-made form contains a provision for the extension of time during which claims must be reported. This time frame is called an extended reporting period or tail coverage. The policy provides for two different options: one is included in the policy at no charge and the other requires the addition of an endorsement and the payment of an additional premium.
Coverage Extensions
If a coinsurance percentage of 80% is shown in the Declarations, the insured may extend the insurance provided by the Commercial Property Coverage Part as follows: *Newly Acquired or Constructed Property Coverage may be extended to cover new buildings to be constructed on the described premises, and newly acquired or constructed property at other locations. The coverage limit is $250,000 at each building. Coverage may be extended to cover newly acquired business personal property, up to $100,000 at each building. This automatic coverage ends at the earliest of the following 3 circumstances: The policy expires. The end of 30 days. The values of the newly acquired or constructed property are reported to the insurance company. *Personal Effects and Property of Others - Personal effects of the insured and the personal property of others in the insured's care, custody, and control are covered for up to $2,500 at each described premises. Coverage does not include loss by theft. *Valuable Papers and Records - Cost of Research Pays for loss or damage by a covered peril that requires the replacement or restoration of lost information on valuable papers and records. The maximum amount paid is $2,500 at each described premises, unless a higher limit is shown in the Declarations. *Property Off Premises A limit of $10,000 of coverage is extended for the insured's covered property (other than stock) while it is temporarily at a location the insured does not own, lease, or operate. This includes property located at a fair, trade show, or exhibition. Exclusions from coverage include property that is in or on a vehicle or in the care, custody, or control of the named insured's salesperson if the salesperson is not at a fair, trade show, or exhibition. *Outdoor Property The insured may extend a maximum amount of $1,000 to cover loss to outdoor fences, detached signs, antennas, trees, shrubs, and plants. A sublimit of $250 applies to any one tree, shrub, or plant. The perils covered by this extension are fire, lightning, explosion, riot or civil commotion, and aircraft. *Non-Owned Detached Trailers Extends insurance that applies to the insured's business personal property to apply to loss or damage to trailers the named insured does not own, provided the trailer is used in the insured's business, is in the insured's care, custody, or control at the described premises, and the insured has the contractual responsibility to pay for loss or damage to the trailer. The most the insurer will pay for loss or damage is $5,000 unless a higher limit is shown in the Declarations. Loss or damage is not covered while the trailer is attached to any motor vehicle or during hitching or unhitching operations. notes
Who is an Insured The Declarations indicates who is an insured; certain other parties are also an insured based on that designation. The following persons are an insured based on the designation on the Declarations--but only with respect to the conduct of the insured business: Even if not designated on the Declarations, the following parties are also insureds when performing duties related to the conduct of the insured's business:
If an individual is designated, the individual and his or her spouse are insureds. If a partnership or joint venture is designated, the partnership, joint venture, and members, partners, and their spouses are insureds. If a limited liability company (LLC) is designated, the LLC, its members, and its managers are insureds. If a trust is designated, the trust and its trustees are insureds. If any other type of organization is designated, the organization, its executive officers, its directors, and its stockholders are insureds. Even if not designated on the Declarations, the following parties are also insureds when performing duties related to the conduct of the insured's business: The insured's volunteer workers and employees who are not executive officers, directors, or managers. Any other person while acting as the insured's real estate manager. Any person or organization having temporary custody of the insured's property if the insured dies. The insured's legal representative if the insured dies, but only with respect to duties as legal representative. Newly acquired or formed organizations are also insured EXCEPT partnerships, joint ventures, or LLCs. The named insured must maintain ownership or majority interest for the organization to be an insured and no other similar insurance must be available to that organization. Coverage for newly acquired or formed organizations is only provided for 90 days after acquisition or establishment or until the expiration of the policy, whichever occurs first.
Part E - Duties After an Accident or Loss
If an insured person, or anyone else, wishes to seek coverage under the personal auto policy, he/she must comply with certain duties. Failure to comply with these duties may result in claim denial if the failure to comply harms the insurance company. In the event of a covered loss, persons submitting claims to the insurance company are required to: -Notify the insurer promptly about how, when, and where the accident or loss occurred. In addition, the insurer must be provided with the names and addresses of anyone with injuries or anyone who witnessed the accident or loss. -Cooperate with the investigation and settlement of any claim. -Promptly send to the insurer any copies of notices or legal papers received. -Submit to a physical exam as reasonably required by the insurer. -Authorize the insurer to obtain copies of medical reports and other pertinent records. Submit a proof of loss when required by the insurer. When seeking Uninsured Motorists Coverage, the insured must promptly notify the police if a hit-and-run driver is involved and provide legal papers if a lawsuit is filed. An insured making a claim under Part D must protect the property from further damage, notify the police promptly if the vehicle is stolen, and allow the insurer to inspect and appraise the damaged vehicle before its repair or disposal.
Consent Withdrawal
If conditions of consent are not continually met, the consent may be withdrawn
Reciprocity
If consent is granted by any state, other states must allow the applicant to work in their states as well
Reasonable Repairs
If covered property is damaged by an insured peril, the policy will pay the reasonable costs incurred by the named insured for necessary measures taken to protect covered property from further damage. This is not additional insurance and coverage does not increase the limit of insurance that applies to the covered property.
Part C Other Insurance
If more than one policy is in place and provides UM, the total amount the insured may collect cannot exceed the highest limit applying to any one vehicle. For example, if the insured's limits are 100/300 and the limits on the other policy are 50/100, the most the insured may collect is 100/300. If the loss occurs while the insured is occupying a non-owned vehicle, the policy covering the non-owned vehicle is primary, and the insured's coverage is excess. If more than one policy applies, the insurer pays only its share of the loss, which is the proportion that its limit of liability bears to the total amount of all applicable coverage.
Other Insurance *Part A
If other auto liability insurance is in place at the time of the loss, the personal auto policy will only pay its share of the loss. That share is the proportion the policy's limit bears to all insurance in place. For example, if the policy provides $100,000 of property damage liability insurance and another policy also provides $100,000 of property damage liability insurance, the insured's policy will only pay ½ of the liability loss. Because the total insurance in place is $200,000 and the limit of liability provided by the insured's policy is $100,000, the insured's policy pays ½ of the total insurance in place. This policy pays liability losses on an excess basis for non-owned vehicles. For example, the covered loss involves a car the insured borrowed from his neighbor. The insurance in place on the neighbor's car must pay first (it's primary insurance) and then this policy will pay (it's excess insurance).
Part D Other Sources of Recovery
If other insurance is in place, or if another party is available to make payment for a covered loss, this policy only pays its proportionate share of the loss (as we've seen in the other coverage parts). If a loss occurs and the covered auto is a non-owned auto, this policy will pay on an excess basis. Primary coverage is considered insurance provided by the vehicle's owner, any other property coverage that may be in place, and any other source of recovery, such as the insurance purchased by the driver of the vehicle.
Property Removed
If property is being removed from the described location to protect it because it is endangered by a covered peril, coverage is provided for direct loss by any peril while removed. Under the DP-1 form, coverage is provided for 5 days while removed; under the DP-2 and DP-3 forms, coverage is provided for 30 days while removed. This coverage does not increase the limit of insurance that applies to the property being removed.
Other Structures on the Residence Premises - Increased Limits
If the Coverage B limit of insurance is inadequate to insure all other structures on the residence premises (10% of Coverage A), this endorsement allows the insured to purchase increased limits for other structures listed in the endorsement. The increased limits generate an additional premium charge.
Improvements, Alterations, and Additions
If the insured is a tenant, he or she may use up to 10% of the Coverage C limit of insurance for a covered loss to improvements, alterations, and additions made or acquired at the insured's expense to that part of the described location only occupied by the named insured. In the DP-1 form, coverage is included in the limit of insurance; in the DP-2 and DP-3 forms, it's additional insurance.
Part C Arbitration
If the insurer and the insured do not agree on the recovery of damages or the amount recoverable by the insured, each party may select an arbitrator (at each party's expense) who then jointly select a third arbitrator (with the expense split equally by each party). A decision agreed upon by the arbitrators will be binding as to the insured's entitlement to, and the amount of, damages.
When the Insurer Does Not Renew
If the insurer decides not to renew, the First Named Insured is to be notified, in writing, 30 days before the expiration date.
Excess
If the policy is excess, it makes payment only after all other insurance in place exhausts its limits or denies coverage.
Primary
If the policy is primary, it makes payment before all other policies in place make payment for a loss.
Other Insurance Part B
If there is other applicable auto Medical Payments insurance, the insurer will pay only the proportion that its limit of liability bears to the total of all applicable limits. However, coverage for non-owned vehicles shall be excess over any other collectible auto insurance providing payment for medical or funeral expense.
Two or More Auto Policies Part F
If two or more policies issued by the same insurer apply to the same accident, the maximum limit of liability that will be paid will not exceed the policy with the highest limit.
Claims-Made Form
In a claims-made form, coverage is triggered if an "occurrence" takes place AFTER the retroactive date AND is REPORTED within the policy period. Determining the coverage trigger in the claims-made form is a two-step process: Step 1. Did the loss occur AFTER the retroactive date? Step 2. Was the loss REPORTED during the policy period? If the answer to both questions is yes, then coverage is triggered.
Loss Conditions
In addition to the Common Policy Conditions and the Commercial Property Conditions, the following conditions, most of which were discussed previously, apply: Abandonment Appraisal Duties in the Event of Loss or Damage Loss Payment - The insurer has the option of making payment for the value of the lost or damaged property or the cost to repair or replace. If it chooses, it may also take the property at an agreed or appraised value or actually arrange for the repair, rebuilding, or replacement of damaged property. Recovered Property - The insured, not the insurance company, has the option of keeping any recovered property and reimbursing the insurer for the amount of the loss settlement already received. Regardless of who retains the recovered property, the insurer pays the costs of recovery and any expenses required to repair the recovered property, subject to the limit of insurance. Vacancy If, at the time of loss, the building where loss or damage occurs has been vacant for more than 60 consecutive days before the loss, there is no coverage for loss resulting from the following perils: vandalism, sprinkler leakage, building glass breakage, water damage, and theft or attempted theft. For all other covered causes of loss, loss payment will be reduced by 15%. If the insured is a tenant, the portion of the building rented or leased to the insured is considered vacant if it doesn't contain enough business personal property to conduct customary operations. If the insured is the owner or general lessee of the building, it is considered vacant unless at least 31% of its total square footage is used to conduct customary operations. Buildings under construction or renovation are not considered vacant. If an insured desires coverage for vandalism, sprinkler leakage, building glass breakage, theft or attempted theft, and water damage for a building that remains vacant beyond the basic 60 days stated in the vacancy provision, it may request a vacancy permit endorsement to cover the excluded perils during a term of vacancy. This endorsement allows the 60-day Vacancy Condition to be waived for the "permit period." If the insurer doesn't agree to add the endorsement, the insured should purchase a specialty vacant property policy. Valuation In the event of a loss, the value of covered property will be determined as follows: *Actual cash value at the time of loss, except as provided below. -If the coinsurance requirement is met, and the loss is $2,500 or less, the policy will pay for building repairs or replacement. However, the following property will continue to be valued at actual cash value even when attached to the building: Awnings or floor coverings Appliances Outdoor equipment or furniture -Stock the named insured has sold, but not delivered, at selling price, less discounts and expenses the insured otherwise would have had. -Glass at the cost of replacement with safety glazing material if required by law. -Tenant's Improvements and Betterments at actual cash value if repairs are made promptly, at a proportion of the insured's original cost if repairs are not made promptly, and no payment is made if repairs or replacement are paid for by others.
Part A - Liability Coverage Supplementary Payments
In addition to the limit of liability, the insurer also makes other payments: If a bail bond is required because of an accident, the policy will pay up to $250 for the cost of the bail bond so long as the accident resulted in a covered bodily injury or property damage claim. If defending a suit, the insurer will pay premiums on appeal bonds and bonds to release attachments. Any interest that accumulates after a judgment has been entered will also be paid by the insurer if it defends a suit. The policy pays up to $200 a day for loss of earnings because the insurer requests attendance at hearings or trials. This does not include loss of other earnings. The policy will also pay for reasonable expenses incurred at the insurer's request. This does NOT include traffic fines.
HO-3 (Special Form)
In the Special Form (HO-3), the dwelling and other structures (Coverages A and B) are insured on an open perils basis, meaning all perils are insured if they aren't specifically excluded in the policy. Losses to the dwelling and other structures are valued on a replacement value basis just as they are in the HO-2. The Special Form (HO-3) specifically excludes the following causes of loss under Coverage A and B: Collapse, except as provided by Additional Coverages Freezing of household appliances or a plumbing, heating, air conditioning, or automatic fire protective system unless the insured has taken reasonable care to maintain heat in the building or shut off the water supply and drained the appliances and systems of water Freezing, thawing, pressure or weight of water or ice on patios, fences, swimming pools, foundations, piers, docks, retaining wall Theft in or to a dwelling under construction, including construction-related materials and supplies Vandalism and malicious mischief, including ensuing loss, if the dwelling has been vacant for more than 60 consecutive days immediately before the loss Mold, fungus, or wet rot unless resulting from accidental discharge or overflow of water or steam that is hidden from view Wear and tear, marring, deterioration, mechanical breakdown, latent defect, inherent vice, smog, rust, corrosion, dry rot Smoke from agricultural smudging or industrial operations Pollution including discharge, dispersal, seepage, migration, or release of smoke, vapor, fumes, acids, or other chemicals unless such discharge is caused by a Coverage C Peril Insured Against Settling, cracking, bulging, or expansion of foundation, walls, floors, pavements, patios Birds, vermin, rodents or insects Animals owned or kept by an insured Personal property (Coverage C) is insured on a named perils basis that includes the same 16 named perils in the Broad Form (HO-2). Coverage C losses are valued on an actual cash value basis. It Includes losses to a fence, driveway or walk caused by a vehicle owned or operated by the insured. The burden of proof for losses to the dwelling and other structures falls to the insurer because coverage is provided on an open perils basis. On the other hand, the burden of proof for losses to personal property falls to the insured to show which of the 16 named perils caused the loss.
Occurrence Form
In the occurrence form, insurance coverage is triggered when an "occurrence" takes place during the policy period and within the coverage territory. Essentially, determining the coverage trigger is a single-step process. Step 1. Did the loss occur during the policy period? If the answer is yes, coverage is triggered. An occurrence form provides coverage for losses that take place during the policy period. It doesn't matter when the loss is reported; what matters is when the loss occurred. The key in this form is the date the loss actually happened and if it happened when the policy was in effect.
Bodily Injury
Includes bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time.
First Aid Expenses
Includes expenses incurred by an insured for rendering first aid to others who sustain bodily injury covered under the policy. No coverage is provided for first aid to an insured.
Claim Expenses (Supplementary Payments)
Includes the insurer's expenses for defending a claim, along with reasonable expenses incurred by an insured at the insurer's request. Also covered as claim expenses are premiums on bonds required in a suit defended by the insurer, the insured's actual loss of earnings up to $250 a day for assistance in the investigation or defense of a claim or suit, and post-judgment interest.
Causes of Loss - Broad Form
Includes the perils contained in the basic form, plus 3 additional causes of loss: Falling Objects - Damage caused by falling objects, but not to the object itself. Coverage for the interior of the building and its contents is only if the exterior of the building is first damaged by the falling object. Weight of Ice, Snow, or Sleet - Does not include coverage for personal property outside of buildings or structures. Water Damage Caused by Accidental Discharge - Coverage for water damage is provided when accidental discharge or leakage of water or steam occurs as the direct result of the breaking apart or cracking of a plumbing, heating, air conditioning, or other system or appliance that is located on the described premises and contains water or steam. Coverage is NOT provided for discharge or leakage from an automatic sprinkler leakage system, a sump or related equipment, roof drains, gutters, downspouts, etc. Coverage also will not be provided if continuous or repeated seepage or leakage of water takes place over a period of 14 or more days. Plumbing is not covered. The Causes of Loss - Broad Form contains the same exclusions, additional coverages, and limitation found in the basic form; however, it also includes the Additional Coverage - Collapse.
Business
Includes trade, profession, or occupation. The courts have determined that business activities have two components: they are continuous in nature and offer the opportunity for profit.
Each of the following is an element of a legal contract, except: Agreement Legal Purpose Consideration Indemnity
Indemnity
Which principle of insurance restores the insured to the same economic condition that existed before the loss?
Indemnity
Financial Rating Services
Independent financial rating services evaluate and rate the financial stability of insurance companies. These companies assign rating codes to show financial strength or weakness of each company rated. The ratings are available to the public and producers are responsible for placing business with insurers that are financially sound. Examples of rating services include: A.M. Best Company, Standard & Poor's, Moody's Investment Services, Weiss Insurance Rating, and Fitch Ratings.
Which of the following defines a loss which is consequential and comes as a result of an original loss?
Indirect loss AN indirect loss is a consequential loss and in not the direct result of peril. Examples include loss of use or loss of business income.
Which of the following is an example of risk reduction?
Installing a fire hose system on every floor of a building. Risk reduction is taking action to reduce the loss of any loss that may occur.
Causes of Loss - Special Form
Instead of providing coverage for named causes of loss, the special form provides coverage for risks of Direct Physical Loss unless the peril or cause of loss is specifically excluded or limited. Coverage under the Special Causes of Loss Form is on an open perils basis. The Limitations section of the Special Causes of Loss Form contains language not found in the Basic and Broad Forms, such as: *No coverage is provided for most damage to steam boilers and equipment due to events inside the boilers and equipment. *No coverage is provided for damage to the interior of a building caused by rain, snow, sleet, ice, sand, or dust unless the exterior of the building or structure first sustains damage. *No coverage is provided for inventory shortage. *No coverage is provided for the following, unless specifically endorsed: fragile articles and builders machinery, tools, and equipment. *Special limits of insurance apply to the following classes of personal property: $2,500 for furs and fur garments; $2,500 for jewelry, watches, jewels, precious and semi-precious stones, gold, silver, etc.; $2,500 for patterns, dies, molds, and forms; and $250 for stamps, tickets, and letters of credit.
Conditions Severability of Insurance
Insurance applies separately to each insured; however, this condition doesn't increase the limit of liability per any one occurrence.
Other Insurance
Insurance is excess over any other collectible insurance, except insurance written specifically as excess insurance over this policy.
Liability Coverage Coverage E - Personal Liability
Insurance is provided for claims made and suits brought against an insured because of bodily injury or property damage caused by an occurrence for which the insurance applies. -The policy pays up to the limit of liability for the damages for which an insured is legally liable, including prejudgment interest awarded against an insured. -The policy provides a defense, at the insurer's expense, even if the suit is groundless, false, or fraudulent. The insurer may investigate and settle any claim or suit it decides is appropriate. The duty to defend ends when the policy limits have been exhausted by payment of a judgment or settlement. Payments for defense costs are made in addition to the limit of liability appearing on the declarations.
Mobile Home Insurance
Insurance on mobile homes may be written by adding a Mobile Home Endorsement to a Homeowners Policy, or by writing a separate Mobile Homeowners Policy. When mobile homes are insured by writing a separate policy, the policy includes Section I - Property and Section II - Liability, which are similar to the corresponding sections in a homeowners policy. Under the mobile homeowners policy, Coverage A (Mobile Home), insures the mobile home itself; property installed on a permanent basis, (such as appliances, floor coverings, dressers and cabinets, attached structures, and utility tanks). Coverages B, C, and D are nearly identical to the same coverages under the homeowners policy, except that Coverage C - Personal Property is generally written at 40% of Coverage A, instead of at 50%. The Additional Coverage, Property Removed, is generally expanded to include up to $500 for reasonable expenses incurred while moving the mobile home when threatened by a covered peril. The mobile homeowners policy may be written on an open perils basis with losses to the mobile home valued on a replacement cost basis, with other items of property being valued on an actual cash value basis. Typically, the endorsements available for attachment to a homeowners policy are also available for coverage with a mobile homeowners policy. Endorsements unique to the mobile homeowners policy are the Transportation/Permission to Move Endorsement and the Mobile Home Actual Cash Value Settlement Endorsement. The Transportation/Permission to Move Endorsement provides coverage for collision, upset, stranding, or sinking for up to 30 days while the mobile home is being moved to a new location. The Mobile Home Actual Cash Value Settlement Endorsement may be used when the insured does not desire to insure the mobile home to 80% of replacement cost.
Insured Contract
Insured individuals and organizations often enter into legal contracts and, many times, the insured assumes liability in those contracts. An insured contract is such a contract that is insured by the policy. In other words, if the insured assumes liability under an insured contract, that liability is transferred to the insurance company according to the terms of the insurance policy.
Principle of Indemnity Define and breakdown
Insured is restored to the same financial or economic condition that existed prior to the loss. Insured should not profit from an insurance transaction.
Which of the following uses of a vehicle is not excluded under the Medical Payments coverage? Insured uses a truck for incidental purposes A neighbor uses the insured's car without permission An insured drives a company car An insured rides a motorcycle **Part B
Insured uses a truck for incidental purposes
ON test do not fail to notice the difference b/w: Insured and Insurer and Insurable Events Define
Insured: Any person, organization or company protected by an insurance policy. Insurer: The party who indemnifies for losses Insurable Events: Any event which may cause loss or damage to a person having an insurable interest in the events.
Determining adequate indemnification after a loss is a principle duty of the
Insurer The insurer determines the amount of indemnification after a loss based on the type of loss valuation provided in the policy. Common loss valuation include replacement cost, actual cash value, functional replacements cost, agreed value, and stated value.
Part B - Exclusions Although legal liability on the part of an insured is not required for Medical Payments Coverage to apply, bodily injury sustained by an insured is NOT covered under the following circumstances when an insured:
Is occupying a vehicle with fewer than 4 wheels. Is occupying a vehicle being used as a public or livery conveyance. A share-the-expense car pool is NOT public or livery conveyance. Is occupying any vehicle that is located for use as a residence or premises—for example, living in one's car or a permanently located motor home or trailer used as a residence. Sustains bodily injury in the course of employment and workers' compensation benefits are either required or available. Is occupying or struck by a vehicle owned by the insured that is not a "your covered auto" and is either owned by the insured OR furnished to the insured, or available for the insured's regular use, such as a company car. Is occupying or struck by a vehicle owned by a family member that is not a "your covered auto" and is either owned by a family member OR furnished to a family member, or available for the family member's regular use, such as a company car. Is using a vehicle without having a reasonable belief that he/she is entitled to drive the car. Is using a vehicle while engaged in business; however, a coverage giveback applies to private passenger autos, pickups, vans, and owned trailers used with such vehicles. This exclusion applies to the business use of trucks and other commercial vehicles. Injuries sustained because of, or as a result of, any type of war or nuclear hazard or action. Injuries sustained when occupying a vehicle located inside a racing facility for the purpose of competing, practicing, or preparing for a race or speed contest.
ll of the following statements are TRUE about the Broad Theft Coverage endorsement, EXCEPT: Both on- and off-premises coverage is available Resulting damage caused by malicious mischief and vandalism is covered Theft and attempted theft are covered It does not apply to the DP-1
It does not apply to the DP-1 **The Theft Coverage endorsement can be added to any form, including the basic DP-1.
Each of the following must be included in an insurable risk, except: Excluded catastrophic perils Calculable chance of loss Large group with different risks Accidental losses
Large group with different risks
Insurable risks must include these 6 things:
Large number of homogenous units or groups with the same perils. Law of Large Numbers - As the number of units in a group increases, the more likely it is to predict a particular outcome. Auto insurance losses are the easiest type of insurance loss to predict precisely because the number of units insured is so great. The chance of loss must be calculable. A statistical expectation of loss is used by insurers to calculate premiums. (Loss must be definite) The loss must be measurable (definite and verifiable in terms of amount, cause, place and time). The premiums must be affordable. From the perspective of the insured, the loss must be accidental in nature. Catastrophic perils are not covered; examples include war, nuclear hazard and illegal operations.
Common Law
Law practiced as the result of judicial or court decisions (i.e., case law and precedents).
Property damage liability
Legal liability arising from physical damage to tangible property, including loss of use of that property, caused by the acts of an insured
Bodily injury liability
Legal liability arising from physical injury, including sickness, disease, and death caused by the acts or omissions of an insured
Personal injury liability
Legal liability arising from the wrongful conduct of the insured resulting in injuries to one's mental or emotional state or reputation
A contract that is against public policy is NOT enforceable according to which contract characteristic?
Legal purpose All contracts much have a legal purpose. The courts will not rule on a contract for an illegal transaction ( ex a contract for transporting illegal drugs).
Lease of Premises
Liability assumed under a lease of premises. It does not include that portion of the contract that indemnifies any person or organization for fire damage to premises rented or temporarily occupied with the owner's permission.
Easement Agreement
Liability assumed under the right to use someone's land or license agreement, except in connection with construction or demolition operations on or within 50 feet of a railroad.
Coverage E - Additional Living Expense
Like Coverage D, Coverage E provides insurance for indirect losses that occur as a result of direct losses to property insured under Coverages A, B, or C that are covered by the policy. Coverage E is automatically included in the DP-2 and DP-3 forms; it's not included in the DP-1 form. The policy pays any necessary increases in living expenses incurred by the named insured when a covered loss makes the unit in which the named insured lives uninhabitable. Payment is made only to the extent the insured's household can maintain its normal standard of living. The Coverage E limit of insurance is up to 20% of the Coverage A limit and is additional coverage. Examples of expenses paid by Coverage E are the costs of a motel room, boarding pets, and dining out.
Lloyds of London
Lloyds of London is not an insurance company, but consists of groups of underwriters called Syndicates, each of which specializes in insuring a particular type of risk. Lloyds provides a meeting place and clerical services for syndicate members who actually transact the business of insurance. Members are individually liable for each risk they assume. Coverage provided is underwritten by a syndicate manager, such as an attorney-in-fact or individual proprietor.
Each of the following is covered under the Legal Liability Coverage Form; except: Loss of income Loss of use Damage to real or personal property owned by others when it is in the insured's care Defense costs
Los of income
Financial Ratios / Name 3
Loss Ratio, Expense Ratio, Combined Ratio
The Ordinance or Law Coverage endorsement covers each of the following losses, except: Increased cost of repairing damaged parts of the building Demolition of the undamaged parts of a building Clearance of the undamaged parts of a building Loss of value in the damaged portion of the building
Loss of value in the damaged portion of the building
Ordinance or Law
Losses resulting from the enforcement of an ordinance or law regulating the construction, repair, remodeling, renovation or demolition of a building are excluded except what is provided in the additional coverage, Ordinance or Law.
Earth Movement
Losses resulting from: earthquake, including land shock waves or tremors before and after volcanic eruptions, landslides, mudslides, mudflow, subsidence, or sinkhole, and any earth sinking, rising, or shifting. Direct loss by fire or explosion that ensues is covered. Loss by theft resulting from earth movement is also covered.
Define Managing Risk
Managing risk is the practice of analyzing exposures that create risk and designing programs to minimize the possibility of a loss.
Each of the following is a factor used by an underwriter, except: Hazards Claims history Outside factors Marital status
Marital status
Mass Marketing
Mass marketing is used to target a specific type of insurance to a large group of individuals, such as the American Association of Retired People (AARP). Insurer reduces marketing and underwriting expenses.
Occupying
Means in, upon, getting in, getting on, getting out, or getting off a vehicle.
What is the difference between misrepresentation and fraud?
Misrepresentation is a representation that is actually false, but fraud is an intentional act designed to deceive. When you think "misrepresentation" think mistake. Fraud is an outright act to deceive another.
Dishonest tendencies that increase the probability of loss is which of the following types of hazard?
Moral A hazard increases the chance of loss and the three types are moral; morale, which is indifference or carelessness; and physical, which is a physical condition.
Private vs. Government Insurers
Most insurance is written through private insurers. However, there are instances where governmental-based insurers step in to offer an insurance alternative when private insurers are unable to provide protection. This usually relates to the catastrophic nature of the risk, capacity to handle the risk, and lack of desire to engage in a line of insurance where experience to evaluate necessary premium intake to offset potential loss is lacking.
Fair Access to Insurance Requirements (FAIR)
Most states have established a Fair Access to Insurance Requirements program, called a FAIR plan, to provide basic property insurance to property owners who are unable to secure coverage in the standard property marketplace. Most FAIR plans operate in a similar fashion. FAIR plans are utilized when existing homeowners or dwelling property coverage is being cancelled or non-renewed due to loss history or the property owner or the property fail to meet other underwriting guidelines of an insurer. Insurance may also be purchased from a FAIR plan when a dwelling is currently uninsured, and no carrier in the standard marketplace will write coverage. In some states, the insured must certify the inability to secure coverage elsewhere. Farm property isn't eligible for coverage, though certain types of incidental business use may be allowed. Agents don't have binding authority, and coverage is usually bound only after the receipt of the application and first premium payment by the insured.
Exclusions Applying to Section II in its Entirety
Motor Vehicle Liability Aircraft Liability Hovercraft Liability
A ______________ insurance company is owned by its policyholders.
Mutual
Does a domicile impact whether an insurer may be admitted to do business in this State?
NO it does not impact
Workers' Compensation
No liability coverage is provided if the insured has a legal obligation to provide workers' compensation insurance, disability benefits, unemployment compensation, or any similar type of insurance. This exclusion applies whether or not the insured actually purchased any coverage required by law. The CGL policy excludes these perils because they may be insured elsewhere and, in many jurisdictions, the insured is required by law to provide coverage.
Common Policy Provisions Types of Insureds Named Insured Insured First Names Insured Additional Insured Define all
Named Insured - The person or organization designated on the Declarations page of the policy. If property is being insured, the named insured should be the owner of the property. If vehicles are being insured, the named insured should be the party or entity to which the vehicle is titled and registered. The named insured receives the broadest coverage of all persons or organizations protected by a policy. Insured - A person or organization protected by an insurance contract. First Named Insured - This insured has rights and responsibilities not applying to other insureds. The First Named insured represents all insured, particularly on commercial lines policies. The First Named Insured receives notifications from the insurer, can cancel the policy, and is responsible for paying the premium. Additional Insured - A person or organization not ordinarily protected by a policy but which, through the addition of an endorsement to the policy, is granted status as an insured. Under a property policy, an additional insured is often a co-owner of real property. Under a liability policy, an additional insured is often a party to an indemnification or hold harmless agreement.
Determine which of the following coverages under each form is provided on a named perils or open perils basis HO-4 Coverage C HO-3 Coverage C HO-2 Coverage C HO-2 Coverage B HO-3 Coverage A HO-6 Coverage A HO-2 Coverage A HO-5 Coverage A HO-6 Coverage C HO-5 Coverage B HO-5 Coverage C HO-3 Coverage B
Named Perils Basis HO-4 Coverage C HO-6 Coverage A HO-2 Coverage A HO-3 Coverage C HO-2 Coverage C HO-2 Coverage B HO-6 Coverage C Open Perils Basis HO-5 Coverage B HO-5 Coverage C HO-3 Coverage B HO-3 Coverage A HO-5 Coverage A
Which of the following has the broadest coverage under the insurance policy?
Names Insured
Negligence
Negligence, in a broad sense, is the failure to use ordinary care. Specifically, it is a wrongful act that is neither criminal nor a breach of contract that violates a duty or the rights of another — and for which the injured party may demand compensation. It is the failure to use the same degree of care a reasonable and prudent person would use when given the same knowledge and set of circumstances.
Bankruptcy
Neither bankruptcy nor insolvency of the insured or of the insured's estate will relieve the insurer from its obligations.
Coverage C - Medical Payments Insuring Agreement Exclusions
No payments is made under Coverage C for the following: Any insured (other than a volunteer worker) Any person hired by the insured or the insured's tenant A person who normally occupies any portion of the insured premises Injuries that should be covered by Workers' Compensation and similar laws Athletic activities Injuries within the products-completed operations hazard Coverage A exclusions
Changes
No changes may be made unless they are contained in a written endorsement issued by the insurance company. The insurer may also adjust the policy premium if changes occur that affect information that determines premium rates, such as number or type of vehicles insured, drivers of insured vehicles, the overnight locations of vehicles, and insurance coverages, deductibles, and limits of liability.
Intentional Loss
No coverage applies to any loss that arises out of any act an insured commits or conspires to commit with the intent to cause loss. In the event of intentional loss, no insured is entitled to coverage, including innocent insureds (those who did not cause the loss, but are covered on the same policy as the person who caused the loss).
Exclusions Applying to Section II in its Entirety Aircraft Liability
No coverage is provided for "aircraft liability" as defined in the policy.
Exclusions Applying to Section II in its Entirety Hovercraft Liability
No coverage is provided for "hovercraft liability" as defined in the policy.
Fraud
No coverage is provided for any insured who commits fraud, makes fraudulent statements, or engages in fraudulent activity with respect to a claim for any accident or loss.
Damage to Insured's Product
No coverage is provided for damage to the insured's own product. Also excluded is damage that arises out of the product or any of its parts.
Damage to Insured's Work
No coverage is provided for damage to the insured's work that is included in the Products or Completed Operations Hazards. An exception exists for damage caused by the work performed by a sub-contractor.
Musical Instrument Floater
No coverage is provided if the covered instruments are played for remuneration, or a fee. Anyone playing for hire must purchase an endorsement and pay an additional premium. The insured must report newly acquired items within 30 days.
Legal Action Against the Insurer
No legal action may be taken against the insurance company by anyone unless he/she has complied fully with the policy. In addition, no one may sue the insurance company until it agrees in writing that the insured has a legal obligation to pay for damages.
Pollution
No liability coverage is provided for bodily injury and property damage arising out of actual, alleged, or threatened pollution or the escape of "pollutants." The exclusion also applies to the cost of clean-up. This coverage may be purchased with a Pollution Extension Endorsement.
Aircraft, Auto, and Watercraft
No liability coverage is provided for bodily injury or property damage arising out of the ownership, maintenance, use, or entrustment to others of aircraft, autos, and watercraft IF such crafts and vehicles are owned by, operated by, rented to, loaned to, or being loaded or unloaded by any insured. This coverage may be purchased on a separate policy or under a business auto coverage part.
Transportation of Mobile Equipment
No liability coverage is provided for bodily injury or property damage arising out of the transportation of "mobile equipment" by an auto that's owned by, operated by, rented to, or loaned to any insured. Neither is liability coverage provided for the use of "mobile equipment" in, or while practicing or preparing for any prearranged racing, speed, demolition, or stunting activity. Mobile equipment subject to compulsory insurance or financial responsibility laws is considered an "auto" and must be insured on the business auto policy.
War Exclusion
No liability coverage is provided for bodily injury or property damage resulting from war—regardless of how caused and whether damage is a direct or indirect loss. War includes undeclared and civil war, warlike action by a military force, insurrection, rebellion, revolution, usurped power, etc.
Employer's Liability
No liability coverage is provided for bodily injury to an employee of the insured that arises out of and during the course of employment by the insured or while performing duties related to the insured business. In addition, no liability coverage is provided to the spouse, child, parent, or sibling of any employee who's injured while on the job. The exclusion applies regardless of the reason for the employers legal liability.
Electronic Data
No liability coverage is provided for damages arising out of the loss of electronic data, including loss of use, corruption of data, and the inability to access or manipulate electronic data. The exclusion defines electronic data as being information, facts, and programs that are stored as or on; created or used on; or transmitted to or from computer software.
Damage to Impaired Property or Property Not Physically Injured
No property damage liability coverage is provided for "impaired property"—which is property that has not been physically injured—IF the damage arises out of a defect, deficiency, inadequacy, or dangerous condition in the insured's product or work.
A party injured in an auto accident is not allowed to sue the negligent party who caused the accident under which of the following laws? Tort Civil No-fault Strict
No-fault
Which of the following is an example of risk avoidance?
Not driving a car to prevent getting in an accident.
Four Elements of a Legal Contract Agreement
One party must make and communicate an offer to the other party and the second party must accept that offer. Offer - The offer for entering an insurance contract is the application submitted by the applicant. Acceptance - The acceptance of an insurance contract takes place when the insurance company agrees to issue insurance. A counteroffer by the insurance company is not acceptance until the applicant accepts the counteroffer.
Contract of Adhesion
One party writes the contract, without input from the other party; one party (insurer) prepares the contract and presents it to the other party (applicant) on a "take-it-or-leave-it" basis, without negotiation. Any doubt or ambiguity found in the document is construed in favor of the party that did not write it (insured).
Unilateral Contract
Only one party is legally bound to the contractual obligations after the premium is paid to the insurer. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract.
Section I of the Boatowners policy provides what type of coverage for the hull? Actual cash value Replacement cost Stated value Open perils
Open perils
Section I - Exclusions The policy does not provide for loss caused directly or indirectly by any of the following perils, even if they are caused concurrently or over a widespread area. Include:
Ordinance or Law Earth Movement Water Damage Power Failure Neglect War Nuclear Hazard Intentional Loss Government Action
Other Insurance
Other Insurance is a provision that specifies the process to be followed when more than one policy covers the same loss. Policy A insures a dwelling for $250,000 and Policy B insures the same dwelling for $500,000. If both policies covered the same loss, Policy A would pay one-third of the loss because $250,000 represents 1/3 of all the insurance available to cover the loss ($250,000 equals 1/3 of $750,000, which is the sum of $250,000 on Policy A and $500,000 on Policy B).
Executives
Oversee the operation of the business.
Which of the following calculations equals a company's loss ratio?
Paid losses + loss reserves ÷ total earned premium
Part A Part B Part C Part D Part E Part F
Part A - Liability Coverages Part B - Medical Payments Part C - Uninsured Motorist (UM) Part D - Coverage for Damage to Your Auto Part E - Duties After an Accident or Loss Part F - General Provisions
Part C - Uninsured Motorists Coverage (UM) Insuring Agreement
Part C - Uninsured Motorists Coverage (UM) provides insurance to insured persons injured in accidents that are caused by another party. The other party must be legally responsible for bodily injury to an insured that arises out of the ownership, maintenance, or use of an "uninsured motor vehicle." If the other party is NOT legally responsible (or not at-fault), this coverage doesn't apply. The insurer will pay damages that an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury. Unless the policy specifically states that Uninsured Motorist Physical Damage (UMPD) is also provided, this section of the policy only applies to bodily injury damages. In addition to the definition of "insured" that applies to the entire policy, the definition of "insured" for UM means: ----The named insured or any family member ----Any person occupying a "your covered auto" ----Any person who is entitled to recover damages because of bodily injury sustained by an insured and covered by the policy. For example, if Sue sustains bodily injury in an accident caused by an uninsured motorist, her children will be entitled to recover damages for loss of care when Sue is unable to care for them because she broke both her legs in the accident. Part C - Uninsured Motorists Coverage contains a definition for "uninsured motor vehicle." An uninsured motor vehicle is one that: ----Doesn't have insurance or a bond in place at the time of the accident. ----Has insurance in place at the time of the accident. However, the bodily injury liability limits are less than those required by the financial responsibility or compulsory insurance laws in place in the state where the insured's "your covered auto" is principally garaged. ----Is a hit-and-run vehicle. The owner or operator of the vehicle can't be identified AND must hit: The named insured or a family member; A vehicle occupied by the named insured or a family member; or "Your covered auto." ----Has insurance, but the insurer either denies the claim or becomes insolvent.
Part D Insuring Agreement
Part D - Coverage for Damage to Your Auto pays for direct and accidental damage, regardless of fault, subject to the policy's exclusions—and those contained in this coverage part. Covered vehicles are Your Covered Auto and non-owned autos. Part D of the policy is the only section that defines non-owned auto. ----A deductible applies and will be the amounts shown on the Declarations for Collision coverage and Other Than Collision coverage, which is also known as comprehensive coverage. The deductibles for Collision and Other Than Collision coverages need not be the same. ----If this coverage pays for damage to a non-owned auto, the broadest coverage appearing on the Declarations will apply.
The National Flood Insurance Program (NFIP) sells flood insurance in which of the following types of communities?
Participating communities
Part A - Liability Coverage Insuring Agreement The insurer will:
Pay damages for bodily injury or property damage for which any insured becomes legally responsible. Settle or defend any claim or suit asking for such damages. Pay all defense costs it incurs, in addition to the liability limits. The insurer's duty to settle or defend ends when the limit of liability is exhausted. The insurer will not defend or settle any suit or claim that is not covered under this policy. The policy defines insured in Part A as: ---The named insured or any family member for the ownership, maintenance, or use of any auto. ---Any person using the covered auto with permission. ---A person or organization, for "your covered auto," if legally responsible for an insured.
Each of the following is a Part A - Liability Coverage Supplementary payment, except: $200 a day for loss of earnings due to an insurer request to assist in the trial Premiums on appeal bonds Payment for all defense costs $250 for the cost of a bail bond
Payment for all defense costs
Medical payments coverage
Pays for necessary medical, surgical, hospital, and funeral expenses incurred by a third party on the insured's premises regardless of fault
Damage to Property of Others
Pays up to $1,000, at replacement cost, for property damage to property of others caused by an insured. Payment is made regardless of negligence. For example, damage caused by an insured to a borrowed lawn mower. Coverage does not apply to property damage: -Covered under Section I of the policy. -Caused intentionally by an insured who is 13 years of age or older. --To any property owned by an insured. To property owned by or rented to a tenant of an insured or a resident of the named insured's household. -Arising out of a business engaged in by an insured; acts or omissions in connection with premises owned, rented, or controlled by an insured that is not the insured location; the ownership, maintenance, occupancy, operation, use, loading or unloading of aircraft, hovercraft, watercraft, or motor vehicles.
The following risks is considered a peril or a hazard? Fire, Hail, Lightning, Theft
Peril
Exclusions
Perils that are NOT covered by the policy are listed in the exclusions section. Other perils may be excluded in provisions stated elsewhere in the policy. Common property exclusions include: Ordinance or Law Earth movement War Water Perils that are NOT covered by the policy are listed in the exclusions section. Other perils may be excluded in provisions stated elsewhere in the policy (i.e., water damage, flood, sewer backup, etc.) Utility failure that originates off-premises Neglect of the insured to protect covered property from further loss Intentional loss Nuclear hazard, war, and military action Governmental action Fungus, wet rot, dry rot, and bacteria (e.g., mold)
Which of the following perils is covered under the Personal Umbrella?
Personal injury
Personal Inland Marine Insurance
Personal lines insurance doesn't only pertain to personal auto, homeowners insurance and dwelling property policies. Other types of policies are also available for the protection of personal lines clients. Personal Inland Marine coverage can be attached by endorsement to a Homeowners or Dwelling Policy; it may also be written as a separate policy. Personal Inland Marine Insurance is a form of coverage used to insure moveable property against direct loss. Since moveable property is known as floating property, the word floater is often used.
The Condominium Commercial Unit-Owners Coverage covers each of the following, except: Personal property Fixtures Appliances Improvements
Personal property
Which of the following types of property are covered by the Personal Effects Floater? Paintings, etchings, and pictures Coin collections Golfer's equipment Personal property carried by travelers
Personal property carried by travelers
In what way is the HO-5, Comprehensive Form different from the HO-3, Special Form?
Personal property is insured on an open perils basis **The HO-5 Comprehensive Form covers personal property for open perils whereas the HO-3 policy covers it for named perils.
Personal Umbrella Policy
Personal umbrella coverage is liability insurance provided on an excess basis. Each contract is unique and may contain provisions and language not found in other umbrella policies. Personal umbrella coverage may be issued as an endorsement added to a homeowners policy or as a standalone policy. The purpose of the umbrella policy contains three elements: -It provides an additional layer of liability insurance after the limits of underlying primary policies are exhausted due to paid claims. -It provides coverage on a broader basis than the primary policies. -It drops down to provide first-dollar coverage when the underlying primary policies don't provide coverage. Coverage is usually written in increments of $1 million, with a single limit per occurrence covering claims for both Bodily Injury/Property Damage, and Personal Injury in excess of the insured's underlying policy limits. Insurance companies issuing umbrella coverage require their insureds to have underlying primary insurance in place. "Primary" insurance pays before the umbrella pays and "underlying" insurance provides coverage for the same risks that are insured under an umbrella policy. For example, every umbrella policyholder must also have personal auto and personal liability insurance in place. If the insured owns recreational vehicles, watercraft, or rental property, those exposures must also be insured on underlying primary policies. The umbrella acts as excess coverage over the limits of these underlying primary policies. If the coverage in an umbrella is broader than the underlying policy—meaning the primary policy doesn't insure a loss—the umbrella will "drop down" and cover the entire loss. When an umbrella policy drops down and acts as a primary policy, the insured pays a self-insured retention, which is a method of loss cost-sharing. The only time the insured must pay a self-insured retention is when the umbrella drops down. If the primary policy pays its limit, and then the umbrella policy makes payment, the insured does NOT pay the self-insured retention. Example Umbrella policies ordinarily cover personal injury losses caused by an insured, while the underlying Personal liability policy (i.e., homeowners) may only cover bodily injury and property damage. In the event a personal injury claim is submitted against the insured under such a circumstance, the umbrella would "drop down" and act as primary insurance for that claim. The personal umbrella policy is generally designed to provide coverage on a worldwide basis to third parties and does not pay benefits directly to an insured. Common personal umbrella liability exclusions include: Losses arising from bodily injury and property damage if the insured fails to maintain the required underlying insurance. Intentional injury Damage to property in the care, custody, or control of an insured Aircraft Business pursuits Professional Liability Directors and Officers Liability Discrimination
Contract Law
Pertains to the formation and enforcement of contracts.
Property Damage
Physical injury to tangible property, including all loss of use of the damaged property. "Property damage" is also loss of use of tangible property that is not physically injured. (Electronic data is not tangible property.)
Property Damage
Physical injury to, destruction of, or loss of use of tangible property.
What type of power failure is excluded under all of the dwelling forms?
Power failure that occurs off the insured premises
Which of the following legal liability exposures is covered if the employee of a business causes bodily injury to another person while working at the insured's business location? Completed operations Contingent liability Premises and Operations Products
Premises and Operations
Intervening Cause
Prevents or limits recovery from the wrongdoer when a second, distinctly separate negligent act occurs after the original negligent act, but before damage occurs, and interferes with the chain of events that brings about the loss. The intervening cause must be unexpected and unforeseen.
Contributory Negligence
Prevents recovery for damages caused by a negligent party if the claimant was negligent to any extent. For example, if the claimant is 5% negligent and the wrongdoer is 95% negligent, the claimant is not permitted to collect damages.
Assumption of Risk
Prevents recovery if the claimant knowingly assumed the risk.
Estoppel
Prevents the denial of a fact, if the fact was admitted to be true previously.
Which of the following is designed to prevent the insured from collecting more than the actual extent of a loss? Primary coverage Pro rata liability Excess insurance Contribution by equal shares
Pro rata liability
Arbitration
Process whereby a disputed claim is decided by a neutral third party. The disputing parties choose the impartial third party and agree in advance to accept the final decision of the arbitrator, who makes a decision after a hearing where both parties offer evidence.
Direct Writing System
Producer or Agent is an employee of the insurer. Insurer owns the accounts. The agent may be paid a salary, salary plus bonus, or commission.
Part F Other Termination Provisions
Proof of mailing of any notice constitutes sufficient proof of notice If the policy is cancelled, the insured may be entitled to a premium refund. If so, the insurer will send the refund. The effective date of cancellation stated in the notice will become the end of the policy period
Which of the following is NOT true about coverage for Property Removed? Coverage does not increase the limit of insurance that applies to the property removed Property coverage applies under the DP-1 policy for 30 days while the property is removed Property is covered while being removed from the premises to avoid a covered loss Coverage applies under the DP-3 form for 30 days while the property is removed
Property coverage applies under the DP-1 policy for 30 days while the property is removed
Builders Risk Coverage Form
Property coverage is provided on buildings or structures under construction if they are designated in the Declarations. The following types of property are covered IF they are to be permanently located in or on covered buildings and structures OR within 100 feet of its premises: The foundations of buildings and structures. Fixtures and machinery that will become part of the covered buildings and structures. Equipment used to service the covered buildings and structures. The insured's building materials and supplies used for construction Property not covered includes land, lawns, trees, shrubs, plants, outside antennas, and signs that are not attached to buildings. Builders risk coverage begins on the effective date of the policy or at the time the insured becomes legally responsible for the property if that date occurs after the policy's effective date. Coverage ends automatically at the earliest of the following events, if they occur before the end of the policy period: The policy expires or is canceled. The covered property is accepted by a purchaser. The insured's interest in the property ends. The insured abandons the property and doesn't intend to complete construction. 90 days after construction is complete. 60 days after any covered building is partially or fully occupied OR is put to its intended use. The form does not provide liability coverage. The standard builders risk coverage form is written on a completed value basis. The limit of coverage is chosen and reflects the anticipated replacement value of the covered building(s) and structure(s) when construction is completed. If an insured is working on several projects at a time, the builders risk reporting form will be added to the policy by endorsement. It allows the limit of insurance to be adjusted based on reports filed per the reporting period on the policy; reporting periods can be daily, weekly, monthly, or quarterly. Failure to submit reports as required results in penalties that range from 25% of the amount the insurer would otherwise have paid or the amount contained on the most recently filed report before the loss. Coinsurance applies to builders risk policies and the coinsurance percentage appears on the Declarations. The policy does not pay any losses to a greater extent than the proportion the actual limit of insurance on the Declarations bears to the value of property on the date of completion. The causes of loss on the builders risk form appearing on the Declarations are the same as those used with the Building and Personal Property Coverage Form.
Which of the following explains market value in determining loss vsluation?
Property is evaluated for the price a willing buyer would pay. Market value is the value placed by the public on an item. For example, you could determine the market value of your 2014 Buick by going to AutoTrader to see the price of comparable models.
Part D Other Than Collision (OTC, Comprehensive)
Provides coverage on an open perils basis, which means all causes of loss other than a collision loss and not excluded in the policy. OTC, or Comprehensive, includes but is not limited to the following causes of loss: -Missiles or falling objects -Fire -Theft or larceny -Explosion or earthquake -Windstorm -Hail, water, or flood, including a flash flood -Malicious mischief or vandalism -Riot or civil commotion -Contact with a bird or animal -Breakage of glass (If caused by an accident, this loss may be applied to collision coverage instead, in order to avoid a double deductible.)
Limited Theft Coverage
Provides insurance for the perils of theft, attempted theft, and vandalism or malicious mischief that results from theft or attempted theft. No VMM coverage applies if the dwelling was vacant from more than 60 consecutive days immediately before the loss On-premises coverage applies when covered property is owned or used by the named insured or a residence employee and is at the described location
Broad Theft Coverage
Provides insurance for the perils of theft, attempted theft, and vandalism or malicious mischief that results from theft or attempted theft. No VMM coverage applies if the dwelling was vacant from more than 60 consecutive days immediately before the loss On-premises coverage is provided for covered property located at the described location occupied by an insured Off-premises coverage is provided when covered property is away from the described location; however, the property must be owned or used by an insured or residence employee
Loss Assessment
Provides up to $1,000 of coverage for the insured's share of loss assessments charged by a corporation or association of property owners during the policy period. The loss assessment must be the result of bodily injury or property damage not otherwise excluded by the policy or liability for an elected director, officer, or trustee who serves on the board of the association or corporation without being compensated.
File and Use
Rates must be filed with the state insurance regulatory authority (Department of Insurance) and may be used as soon as they are filed.
Underwriting Department
Responsible for the selection of risks (persons and property to insure) and rating that determines actual policy premium.
Loss
Reduction, decrease, or disappearance of value. The basis of a claim for damages under the terms of an insurance policy.
If an insurance company wants to transfer all or part of the risk it has accepted, it would buy which of the following types of insurance?
Reinsurance
Facultative Agreements
Reinsurance agreement that allows ceding and reinsurance companies the opportunity to negotiate coverage for individual risks.
Treaty Agreements
Reinsurance agreement that covers all risks contained in the subject line(s) of business automatically.
What calculation is used to determine the actual cash value (ACV) of a loss?
Replacement cost - depreciation = ACV
_____________ is the method of loss valuation that values damaged property at the cost to replace with property of like kind and quality, at current prices, and without deduction for depreciation.
Replacement value
Marketing/Sales Department
Responsible for advertising and selling.
Risk Retention Groups (RRGs)
Risk Retention Groups are group-owned insurers that primarily assume and spread the liability related risks of their members. RRGs are owned by their policyholders and licensed in at least one state. However, they may insure members of the group in other states. The Group must be made up of a large number of homogeneous or similar units and membership is limited to risks with exposure to similar liability needs, such as theme parks, go cart tracks, or waterslides. The Group also must have sufficient liquid assets to meet loss obligations and each member assumes a portion of the risks insured.
Part D Comprehensive covers all of the following losses, except: Falling objects Rollover Contact with a deer Theft
Rollover
Determine which of the following coverages is associated with either Section I or Section II of a homeowners policy Expenses for defending a claim Damage to property of others caused by an insured A deductible applies to all losses unless otherwise specified Bodily injury claims made against the insured who is legally liable Additional living expenses incurred by a named insured due to a loss by a covered peril Coverages are not subject to a deductible Loss to an insured caused by forgery or alteration of a check Fair rental value if property loss makes part of a residence that is rented to others unfit to live in
Section I: Additional living expenses incurred by a named insured due to a loss by a covered peril A deductible applies to all losses unless otherwise specified Fair rental value if property loss makes part of a residence that is rented to others unfit to live in Loss to an insured caused by forgery or alteration of a check Section II: Damage to property of others caused by an insured Coverages are not subject to a deductible Bodily injury claims made against the insured who is legally liable Expenses for defending a claim
Direct Mail or Direct Response Company
Sells insurance policies directly to the public with licensed employees or contractors. A marketing system utilizing direct mail, newspapers, magazines, radio, television, internet, web sites, call centers and vending machines.
Private Passenger Auto
Shall be deemed to be owned by a person if the auto is owned or leased under contract for a continuous period of at least 6 months.
What are the 5 ways of managing risk?
Sharing: Investments of a large number of people may be pooled by use of a corporation or partnership Transfer: Transferring the risk from one party to another, such as from a consumer to an insurance company Transfer the uncertainty of loss via a contract Avoidance: Elimination of the risk Avoid the activity that gives rise to the chance of loss After potential areas of hazards have been identified, it may be found that some exposure to risk can be eliminated, but it is impossible to avoid all risk Reduction: Minimizing the chance of loss, but not preventing the risk. For example, sprinkler systems, burglar alarms, pollution controls and safety guards on machinery. Pooling or spreading the risk among a large number of persons or entities Retention: Assume the responsibility for loss Self insure the entire loss or a portion of the loss. Choosing deductibles is a method of risk retention. It might be economically practical for an insured to not insure each exposure to loss, and instead insure only those risks that threaten financial stability security
Speculative Risk
Situations where there is a chance or possibility for loss, no loss or gain (i.e., gambling)
Pure Risk
Situations where there is no chance for gain, only loss. Only pure risks can be insured (For instance, the possibility of damage to property caused by a fire or other natural disaster; or the possibility of financial loss as a result of premature death).
Mandatory Rates
Some states require that mandatory rates be used for certain lines of insurance.
Four Elements of a Legal Contract Consideration
Something of value is exchanged, the exchange of an act for a promise. The consideration made by the applicant is the premium payment. The consideration made by the insurer is its promise to pay for covered losses.
Loss Payment
Specifies how the insurer will make payment for loss and any applicable time frames that must be honored when submitting proof of loss and other claim documents.
Loss Payable Clause
Specifies how the policy protects the interests of a loss payee. A loss payee has insurable interest in personal property.
Motrgage Clause
Specifies how the policy protects the mortgagee's financial interest. (A mortgagee has insurable interest in real property.) Payment is made to mortgagees only up to its insurable interest in covered property and in order of precedence. The mortgagee must comply with requirements if the insured's claim is denied and the mortgagee wishes to collect under the policy: It must pay any premium due under the policy on demand if the insured fails to do so It must notify the insurer of any change in ownership, occupancy, or substantial change in risk of which the mortgagee is aware It must submit a proof of loss to the insurer if the insured fails to do so Under cancellation requirements, the insurer must provide the mortgage holder (mortgagee) with advance written notice (typically 10 days) before cancelling or nonrenewing coverage, giving the mortgagee the opportunity to pay the premiums.
Bankruptcy Clause
Specifies that bankruptcy or insolvency of the insured does not relieve the insurer of any of its duties or obligations under the policy.
Death
Specifies that in the event of the named insured's death, the insurer will extend coverage to the legal representative of the deceased with respect to the premises and property covered under the policy at the time of the named insured's death.
No Benefit to Bailee
Specifies that no coverage applies if loss payment benefits a bailee.
Legal Action Against Us
Specifies that no one may bring suit against the insurer until all terms and conditions of the policy have been complied with.
Assignment
Specifies that the insured may not transfer rights of ownership without the insurer's prior written consent.
Abandonment of Properts
Specifies that the insurer is not obligated to accept any property abandoned by an insured.
Duties in the Event of Loss explain and list all
Specifies the obligations of the insured in the event of a loss. With respect to any loss, these obligations include: Giving prompt written notice to the insurer, including a complete description of how, when, and where the loss or damage occurred Notifying the police if a theft occurred Cooperating with the insurer in the investigation and settlement of the loss Protecting property from further damage Preparing an inventory of the damaged property Allowing the insurer to inspect any damaged property and examine books and records Submitting proof of loss to the insurer, including: The time and cause of loss Any other insurance that may cover the loss Any appropriate receipts, evidence, or affidavits to support the loss
Recovered Property
Specifies the procedure to be followed when lost or stolen property is recovered after the insurer has made payment under the policy. Each party shall notify the other of any recovery and, under most property policies, the insured has the right of keeping the claim payment or returning the claim payment and retaining right to the property after adjustments have been made for any damage.
Pro Rata Liability
Specifies the process to be followed when more than one policy covers the same loss. Each policy pays no more than its share of the loss and the method of sharing varies by contract. Some policies require sharing of losses by the ratio of applicable limits of insurance each insurer writes with respect to the total of all limits available for the loss (pro rata). Other policies require the insurers to share the loss by contributing equal shares until each insurer has paid its limit of insurance (contribution by equal shares).
Other Insurance
Specifies the process to be followed when more than one policy covers the same loss. Each policy pays no more than its share of the loss.
Restoration/Nonreduction of Limits
Specifies the sum and circumstances under which an insurer charges the insured, usually a business firm, to restore a policy to its initial face value or not reduce limits of coverage after the insurer has paid a claim either to the insured business or a third party on behalf of the business.
Loss Settlement
Specifies which loss valuation method will apply to the property insured under the policy.
What are the types of risk:
Speculative Risk - Situations where there is a chance or possibility for loss, no loss or gain (i.e., gambling) Pure Risk - Situations where there is no chance for gain, only loss. Only pure risks can be insured (For instance, the possibility of damage to property caused by a fire or other natural disaster; or the possibility of financial loss as a result of premature death).
A warranty is defined as which of the following? Intentional misrepresentation on the application Statement in the application that is guaranteed to be true A false statement in the application What a reasonable and prudent buyer can expect
Statement in the application that is guaranteed to be true
Warranties
Statements in the application or stipulations in the policy that are guaranteed true in all respects. If warranties are later discovered untrue or breached (past, present or future), coverage (and sometimes the contract) is voided.
Representations
Statements made by the applicant on the application that are believed to be true to the best of the knowledge and belief of the applicant; may be withdrawn prior to policy issuance.
Subrogation
States the insured must transfer to the insurance company its right of recovery against any party causing a loss after it accepts payment from the insurer for a loss. Subrogation allows the insurer to recover from the party that caused a loss any amounts paid to an insured. It also: Prevents the insured from collecting twice for the same loss. Helps the insurer control expenses and premiums. Ultimately holds the responsible third party accountable for the loss
Which of the following perils is not one of the three included on the Broad Causes of Loss Form? Water damage from accidental discharge Falling objects Steam boiler explosion Weight of ice, snow or sleet
Steam boiler explosion
Strict and Absolute Liability
Strict and Absolute liability is a legal principle that imposes legal liability based on conditions, activities, or products that exhibit very high hazards; the degree of care exercised by the insured isn't considered when making a determination of liability. Absolute liability is most often associated with dangerous animal ownership, abnormally dangerous activities, and employers liability for injuries sustained by their employees. Dangerous animals include lions, bears, and certain dog breeds such as pit bulls and rottweillers. Absolute liability applies to the storage of explosives, highly flammable material and weapons or firearms.
After an automobile policy has been in effect for 60 days, the insurer may cancel the policy for any of the following reasons, except: Material misrepresentation of information on the application by the insured Non-payment of premium Submission of four or more claims during a single policy period Suspension of the driver's license of the named insured's or household resident Part F
Submission of four or more claims during a single policy period
Combined Ratio
Sum of the loss ratio and expense ratio.
Surplus (Excess) Lines Insurance
Surplus Lines insurance finds coverage when the kind or amount of insurance cannot be obtained from admitted insurers. It may not be utilized solely to receive lower cost coverage than would be available from an admitted carrier. **One that is not unauthorized or non admitted in a state. Surplus producer or broker. Each State regulates the procurement on Surplus Lines insurance in their State. Non-admitted business must be transacted through a Surplus Lines Broker.
When did TRIA expire and was it extended? Explain
TRIA expired on December 31, 2005 and was extended for two years, with changes, under the Terrorism Risk Insurance Extension Act of 2005 (TRIEA). It was extended with changes a second time, in 2007, under the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA) and is scheduled to expire on December 31, 2020. It protects consumers by addressing market disruptions and ensuring the continued widespread availability and affordability of property and casualty insurance for terrorism risk.
Impaired Property
Tangible property, other than an insured's product or work, which cannot be used because it is thought or known to be defective, inadequate, deficient, or dangerous.
Residence Premises means:
The 1-family dwelling where the named insured resides. The 2-, 3-, or 4-family dwelling in which the named insured resides in at least one of the family units. That part of any other building where the insured resides. The residence premises also includes other structures and the grounds at that location, such as the 5 acres upon which the insured resides, including the barn, detached garage, and swimming pool.
Causes of Loss - Basic Form
The Basic Form provides coverage for the following causes of loss (perils): fire, lightning, windstorm, or hail, smoke, aircraft, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. The exclusions contained in the Causes of Loss - Basic Form include ordinance or law, earth movement; governmental action, nuclear hazard, utility services, war and military action; water or fungus, wet or dry rot, and bacteria. A special exclusion exists for business income and extra expense coverages. *Vandalism does not include coverage for theft but does cover building damage caused by the breaking or exiting of burglars. *Smoke does not include coverage for smoke from agricultural smudging or industrial operations. The basic causes of loss form contains a Limitation provision that specifies loss of animals is covered but only if they are killed or their destruction is made necessary. *The basic form includes the Additional Coverage - Limited Coverage for Fungus, Wet Rot, Dry Rot, and Bacteria. The Limit of insurance is up to $15,000 for all covered losses that take place during the 12-month period that begins with the policy's inception date.
Boatowners Policy
The Boatowners policy is a package policy that provides both property and liability coverage and is similar in design to the homeowners policy. The coverage it provides is similar to that provided by the personal auto policy. The policy is generally used to insure boats that can be towed by a car. Section I of the policy provides open perils coverage for the hull, motor, trailer, equipment, and accessories manufactured for marine use. Losses are settled on an actual cash value (ACV) basis. Section II provides Watercraft Liability, Medical Payments for passengers, and Uninsured Boaters coverages. (Does not include Personal Injury Liability.)
Commercial Property Coverage Part Building and Personal Property Coverage Form Coverage
The Building and Personal Property Coverage Form describes how property coverage applies to the following classes of property: buildings, business personal property of the insured, and personal property of others. There is no liability coverage provided by this form.
Covered Causes of Loss
The Building and Personal Property Coverage Form requires the insured to select one or more of the cause of loss forms to be attached. These forms vary and allow the insured to select the appropriate form for a particular class or type of property. For example, the insured may want building items to be insured under a special causes of loss form and business personal property to be insured under a broad causes of loss form.
Common Policy Conditions
The Common Policy Conditions contains the legal obligations and duties of the insured and insurer, such as: Cancellation - Who may cancel and when written notice must be given. The First Named Insured has the right to cancel the policy. The insurance company may also cancel the policy, subject to insurance regulations and the contents of the insurance contract. Changes - The First Named Insured has the right to request policy changes. Changes can only be made, in writing, with the consent of the insurer. Examination of Your Books and Records - The insurer may examine the insured's books and records anytime during the policy period and up to 3 years afterward. Inspections and Surveys - The insurer has the right, but is not obligated, to make inspections and surveys at anytime. These surveys are for purposes of underwriting and rating and are not safety inspections. Premiums - The First Named Insured is responsible for the premium payments and will be the recipient of any return premiums. Transfer of Your Rights and Duties Under This Policy - The insured's rights may not be transferred without the written consent of the insurer, unless the insured dies, and then rights are automatically transferred to the insured's legal representative.
Declarations Page
The Common Policy Declarations Page shows the Who, What, When, Where, and how much that applies to the insurance provided by the policy. It defines each of the coverage parts included on the policy. Each coverage part also contains its own unique declarations page: Who: The Named Insured, which is the individual or business entity for whom insurance is provided. What: A description of the business being insured. When: The policy period, which includes the effective and expiration dates. Commercial package policies are written for terms of one year. Where: The mailing address of the named insured. How Much: On the common declarations, this includes the total premium charged for each coverage part as well as the total policy premium. If a premium does not appear next to a coverage part on the common declarations, no coverage is provided.
HO-5 (Comprehensive Form)
The Comprehensive Form provides the broadest coverage of any of the homeowners forms. Coverages A - Dwelling, Coverage B - Other Structures, and Coverage C - Personal Property provide insurance on an open perils basis. Losses to the dwelling and other structures are valued on a replacement cost basis, losses to personal property are valued on an actual cash value basis.
HO-4 (Contents Broad Form)
The Contents Broad Form is also known as the renter's or tenant homeowners policy. It doesn't provide any coverage for the dwelling or other structures because it's designed to insure those who are tenants. The HO-4 insures personal property under Coverage C against loss from the 16 named broad form perils found in the HO-2 and HO-3 forms. Personal property losses are valued on an actual cash value basis, as they are on the HO-2 and HO-3 forms.
What are Declarations? What does it include?
The Declarations Page describes basic information about the policy, including: Who - Names the insurer and insured, including legal representatives in the event of the insured's death. What - A description of the property being insured and other parties having insurable interests, such as a mortgagee. Where - The location of insured property and the named insured's mailing address. When - The effective and expiration dates of the policy. How Much - The limits of liability insuring covered property and the annual premium for each type of coverage.
What is Dwelling Policy primarily used to do?
The Dwelling Policy is primarily used to insure personally owned residential dwellings containing one to four units that are either not eligible for coverage under a homeowners policy or occupied by a tenant. It can be owner or tenant occupied and may also be occupied on a seasonal or secondary basis.
Earthquake and Volcanic Eruption Endorsement
The Earthquake and Volcanic Eruption Endorsement must be added to one of the causes of loss forms (basic, broad, or special) and cannot be purchased alone. The only causes of loss provided by this endorsement are earthquake and volcanic eruption. All earthquake shocks and volcanic eruptions that occur within any 168-hour period are considered a single earthquake or volcanic eruption. Separate deductibles apply to each building, and personal property located at each building, and personal property in the open. The deductibles are chosen by the insured as a percentage of the limit of liability applying to each class of property. The deductible does NOT apply to business income and/or extra expense coverage.
Fair Credit Reporting Act (15 USC 1681-1681d)
The Fair Credit Reporting Act protects consumer privacy, while ensuring data collected is confidential, accurate, relevant and used for a proper and specific purpose. It also protects the public from overly intrusive information collection practices. When an application is taken, it must inform the applicant a credit report (from consumer reporting agency) will be obtained. The purpose of this is to determine the financial and moral status of an applicant (for variety of purposes such as employment screening, insurance underwriting or loan approvals).
Financial Anti-Terrorism Act (The USA Patriot Act)
The Financial Anti-Terrorism Act imposes record keeping and government reporting requirements on banks, financial institutions and non-financial businesses for specific financial transactions and customer financial records (a part of the Bank Secrecy Act).
Part F - General Provisions
The General Provisions of the personal auto policy apply to all sections of the policy. They spell out the obligations of both the named insured and the insurance company. Bankruptcy Changes Fraud Legal Action Against the Insurer Right to Recover Payment
Insurer(principal)
The Insurer is the source of authority from which the producer must abide; and it is responsible for all acts of a producer, but only when the producer is acting within the scope of his/her authority. However, a producer may be personally liable when his/her actions exceed the authority of the agency's contract.
Limits of Insurance
The Limits of Insurance shown in the Declarations are the most the insurer will pay regardless of the number of insureds, claims made, suits brought, or persons or organizations making claims or bringing suits. General Aggregate Limit Products completed Operations Aggregate Limit Personal and Advertising Injury Limit Per Occurence Limit Medical Expense Limit
Insurance Regulation at the Federal Level
The McCarran-Ferguson Act of 1945 determined that the federal government can not regulate insurance in areas over which states have the authority to do so. Congress created federal agencies to provide regulatory oversight impacting insurance practices. Government insurers step in (as a last resort) when private insurers are unable to provide protection relative to the catastrophic nature or unpredictability of a risk.
Exclusions Applying to Section II in its Entirety Motor Vehicle Liability
The Motor Vehicle Liability exclusion applies to all coverages in Section II. No coverage is provided for "motor vehicle" liability if at the time of an occurrence, the "motor vehicle" involved in the loss was registered for use on public roads or wasn't registered but was required to be registered. In addition, no coverage is provided for vehicles that are being operated in or practicing for racing, rented to others, used to carry people or cargo for a fee, or used for any business purpose. Exceptions to the exclusion, meaning coverage is given back, exist for the following: -Vehicles in dead storage on an insured location, meaning they are physically unable to be driven, because their batteries have been removed and they're up on blocks. -Vehicles used solely to service an insured's residence. -Vehicles designed to assist the handicapped, so long as the vehicle is being used to assist a handicapped person, or it is parked on an insured location. -A motorized golf cart used on a golfing facility for purposes approved by the facility or within a private residential community and used as approved by the community. -Vehicles designed for recreational use off public roads IF they are not owned by an insured OR are owned by an insured and used on an insured location.
Pollution Liability Coverage
The Pollution Exclusion incorporated in the policy excludes bodily injury or property damage arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of pollutants. Insurers have three options available that they may use at their discretion, on an individual account basis, to provide "Buy Back" coverage to insureds:,Pollution Liability Coverage Form(Designated Sites);Limited Pollution Liability Coverage Form(Designated Sites);Pollution Extension Endorsment
Why was TRIA enacted and when? define
The Terrorism Risk Insurance Act of 2002 (TRIA) was enacted in direct response to the terrorist attacks on New York City and Washington, D.C. on September 11, 2001. Congress provided temporary financial compensation to insured parties during its crisis of recovery from the terrorist attacks. TRIA was intended to respond to the chaos the 9/11 terrorist attacks caused in the insurance industry as well as to assure that commercial property and liability insurance would continue to be able to provide coverage for the peril of terrorism. It also was a temporary program that allowed the federal government to share in terrorism losses with private insurers in the event a certified act of terrorism took place.
Terrorism Risk Insurance Act and Its Extensions of 2005 and 2007
The Terrorism Risk Insurance Act of 2002 (TRIA) was enacted in direct response to the terrorist attacks on New York City and Washington, D.C. on September 11, 2001. Congress provided temporary financial compensation to insured parties during its crisis of recovery from the terrorist attacks. TRIA was intended to respond to the chaos the 9/11 terrorist attacks caused in the insurance industry as well as to assure that commercial property and liability insurance would continue to be able to provide coverage for the peril of terrorism. It also was a temporary program that allowed the federal government to share in terrorism losses with private insurers in the event a certified act of terrorism took place. TRIA expired on December 31, 2005 and was extended for two years, with changes, under the Terrorism Risk Insurance Extension Act of 2005 (TRIEA). It was extended with changes a second time, in 2007, under the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA) and is scheduled to expire on December 31, 2020. It protects consumers by addressing market disruptions and ensuring the continued widespread availability and affordability of property and casualty insurance for terrorism risk. The Act provides for a Terrorism Insurance Program established in the Department of the Treasury. The Secretary of the Treasury administers the Program and an "Act of Terrorism" is defined as any act certified by the Secretary of Treasury, in cooperation with the Secretary of State and Attorney General. Only commercial property and casualty insurance is covered by the Program; personal lines insurance and life and health insurance are not covered. No payment may be made by the Secretary under the Program with respect to an insured loss that is covered by an insurer, unless: The person that suffers the insured loss, or a person acting on behalf of that person, files a claim with the insurer. The insurer provides clear and conspicuous disclosure to the policyholder of the premium charged for insured losses covered by the Program and the Federal share of compensation for insured losses under the Program. The insurer processes the claim for the insured loss in accordance with appropriate business practices, and any reasonable procedures that the Secretary may prescribe. The insurer submits to the Secretary, in accordance with such reasonable procedures as the Secretary may establish. An insurer must make coverage for insured losses that do not differ materially from the terms, amounts, and other coverage limitations applicable to losses arising from events other than acts of terrorism. However, the Secretary shall not make any payment for any portion of the amount of such losses that exceeds $100 billion (cap on annual liability) and no insurer that has met its insurer deductible shall be liable for the payment of any portion of that amount that exceeds $100 billion. The insurer deductible is 20% of all covered losses and the insurance marketplace aggregate retention amount (the maximum losses the insurance industry must sustain before federal co-payments are available) is the lesser of $27.5 billion and the aggregate amount, for all insurers, of insured losses during such period. The insurance companies share of losses in excess of the deductible (amounts paid or losses exceeding insurer's deductible) is 15%, while the federal government is responsible for 85%.
All of the following are true regarding the Personal Umbrella Policy, except: The Umbrella acts as a contributory liability policy The policy is written for higher liability limits The policy requires underlying coverage for automobiles and homes The Umbrella can provide broader coverage than the primary policy
The Umbrella acts as a contributory liability policy
HO-6 (Unit-Owners Form)
The Unit-owners Form provides named perils coverage to the owner of a condominium or cooperative unit under Coverage A - Dwelling and Coverage C - Personal Property. Coverage B does not appear in this form; however, if the owners of condominiums or cooperative units wish to insure other structures, the value of other structures may be included in the Coverage A limit of insurance. The form insures real property (building and building items) for which the insured is responsible under the bylaws of the condominium association or cooperative corporation. It also insures personal property of the insured while anywhere in the world.
Write Your Own (WYO Program)
The WYO Program is a cooperative effort involving FEMA and the private sector that allows existing property and casualty insurance companies to write, issue, and service flood insurance under their own names. It is estimated that over 90% of the flood insurance policies in force are maintained by WYO companies. The remaining policies are written and maintained directly by FEMA. WYO companies, according to guidelines and regulations of the NFIP, may structure their flood insurance business within their existing personal lines business. This provides incentive for producers or agents to place their flood business with the WYO companies they represent.
Insurability
The ability of an applicant to meet an insurer's underwriting requirements.
Premium Audit
The advance premium is only a premium deposit, and the earned premium will be based on an audit at the end of the policy period. The insured must maintain records necessary for the insurer to compute the premium, as premiums are based on sales, receipts, payroll, or some combination thereof. An additional premium is required if the earned premium is greater than the premium deposit.
Salvage Value
The amount for which property can be sold at the end of its useful life. In property insurance, the salvage value is the scrap value of damaged property.
Split Limits *Part A
The amounts of coverage for bodily injury and property damage are separate. Split limits are expressed using 3 separate limits: a bodily injury (BI) limit per person, a bodily injury (BI) limit per accident, and a separate limit for property damage (PD) per accident. If Part A of a policy is written with limits of 100/300/50, the policy will provide coverage of $100,000 per person for BI with a maximum BI aggregate limit of $300,000 per accident. Additionally the policy will provide a $50,000 limit for PD per accident. Example An insured causes a car accident that leaves the driver of the other car and 2 passengers suffering injuries of $30,000 each and $15,000 in damage to the other vehicle. The insured's policy has limits of 25/50/10. Based on the limits of liability, the policy will pay $25,000 BI per person (maximum $50,000 per accident) and will only pay $10,000 in PD.
Exclusions and Limitations
The applicable Causes of Loss Form shown in the Declarations contains the applicable coverage exclusions and limitations.
Coverage Parts
The available Coverage Parts - The Coverage Parts available on a Commercial Package Policy include: --Commercial Property, which may consist of one or more of the following: *Building and Personal Property Coverage Form *Commercial Builders Risk Coverage Form *Condominium Association Form *Condominium Unit-Owners Coverage Form *Business Income Coverage Form *Extra Expense Coverage Form *Legal Liability Coverage Form --Commercial Inland Marine Coverage Part --Equipment Breakdown (formerly called Boiler & Machinery) --Farm Property and Liability Coverage Part --Commercial General Liability Coverage Part --Commercial Crime Coverage Part --Commercial Automobile Coverage Part
Personal Articles Floater (Scheduled Article Floater)
The basic form used to insure "individual" items of personal property on a scheduled basis. Claims are normally settled on an "actual cash value basis" with some exceptions. -Coverage is provided worldwide, with some exceptions. -Coverage is provided on an open perils basis with very few exclusions. Typical exclusions are wear and tear, insects or vermin, intentional loss, and war. Specific classes of property have additional exclusions. For example, a collection of glassware may have specific exclusions for breakage caused by certain perils. -Coverage may be provided for classes of property consisting principally of the following: Jewelry Furs Cameras Musical Instruments Silverware and Goldware Golfer's Equipment Fine Arts Stamp Collections Coin Collections China and crystal
Theft
The broadest of the crime coverages, theft includes any act of stealing.
Noncombustible
The buildings and its walls, floors, and structural framework are constructed of noncombustible materials.
Peril
The cause of a loss
Loss Exposure
The condition of being at risk for a loss. Purely by existing, property and people are at risk for loss.
The insureds duties and obligations include: Policy period Concealment or Fraud Liberalization Clause Cancellation
The conditions section states the obligations of the parties to the contract, as well as any other conditions of coverage. The insureds duties and obligations are spelled out in this section. Policy Period - Specifies that coverage only applies to losses occurring when the policy is in force. Concealment or Fraud - Specifies that coverage will not apply if an insured makes a material concealment, misrepresentation, or fraud in the application pertaining to the claim. Liberalization Clause - Specifies that if the insurer broadens coverage with no increase in premium, that broadening of coverage will apply to existing policies without the need for an endorsement. Cancellation - Specifies the terms under which the policy can be cancelled by the insurer and the named insured.
Actual Cash Value (ACV)
The cost to repair or replace property at its replacement value, minus depreciation.
Functional Replacement Value
The cost to replace property with other property that performs the same function with similar efficiency, although the replacement property is not identical to the property being replaced. This valuation method is typically used with older property (such as a Victorian home) for which the replacement value exceeds the insured's ability or willingness to purchase coverage.
Replacement Value
The cost to replace property with property of like kind and quality, at current pricing, without a deduction for depreciation. Many property policies providing loss valuation at replacement value require covered property to be insured to a certain percentage of its replacement value, such as 80% or 90%.
Multi-Peril Crop Insurance (MPCI)
The coverage is written by private insurers and is reinsured by the Federal Crop Insurance Corporation (FCIC). Coverage may be provided for approximately 200 different types of crops, but 5 major crops account for 90% of the liability assumed (corn and maize, cereal grains, soybeans, tobacco, and cotton). Covered causes of loss include: adverse weather conditions, fire, insects, plant disease, wildlife, earthquake, and volcanic eruption.
Coverage Territory
The coverage territory of the CGL is the United States, its territories and possessions, Puerto Rico, and Canada. International waters and airspace are included in the coverage territory, but only if injury or damage occurs in the course of travel or transportation between any places included in the coverage territory.
Additional Coverages
The coverages extend the insurance provided and are automatically included at no extra cost to the insured. Debris Removal - Pays the expense of removing debris following a covered loss and is subject to a maximum of 25% of the coverage applying to direct physical loss. However, in the event of a total loss where the limit of insurance on the building is exhausted, the policy will pay up to an additional $10,000 for debris removal. Example If a building insured for $100,000 suffers $80,000 of direct fire damage and incurs debris removal costs of $15,000, the policy will pay $95,000. Preservation of Property - Provides open peril coverage for a maximum period of 30 days on insured property that is being moved or temporarily stored at another location because of endangerment by a covered peril. Fire Department Service Charge - Provides, as an additional amount of insurance, up to $1,000 for the payment of fire department service charges when the department is called to protect insured property. No deductible applies to this coverage. Pollutant Clean up and Removal - Pays the insured's expense, up to $10,000 aggregate limit, for each described location in a policy period, to extract pollutants from land or water at the described premises if the discharge or escape of the pollutants is caused by or results from a covered cause of loss. Increased Cost of Construction - In the event of damage to a covered building for a loss to which Replacement Cost Optional Coverage applies, the insurer will pay the increased costs, up to a $10,000 aggregate limit, incurred to comply with enforcement of an ordinance or law regulating the repair, rebuilding, or replacement of damaged parts. Electronic Data - Pays up to $2,500 aggregate in any one policy year, regardless of the number of locations, for the cost to replace or restore electronic data that has been destroyed or corrupted by a covered cause of loss. notes
An insured operates an auto repair shop and has a garage coverage from the garagekeepers insurance. When test driving a customers car, the employee is involved in a accident. How will the customer's car be covered by the insured's policy?
The customer's car is covered for any physical damage while in the custody of the insured Once garagekeepers is endorsed on the policy, it provided a goodwill coverage if the shop employee damages the customers vehicle, it is stolen, or vandalized. The shop's policy is primary and the garage's insurer handles the damages. This keeps the shop's customers happy.
Deductibles
The deductible applies to all losses unless otherwise noted in the policy. With respect to any one loss, the policy will only pay that part of the total of all loss payable under Section I that exceeds the deductible amount shown in the declarations — subject to the policy limits. Although the standard homeowners policy deductible is $250, an insured may choose a higher or lower deductible. As the deductible increases, the policy premium decreases. For example, the premium for a policy with a $1,000 deductible will be less than a premium for a policy with a $250 deductible.
Government Action
The destruction, confiscation, or seizure of covered property by order of any governmental or public authority is excluded. The exclusion doesn't apply to such acts taken at the time of a fire to prevent its spread, if the fire loss would be covered under the policy.
Management definition
The determination of what types of protection are required to meet an insured's needs using: A survey of the insured's operations, health, assets and exposures that could give rise to losses Assessment of potential loss frequency and severity Physical inspections, applications or medical exams used for underwriting help manage a risk
Rate
The dollar amount charged for a particular unit of insurance, such as $5 per $1,000 of insurance
Non-Concurrency/Non-Concurrent Policies
The existence of two or more policies covering the same exposures that don't have the same policy periods. Non-concurrency may create a coverage gap when underlying liability policies and an umbrella policy are non-concurrent because if an underlying liability policy exhausts its aggregate, it may violate the umbrella's underlying limits requirement.
Concurrency/Concurrent Policies
The existence of two or more policies covering the same exposures, having the same policy periods, and the same coverage triggers. For example, if an auto policy and an umbrella policy are written with the same policy dates, they are considered to be concurrent.
Personal Injury Endorsement
The endorsement adds liability coverage for "personal injury," which is defined to include the following offenses: -False arrest, detention, or imprisonment. -Malicious prosecution. -The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling, or premises that a person occupies, committed by or on behalf of its owner, landlord, or lessor. -Oral or written publication of material that violates a person's right of privacy, slanders or libels a person or organization, or disparages a person's or organization's goods, products, or services. ------- Insurance provided by the endorsement does not apply to "personal injury" that is: -Caused by or at the direction of an insured with the knowledge the act would violate another's rights and inflict personal injury. -Arising out of oral or written publication of material: ----With the knowledge of its falsity. ----That took place before the inception date of the policy. -Arising out of a criminal act committed by, or at the direction of, an insured. -Arising out of contractual liability assumed by an insured other than an indemnity agreement that relates directly to the ownership, maintenance, or use of the premises. -An offense related directly or indirectly to the employment of an injured party by an insured. -Arising out of or in connection with a business conducted from an insured location or engaged in by an insured. Arising out of civic or public activities performed by an insured for pay. -Sustained by the named insured or an insured. -Actual, alleged, or threatened: ---Discharge, dispersal, seepage, migration, etc., of pollution. ---Ingestion of, inhalation of, contact with, exposure to, existence of, or presence of any "fungi," wet or dry rot, or bacteria.
Watercraft Liability Endorsement
The endorsement amends the liability exclusion pertaining to certain types of watercraft liability. The exclusion is deleted and replaced with a revised exclusion, which states that Coverage E and F don't apply to "watercraft liability" if the involved watercraft is being: -Operated in or practicing for any prearranged or organized race, speed contest, or competition. Sailing vessels and predicted log cruises are not excluded. -Rented to others -Used to carry people or cargo for a charge -Used for any "business" purpose If the watercraft is a sailing vessel or one powered by an inboard or inboard-outdrive engine or motor, Coverages E and F don't apply to bodily injury sustained by any employee in the course of employment. Such exclusion applies if the employee's principal duties are in connection with the maintenance, operation, or use of a watercraft designated in the endorsement.
Selected Homeowner Section II Endorsements Home Day Care Endorsement
The endorsement extends Section I and II coverages to the home day care "business" described in the schedule provided it is conducted by an insured on the residence premises. The endorsement typically imposes a policy year aggregate limit for the sum of personal liability and medical payments to others losses. The limit corresponds to the Coverage E limit shown in the Declarations, with a per person per accident sublimit for day care-related medical expenses equal to Coverage F. The endorsement does not cover injury to any employee arising out of the "business," as described.
Business Pursuits Endorsement
The endorsement extends liability coverage for the insured's involvement in a business that the insured does not own, have financial control over, or have a partnership interest in. The pursuit must be named in the endorsement, and is commonly added for those in the teaching, sales, and clerical professions.
Permitted Incidental Occupancies Endorsement
The endorsement modifies the Section II exclusions of liability and medical payments in connection with business pursuits of the insured to allow the necessary and incidental use of the premises for the business described on the endorsement. The premises must be occupied principally as the insured's residence; the business must be conducted by an insured; and there can be no other business conducted on the premises. The endorsement is commonly used for a studio, office, or private school type of occupancy. It does not cover bodily injury to any employee of the insured, except residence employees in the course of their employment.
Home Business Endorsement
The endorsement provides for both business property and liability coverages for a variety of home businesses. The business must be owned by the named insured, or by a partnership, joint venture, or organization comprised solely of the named insured and resident relatives. It also includes coverage for premises operations, advertising injury, and personal injury. However, there is no coverage for professional services.
Fire Resistive
The entire building and roof are constructed of reinforced concrete and steel. Must have at least a 2-hour fire resistive rating.
Insurance
The exchange of a small certain expense for a large uncertain loss. 1.Transfer the risk 2.Protects against uncertainty 3. Shares the loss 4. Reduces anxiety
Aleatory
The exchange of value is unequal. Insured's premium payment is less than the potential benefit to be received in the event of a loss. The insurer's payment in the event of a loss may be much greater, or much less (e.g., $0 in the event a loss doesn't occur), than the insured's premium payment.
Additional Conditions
The following conditions apply in addition to the Common Policy Conditions and the Commercial Property Conditions. Coinsurance - The insured is required to insure all covered property to a percentage of its replacement value; failure to do so results in a penalty in the event of partial losses. The coinsurance percentage is shown on the Declarations; and the standard coinsurance percentage is 80%. Any applicable loss penalty is determined based on the percentage of insurance to value. For example, assume a building with a $100,000 replacement value were insured on a policy with an 80% coinsurance percentage and suffered a $10,000 loss. If the amount of insurance on the dwelling were $40,000, the policy would only pay 50% of the $10,000 loss, or $5,000, before application of the deductible. Because the building is insured to one-half the amount required by the coinsurance clause ($80,000), the loss penalty will be 50%. The formula that is applied in the event of a partial loss is as follows: (Amount of Insurance Carried ÷ Amount of Insurance Required) x Amount of Loss = The amount the insurer pays ((Carried) $40,000 ÷ (Required) $80,000) x $10,000 (Amount of loss) = $5,000 (Amount the insurer pays) Mortgage Holders - The policy will pay to each mortgage holder shown in the Declarations its share of a covered loss or damage, in order of precedence, as its interests may appear. The mortgage holder will be paid, even if coverage is denied to the insured, subject to certain provisions. Payment will be made to the mortgage holder, but only if the mortgage holder: -Pays any premiums due if the insured hasn't done so; -Submits a signed, sworn, proof of loss within 60 days of being notified that the insured failed to submit such proof of loss; AND -Has notified the insurer of any change in ownership, occupancy, or substantial change in risk about which it was aware. If the insurer pays a mortgage holder, it must assign its rights of recovery, and rights under the terms of the mortgage, to the insurer. If the insurer cancels the policy, it must give all mortgage holders advance written notice subject to the terms of the policy.
Optional Coverages
The following coverages are automatically included in the policy. However, coverage is not activated unless appropriate designations appear in the Declarations. Agreed Value The coinsurance clause is suspended when this optional coverage applies. The insured and insurer agree on value specified on the Declarations page. This optional coverage only applies to loss or damage that occurs after the effective date of the optional coverage and before the agreed value expiration date shown in the Declarations. This coverage does not automatically renew; the insured must choose it. Inflation Guard The limit of insurance for property subject to this additional coverage automatically increases by the annual percentage shown in the Declarations. This percentage of increase is applied to the policy at the rate of 1/365 of each day. Replacement Cost The insured may purchase coverage for replacement cost loss valuation instead of the actual cash value method of valuation contained in the form. This optional coverage does not apply to: Personal property of others. Contents of a residence. Works of art, antiques, rare articles, etc. Stock, unless the stock option is shown in the Declarations. Tenants' improvements and betterments are NOT considered personal property of others under this coverage. Extension of Replacement Cost to Personal Property of Others This optional coverage allows replacement cost loss settlement, instead of actual cash value loss settlement, to apply for loss to personal property of others.
Agreed Value
The insurance company and insured agree to a specific value of a particular property before the policy is issued. If a total loss occurs, the insurer will pay the Agreed Value.
Insurance Regulation at the State Level
The insurance industry is regulated primarily at the state level. The legislative branch writes and passes state insurance laws, or statutes, to protect the insuring public. The judicial branch is responsible for interpreting and determining the constitutionality of the statutes. The role of a state's executive branch is to enforce the existing statutes that have been put in place. The Commissioner, Director, or Superintendent of Insurance is typically appointed by the Governor, and the Commissioner has the power to issue rules and regulations to help enforce these statutes.
Transfer of Rights of Recovery Against Others to the Insurer (Subrogation)
The insured agrees to transfer to the insurer any rights to recover any payment the insurer has made on behalf of the insured.
Legal Action Against the Insurer
The insured cannot sue the insurer until all terms have been fully complied with, such as notice of occurrence, etc.
Cameras Floater
The insured items are scheduled, with the exception that blanket coverage is provided on items such as shades, filters, etc. Automatic coverage is provided on newly acquired items for 30 days at a limit of insurance up to 25% of the limit designated on the schedule.
Ordinance or Law
The insured may use up to 10% of the Coverage A limit of insurance for increased costs the insured incurs due to the enforcement of any ordinance or law that requires or regulates: -Construction, demolition, remodeling, renovation, or repair of that part of a covered building damaged by an insured peril. -The demolition or reconstruction of the undamaged part of a covered building, when that building must be totally demolished because of damage by an insured peril to another part of that covered building. -The remodeling, removal, or replacement of the portion of the undamaged part of a covered building to complete the remodeling, repair, or replacement to that part of the covered building damaged by an insured peril. This coverage is additional insurance.
Worldwide Coverage
The insured may use up to 10% of the Coverage C limit of liability for a covered loss to property insured under Coverage C while it's located anywhere in the world. This coverage does NOT apply to rowboats, canoes, or property owned by guests or servants. It is included in the Coverage C limit of liability.
Which situation is an example of vicarious liability?
The insured's employee causes an injury while on the job. Vicarious liability applies when one person can be held responsible for the actions of another. It is based on the relationship between the two parties such as a parent and a child or an employer and an employee.
Which situation is an example of vicarious liability?
The insured's employee causes an injury while on the job. Vicarious liability applies when one person can be help responsible for the actions of another. It is based on the relationship between the two parties such as a parents and a child or an employer and an employee.
An insured carries uninsured motorist coverage limits of 100/300/100 and is struck by an uninsured motorist. Who will pay the insured's bodily injury damages claimed for $100,000?
The insured's insurer The insured's uninsured motorist coverage applies to this claim.
Coverage B excludes a number of offenses. Neither coverage nor defense applies to the following types of offenses that cause damage:
The insured's knowledge that an act will violate another's rights and would inflict personal and advertising injury The oral or written publication of material by the insured, or at the insured's direction, when knowing the material is false Criminal acts committed by, or at the direction of, the insured Contractual liability unless the insured would be liable for the act in the absence of the contract Breach of contract The failure of the insured's goods, products, or services to conform to advertising statements Damage that arises out of the wrong description of goods, products, or services
Which of the following policy assignment rights occurs when the names insured dies?
The insured's legal representative takes over the policy. Assignment/transfer of rights until renewal.
Part F Non-renewal
The insurer may elect to non-renew a policy; if non-renewing the policy, the insurer must give the insured written notice before the end of the policy period. At least 20 days advance written notice must be provided (some states require 30, 45 or 60 days notice). In most cases, state law requires the insurer to list the reason for non-renewal on the notice. State law prevails.
Insurable Interest and Limit of Liability
The insurer will not be responsible for payment of loss in an amount greater than the financial interest of an insured.
Part B - Medical Payments Coverage Insuring Agreement
The insurer will pay reasonable expenses incurred for necessary medical and funeral services caused by an accident, sustained by an insured, and incurred within 3 years of the accident. Unlike Liability Coverage, Medical Payments Coverage does NOT require an insured to be legally responsible for causing injuries. The policy defines insured in Part B, as: ----The named insured or any family member occupying any auto; or as a pedestrian when struck by a motor vehicle designed for use mainly on public roads. These vehicles do NOT have to be owned by the insured and include any type of trailer. ----Any other person, such as a passenger, while occupying the insured auto.
Section I - Coverages Coverage A - Bodily Injury and Property Damage Liability Insuring Agreement
The insurer will pay those sums the insured becomes legally obligated to pay as damages because of bodily injury and/or property damage to which coverage applies, provided the occurrence took place during the policy period and in the coverage territory. -The coverage territory includes the United States of America including its territories and possessions, Puerto Rico, and Canada. -If the insured's products are made or sold in the coverage territory and a suit is brought in the coverage territory, the policy would then respond to a product-related claim worldwide. -The insurer has the right and duty to defend the insured against any suit seeking damages. There is no duty to defend any claim or suit to which insurance does not apply.
Transportation Expenses Part D
The insurer will pay, without application of a deductible, a maximum of $20 per day, up to $600, for transportation expenses incurred because of a collision or comprehensive loss. If the damaged auto is a non-owned auto, coverage only applies if the insured is legally responsible for the loss. If the loss is caused by a total theft of the covered auto or a non-owned auto, the insurer will only pay expenses incurred during the period beginning 48 hours after the theft, and ending when the auto is returned to use or the insurer pays for the loss. If the loss is caused by a peril other than theft of the auto, the insurer will only pay expenses beginning when the auto is withdrawn from use for more than 24 hours.
The Insured's Right to Claim Information (Claims Made Form only)
The insurer will provide, upon cancellation, non-renewal, or written request of the First Named Insured, a summary of paid claims, claims for which the insurer has established reserves, and notices received by the insurer of occurrences that could give rise to claims.
Part D Limit of Liability
The insurer's limit of liability for loss is the lesser of the actual cash value (ACV) of the vehicle or the amount necessary to repair or replace the vehicle with another of like kind and quality. In the event of a total loss, adjustments will be made for depreciation and physical condition when determining the ACV. If a repair or replacement results in better than like kind or quality, the insurer will not pay for the amount of the betterment. There is a maximum limit of $1,500 for a non-owned trailer and $1,000 for certain electronic equipment.
Insuring Agreement
The insuring agreement states the insurance company's promise to pay the insured. This promise is usually broad and the other sections of the policy restrict or limit the scope of coverage provided by the policy. Property insurance policies state in the insuring agreement what perils are covered.
Homeowner Section II
The language contained in Section II - Liability Coverages is identical in each of the homeowners forms. It provides the same coverages contained in a standalone Comprehensive Personal Liability (CPL) policy. Section II coverages are not subject to a deductible.
Violent Crime Control and Law Enforcement Act of 1994 (18 USC 1033, 1034)
The largest crime bill in U.S. history expands funding to federal agencies such as the FBI, DEA, and INS and includes provisions that address (among other topics) domestic abuse and firearms, gang crimes, immigration, registration of sexually violent offenders, victims of crime, and fraud. The Act made it a felony for a person to engage in the business of insurance after being convicted of a state or federal felony crime involving dishonesty or breach of trust. Violations include willfully embezzling money, knowingly making false entries in any book, report or statement of the business, threatening or impeding proper administration of the law in any proceeding involving the business of insurance. Penalties include fines and possible prison time.
Statute of Limitations
The length of time during which legal proceedings may be initiated. This time period is established by federal or state law and usually begins on the day an event occurs.
The insurer's limit of liability for a vehicle damaged by a loss under Part D is which of the following? The lesser of actual cash value and replacement value The greater of actual cash value and replacement value Replacement value Actual cash value
The lesser of actual cash value and replacement value
Contingent Liability Exposure
The liability of others arises when a business is held legally liable for the actions, or failures to act, of other parties, such as sub-contractors or independent contractors. Owners and Contractors Protective (OCP) liability, arises out of the work an independent contractor or sub-contractor performs for, or on behalf of, the insured. For example, ABC Building hires Paul's Plumbing to replace the sink in Harry Homeowner's kitchen. If Paul damages the cherry cabinets in Harry's kitchen while doing his work, ABC Building may be considered legally liable for Paul's actions. A business may also be held legally liable for the actions of, or failures to act, of parties per the language of a contract or legal agreement. This is called Contractual Liability. Examples of such contracts and agreements include: -A lease of premises -A service contract -A hold harmless or indemnification agreement
Limit of Liability Part B
The limit of liability shown in the Declarations is the maximum the insurer will pay for each person injured in any one accident. This is the most the policy will pay regardless of the number of insureds, claims made, vehicles or premiums shown in the Declarations, or vehicles involved in the accident. If the loss is covered under more than one Part of the policy, payment will not be duplicated.
Part C Limit of Liability
The limit of liability shown in the Declarations is the maximum the insurer will pay in any one accident. This is the most the insurer will pay regardless of the number of insureds, claims made, vehicles or premiums shown in the Declarations, or vehicles involved in the accident. If the loss is covered under more than one Part of the policy, payment will not be duplicated.
Combined Single Limit *Part A
The limit of the policy may be applied to bodily injury (BI) and/or property damage (PD). A combined single limit policy has a maximum aggregate per accident, regardless of the type of loss (BI or PD).
Mysterious Disappearance
The loss of property when the cause of loss is not known. This is NOT theft, burglary, or robbery.
HO-8 (Modified Form)
The loss valuation method for the Modified Coverage Form is typically Actual Cash Value (ACV). However, if exact materials are not available, they may be replaced with materials that will perform the same function and have the same efficiency, even if they aren't of like kind and quality. The Modified Coverage Form is often used to insure older homes when the replacement and market values of the dwelling are disproportionate or if a moral hazard would be created if insurance were written at 100% of replacement cost. An example of a dwelling that would be insured under this coverage form is an old Victorian home. If the property were destroyed in a loss, the insured would not want to restore or replace it exactly as it was before the loss, or they may not be able to find the necessary materials to recreate the dwelling exactly as it was. Instead of insuring the dwelling for its replacement value of $1,200,000, the insured could insure it for a much lower amount of insurance using this form. The HO-8 does not cover the following perils: Falling objects Weight of ice, sleet, or snow Accidental discharge of water or steam Accidental tearing apart, cracking, burning, or bulging of heating or air conditioning systems Freezing Sudden and accidental damage from artificially generated electrical current
Modified Fire Resistive
The materials used in the walls, floors, and roof of a structure must have a fire resistive rating of at least 1 hour, but less than 2 hours.
Part A - Liability Coverage Limit of Liability
The maximum limit paid under Part A - Liability Coverage is shown on the policy's Declarations. That limit applies per accident for all bodily injury and property damage arising from that one accident, including damages for care, loss of services, and a death. The limit shown in the Declarations is the most the insurer will pay in any one accident, regardless of the number of: -Insureds -Claims made -Vehicles or premiums shown in the Declarations -Vehicles involved in the accident If the loss is covered under more than one part of the policy, payment will not be duplicated. Personal auto policies may have liability limits written as Split Limits or Combined Single Limit.
Per Occurrence Limit
The most the policy will pay for all losses arising out of any one occurrence, regardless of other policy limits. Example: The limit of liability for personal liability on a homeowners policy is a per occurrence limit.
Combined Single Limit
The most the policy will pay for all losses of all types resulting from any one occurrence, regardless of other limits. For example, the per occurrence limits on homeowners and general liability policies provide coverage for the sum of all bodily injury liability and property damage liability claims that arise from one occurrence.
Aggregate Limits
The most the policy will pay for all losses submitted during the policy period, regardless of other policy limits. Each loss payment made under a per occurrence limit or per person limit reduces the aggregate limit of liability. For example, if a commercial general liability policy has a medical payments coverage per person limit of $5,000, a liability per occurrence limit of $1 million and a $2 million general aggregate limit, payment of a $3,000 medical payments claim would use up $3,000 of the general aggregate limit, leaving $1,997,000 available for the payment of future claims submitted during the balance of the policy term.
Split Limit
The most the policy will pay for loss of different types that occur as a result of any one loss, regardless of other limits. For example, the limits of liability on an auto policy for bodily injury might be represented as 100/300/100 ($100,000 is the per person limit for bodily injury liability, $300,000 is the per occurrence limit for bodily injury, and $100,000 is the per occurrence limit for property damage liability).
Limits of Insurance
The most the policy will pay for loss or damage in any one occurrence is the limit of insurance shown in the Declarations. -The most the policy will pay for loss or damage to outdoor signs attached to the building is $2,500 per sign in any one occurrence. -The limits applicable to the Fire Department Service Charge and Pollutant Clean Up and Removal Additional Coverages are in addition to the limits of insurance.
Per Person Limit
The most the policy will pay for loss to any one person injured in any one loss, regardless of other policy limits. Example: The limit of liability for medical payments coverage on an auto policy is a per person limit.
First Named Insured
The name of the person or organization that appears first on the Declarations page of a policy as "named insured."
Representations
The named insured agrees that all statements made in the application are accurate and complete, that the statements are based on representations made by the named insured to the insurer, and that the insurer has issued the policy based upon such representations.
The named insured is the person or persons designated on the policy's declarations page and should be the party or parties holding deed to the property being insured. In situations where real property is owned by a trust, the named insured will be the trustee(s) living in the insured dwelling. Insured means:
The named insured and his or her resident spouse if the resident spouse is a member of the named insured's household. Other residents of the named insured's household who are: -Relatives of the named insured, meaning they are related by blood, marriage, or adoption -Under the age of 21 and in the care of any insured Full-time students living away at college if they: -Are under age 24 and related to the named insured -Were a resident of the named insured's household before moving away to college, OR -Are under age 21 and in the care of the named insured or a resident relative Under Section II Liability Coverages, any person or organization legally responsible for covered animals or watercraft owned by an insured, unless custody of such animals or watercraft is in the course of "business" — as defined by the policy. With respect to a "motor vehicle" to which liability coverage applies, persons using a covered vehicle on an insured location with the insured's consent, and persons while engaged in the employment of the named insured or a resident relative.
You and Your
The named insured listed in the declarations, and the spouse if a resident of the same household. The named insured should always be the person or persons to whom the vehicle is titled and registered, unless it's a leased vehicle.
Part F Cancellation
The named insured may cancel the policy for any reason by either returning it to the insurer or giving the insurer advance written notice of the date the cancellation is to take effect During the first 60 days of a new policy, an insurer may cancel the policy for any reason by mailing notice to the named insured shown on the Declarations. Notice of at least 10 days is required for cancellation due to non-payment of premium, and at least 20 days advance written notice for all other reasons. After the policy has been in effect for 60 days, the insurer may cancel only for the following reasons: ----Non-payment of premium ----The policy was obtained through fraud or material misrepresentation, meaning the application contained false information and, had the insurer been provided with accurate information, would not have issued the policy ----Suspension or revocation of the driver's license of the named insured, any driver who is a household resident of the named insured, any driver who regularly uses a Your Covered Auto State law will supersede this provision
Transfer of Your Interest in This Policy Part F
The named insured may not transfer or assign his/her interest in the policy without the insurer's written consent. However, if the named insured dies, the resident spouse will automatically become the named insured. By the same token, if the named insured dies, his/her legal representative will automatically become the named insured, but only with respect to legal responsibility for maintenance or use of any Your Covered Auto. This automatic coverage is provided until the end of the policy period.
Conditions Duties After Occurrence
The named insured or another insured is responsible for performing the following duties. The insurance company has no duty to provide coverage if the named insured's failure to comply with the following duties is prejudicial to the insurance company. -Give the following information in written notice to the insurer or its agent as soon as is practical: ---The policy number ---The identity of the named insured ---Reasonably available information about the time, place, and circumstances of the occurrence ---Names and addresses of any claimants and witnesses ---Cooperate with the insurer in the investigation, settlement, or defense of any claims ---Promptly forward any notice, demand, summons, or other process to the insurer ---At the insurer's request, aid the insurer in making a settlement, pursuing subrogation attempts, taking the case to court, and procuring evidence ---With respect to Damage to Property of Others, submit to the insurer, within 60 days after a loss, a sworn statement of loss and show the damaged property ---No insured shall, except at his/her own expense, voluntarily make payment, assume obligation, or incur expense other than for first aid at the time of bodily injury
Loss Reserves
The net premiums plus interest reflects possible future contract obligations. An accounting measurement of an insurer's future obligation to its policyholders.
Assignment
The owner of a liability policy cannot transfer policy ownership without the insurer's written consent. For example, a business owner cannot sell his business and then transfer ownership of the business' general liability insurance policy to the new owner without the written consent of the insurance company.
Earthquake Endorsement
The peril of earthquake, or earth movement, is excluded on virtually all property policies. It may be added to most homeowners policies by endorsements and, in some jurisdictions, such as California, may also be purchased as a separate policy. Included in the peril of earthquake are earth movement, land shock waves or tremors, landslide, mudslide, mudflow, sinkhole, and the rising, sinking, or shifting of the earth. All earth movements occurring within a 72-hour period are considered a single occurrence of earth movement.
DP-1 (Basic Form)
The perils insured against are fire, lightning, and internal explosion. If an additional premium is paid for Extended Coverage (EC), the following perils are also included: Wind storm or hail Explosion Riot or civil commotion Aircraft, vehicles Smoke Volcanic eruption The peril of vandalism or malicious mischief (VMM) may also be included with the payment of an additional premium. EC and VMM coverages, if purchased, must appear on the declarations. If VMM is purchased, it excludes loss for vandalism in vacant buildings. Losses to the dwelling, other structures, and contents are paid on an actual cash value basis.
Market
The price a willing buyer would pay for property purchased from a willing seller.
DP-2 (Broad Form)
The perils insured against are the DP-1 perils, the EC perils, VMM and the following: Damage by Burglars - This does not include theft coverage nor does it apply if the dwelling was vacant 60 or more consecutive days immediately before a loss. Falling objects - Damage to the exterior of the building must take place for coverage to apply to contents inside the building. Weight of ice, snow, or sleet - This doesn't apply to awnings, patios, pavements, pools, etc. Accidental discharge or overflow of water or steam - Must occur from within a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or household appliance. This doesn't apply to constant or repeated seepage or leakage over a period of time or if the dwelling was vacant 60 or more consecutive days immediately before a loss. Sudden and accidental tearing apart, cracking, burning, or bulging - Must occur to a steam or hot water heating system, air conditioning system, or automatic fire protective system, or household appliance. Freezing - Must occur to a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or household appliance. Applies only if the insured used reasonable care to maintain heat in the building OR shut off the water supply and drained all systems of water. Sudden and accidental damage from artificially generated electrical current - This peril is caused by man-made electricity or power surge and does NOT apply to damage to tubes, transistors, electronic components, or circuitry contained in appliances, fixtures, computers, etc. The Damage by Burglars peril includes damage to the covered property caused by the burglar, but not theft of property. The Vehicle peril does not include loss to a fence, driveway, or walkway caused by a vehicle owned or operated by the insured. The Smoke peril does not include loss caused by smoke from agricultural smudging or industrial operations. Losses to the dwelling and other structures are paid on a replacement cost basis, and losses to personal property are paid on an actual cash value basis.
Named Insured
The person or organization designated on the Declarations page of the policy as being protected by an insurance contract.
No payment may be made by the Secretary under the Program with respect to an insured loss that is covered by an insurer, unless: TRIA
The person that suffers the insured loss, or a person acting on behalf of that person, files a claim with the insurer. The insurer provides clear and conspicuous disclosure to the policyholder of the premium charged for insured losses covered by the Program and the Federal share of compensation for insured losses under the Program. The insurer processes the claim for the insured loss in accordance with appropriate business practices, and any reasonable procedures that the Secretary may prescribe. The insurer submits to the Secretary, in accordance with such reasonable procedures as the Secretary may establish.
Coverage C - Personal Property
The policy covers personal property owned or used by an insured while it's anywhere in the world. After a loss, and at the named insured's request, it covers property owned by others while it's on the residence premises occupied by an insured or property owned by a guest or residence employee while located in any residence occupied by an insured. Coverage for property at another residence is limited. If personal property is usually located at an insured's residence other than the residence premises, coverage is limited to 10% of Coverage C or $1,000, whichever is greater. For example: property usually located in a student's dormitory or at the insured's summer home. This limit doesn't apply to property being moved because it's being repaired or rebuilt, located in a newly acquired principle residence during the first 30 days after being moved, or the residence premises is not fit to live in or store property in. Property not covered under Coverage C includes: -Property specifically described and insured elsewhere, such as on another policy or by endorsement to the homeowners policy -Animals, birds, or fish -Motor vehicles, including equipment, parts, and electronic equipment and accessories that can only be operated by the motor vehicle. An exception exists (meaning coverage is provided) for motor vehicles not required to be registered for use on public roads, used solely to service an insured's residence, or designed to assist the handicapped -Aircraft, including its parts, except model or hobby aircraft is covered if it's not used or designed to carry people or cargo -Hovercraft, including its parts -Property of roomers, boarders, and other tenants—except those related to an insured -Property in an apartment regularly rented, or held for rental, to others by an insured—except for property covered under the additional coverage, -Landlord's Furnishings -Property rented or held for rental to others off the residence premises -Business data, credit cards, and electronic fund transfer cards—including data stored in books of account, on paper records, or on computers -Water or steam This insurance limit is 50% of the Coverage A limit of liability, does not reduce the Coverage A limit of liability, and may be increased by endorsement.
Coverage A - Dwelling What does the policy over: What does the policy not cover:
The policy covers: Dwelling on the residence premises shown in the declaration, including structures attached to the dwelling. Materials and supplies located on or next to the residence premises used to construct, alter, or repair the dwelling or other structures on the residence premises. For example, the pile of lumber in the insured's back yard that will be used to construct a deck off the kitchen. The policy does not cover: Land on which the dwelling is located. Theft in, to, or from a dwelling under construction, including materials used in the construction. Vandalism and malicious mischief including ensuing loss, if the dwelling was vacant for more than 60 consecutive days immediately before the loss. When a limit of liability is chosen for Coverage A - Dwelling, the other three property coverages (B, C, and D) are automatically issued at limits equaling a specific percentage of the Coverage A limit of liability. If these limits are inadequate, the insured may purchase higher limits. In most cases, the insurer requires the named insured to purchase insurance in an amount that is no less than 80% of the dwelling's replacement value. If, at the time of a loss, the amount of insurance on the dwelling is less than 80% of the dwelling's replacement value, a penalty will be applied to partial losses. If 80% replacement cost is not carried, ACV will apply.
Concealment or Fraud
The policy does not provide coverage to an insured who, whether before or after a loss, has intentionally concealed or misrepresented any material fact or circumstance, engaged in fraudulent conduct, or made false statements relating to this insurance.
Part F Termination
The policy may be terminated by either the named insured or the insurance company.
Policy Period
The policy only applies to bodily injury or property damage that occurs during the policy period.
Part F Policy Period and Territory
The policy only provides coverage for accidents and losses that occur during the policy period and within the policy territory. The policy territory is the United States of America, its territories and possessions, Puerto Rico and Canada, and while being transported between their ports. Mexico is NOT in the policy territory.
Debris Removal
The policy pays the insured's reasonable expenses for the removal of debris of covered property if the property is damaged by an insured peril. Debris removal expense is included in the limit of insurance that applies to the damaged property.
Coverage B - Personal and Advertising Injury Insuring Agreement
The policy provides protection for liability arising from "personal and advertising injury" offenses that are committed in the coverage territory and during the policy period. Personal and advertising injury offenses include: -False arrest, detention, or imprisonment -Malicious prosecution -Wrongful eviction from wrongful entry into, or invasion of privacy of the right of private occupancy -Libel or slander -Violation of privacy -Use of another's idea in the insured's "advertisement" -Infringement of copyright, trade dress, or slogan in the insured's "advertisement" The policy will pay those sums the insured becomes legally obligated to pay as damages because of personal and advertising injury to which the insurance applies. The insurance company has the right and duty to defend the insured against any suit seeking damages because of personal and advertising injury. The policy doesn't provide defense coverage to anyone else, including anyone named in a contract or hold harmless agreement, unless they are also an "insured."
Deductible
The policy will not pay for a loss until the amount of loss exceeds the deductible amount shown in the Declarations. The standard deductible is $500.
Proximate Cause
The primary cause of loss. If only one peril caused the loss, the proximate cause is the first event in the unbroken chain of events that resulted in loss. If more than two perils caused or contributed to the loss, the proximate cause is the peril having the most significant impact in generating the loss or damage.
Liability Coverage Coverage F - Medical Payments to Others
The policy will pay necessary medical expenses that are incurred or medically ascertained within 3 years from the date of an accident causing bodily injury. Legal liability, negligence, and fault do not trigger this coverage. Medical payments to others is a goodwill coverage and designed to discourage the submission of liability claims. Medical expenses are the reasonable charges for medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, prosthetic devices, and funeral services. Coverage does not apply to the insured or regular residents of the insured's household (except residence employees). However, coverage does apply to: -A person on the insured location with the permission of an insured. -A person off the insured location if the bodily injury: ----Arises out of a condition on the insured location or the immediate surroundings. ----Is caused by the activities of an insured. ----Is caused by a residence employee in the course of employment by the insured. ----Is caused by an animal owned by or in the care of an insured.
Debris Removal
The policy will pay the named insured's reasonable expenses for the removal of debris of covered property if a covered loss occurs. Payment is included in the limit of insurance for covered property that is damaged. If debris removal expenses and expenses for damaged property exceed the applicable limit of insurance, this coverage will provide additional insurance equal to 5% of the limit available for such expense. For example, the insured's shed burns to the ground. The Coverage B limit of liability is $10,000. This coverage will pay a total of $10,000 plus $500 ($10,000 times 5%) for the replacement value of the shed plus debris removal expenses. A limit of $1,000 applies for reasonable expenses to remove from the residence premises debris of the insured's trees felled by windstorm, hail, or the weight of ice, snow, or sleet.
Grave Markers
The policy will pay up to $5,000 for grave markers, on or away from the residence premises, for loss caused by a peril insured under Coverage C. This coverage does not increase the limits of insurance that apply to the damaged, covered property.
Underwriting
The process of selecting, classifying, and rating a risk for the purpose of issuing insurance coverage. Analyze insurance applications determining if they will be accepted or rejected.
Insured Location means:
The residence premises The part of any other premises, structures, or grounds used by the insured as a residence if it is shown in the Declarations or acquired by the named insured during the policy period for use as a residence Any premises described above used by the named insured, such as a boat slip Any premises not owned by an insured and where the insured is temporarily residing, such as hotel rooms and summer vacation rentals Vacant land, other than farm land, owned by or rented to an insured Land owned by or rented by an insured on which a 1, 2, 3, or 4-family dwelling is being built as a residence for an insured Individual and family cemetery plots or burial vaults of an insured Any part of a premises occasionally rented to an insured for other than business purposes, such as a banquet hall where a wedding reception is hosted
Right of Salvage
The right of the insurer to take possession of damaged property after paying for its loss. The salvage belongs to the insurer.
Deductible
The specified amount of each loss that the insured must bear. In property insurance (and with a per claim, or per occurrence, deductible), the insurer subtracts the deductible from the amount of loss when making payment. By accepting a larger deductible, the insured's premium may be reduced. An insurer may require a larger deductible as an underwriting tool to limit small claims.
Burglary
The taking of property from inside the premises or a locked safe or vault by a person who commits forcible entry into, or exit from, the property of another while trespassing.
Robbery
The taking of property from the care and custody of a person who has been caused or threatened with bodily harm.
Separations of Insureds (Severability)
The term insured is used severally and not collectively in the policy, and it is to be applied as meaning the insured against whom claim is made or suit is brought. The insurance afforded applies separately to each insured. Multiple suits against multiple insureds do not increase the amount of insurance for that occurrence or policy period.
Nonrenewal
The termination of a policy at the expiration of its term. The policy does not renew and no coverage is provided after the expiration date.
Cancellation
The termination of an insurance policy before its expiration date. Once cancelled, a policy provides no coverage. A policy may be cancelled by the insured or insurer.
Premium
The total cost for the amount of insurance purchased For instance, $50,000 of coverage = $5 rate x 50 (per $1,000 of insurance) for a $250 premium
Part D Insuring Agreement (continued) Collision
The upset of the covered vehicle or a non-owned auto, or its impact with another vehicle or object, such as a tree. Collision is the single named peril in the policy.
Manual Rating
The use of rates contained in a manual published by the insurer or those of the rating organization of which it is a member.
Retrospective Rating
The use of rates that adjust the policy premium to reflect the current loss experience of the policyholder. Premium adjustments are subject to minimums and maximums.
Merit Rating
The use of rates that rewards a policyholder that takes measures to decrease the probability of loss by the implementation of safety programs, loss control programs, etc.
Concealment
The willful holding back or secretion of material facts pertinent to the issuance of insurance (or a claim), even if the applicant or insured was not about the subject. Concealment results in denial of coverage and may void the policy.
Each of the following is an element of negligence, except: There is an intervening cause There is a foreseeable consequence The duty is violated A duty is owed
There is an intervening cause
Neglect
There is no coverage for losses if the insured fails to use all reasonable means to save and preserve covered property at and after the time of a loss.
Interline Endorsements
These endorsements coordinate the coverage contained in one coverage part of the policy with other coverage parts to prevent duplication.
Time Element Coverage Forms Business Income and Extra Expense Forms
These time element coverages provide insurance for two distinct types of indirect loss that result from the necessary suspension of the insured's operations due to a covered property loss: Loss of business income. Extra expense.
Gramm-Leach-Bliley Act (GLBA, a.k.a. the Financial Services Modernization Act of 1999)
This act repealed parts of the Glass-Steagall Act of 1933 to allow the merger of banks, securities companies, and insurance companies. It also established the Financial Privacy Rule and Safeguards Rule for the protection of consumers' privacy. The Financial Privacy rule requires "financial institutions," which include insurers, to provide each consumer with a privacy notice at the time the consumer relationship is established and annually thereafter. The privacy notice must explain: The information collected about the consumer Where that information is shared How that information is used How that information is protected The notice must also identify the consumer's right to opt out of the information being shared with unaffiliated parties pursuant to the provisions of the Fair Credit Reporting Act. Should the financial institutions privacy policy change at any point in time, the consumer must be notified again for acceptance. Each time the privacy notice is re-established, the consumer has the right to opt out again.
Duties of an Injured Person - Coverage F - Medical Payments to Others
This condition applies to third party claimants who are pursuing coverage under the policy. The injured person, or someone acting on his or her behalf, must: -Give the insurer written proof of the claim as soon as practical—and under oath, if required. -Authorize the insurer to obtain copies of medical records and reports. -Submit to a physical exam by a doctor of the insurer's choice when and as often as the insurer reasonably requires.
Payment of Claim - Coverage F - Medical Payments to Others
This condition states that payment under Coverage F is not an admission of liability.
Legal Liability Coverage Form
This coverage form provides coverage for the insured's legal liability for loss or damage to real or personal property owned by others when it is in the insured's care, custody, or control and is damaged by a covered peril. It is most commonly written for the tenant of a commercial building when the tenant, under the terms of a lease, is legally responsible for damage to the building. The form also covers for loss of use of the property, and provides defense coverage.
Personal and Advertising Injury
This coverage is provided under Coverage B.
Part C Underinsured Motorists Coverage (UIM)
This coverage is slightly different from Uninsured Motorists Coverage, and may be required by state statutes as part of the Uninsured Motorists Coverage. In other states, coverage is optional or added by endorsement. Underinsured Motorists Coverage (UIM) protects the insured against drivers who do have auto liability insurance, but whose coverage limits are inadequate or insufficient to respond to claims. The coverage pays only up to the amount that exceeds the limit of liability of the at-fault party.
Fire Department Service Charge
This coverage pays up to $500 for the named insured's contractual liability to pay fire department charges incurred by a fire department that is called to save or protect covered property by a peril insured against. Covered charges must be incurred by a fire department other than that of the jurisdiction in which the covered property is located. For example, a neighboring fire department is called to assist the fire department of the jurisdiction in which the insured property is located. This coverage is additional insurance, and the policy deductible does not apply.
Water Back Up and Sump Discharge or Overflow
This endorsement allows the insured to buy back some coverage that is excluded under the Water Damage exclusion. It provides up to $5,000 of coverage for direct physical loss to property insured under Section I (Coverages A, B, and C) caused by water or waterborne material that: -Backs up through sewers or drains, or -Overflows from a sump, sump pump, or related equipment. Coverage is provided even if the sump overflow is caused by equipment breakdown. A special deductible of $250 applies and replaces any other deductible that may otherwise apply. Coverage doesn't apply if damage is caused by the negligence of an insured.
Joint Ownership Coverage Endorsement (PP 03 34)
This endorsement amends the definition of "you" and "your" to refer to 2 or more individuals, other than husband and wife, who reside in the same household, or to non-resident relatives who jointly own the insured vehicle.
Miscellaneous Type Vehicle Endorsement (PP 03 23)
This endorsement changes the policy by adding a definition for "miscellaneous type vehicle," which means a motor home, motorcycle, or other similar type vehicle, ATV, dune buggy, or golf cart. In addition, to the definitions section of the policy, the endorsement amends "your covered auto" and "newly acquired auto" to include any "miscellaneous type vehicle" shown on the endorsement. The definition does not include snowmobiles. Various exclusions under Parts A, B, and D are also amended to remove exclusions for damage to, and injuries arising out of, vehicles having fewer than 4 wheels and vehicles designed mainly for off-road use. The endorsement excludes coverage for any non-owned vehicles, other than a temporary substitute vehicle.
Personal Property Replacement Cost Endorsement
This endorsement changes the valuation method for most property insured under Coverage C from actual cash value (ACV) to replacement cost. It also applies to awnings, outdoor antennas and equipment, carpeting, and household appliances. If the following classes of property are separately described and specifically insured in this policy and NOT subject to agreed value loss settlement, the endorsement also applies to jewelry, furs and fur garments, cameras and related equipment, musical instruments and related equipment, silverware, goldware, pewterware, and golfer's equipment. Other classes of property separately described and specifically insured are NOT subject to this endorsement. Property NOT eligible for coverage under this endorsement—and that is subject to actual cash value loss settlement—includes antiques, fine arts, paintings and similar articles of rarity or antiquity that cannot be replaced, memorabilia, souvenirs, collectors' items, articles whose ages and histories contribute to their value, articles not maintained in good or workable condition, and articles that are outdated or obsolete and are stored or not being used. This endorsement only changes loss valuation—it doesn't change other policy provisions, including perils insured against or exclusions.
Pollution Extension Endorsement
This endorsement deletes the Pollution Exclusion for bodily injury and property damage liability, but continues to exclude clean up costs.
Vacancy Permit (CP 04 50)
This endorsement extends coverage on a building that has been vacant or unoccupied beyond the limitation period specified in a policy (usually 30 or 60 days). Usually, the permit is granted free of charge when the structure is in an area with satisfactory fire protection. The perils of Vandalism and sprinkler leakage are excluded under this endorsement.
Dwelling Under Construction Endorsement (DP 11 43)
This endorsement is needed because eligibility for the dwelling property coverage requires insured dwellings to be occupied for residential purposes. Dwellings under construction are not occupied and, when this endorsement is added, the named insured agrees to advise the insurer when construction is completed. The limit of liability for Coverage A is provisional and is based on the building's value upon completion. The limit of insurance in place at any time prior to completion is a percentage of the Coverage A limit that equals the proportion the actual value bears to the value on the date of completion. Once the construction is completed, the named insured must notify the insurer to obtain consent to occupy the dwelling and to adjust the policy premium. Occupancy of the building under Coverage A, as a dwelling, is permitted for 30 days after completion.
Scheduled Personal Property Endorsement
This endorsement is used to increase limits of liability for certain categories of personal property and to broaden the perils insured against that apply to that property. Coverage is provided on an open-perils basis and contains very few exclusions; including wear and tear, insects or vermin, war, and nuclear hazard. Some additional exclusions and restrictions apply for fine arts, postage stamps, coins, and the breakage of art glass windows, glassware, statuary, marble, bric-a-brac, porcelains, and similar fragile articles. This endorsement is also referred to as a Personal Article Floater. Newly acquired property of a class already insured on the endorsement is automatically covered. The insurer must be notified within 30 days (90 days for fine arts) if new property is acquired. Scheduled property is insured worldwide and the Section I deductible does not apply to this endorsement.
Optional Limits Transportation Expenses Coverage
This endorsement is used when the insured wishes to increase the limits of liability for transportation expenses that are provided in the personal auto policy ($20 per day, $600 maximum). The vehicle is described on the schedule along with the increased daily limit and the increased maximum limit. The endorsement does NOT change or broaden the insurance that is provided for Transportation Expenses in Part D - Coverage for Damage to your Auto.
Limited Fungi, Wet or Dry Rot, or Bacteria Coverage Endorsement
This endorsement provides a basic property limit option of $10,000 on an annual aggregate basis during the policy period for: -Loss caused by fungi, wet or dry rot, or bacteria. -Cost of: ---Testing the air or property to confirm the existence of fungi, wet or dry rot, or bacteria. ---Removal of fungi, wet or dry rot, or bacteria. ---Tearing out and replacing any part of the building or other covered property to gain access to fungi, wet or dry rot, or bacteria. Insurers also can offer higher optional coverage limits of $25,000 and $50,000.
Extended Non-Owned Coverage for a Named Individual (PP 03 06)
This endorsement provides coverage by removing or altering some of the Personal Auto Policy's exclusions or limitations. It also covers non-owned autos furnished or available for the insured's regular use. The endorsement provides excess liability coverage for the individual named on the endorsement and for the business use of a commercial type vehicle that the named insured does not own. It can be used to provide excess liability coverage for the use of a vehicle as a public or livery conveyance. An extra premium charge applies for liability and medical payments purchased by this endorsement.
Excess Electronic Equipment Coverage
This endorsement provides coverage for electronic equipment that is permanently installed in the vehicle in a location not used by the auto manufacturer. Coverage increases the policy limit from $1,000 to the amount shown on the endorsement. It includes $200 of coverage for tapes, records, discs, and other media used with covered excess electronic equipment.
Limited Mexico Coverage
This endorsement provides coverage on an excess basis and only for losses and accidents that occur in Mexico and within 25 miles of the U.S. border. In addition, coverage only applies if the insured's visit to Mexico is of 10 or fewer days duration. Coverage only applies if existing liability insurance is in place, and was issued by a licensed Mexican insurance company. No coverage is provided for anyone who is a citizen or resident of Mexico.
Named Non-owner Coverage for a Named Individual
This endorsement provides liability, medical payments, and uninsured motorists coverage for individuals who do not own vehicles, but often borrow or rent autos. The endorsement is also designed for individuals who need to prove financial responsibility. Definitions are amended by this endorsement, which also amends certain exclusions. Part D - Coverage for Damage to your Auto is NOT provided by this endorsement. The endorsement covers only the person named in the endorsement; a spouse and family members may be included if that option is selected on the endorsement. The endorsement provides only Liability, Medical Payments, and Uninsured Motorists Coverages.
Towing and Labor Costs Coverage Endorsement (PP 03 03)
This endorsement provides payment, at the designated amount, for towing to a garage or for labor performed at the site of disablement. The coverage applies per occurrence and to either a Your Covered Auto or the insured's use of a non-owned auto.
Ordinance or Law Coverage (CP 04 05)
This endorsement responds if the enforcement of any building, zoning, or land use law, results in: The loss in value of the undamaged portion of a building because of enforcement of an ordinance or law that requires demolition of the undamaged parts of a building Demolition site and clearance of the undamaged parts of a building Increased cost of repairing or reconstructing damaged parts of a building
Identity Theft Expense
This endorsement will pay up to $15,000 for expenses resulting from an instance of identity fraud discovered during the policy period. The endorsement does not cover losses arising out of business activity. It carries a $500 deductible and the insured must notify the insurer within 60 days of the loss.
Damage to Property
This exclusion applies to the insured's own property and any property in the care, custody, or control of the insured. The Commercial Property Part and the Commercial Inland Marine Part of the Commercial Package Policy provide this coverage.
Basic Extended Reporting Period (BERP)
This extended reporting period is a provision in a claims-made form and allows claims to be reported after the policy term for a specific period of time, such as 60 days after the policy's expiration or cancellation date.
Personal Effects Floater
This floater provides open peril coverage for items worn or carried by tourists and travelers. The coverage applies worldwide, but not at the insured's home.
Limited Pollution Liability Coverage Form (Designated Sites)
This form is identical to the Pollution Liability Coverage Form; except that it does not include clean up.
Condominium Commercial Unit-Owners Coverage Form
This form is used for commercial unit-owners instead of the personal lines Unit-owners Coverage Form (HO-6), which is used by the owners of residential condominium and cooperative units. Only the business personal property of the unit-owner is insured. In the event of duplicate coverage issued by this policy and the policy issued to the condominium association or cooperative corporation, the Unit-Owners Form acts as excess insurance. Covered property includes fixtures, improvements and alterations, and appliances owned by the insured and making up part of the building.
Condominium Association Coverage Form
This form is used in place of the Building and Personal Property Coverage Form when insuring property in the name of a condominium association. Coverage includes the buildings and the fixtures that are a part of the building, such as refrigerators, air conditioners, and other appliances, if the Association Agreement requires the association insure the property. If the unit-owner has insurance covering the same property, the association's coverage will be primary.
Pollution Liability Coverage Form (Designated Sites)
This form provides coverage on a claims-made basis with its own limit of liability. Coverage includes a leak from a waste disposal facility located on the premises. The form provides coverage for clean up imposed by governmental direction if the cost is incurred because of environmental damage caused by a pollution incident.
HO-2 (Broad Form)
This form provides named perils coverage for the dwelling (Coverage A), other structures (Coverage B), and personal property (Coverage C). The 16 named perils are: Fire or lightning Windstorm or hail Explosion Riot or civil commotion Aircraft Vehicles Smoke Volcanic eruption Vandalism or malicious mischief Theft (limited) Falling objects Weight of ice, snow, or sleet Accidental discharge or overflow of water or steam Sudden and accidental tearing apart, cracking, burning, or bulging of heating or air conditioning systems (HVAC) Freezing Sudden and accidental damage from artificially generated electrical current Losses under Coverages A and B are valued on a replacement cost basis. Although coverage for personal property (Coverage C) is provided on the same named perils basis as the dwelling and other structures are, losses are valued on an actual cash value (ACV) basis. This form does not cover loss to a fence, driveway or walk caused by a vehicle owned or operated by the insured.
Ordinance or Law
This is an additional coverage for DP-2 and DP-3. It applies to increased costs incurred by the named insured due to the enforcement of any ordinance or law that requires or regulates the construction, demolition, remodeling, renovation, or repair of a covered building or structure because of a covered loss. Up to 10% of the Coverage A limit of liability may be used for this coverage and, if the insured is a tenant, up to 10% of the limit of insurance that applies to improvements, alterations, and additions may be used. Some or all of the limit of insurance for this coverage may be used to pay for the increased costs incurred by the named insured to remove debris resulting from the construction, demolition, remodeling, renovation, repair, or replacement of covered property. This is additional insurance, and NO coverage is provided for any loss in value of a building or structure due to the enforcement of any ordinance or law or costs incurred by ordinances that require pollution clean up, removal, treatment, etc.
Crop/Hail Insurance
This is private insurance, not reinsured by the federal government. This policy provides named perils coverage. Other perils that may be included in addition to hail are: Fire, lightning, wind. Freezing, drought, insects and disease. The rates for crop hail insurance are developed by the Crop Hail Insurance Actuarial Association (CHIAA). Crop-hail insurance is rated on an acreage basis and the insured can choose a wide variety of coverage options. Typically, coverage begins at 12:01 a.m. following the date the application is signed, provided the crop is clearly visible above the ground. However, this will vary by insurer and state. Changes will be addressed in the state law chapter if applicable. The policy is typically written with deductibles (normally a 5% yield reduction). Policies can be written to cover a percentage of expected yield, such as 50% or 100%. If a crop is expected to yield 10,000 bushels but yields only 5,000, the policy will cover the unrealized 5,000 bushels. The coverage ceases when the crop is harvested (1 growing season) and the payment of an insured loss reduces the total amount of available insurance. The policy includes a replanting provision designed to reduce both the insured's and the insurer's losses. The insurer may reimburse the insured up to 20% of the amount of insurance. The reimbursement does not reduce the amount of insurance available for the crop. Exclusions - These may vary by company, but common exclusions include: -Until normal visible (crop must be above ground) -Failure to harvest a mature crop -Non-owned property (share crop) -Loss from injury to buds, blossoms or blooms, unless the crop is affected -Injury to leaves, vines, etc unless crops are also damaged or affected -Injury to trees, bushes, fruit or nut crops
Named Peril
This type of property coverage only provides insurance for the causes of loss, or perils, listed. If a peril is not "named" in the policy, no coverage applies for loss or damage caused by that peril. Typical "named perils" are fire and theft. Named perils may contain coverage for up to 16 named perils; coverage for additional perils may be added by endorsement.
Tort Law
Torts are civil wrongs; they're not crimes or breaches of contract. They result in injuries or harm that constitute the basis of a claim by a third party.
Types of Reinsurance
Treaty Agreements - Reinsurance agreement that covers all risks contained in the subject line(s) of business automatically. Facultative Agreements - Reinsurance agreement that allows ceding and reinsurance companies the opportunity to negotiate coverage for individual risks.
Fire Department Service Charge
Under each of the dwelling forms, the policy will pay up to $500 for the named insured's liability assumed by contract or agreement for fire department charges incurred when the fire department is called to save or protect covered property from an insured peril. Coverage does not apply if the property is located within the limits of the city, municipality, or protection district furnishing the fire department response. Essentially, coverage is provided for services provided by an assisting fire department. This is additional insurance and the policy deductible does not apply.
Glass or Safety Glazing Material
Under the DP-2 and DP-3 forms, coverage is provided for the breakage of glass or safety glazing material if it is part of a covered building, storm door, or storm window. Coverage is provided for direct loss caused by earth movement and the pieces, fragments, or splinters of broken glass from the glass or safety glazing material. No coverage applies if the dwelling was vacant for 60 consecutive days immediately before the loss. The vacancy provision doesn't apply to losses caused by earthquake. Loss for damage to glass will be settled on the basis of replacement with safety glazing materials when required by ordinance or law. Coverage doesn't increase the limit of liability and is NOT provided by the DP-1 form.
Trees, Shrubs, and Other Plants
Under the DP-2 and DP-3 forms, coverage is provided for trees, shrubs, plants or lawns on the described location for loss caused by the following perils: fire or lightning; explosion; riot or civil commotion; aircraft; vehicles not owned by the named insured or by a resident of the described location; vandalism or malicious mischief; and damage caused during a burglary or an attempted burglary. This coverage is not included in the DP-1 form. Damage to trees, shrubs, plants, or lawns caused by the following perils are not covered: wind; hail; weight of snow, ice or sleet; and loss by theft. The limit of insurance for this coverage is up to 5% of the Coverage A limit, with a maximum of $500 applying to any one tree, shrub, or plant. This is additional coverage.
Value Reporting Form (Full Value Form) (CP 13 10)
Under this form, an insured that owns business personal property that fluctuates in value is protected for the values actually at risk. The insured pays an advance premium at the beginning of the policy period. Reports are filed either daily, weekly, monthly, or quarterly. The final premium is based upon the average values reported and is determined at the end of the policy year. This form may be attached to the Building and Personal Property Form and the Condominium Commercial Unit-Owners Form. The insured is required to report 100% of values with each report. Late reporting or under-reporting will result in a penalty in the event of a loss.
Which insurance company department accepts the insurance risk?
Underwriting
Insurer Underwriting List the factors also
Underwriting protects the insurer against adverse selection and risks that are more likely than average to suffer losses. The underwriter's primary responsibility is the selection of risks to be insured. The underwriter also determines the classification, and premium rate if a risk is accepted by the insurer. The goal of an underwriter is to select risks that fall into the normal range of expected losses. The producer is the field underwriter; the line and staff underwriters are employed by the insurer. Underwriting Factors: Nature of the risk Hazards that are present Claims history Other factors that depend upon the type of risk being insured
Landlord's Furnishings
Up to $2,500 coverage is provided for appliances, carpeting, and household furnishings owned by the named insured and located in each apartment on the residence premises that is rented to others. Coverage is provided for the 15 named perils (the Coverage C perils, with the exception of theft). This coverage does not increase the limit of insurance applying to the damaged property.
Fraternal Benefits Society
Usually organized on a non-profit basis, fraternal benefit societies are primarily social organizations that engage in charitable and benevolent activities that provide life and health insurance to their members. Membership typically consists of members of a given faith, lodge, order, or society.
Which of the following is excluded under the Basic Causes of Loss form? Volcanic action Sprinkler leakage Utility services Sinkhole collapse
Utility services
Under commercial property policy, which endorsement is used to provide coverage based on actual inventory values at certain locations at specific times?
Value reporting form Some businesses such as toy stores have higher inventory during holidays.
Which of the following is excluded under the Section II exclusions? Motorized golf cart approved for use while golfing Vehicle used to assist the handicapped and parked in a public lot Non-owned vehicle used off public roads Vehicle in dead storage
Vehicle used to assist the handicapped and parked in a public lot
Part A Exclusions (continued) Liability coverage is not provided for the ownership, maintenance, or use of:
Vehicles that have fewer than four wheels, such as motorcycles Vehicles designed mainly for use off public roads, such as snowmobiles or ATVs. An exception applies for off-road vehicles used by an insured in a medical emergency, "trailers," or non-owned golf carts. Vehicles owned by the insured that are not insured on this policy OR not owned by the insured, but are furnished to the insured or available for the insured's regular use, such as a company car Vehicles owned by a family member that aren't insured by this policy OR not owned, but are furnished to a family member or available for the family member's regular use, such as a company car Vehicles located inside a racing facility for the purpose of competing, practicing, or preparing for a race or speed contest
Waiver
Voluntary surrender of a known right, claim or privilege.
Coverage A Exclusions (continued)
War exclusion Damage to Property damage to insureds Product Damage to Insureds work Damage to impaired property or property Not physical injured Product recall Personal and advertising injury Electronic data
War
War includes the following, including any consequences of: undeclared war, civil war, insurrection, rebellion or revolution, warlike act by a military force or personnel, destruction, seizure or use for a military purpose. Discharge of a nuclear weapon is deemed warlike even if it occurs accidentally.
Water Damage
Water damage means flood, surface water, tidal water, overflow of a body of water, water or water-borne material that backs up through sewers or drains or that overflows from a sump pump, and water that exerts pressure on or seeps or leaks through a building, foundation, swimming pool, or other structure. Direct loss by fire, explosion, or theft resulting from water damage is covered. Water damage is excluded whether caused by human, animal, or natural forces.
Limited Fungi
Wet or Dry Rot, or Bacteria Coverage Endorsement,The endorsement covers the insured's liability exposure in the event that a third party claims illness as a result of exposure to mold and the insured is deemed liable for the illness. The basic liability limit is currently $50,000 on an annual aggregate basis during the policy period for all fungi, wet or dry rot, or bacteria related damages. Insurers can also offer a higher optional liability coverage limit of $100,000.
Out of State Coverage *Part A
When a "your covered auto" is being driven outside the state in which it is principally garaged (and also within the coverage territory), Part A - Liability Coverage extends to provide coverage as required by the financial responsibility or compulsory insurance laws of that state or Canadian province. For example, if the insured's policy doesn't provide Personal Injury Protection (PIP) coverage and the state in which the vehicle is being driven requires it, the insured's personal auto policy will provide PIP coverage at required limits while the insured is in that state.
Completed Operations Exposure
When a business performs services or work, such as installation, construction, or repair, it's vulnerable to lawsuits and claims resulting from improper or defective workmanship. This exposure typically begins after the insured's operations have been completed and the insured leaves the job site. Injury or damage must occur away from the premises the insured owns or rents. Examples of completed operations exposures include: -A cabinetmaker who builds kitchen cabinets and, a week after he installs them in a customer's kitchen, one of the cabinets falls off the wall and injures the customer's family dog, and -A carpet cleaner uses a solvent that emits a chemical that causes injury to his customer. Coverage will pay for bodily injury and/or property damage caused by negligent or faulty workmanship by an insured, but will not pay for the cost to replace the work that caused the loss. Example A ramp the insured has built and completed at a customer's business later collapses, causing injury. If the ramp had collapsed while being built, premises and operations liability insurance would apply; however, because the ramp collapsed after work was completed and the insured had left the site, Completed Operations liability insurance applies.
Defenses
When a claimant accuses an insured of negligence, the insured may use one of several defenses
No-Fault Liability
When a no-fault liability system or law is in place, the injured party collects insurance benefits from his or her own insurance as if it were first-party coverage, thus eliminating the process of determining negligence or legal liability. No-fault laws vary by state and typically apply to auto insurance. Most no-fault laws restrict the rights of the injured party to sue unless the injuries are severe (e.g., paralysis or death) and meet certain conditions. These conditions are called a threshold and can either be a monetary limit (e.g., $5,000) or described verbally (e.g., death, facial injuries, or broken bones). Some no-fault laws allow the insured to choose whether their policy operates under a no-fault or tort basis. Other states allow policyholders to "add-on" no-fault benefits to their auto policies that are otherwise subject to tort liability. Some states refer to their no-fault laws and coverage as personal injury protection (PIP).
Liberalization
When coverage under a particular form of insurance issued by an insurer is broadened without an additional premium charge, it automatically applies to all policies currently in effect. For example, Carrier A adds coverage enhancements to its Special Form homeowners policy, without an additional charge. Those changes automatically apply to all policies currently in effect.
Part D Payment of Loss
When paying for losses covered under Part D, the insurer may make payment in cash or by repairing or replacing the stolen or damaged property. If making payment in the form of cash, the insurer will include any sales tax that applies to the stolen or damaged property. If stolen property is recovered, the insurer has the option of keeping the stolen property (at agreed or appraised value) or returning it to the named insured. If the insurer returns the stolen property, it must pay for any damage that resulted from the theft.
Reasonable Repairs
When the insured's property has been damaged by a covered peril, this coverage pays the reasonable costs incurred by the named insured to take necessary measures to protect covered property damaged by a covered peril against further damage. For example, a tree falls on the dwelling's roof. The insured's expenses to place a tarp over the hole in the roof would be covered. This coverage does not increase the limit of insurance that applies to the covered property.
Financial Responsibility *Part A
When the policy is certified as future proof of financial responsibility, the policy shall comply with the law to the extent required.
Windstorm Insurance Coverage
Windstorm damage is covered under the peril of wind in standard property insurance policies. In some states, exclusionary endorsements may be added to property policies to exclude coverage for the peril of wind or windstorm. These states are Alabama, Delaware, Florida, Georgia, Louisiana, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, South Carolina, and Texas. Because these states are at high risk for wind loss caused by hurricane, they have established wind and/or wind and hail associations that provide a marketplace of last resort for those who are unable to purchase insurance for the peril of wind on their primary property policies. In these and other states, some insurers require mandatory wind deductibles of a certain dollar amount, such as $2,500 or higher, based on the geographic location of property (such as within a certain distance of the sea coast) or prior wind losses.
Permitted Incidental Occupancies Endorsement
With respect to Section I, Coverage B (Other Structures), this endorsement covers a structure of the residence premises, specifically described, for direct physical loss by an insured peril for a specified limit of insurance when used to conduct a business. The endorsement also allows the Coverage C (Personal Property) special limit of $2,500 to apply to the described business.
If the insurer makes a change that broadens coverage under the current edition of the insured's policy
and the change doesn't generate a premium charge, the change automatically applies to the insured's policy.
Definitions
Words, terms, and phrases that are clearly described and used in an insurance policy for the purpose of clarifying the intent of the insurer and to avoid coverage disputes with respect to the extent of coverage provided by the policy. Most policies contain a definitions section in the policy and emphasize policy definitions by enclosing them within quotes or highlighting them with bold text.
Your Work
Work or operations performed by the named insured or on the named insured's behalf. Your work includes materials, parts, or equipment furnished in connection with such work or operations. Your work also includes warranties or representations made at any time with respect to the fitness, quality, durability, performance, or use of "your product" and also includes the providing of, or failure to provide, warnings or instructions.
Statutory Law
Written law enacted by legislatures.
Which of the following injuries is covered by medical payments on a homeowner policy?
a neighbors injury from fall while helping clean the insured's leaves Medical payments to others under a homeowners policy pays for necessary magical expenses incurred within 3 years of an accident causing bodily injury. It is a no-fault coverage. Medical payments to others does not cover the insured or family members or injuries received in the course of employment except for residence employees.
The purpose of the homeowners policy is to provide
a package policy that reduces the need for multiple policies A homeowners policy provides both property and liability coverage in one policy designed to avoid overlaps or gaps in coverage.
All of the following are true regarding torts EXCEPT
a tort is always unintentional Torts can be either intentional or unintentional
All fo the following describe a nonowned auto under the commercial auto policy Symbol 9 EXCEPT
an auto not titles to an insured but available for regular use of named insured or family member. Symbol 9 covers the business owner for liability resulting if the owner uses the person vehicle of employees or partners. Therefore, a borrowed auto available for regular use would not find coverage under Symbol 9.
+ In addition to these five contracts
any other contract or agreement pertaining to the insured's business under which one assumes the tort liability of another party to pay for "bodily injury" or "property damage" to a third person or organization.
To be eligible to receive workers' compensation benefits, an employee must
be injured in a work-related incident. Workers compensation provides coverage for the employer's obligation to cover injuries or disease from work related activities.
Which of the following defines the term peril?
cause of loss A peril is a cause of the loss.
Which document would a lender ask an insured for as evidence that a policy has been writte?
certificate of insurance A certificate of insurance is a document that indicates a policy is in place and provides certain limits.
If a covered loss occurs, the insured must provide proof of loss, and the insurer must respond within a specific time period following the loss. This is because insurance contracts are which type of contract?
conditional In the conditional section of the policy, the insured signs the application and agrees to do certain things, including signing a proof of loss. Following a loss, the insured must complete and sign a proof of loss. This is a policy condition making the contract "conditional".
What part of a legal contract to an exchange of value?
consideration Consideration is another work for payment
All of the following are listed in the duties of the insured following a loss EXCEPT
contracting for restoration The duties after a loss include prompt notification of a claim to the insurer, protect the property from further damage, complete a proof of loss, make the property available for inspection by the insurer, submit to an examination under oath, and cooperate with the insurer during the investigation of a claim.
Under a commercial general liability policy, what is an easement agreement for the use of shared property?
contractual liability When the insured enters into a contract such as sharing property, liability arising of out that contract can be defined as contractual liability.
All of the following are used to establish negligence EXCEPT
cost of damages There are four elements needed to establish negligence: a duty owned, breach of the duty, proximate cause, and resulting damages.
All of the following are a covered cause of loss under the homeowners HO-2 broad form EXCEPT
discharge or overflow of water from a sump Discharge or overflow of water from a sump is expressly excluded as part of the "water damage" exclusion. Coverage can be added by endorsement.
All of the following are considered an insured under Part A - Liability coverage of the personal auto policy except
employee driving a company car Insureds under the personal auto policy include the named insured, the named insured's spouse and other family member who resides with the named insured, and any person borrowing a covered auto with permission of any insured.
Which of the following is attached to and used to modify or change the original policy in some way?
endorsement An endorsement is added to a policy to change its original terms, conditions, or coverage.
Which part of the insurance contract describes a loss for which the insures will not be indemnified?
exclusions The policy exclusions list the perils, property, people, hazards, or losses that are not covered by the policy. Exclusions are used to restrict coverage.
A cable company uses employees to install equipment in customers homes. The company purchases a bond from an insurer to protect itself from potential dishonest acts of the employees. Which bond should the cable company purchase?
fidelity bond a fidelity bond guarantees an employees honest performance and provides protection against the dishonest acts of employees.
Which word best describes an insurer incorporated outside of the state in which it is doing business?
foreign When we think "foreign", we think our country,. In insurance, it is outside the state where the insurer is licensed.
All of the following are covered for named perils under Coverage B except
grave markers Coverage B - other structures only covers other structures that are not on the residence premises.
Plugging too many electrical cords into a single outlet can be best described as a
hazard A hazard is a particular condition that increases the likelihood or severity of a loss
Coverage C - Medical Payments Insuring Agreement
he insurer will pay for medical expenses, due to the bodily injury, caused by an accident on the insured's premises or because of the insured's operations. The accident must take place in the coverage territory and during the policy period. Expenses include first aid administered at the time of the accident, and expenses that have been incurred and reported within one year of the date of the accident. These payments are made regardless of fault.
Applicant
he party submitting an application for insurance.
Part F Automatic Termination
he policy automatically terminates if the insured, or a legal representative, fails to accept or pay for a renewal or continuation of the policy. In addition, coverage automatically terminates if the named insured secures other auto insurance on an auto shown on the Declarations.
Which of the following is how defense costs are paid in relation to the limit of insurance under the personal auto policy for bodily injury and property damage Part A - liability coverage?
in excess of the limit Supplementary payments, including defense costs, are paid in addition to the limit of liability.
Which characteristic of an insurance contract expresses the principle the policyholder is returned to the approximate financial condition as before the loss?
indemnity Indemnity means to "make whole"
Declarations page
insureds name, location of the property, the limits of coverage provided, and the premium
Determining adequate indemnification after a loss is a principle duty of the
insurer The insurer determines the amount of indemnification after a loss based on the type of loss valuation provided in the policy. Common loss valuations include replacement cost, actual cash value, functional replacement cost, agreed value and states value.
All of the following are examples of an insured's negligence EXCEPT
intentional destruction of property of another Intentional destruction of property is a crime. Negligence involves a wrongful act that is not criminal.
The Personal Auto Policy (PAP)
is a personal lines policy that provides several types of insurance for loss that results from the non-business use of certain types of motor vehicles. The PAP is designed to cover an individual's or family's personal use of an auto, and is comprised of 6 major parts. was designed to provide insurance for eligible vehicles that are owned by one or more individuals. Eligible vehicles are private passenger vehicles including cars, SUVs, passenger vans, and pickups with a gross vehicle weight of 10,000 pounds or less. The primary use of eligible vehicles must be personal, although incidental business use is allowed—e.g., making sales calls. Delivery or commercial use of an eligible vehicle renders it ineligible for the personal auto policy and requires it to be insured on a business auto policy.
Per Occurrence Limit
is the most the insurer will pay for damages under Coverage A and medical expenses under Coverage C because of bodily injury or property damage arising out of any one occurrence.
Personal and Advertising Injury Limit
is the most the insurer will pay under Coverage B for the sum of all damages because of all personal and advertising injury sustained by any one person or organization.
Medical Expense Limit
is the most the insurer will pay under Coverage C for all medical expenses because of bodily injury sustained by any one person.
Products Completed Operations Aggregate Limit
is the most the insurer will pay, during the policy period, for losses payable under Coverage A included in the Product and Completed Operations Hazard.
All fo the following are found on a declarations page EXCEPT
policy exclusions The declarations page of a policy provides specific details about the policy including the insureds name, location of the property, the limits of coverage provided, and the premium.
Which of the following losses is covered under Coverage A Dwelling?
lightning strike on home's chimney Coverage A applies only to the dwelling itself, which includes its chimney.
As a general rule, commercial inland marine insurance covers all of the following EXCEPT
merchandise while it is being manufactured
Which of the following is NOT defined as an auto under a commercial auto policy?
mobile equipment Under both the business auto and the commercial general liability policy, mobile equipment is defined separately. Mobile eq. includes forklifts, tractors, and equip on crawler treads.
Which type of hazard is an example of a person who increases the chance of loss through carelessness or by irresponsible actions?
morale hazard Morale hazard involve the attitude of an insured, such as carelessness, that increases the probability of a loss.
All of the following professionals would purchase medical malpractice insurance to manage the liability risk associated with their practice except?
morticians Medical malpractice is professional liability insurance is sold to medical professionals such as nurses, doctors, and veterinarians.
Absolute liability can be imposed by law and exist in the absence of
negligence Absolute liability can be imposed when an activity is deemed to be especially hazardous. It imposes a high degree of care and does not require negligence on the part of the party performing the activity.
Which of the following is not authorized to transact insurance in a state?
non-admitted insurer A nonadmitted insurer is not authorized to sell insurance in a particular state
The conditions section states the.....?
obligations of the parties to the contract, as well as any other conditions of coverage. The insureds duties and obligations are spelled out in this section.
For the commercial general liability coverages of bodily injury, property damage and medical payments, which limits of insurance apply if the the aggregate limit is NOT met?
per occurrence per occurrence limit is the most that will be paid for any one occurrence.
The most a policy will pay for all losses arising our of any occurrence regardless of other policy limits is called the
per occurrence limit Certain limits of liability apply to any one loss and other limits apply to the total of all losses that occur within the policy period. The per occurrence limit applies to all losses that arise from a single occurrence.
The causes of loss form lists which of the following?
perils property in insured against causes of loss forms list the perils that property is insured against.
Which method of risk management is used when an insured elects to self insure?
retention retaining risk means the entity will pay for its own losses. This could be a high deductible or a decision not to purchase insurance. For example, a contractor buys a new piece of equipment but does not purchase coverage for it.
Which of the following is a covered peril under the DP-2 basic policy form?
riot or civil commotion DP-1 only covers the following perils: fire, lightning, internal explosion. A policy can be endorsed to add wind, hair, aircraft, riot or civil commotion, vehicles, volcanic eruption, smoke, vandalism and malicious mischief.
All of the following activities would warrant absolute liability EXCEPT
risky transportation Absolute liability only applies to especially hazardous activities such as those involving dangerous materials, hazardous operations, or dangerous animals.
All of the following are a producer's responsibility to the insured EXCEPT
setting and paying claims The claims department of the insurer is responsible for handing claims, not the producer.
General Aggregate Limit
shown is the most the insurer will pay, during the policy period, for medical expenses under Coverage C, damages under Coverage A (except damages that are included in the Product and Completed Operations Hazard), and damages under Coverage B.
Which of the following automobiles is covered when an insured selects Symbol 7 on the declaration page?
specifically described autos When you think Symbol, think "S" for specific vehicles.
A woman slips on icy steps and breaks her leg. What is the peril in this situation?
the fall A peril is the cause of a loss.
The law of large numbers states which of the following?
the larger the group, the more accurately losses can be predicted The law of large numbers is a principle that states the more examples used to develop a statistic, the more reliable the statistic will be. Used to determine the amount of losses expected so that insurers can determine the proper rates to charge to cover those losses.
To self-insure means
to assume the financial risk one's self. This is generally an option only for large companies who may even reinsure for risks above certain maximum limits.
Purchasing boatowners insurance is an example of which method of handling risk?
transfer Risk transfer is the process of one party assuming the loss of another party via the terms of a contract.
A businessowners policy includes two separate aggregate limits. Both aggregates are how many times the limit shown in the declarations for liability and medical expenses coverage?
two The policy wording under "aggregate" in the BOP clearly limits the aggregate limits to twice the liability and medical expenses limit.
Under a commercial property policy, which endorsement us used to provide coverage based on actual inventory values at certain locations at specific times?
value reporting form Some businesses such as toy stores have higher inventory during holidays. The value reporting form allows the insured to timely report appropriate values to avoid overinsurance and underinsurance.
Which of the following are defined as a part of the policy and can void the policy if they are breached, whether the breach was intentional or unintentional?
warranties A warranty is a guarantee.
The commercial auto liability coverage covers bodily injury for an accident that occurs
within the policy territory The policy territory is a critical element to consider in any policy, especially those who reside near the Mexico border.
The commercial auto liability coverage bodily injury for an accident that occurs
within the policy territory The policy territory is a critical element to consider on any policy, especially those who reside near the Mexico border.
The businessowners policy covers specified medical expenses
without regard to who is at fault. The insurer pays premises medical payment losses regardless of fault. Medical payments was designed to prevent guests of a store, for example, from having to sue for medical cost reimbursement, and keeps the goodwill of the customer.
