insurance test
What is a "named peril" insuring agreement?
A named peril insuring agreement is one that includes coverage for only a limited number of specific listed perils.
II. Insurance Terms and Related Concepts L. Co-Insurance (80% Rule): Replacement Cost of house - $200,000 Minimum Coverage Required - $160,000 Coverage Selected - $120,000 Customer accidentally sets the kitchen on fire and the damage is $40,000. How will this claim be shared between insurance and customer ?
120,000 ÷ $160,000 - 75%, So the split is 75-25. So company will pay $30,000 and customer will pay $10,000
The insurance company has the right to examine and audit the books and records of the insured business during the policy period and up to how long after the policy period?
3 years after the policy period
FORM HO-3 Debris Removal: If you spend so much on Debris Removal that you don't have enough left to re-build, how much bonus coverage do you get as an allowance?
5% of the limit that applies to the damaged property. Correct. It is 5% of Coverage A for Coverage A repairs. 5% of Coverage B for Coverage B repairs and 5% of Coverage C for Coverage C re-purchase of damaged items.
II. Insurance Terms and Related Concepts R. Negligence: The 4 part test for Negligence: "A claimant must demonstrate that they have legitimate special or general damages that can be compensated" corresponds to which of the 4 steps?
ACTUAL LOSS SUSTAINED
LOSS SETTLEMENT PROVISIONS: WHAT COVERAGE DOES PERSONAL PROPERTY (COVERAGE C) GET?
ACV
Insurance Terms and Related Concepts F. Direct and Indirect Loss: What are two coverages on a BOP that touch on Indirect Loss?
Business Income and Extra Expense Coverge
You are asked an open-ended question that invites you to supply relevant information that only you have - but you do not say anything and you purposefully withhold information that you know to be relevent. What violation have you committed?
Concealment- failing to disclose relevant information is concealment
PART C UNINSURED MOTORISTS COVERAGE Which of the following situations qualifies you to file under your UM Coverage? A) Hit by a vehicle that is not insured either by the owner or driver B) Hit by a Hit and Run driver who cannot be identified C) Hit by a car that has a policy, but the driver who hit you is not covered under the policy
D) ALL OF THEM
Premium Audit and Deposit Premium "a. The estimated premium for this Coverage Form is based on the exposures you told us you would have when this policy began. We will compute the final premium due when we determine your actual exposures." Sometimes the price charged for a policy is based on a variable. Let's say the premium is based on: 1) Total Revenue for the year 2) Total Payroll for the year 3) Total number of units sold during the year 4) Total Number of shipments made during the year You give the insurance company an estimate at the beginning of the policy period and they base your rate on that ESTIMATE. So, you are paying a price up-front that has to be verified later. There is a name for this premium that you are paying during the year - what is it?
Deposit Premium
FORM HO-3 In the CONDITIONS SECTION, we learn that: "Volcanic Eruption Period: "One or more volcanic eruptions that occur within a 72-hour period will be considered as one volcanic eruption." What's the point??
Each seperate eruption -or whatever -would normally be considered a seperate claim, with a seperate deductible if we didn't have this rule, so it is a total hook-up. All activity in a 72 hour period is ONE CLAIM AND ONE DEDUCTIBLE
What kind of Professional Liability polices do NON-MEDICAL PROFESSIONALS get?
Errors and Omissions (E&O)
Which of the following best describes NEGLIGENCE?
Failure to exercise the care expected of a reasonably prudent person in a given situation
SECTION I-CONDITIONS F. Appraisal: We use appraisal to appeal when a claim has been denied?
False. Appraisal is used to settle a dispute as to value, not coverage.
II. Insurance Terms and Related Concepts E. Peril: A peril is a physical or criminal force that damages property or reduces its value, including theft, which makes the property un-usable by its owner. A Hazard is a condition or attitude that INCREASES THE CHANCES OF A LOSS OCCURRING.
Fire is a peril that can cause damage to your property. Having too much under-brush around your house is a hazard that makes it more likely your house would be damaged by fire.
What is the definition of the Actual Cash Value loss settlement option?
First we determine the current replacement cost for an item of Like Kind and Quality, then we apply a deduction for depreciation based on the age and condition of the covered property at the time of the loss.
Exam Section 2 Texas Statutes: You live in Texas. Your insurance company is incorporated as a FLORIDA Company. You are dealing with what kind of Insurer?
Foreign
I. Types of Policies E. National Flood Insurance Program: Coverage Effective Date: EXCEPTION TO THE 30 DAY WAIT - 1 DAY WAIT AFTER MAP REVISION - FEMA and the Corps Of Engineers are always updating and re-drawing the Flood Insurance Rate Maps as new development takes place and drainage patterns are changed, or a new mapping technology emerges. If your house has been in a "safe zone" and a map revision comes out and puts you in a Special Flood Hazard Area, then you get the following benefit: A 13 month window during which you can buy flood insurance with a 1 Day waiting period. Get it?
Got it GOOD
IV. TYPES OF POLICIES B. Automobile: Business Auto Policy Structure of Business Auto The Coverage Symbols Symbol 19 is for "MOBILE EQUIPMENT" THAT DOES NOT QUALIFY AS AN "AUTO" GET IT??
Got it, symbol 19 is used if the business has any mobile equipment that needs to be insured
According to our sample Dec Page, which of the HO-Series policies is in use here?
HO-3, as shown in Circle 11
Which one of the following IS NOT one of the 4 Elements of a contract?
Insurable Interest
Insurance Terms and Related Concepts C. Risk: You have a policy on a house that you own. Is insuring your own house an example of Pure Risk or Speculative Risk?
Insuring your own home is a Pure Risk and therefor insurable. Insuring your own home is a Pure Risk and therefor insurable
FORM HO-3 Perils Insured Against: An out-of-control car wipes out 100 feet of your fence. Covered or not?
It is covered. A fence is a Coverage B Other Structure, so it gets Open Peril Coverage and there is no EXCLUSION FOR VEHICLE DAMAGE TO FENCES.
Insurance Terms and Related Concepts G. Loss Valuation Methods:. When an item like a 3 year old sofa has no market value, we still have to be able to determine its Actual Cash Value for insurance purposes. What is the formula we use to determine ACV in cases like these?
LKQ Replacement Cost minus Depreciation
Insurance Terms and Related Concepts G. Loss Valuation Methods:. Replacement Cost means that the insurance settlement will be enough to repair, re-build or replace the damaged property. What is the standard the insurance company is held to when calculating a fair Replacement Cost?
Like Kind and Quality - LKQ
What kind of Professional Liability do MEDICAL PROFESSIONALS get?
Malpractice Insurance
I am selling you car insurance and I ask you about your driving history over the past 36 months. I want to know about tickets you received and at-fault accidents. You tell me you are clean, having honestly forgotten about a speeding ticket you got 34 months ago. You just thought that ticket was much longer ago that it really was. What type of statement have you made?
Mis-Representation
PART D EXCLUSIONS 1. Loss to "your covered auto"..... which occurs while it is being used as a public or livery conveyance. (UBER/LYFT/DELIVERY) _________________________________________________________________________ Are you allowed to use your car to transport people or property for a fee?
NO, that is clearly not allowed
Insurance Terms and Related Concepts N. + O. Non-renew vs Cancel: CANCELLATION: Can the insurance company always cancel a policy anytime for any reason or for no reason - like the customer can?
NO, the company has strict rules that have to follow in order to cancel a policy. The customer can cancel anytime, but there are rules that the company must follow
If you change or even cancel your insurance after your agent has issued a Certificate of Insurance, does the agent have to notify the certificate holder?
No, there is no notice required. A certificate of insurance has a date on it. Insurance is verified as of that date only.
FORM HO-3 Perils Insured Against - Accidental Discharge of Water: What happens to the Water Damage coverage after 60 consecutive days of Vacancy?
Nothing, Vacancy does not impact Water Damage Coverage on the HO-3. (Unless vandals caused it)
The HO Series give coverage for "All of your stuff, anywhere in the world". But, the Dwelling Policies are not anywhere near that generous. They only cover "property that is usual to the occupancy of the dwelling as a residence" and only while "at the described premises".
OK, I get it. The coverage is waaaay better on the HO Series. All of my stuff vs only my household goods and worldwide coverage vs on-premises only. Cool.
You borrow your neighbor's fancy china soup tureen for a party you are having for some business associates. On the way to bring it back, you accidentally drop it and smash it. Luckily, you know about the Damage to Property of Others provision of your Homeowners Policy. You turn in a claim. The piece has a replacement cost of $800. It was a few years old at the time and had a few little nicks and normal wear and tear. ACV of, let's say $550. How much will your policy pay?
RCV of $800. This coverage provision is very nice and allows RCV for these types of minor claims
Product Liability claims are handled under which Theory of Liability?
Strict Liability
How is the State Average Weekly Wage calculated
The State Average Weekly Wage is set at 88% of the average weekly earnings of all workers in the state
II. Insurance Terms and Related Concepts S. Binder: Who issues a Binder?
The Agent
What is the coverage limit per sign for signs attached to buildings?
There is $1000 of coverage for each sign that is attached to a covered building
FORM HO-3: What happens when a business is being run out of a detached garage?
There is no coverage if a business is being run out of a detatched garage.
Which of the following is an example of Advertising Injury?
You get a "great idea" to promote your insurance agency with a white duck who goes around saying "quack-quack" - kinda like what the AFLAC duck has been doing for the last 30 years.
FORM HO-3 Additional Coverages Landlord's Furnishings: As we know, an HO Policy can be written on a multi-family dwelling (up to and including 4 units. As long as at least one of the units is occupied as a residence by the insured ). How much will the policy pay for appliances,carpeting and other household furnishings in the rented-out units?
$2500 in each unit.
FORM HO-3 Additional Coverages: Grave Markers on or off premises (if you have the land, you could have a family cemetery on premises) Covered for The Coverage C 16 Named Perils How Much?
$5000
I. Types of Policies E. National Flood Insurance Program - Coverage for Antiques " We will pay only for the functional value of antiques" You have an antique sleigh bed valued at $30,000. It is wrecked in a flood. A new sleigh bed pretty much like it is selling at Gallery Furniture for $6,000 - and you can get it delivered TODAY! Will your ACV settlement be based on the antique value of $30,000 or the functional value of $6000?
$6000. The antique or collectable value is not recognized. A $100,000 Ming Vase is just a ceramic jar worth $9.95 at walmart
Insurance Terms and Related Concepts G. Loss Valuation Methods: Stated Value and Agreed Value Loss Settlement Agreements: Your baseball card collection is insured for a STATED VALUE of $10,000 After it burns up in a fire, the adjuster prices out the list of cards you had it the value comes to $7000. How much do you get?
$7,000 - the value as of the date of loss
An insurance company has the right to examine and audit the books of a commercial insured during the policy period and for how long after the policy period?
3 years
II. Insurance Terms and Related Concepts N. + O. Non-renew vs Cancel: CANCELLATION : After the company has had 60 days to doublecheck a new policy, they are now expected to keep the one year commitment of coverage (they can non-renew at the end if they want). BUT, there are some situations where the company can cancel a policy immediately and not have to keep the coverage in force for the whole year they agreed to. (1) If there has been a material misrepresentation of fact which if known to us would have caused us not to issue the policy; or (2) If the risk has changed substantially since the policy was issued. This can be done by letting you know at least ?? days before the date cancellation takes effect. How much notice is required?
30 days
II. Insurance Terms and Related Concepts F. Direct and Indirect Loss: Our Property Coverage Insuring Agreements all say something like: "We insure for direct physical loss to the property..." "Direct Loss", for testing purposes, is the physical damage done to covered property by exposure to the effects of a covered peril. >Which of the following is a "Direct Loss"?
A) A hail storm blitzes your roof B) A wildfire burns your house down to the slab C) Flood waters inundate your house to a depth of six feet (not talking about it if's covered or not) D) ALL OF THE ABOVE ARE EXAMPLES OF DIRECT LOSS
I. Types of Policies C. Commercial. Builders Risk: When Coverage Ceases (ENDS) [Which of the following causes the coverage to END?]
A) The property is accepted by the purchaser - which means they have their own HO or DP in place B) Your interest in the property ceases - if you sell-out the project and you have no more insurable interest C) You abandon the construction with no intention to complete it - as if we are going to insure an abandoned job site D) All of the above terminate coverage
Insurance Terms and Related Concepts G. Loss Valuation Methods: "Replacement Cost minus depreciation" is the definition of which Valuation Method?
Actual Cash Value (ACV
What is the difference, if any, between an Excess Liability Policy and an Umbrella Liability Policy?
An Excess Liability Policy will only ever accept a claim that was first accepted by and exhausted an underlying liability policy. On the other hand, with an Umbrella Policy, there is at least the possibility that a claim that was denied by an underlying policy, or for which there was no underlying coverage, might in fact be covered by the Umbrella
While the BOP is generally an OPEN PERIL policy, we learn of two classes of property that are not covered on the OPEN PERIL basis but on a special NAMED PERIL basis known as THE SPECIFIED CAUSES OF LOSS. What are those two classes of property?
Animals and Fragile Articles
I. TYPES OF POLICIES C. COMMERCIAL. BUILDERS RISK FORM: While coverage is generally limited to the job site, an exception is made for one class of property - to give coverage at a "temporary storage location" or while "in transit". [What class of property gets this consideration on the Builders Risk Form?]
Building materials and supplies - this is the bread and butter coverage of the policy, so it makes sense that it should be the broadest coverage
How might an insurance company violate the Consideration Requirement of a contract?
By arbitrarily denying a good and valid claim that was clearly owed. The consideration given on the part of the insurance company is their promise to pay good and valid claims promptly. By refusing to honor a good and valid claim, they would be withholding their consideration.
Solve this problem with for the Primary and Excess Method Company A's Policy - $100,000 - Excess Company B's Policy - $400,000 - Excess Company C's Policy - $500,000 - Primary A $200,000 loss occurs that is covered under all 3 policies. How much will each company pay. (Forget deductibles and 80% rule)
C pays 100% A pays zero and B pays zero. Under the primary and excess rule, Company C has to pay the entire loss. Company A and B would only come in after Company C paid out their policy limit
Solve this problem using the PRO RATA METHOD Company A's Policy - $100,000 Company B's Policy - $400,000 Company C's Policy - $500,000 A $200,000 loss occurs that is covered under all 3 policies. How much will each company pay. (Forget deductibles and 80% rule)
C) A pays 10% B pays 40% and C pays 60% Under the Pro Rata method: The total amount of coverage in force is $1,000,000 (A+B+C). Company A accounts for 10% of the insurance and pays 10% of the claim and so on
"Indirect Loss" has another name that comes from the idea that these types of economic losses are a consequence of a direct loss. >What is the other name for "Indirect Loss"?
Consequential Loss- Indirect Loss" has another name: Consequential Loss. That comes from the idea that these types of economic losses are a consequence of a direct loss. Consequential Loss
TYPES OF POLICIES C. COMMERCIAL. BUILDERS RISK FORM: Coverage is provided for: "Property that is intended to be permanently {installed and made part of the building] consisting of the following:" All of the following are Covered Property on a Builders Risk EXCEPT:
Contractor's equipment and tools - this sounds more like PROPERTY NOT COVERED. Besides, the builder should already have a BOP or BPP or a Floater Policy to cover his equipment and tools.
Insurance Terms and Related Concepts G. Loss Valuation Methods: Agreed Value - Are Agreed Value Loss Settlement agreements used for property that is easy to place a value on, or hard to place a value on?
Easy to place a value on. An agreed amount is used when everyone is pretty sure what an item is worth and they are also pretty sure that the value is not going to be swinging wildly up and down every year
Insurance Terms and Related Concepts D. Hazard: There are 3 and only 3 categories of Hazards on the test. Which one of the following IS NOT one of them?
Electrical- An electrical problem is certainly a type of physical hazard, but NOT one of the three kinds of hazards as we studied them.
Which of the following misrepresentations would be considered "material"
I ask if you have ever been convicted of DWI. You know that you have, but you say "NO" in order to get a lower rate. A "material misrepresentation" impacts price or eligibility. A misrepresentation over a minor clerical point is not "material"
In the making of an insurance contract the underwriter accepts a customer's offer by doing what specific act?
Issuing a policy as applied for. The underwriter accepts the customer's offer by issuing a policy as applied for. NOTE If the underwriter does not issue the policy as applied for, but issues a policy at a higher rate, that is a counter-offer and the customer would then have to accept that counter in order to perfect a deal.
An auto adjuster is assigned a claim for a damaged vehicle. He determines that there is no way the car can ever be repaired. It is a physical total loss. The car is a 2009 Honda Accord EX-L with 60,000 miles. The vehicle was is in overall good condition at the time of the loss. After consulting some on-line resources and checking with local dealerships, the adjuster determines that a 2009 Honda Accord EX-L with 60,000 miles can be had today for a price of $9,000. What valuation method was used here?
Market Value
Agreement consists of which two elements?
Offer and Acceptance
IV. TYPES OF POLICIES B. Automobile: Business Auto Policy Structure of Business Auto: "Who is an insured"? The point is to cover our customer, the business owner, so of course "insured" means a. You for any covered "auto". and b. Anyone else while using with your permission a covered "auto" you own, hire or borrow _________________________________________________________________________ Let's say your employee is using her car in your business. That car, from your perspective, is a Non-Owned vehicle. If you have the right symbols, then YOU can be covered if the employee causes an accident while on a mission for you. (Vicarious Liability, right??) BUT THE EMPLOYEE DOES NOT GET ANY COVERAGE FROM YOUR POLICY. The employee has to rely on HER OWN POLICY TO PROTECT HER. _________________________________________________________________________ You have a pizza delivery place. One rainy afternoon, two of your drivers are involved in separate accidents while out on delivery. Driver one is using her own car. Driver two is using the delivery car that YOU OWN. You, the business are covered either way. But only one of the delivery drivers is an "insured" under the business auto policy. The other one has only her own policy to protect her. Which driver IS COVERED UNDER THE BUSINESS AUTO POLICY??
Only Driver 2 is covered because she was driving a company car with permission
Your Aunt from out-of-town is visiting for the holidays and she burns her hand while cooking her favorite dish in your kitchen. You take her to the ER and they bandage her up. She's gonna be ok. You tell her about your Homeowners Med Pay coverage and when she gets home she emails you the following claim: 1) Medical Bill $2000 2) Lost wages for 1 week $3000 3) Pain and Suffering $5000 4) Scarring $5000 What, if anything, is covered under your Med Pay?
Only the medical bill of $2000 - and subject to the coverage limit
Which type of insuring agreement is focused primarily on a LIST of the types of losses that..... ARE NOT COVERED?
Open Peril
Bob owns ABC Plumbing Co. He operates the business out of a building that he owns. He has a warehouse full of supplies and inventory. He has a display room with sample fixtures for customers to look at. He has the usual amount of office furniture, phones, etc. And he has 7 vans that he just had wrapped with his new logo. What jumps out at you here as PROPERTY NOT COVERED under the BOP?
Property Not Covered Covered Property does not include: a. Aircraft, automobiles, motortrucks and other vehicles subject to motor vehicle registration; Vehicles" are "property not covered". Bob needs to get a commercial auto policy to cover that fleet of vans
The Accounts Receivable Coverage Extension includes all of the following benefits EXCEPT
Providing you with a short-term loan to cover expenses during the claims handling process. The BOP DOES NOT include a benefit that would provide short term loans. You have to get your own loan somewhere else and the BOP would pay the interest on such a loan, but not the principle - and the insurance company is not obligated to loan or advance anything.
II. Insurance Terms and Related Concepts G. Loss Valuation Methods:. The Principle of Indemnity holds that you should not be made better off by an insurance claim - you are only supposed to be compensated for your loss - put back in the same position you were in. Does replacement cost support or conflict with The Principle of Indemnity?
Replacement Cost conflicts with The Principle of Indemnity because instead of an old one, you now have a brand new one
II. Insurance Terms and Related Concepts G. Loss Valuation Methods:. You paid $5000 for a cutting edge laptop in 2015. In 2019 it was burned up in a fire. In 2019, a new laptop of Like Kind and Quality can be had for $2000. What is the Replacement Cost of your laptop?
Replacement cost is $2000 - the cost of an item of LKQ today
II. Insurance Terms and Related Concepts G. Loss Valuation Methods: - Salvage Value: You rear-ended a truck and totaled your car. Your Liability Coverage paid for the BI and PD that you caused Your policy paid you the book value of $29,000 for your car under your Collision Coverage..Now, the wreck of your car belongs to the insurance company. The back doors are fine, the seats are fine, the trunk is fine -there are lots of parts on your car that are fine. This car has some value that can be realized by selling it to a parts company. What is the as-is value of your totaled car called? A) Its residual value
Salvage Value
Exam Section 2 Texas Statutes Part III File and Use. = The Department of Insurance must approve all policy forms and endorsements that will be used in Texas. Texas is a "File and Use" state. Some states are "Prior Approval", meaning all forms and endorsements must be submitted to the department for approval and cannot be used until approved - no matter how long it takes. In "File and Use" states, like Texas, it works this way: "Each filing pursuant to Subsection (c) or (d) of this article shall be made not later than the 60th day before the date of any use or delivery for use. At the expiration of the 60-day period, a filed form or endorsement is approved unless before the expiration of the 60 days the commissioner either disapproves the form or endorsement by order or approves the form or endorsement." So, an insurance company can design a new policy, and submit it to TDI for approval - with at least 60 days lead time before they intend to start using the new policy. TDI has 60 days to review the form. If they reject it during the 60 day review time, that's that. If they don't reject it in the 60 day review period, then the new policy is deemed approved and can be used.
TRUE
Exam Section 2 Texas Statutes Sec. 31.022. APPOINTMENT; TERM. (a) The governor, with the advice and consent of the senate, shall appoint the commissioner. The commissioner serves a two-year term that expires on February 1 of each odd-numbered year. (b) The governor shall appoint the commissioner without regard to the race, color, disability, sex, religion, age, or national origin of the appointee.
TRUE
Exam Section 2 Texas Statutes Sec. 541.103. HEARING. A person against whom charges are made is entitled to have an opportunity to be heard and show cause why the department should not issue an order requiring the person to cease and desist from the unfair method of competition or unfair or deceptive act or practice described in the charges.
TRUE
Exam Section 2 Texas Statutes Sec. 541.107. DETERMINATION OF VIOLATION. After a hearing under this subchapter, the department shall determine whether: (1) the method of competition or the act or practice considered in the hearing is defined as: (A) an unfair method of competition or deceptive act or practice under Subchapter B or a rule adopted under this chapter; or (B) a false, misleading, or deceptive act or practice (2) and whether or not the person against whom the charges were made engaged in the method of competition or act or practice
TRUE
Exam Section 2 Texas Statutes: Admitted Carriers vs Non-Admitted Carriers - Authorized- also known as- admitted companies: These insurers represent the standard market. The Company Licensing and Registration office incorporates and licenses domestic authorized carriers, and admits foreign insurers, licensing them to operate in the Texas standard admitted market. If a company has not gone through this process, it is a Non-Admitted Carrier
TRUE
Exam Section 2. Texas Statutes Sec. 31.021. CHIEF EXECUTIVE - . (a) The commissioner is the department's chief executive and administrative officer. The commissioner shall administer and enforce this code, other insurance laws of this state, and other laws granting jurisdiction or applicable to the department or the commissioner.
TRUE
This is a very common test question: Distribution and Duration of Death Benefits to Eligible Beneficiaries: A surviving spouse may receive death benefits for the remainder of his or her life unless the spouse remarries. If there are dependent children at the time the employee dies, the death benefits are distributed one half to the surviving spouse, and the remaining half is distributed among the eligible children. This is another very common test question: When There Are No Surviving Eligible Beneficiaries If at any time, there are no eligible beneficiaries, or the eligible beneficiaries are no longer eligible and at least 364 weeks has not been paid by the insurance carrier, the remaining benefits are paid to the Subsequent Injury Fund administered by TDI-DWC. GOT IT??
TRUE
FORM HO-3 Perils Insured Against: What happens if you leave a window open and the wind blows rain in and ruins your hardwood floors and wrecks your $85,000 Grand Piano??
The Piano is NOT COVERED, but the HARDWOOD FLOOR IS COVERED. The "OPEN WINDOW RULE" in the HO-Series applies only to Coverage C, the property contained in the building. Coverage C items would be covered if the storm created an opening, but not if you just left a window open. The damage to the hardwood floor in this example is covered, since the OPEN WINDOW RULE does not apply to Coverage A.
Form HO-3 Which of the following DOES NOT meet the definition of Coverage A?
The land on which The Dwelling is located. This question asked which IS NOT a Coverage A element. A,B and C ARE - so they are all wrong answers to the question. Be careful.
You are a Medical Malpractice adjuster. You have a big claim that you are working from a surgery that was botched by the doctor. The doctor has a $10,000,000 policy. After a long negotiation, you get agreement with the claimant on a $3,000,000 settlement. BUT the doctor withholds consent to settle and you have to go to trial on this one. If a jury awards $5,000,000 - how much will you have to pay?
The most you would have to pay is the $3,000,000 the case could have been settled for. While the doctor does have the right to withhold consent to settle, there is also the HAMMER CLAUSE. Since the doctor would not allow the $3,000,000 settlement, he has to pay anything over that amount when a judgement is entered.
The BOP is an Open Peril policy. When a commercial location has been declared "vacant", six perils are taken away. But that leaves a lot of losses that are still covered for a vacant location. So, let's say a tornado damages a property that was duly vacant at the time of the loss. How would such a claim be covered?
Tornado damage to a vacant commercial location would be covered, but there would be a 15% reduction in the claim payment as a vacancy penalty
Exam Section 2 Texas Statutes Part III File and Use. = The Department of Insurance must approve all policy forms and endorsements that will be used in Texas. Texas is a "File and Use" state. Some states are "Prior Approval", meaning all forms and endorsements must be submitted to the department for approval and cannot be used until approved - no matter how long it takes. In "File and Use" states, like Texas, it works this way: "Each filing pursuant to Subsection (c) or (d) of this article shall be made not later than the 60th day before the date of any use or delivery for use. At the expiration of the 60-day period, a filed form or endorsement is approved unless before the expiration of the 60 days the commissioner either disapproves the form or endorsement by order or approves the form or endorsement." So, an insurance company can design a new policy, and submit it to TDI for approval - with at least 60 days lead time before they intend to start using the new policy. TDI has 60 days to review the form. If they reject it during the 60 day review time, that's that. If they don't reject it in the 60 day review period, then the new policy is deemed approved and can be used.
True
IV. TYPES OF POLICIES E. BONDS " LICENSED, BONDED AND INSURED" The 3 parties to a Bond: This is just pure test taking terminology, so here we go You are a contractor. You have all of your commercial insurance with my agency. You place a bid to build a 3 story building. The building owner has done his due diligence on you - checked your references etc. We have provided the building owner with a Certificate of Liability Insurance, so he knows you have a $1,000,000 CGL. In addition to your Liability Insurance, the building owner wants to be protected in case you screw up. He likes you, thinks you're a great person, but that isn't enough. He wants to be sure that if you mess this up, you have the backing of an insurance company with tons of money to come in and make it right. He knows you may not have that kind of cash. 1) A Performance Bond - guarantees the work will be done as called for in the contract and on-time 2) A Payment Bond - guarantees that you will pay for all materials and supplies on time. Also, you will pay your employees and sub-contractors on-time. This way, nobody puts a lien on the building for un-paid monies owed. 3) A Maintenance Bond - Guarantees that upon completion everything will work like it is supposed to (for a certain period of time at least) Do you see the need for all of these bonds? None of these concerns would be addressed by Commercial Liability Insurance?
Yes, I see it now. The insurance and the bonds work together to provide a web of protection for everyone
Definition of "Newly Acquired Vehicle: Before everything was 24 hour service 365 days a year, businesses, including insurance companies, used to be closed sometimes. On a 3 or 4 day holiday weekend, it could be that long before you could reach anyone even if you tried. So, there had to be a provision to give you automatic coverage if you got a new car while the company or agency was closed. It is also just a nice business courtesy, ok? Get it??
Yes, I see what you mean
SECTION I-CONDITIONS C. Duties After Loss: DO YOU HAVE TO: 8. Send to us, within 60 days after our request, your signed, sworn proof of loss which sets forth, to the best of your knowledge and belief: a. The time and cause of loss; b. The interests of all "insureds" and all others in the property involved and all liens on the property; c. Other insurance which may cover the loss; d. Changes in title or occupancy of the property during the term of the policy; e. Specifications of damaged buildings and detailed repair estimates; f. The inventory of damaged personal property described in 6. above; g. Receipts for additional living expenses incurred and records that support the fair rental value loss;??
Yes, every bit of it
TYPES OF POLICIES B. Automobile: Business Auto Policy Structure of Business Auto "The Symbols" This is a major, major part of understanding how this policy works. Think about all of the different kinds of commercial vehicles out there. From just a normal passenger car to vans to box trucks to a crane, cherry picker, bulldozer, cement mixer. Just about anything that can be welded to a chassis and driven down the road. Then consider that all of these types of vehicles can be OWNED, LEASED or BORROWED by the Business Owner. Or, an employee can use his or her own car in the business. (And we know that now we have a Vicarious Liability situation, don't we ??)
Yes, let's do it
II. Insurance Terms and Related Concepts S. Binder: An agent takes an application for a homeowners policy. Agent issues a BINDER good for 30 days and submits the application to the carrier. Ten days later, the underwriter decides NOT to issue a policy because the customer has 5 prior losses that were not disclosed. Does the customer have insurance at this point?
Yes, the customer still has coverage for the balance of the time on the binder. COVERAGE UNDER THE BINDER IS STILL VALID FOR THE BALANCE OF THE 30 DAYS.
SECTION I-CONDITIONS C. Duties After Loss: DO YOU HAVE TO: 6. Prepare an inventory of damaged personal property showing the quantity, description, actual cash value and amount of loss. Attach all bills, receipts and related documents that justify the figures in the inventory??? EVEN IF THERE WAS A TOTAL LOSS BY FIRE AND THE ARTICLE 6.13 LIQUIDATED DEMAND PROVISION APPLIES???
Yes, you still have to do the inventory after a total loss by fire. The Liquidated Demand clause only applies to Coverage A and B
PART D COVERAGE FOR DAMAGE TO YOUR AUTO: COLLISION MEANS: "Collision" means the upset of {your car} or its impact with another vehicle or object." Remember, COLLISION will pay you whether you were at-fault or not. But if you are at-fault, you can expect a rate increase. In which of the following situations do you NOT DESERVE A rate increase for an accident?
You are driving along at the speed limit doing everthing right and a deer runs into the road and you hit it
You own a plumbing company. One of your guys fails to tighten a connection on a new line he was installing. You get a call two days from your customer say the house has two inches of water all over the place. Who ya gonna call?
You call your CGL carrier because one of you employees has been negligent and has caused property damage. This is an example of a completed operations liability claim. This claim goes to your CGL, not your Workers Comp
You own a plumbing company. Your crew just finished digging up a customer's back yard to put in new sewer lines. Your guys load the back-hoe onto its trailer and head home. But, they did not hook up the trailer correctly and the trailer with the back-hoe comes loose and causes damage to 5 cars on the freeway before finally coming to a stop. What a mess!! Who ya gonna call?
You call your Commercial Auto carrier because the cover your mobile equipment while it is being transported. The CGL covers use of the equipment, but not transportation of the equipment.
What is the definition of the Replacement Cost Loss Settlement Option?
You get enough money to re-build coverage A and B items and you get enough money to buy new coverage C items - all based on today's replacement cost, without deduction for depreciation. The Like Kind and Quality standard is observed.
PART D COVERAGE FOR DAMAGE TO YOUR AUTO: This is where you obtain insurance protection in case your car suffers physical damage. PART D is paid TO YOU. Liability pays for the damage that you do so someone else's car. But PART D is FOR YOU. The two categories of coverage are: Collision Coverage and Other Than Collision Coverage (aka COMPREHENSIVE OR COMP) Let's look at them one at a time. Collision will pay YOU if: 1) You are at fault and you hit another car (parked or moving), or you hit a tree or pole, or you hit a building. You hit any stationary object. 2) You are not-at-fault and a car hits you while you are driving 3) Your car is parked and somebody hits it Ok? This is for YOU. Your policy will pay to fix your car whether you were at fault or not. Let's make sure you understand how COLLISION AND LIABILITY WORK TOGETHER _________________________________________________________________________ You cause an accident. You total both your own car and the car you hit. You have both Part A Liability and Part D Collision, which coverage part pays what????
Your liability pays for the car you hit and your collision pays for your car
II. Insurance Terms and Related Concepts M. OCCURRENCE: OCCURRENCE IS DEFINED AS: "an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in: a. "Bodily injury"; or b. "Property damage". The point here is that this definition includes "continuous or repeated exposure" - which is kind of the opposite of "sudden and accidental damage". This is what you need to understand. When a peril, like the smoke peril, says "Sudden and Accidental" it means the damage has to happen all at the same time. On the other hand, an OCCURRENCE can include long-term damage that has been going on for a while. Which of the following is damage that would be considered "Sudden and Accidental"?
Your washing machine host bursts on Tuesday afternoon at exatly 3:05pm and floods the house
Exam Section 2 Texas Statutes PART II Sec. 4001.104. ISSUANCE OF LICENSE: INTENT TO ACTIVELY ENGAGE IN BUSINESS OF INSURANCE FOR GENERAL PUBLIC. (a) The department may not issue a license as an agent to write any line of insurance unless the department determines that: (1) the applicant is or intends to be actively engaged in the soliciting or writing of insurance for the general public and is to be actively engaged in the business of insurance; and (2) the application is not made to evade the laws against rebating and discrimination, either for the applicant or for another person. (b) This subchapter does not prohibit an applicant from insuring property that the applicant owns or in which the applicant has an interest. It is the intent of this subchapter to prohibit coercion of insurance and to preserve to each individual the right to choose that individual's own agent or insurer and to prohibit the licensing of an applicant to engage in the business of insurance principally to handle business that the applicant controls only through ownership, mortgage, sale, family relationship, or employment. An applicant for an original license must have a bona fide intention to engage in business in which, in any calendar year, at least 25 percent of the total volume of premiums is derived from persons other than the applicant and from property other than that on which the applicant controls the placing of insurance through ownership, mortgage, sale, family relationship, or employment. (c) The department may not deny a license application solely on the ground that the applicant will act only part-time as an agent. (You have a used car lot. You decide to get an insurance license so you can write car insurance for all of your customers, but you are not intending to open an agency to the public - this is not allowed. You would have to hold yourself out to the public as an agent and at least 25% of the premiums you write would have to be from business you don't control.) A) I get it
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Exam Section 2 Texas Statutes PART II Sec. 541.060. UNFAIR SETTLEMENT PRACTICES. (a) It is an unfair method of competition or an unfair or deceptive act or practice to engage in the following unfair settlement practices with respect to a claim by an insured or beneficiary: (1) misrepresenting to a claimant a material fact or policy provision relating to coverage at issue; (LYING) (2) failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of: (DELAYING) (A) a claim with respect to which the insurer's liability has become reasonably clear; (PRETENDING THEY DON'T OWE IT) (B) a claim under one portion of a policy with respect to which the insurer's liability has become reasonably clear to influence the claimant to settle another claim under another portion of the coverage (YOUR CAR IS CLEARLY A TOTAL LOSS BUT THEY HOLD UP THE SETTLEMENT TO PRESSURE YOU ON THE PIP CLAIM) (3) failing to promptly provide to a policyholder a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the insurer's denial of a claim or offer of a compromise settlement of a claim; (THEY HAVE TO QUOTE YOU THE EXACT POLICY LANGUAGE THEY ARE RELYING ON TO DENY YOUR CLAIM) (4) failing within a reasonable time to: (A) affirm or deny coverage of a claim to a policyholder; or (EITHER IT IS OPEN PERIL AND THEY HAVE TO PAY UNLESS THERE IS AN EXCLUSION OR IT IS NAMED PERIL AND EITHER THE DAMAGE IS FROM A NAMED PERIL OR IT ISN'T. MAKE A DECISION, COVERED OR NOT) (B) submit a reservation of rights to a policyholder; (5) refusing, failing, or unreasonably delaying a settlement offer under applicable first-party coverage on the basis that other coverage may be available or that third parties are responsible for the damages suffered, except as may be specifically provided in the policy; (YOU HAVE THE RIGHT TO COLLECT UNDER YOUR POLICY EVEN WHEN SOMEBODY ELSE WAS RESPONSIBLE - YOUR INSURANCE CAN THEN SUBROGATE THE AT-FAULT PARTY, BUT YOU CAN USE YOUR POLICY IF YOU WANT TO) (6) undertaking to enforce a full and final release of a claim from a policyholder when only a partial payment has been made, unless the payment is a compromise settlement of a doubtful or disputed claim; (7) refusing to pay a claim without conducting a reasonable investigation with respect to the claim; (8) with respect to a Texas personal automobile insurance policy, delaying or refusing settlement of a claim solely because there is other insurance of a different kind available to satisfy all or part of the loss forming the basis of that claim; or (9) requiring a claimant as a condition of settling a claim to produce the claimant's federal income tax returns for examination or investigation by the person unless: (A) a court orders the claimant to produce those tax returns; (B) the claim involves a fire loss; or (C) the claim involves lost profits or income.
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Exam Section 2 Texas Statutes PART II Sec. 542.003. UNFAIR CLAIM SETTLEMENT PRACTICES PROHIBITED. (a) An insurer engaging in business in this state may not engage in an unfair claim settlement practice. (b) Any of the following acts by an insurer constitutes unfair claim settlement practices: (1) knowingly misrepresenting to a claimant pertinent facts or policy provisions relating to coverage at issue; (2) failing to acknowledge with reasonable promptness pertinent communications relating to a claim arising under the insurer's policy; (3) failing to adopt and implement reasonable standards for the prompt investigation of claims arising under the insurer's policies; (4) not attempting in good faith to effect a prompt, fair, and equitable settlement of a claim submitted in which liability has become reasonably clear; (5) compelling a policyholder to institute a suit to recover an amount due under a policy by offering substantially less than the amount ultimately recovered in a suit brought by the policyholder; (6) failing to maintain the information required by Section 542.005; or (7) committing another act the commissioner determines by rule constitutes an unfair claim settlement practice.
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Exam Section 2 Texas Statutes PART II TERM OF TEMPORARY LICENSE. A temporary license is valid for 90 days after the date of issuance. RESTRICTION ON ISSUANCE OR RENEWAL OF TEMPORARY LICENSE. (a) A temporary license may not be issued to or renewed by the same person more than once in a consecutive six-month period. (b) A temporary license may not be issued to a person who does not intend to apply for a license to sell insurance or memberships to the general public. OBTAINING CERTAIN COMMISSIONS PROHIBITED. (a) A temporary license holder may not obtain a commission on a sale made to a person who has a family, employment, or business relationship with the temporary license holder. (CONTROLLED BUSINESS)
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Exam Section 2 Texas Statutes Part III The law requires that every auto insurance policy that covers Liability must also include: 1) Uninsured/Under-insured Motorist Coverage 2) Personal Injury Protection (PIP) If the customer does not want this coverage, he can sign a Rejection Form. But, unless there is a signed rejection form, the insurance company MUST PUT UM AND PIP on every policy and charge you for it.
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Exam Section 2 Texas Statutes Part III WORKERS COMP Sec. 406.031. LIABILITY FOR COMPENSATION. (a) An insurance carrier is liable for compensation for an employee's injury without regard to fault or negligence if: (1) at the time of injury, the employee is subject to this subtitle; and (2) the injury arises out of and in the course and scope of employment. (b) If an injury is an occupational disease, the employer in whose employ the employee was last injuriously exposed to the hazards of the disease is considered to be the employer of the employee under this subtitle.
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Exam Section 2 Texas Statutes Part III We all know that minimum required Auto Liability coverage is 30/60/25. UM is also sold to you the same way - with split limits of BI max per person/Bi max per accident/PD Max. The law says your UM limits cannot be higher than your Liability limits. Your UM limits can be lower than your Liability Limits, but NOT HIGHER THAN.
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Exam Section 2 Texas Statutes Sec. 401.052. FREQUENCY OF EXAMINATION.The department shall examine an insurance company as frequently as the department considers necessary. At a minimum, the department shall examine every company at least once every five years.
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Exam Section 2 Texas Statutes Sec. 521.003. NOTIFICATION OF COMPLAINT STATUS. If a written complaint is filed with the department, the department, at least quarterly, shall notify each party to the complaint of the complaint's status unless the notice would jeopardize an undercover investigation. Sec. 521.004. RECORDS OF COMPLAINTS. The department shall keep an information file about each complaint filed with the department that concerns an activity regulated by the department or the commissioner.
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Exam Section 2 Texas Statutes Sec. 541.102. STATEMENT OF CHARGES; NOTICE OF HEARING. (a) When the department has reason to believe that a person engaged in the business of insurance in this state has engaged in an unfair method of competition or unfair or deceptive act or practice the department shall issue and serve on the person: (1) a statement of the charges; and (2) a notice of the hearing on the charges, including the time and place for the hearing. (b) The department may not hold the hearing before the sixth day after the date the notice is served.
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Exam Section 2 Texas Statutes Sec. 541.110. ADMINISTRATIVE PENALTY. (c) An administrative penalty imposed under this section may not exceed: (1) $1,000 for each violation; or (2) $5,000 for all violations. (d) An order of the department imposing an administrative penalty under this section applies only to a violation of the cease and desist order committed before the date the order imposing the penalty is issued. (Here they are telling you the fine for violating the cease and desist order by continuing to engage in the prohibited conduct - which would be pretty hard-core on your part. $1,000 per act in violation of the cease and desist order - up to a maximum of $5,000. But this is only the discipline for violating the cease and desist order. You still face punishment for the underlying conduct!!
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IV. TYPES OF POLICIES B. Automobile: Business Auto Policy Structure of Business Auto Definition of an "AUTO" "Auto" means: 1. A land motor vehicle ......designed for travel on public roads So, car, truck, van, darn near anything rolling down the road. BUT, not if it crosses the line into "Mobile Equipment" Mobile Equipment gets into things like Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads; Power cranes, shovels, loaders, diggers or drills; or road construction or resurfacing equipment such as graders, scrapers or rollers; _________________________________________________________________________ Get the Idea, the policy will cover just about any kind of car truck or van as long as it is not considered "Mobile Equipment" There is no question here, just learning the terminology. GET IT??
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Signs that are not attached to buildings are covered under the Outdoor Property Coverage Extension and only covered for 5 named perils. On the other hand, signs that are attached to buildings are covered on the Open Peril basis, but only up to $1000 each. Agents need to be aware of the limitations on sign coverage and use the Optional Sign Coverage where appropriate to make sure clients are covered adequately. The optional sign coverage can protect all signs, whether or not attached to building
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The Dwelling Policy 1 - Basic Form is the only policy that: 1) Does not provide Coverage B as an additional amount of insurance. It counts against Cov A 2) Does not offer Replacement Cost Benefits for Cov A and B - strictly ACV on A, B and C 3) Does not use the 80% rule. You can insure the house for whatever you want (for ACV only) 4) Has NO ALE and limits Loss of Rent to 20% of Coverage A, NOT as additional insurance 5) Has a 3 tiered coverage structure that allows you to choose from up to 9 covered perils max 6) Has NO coverage for Trees, Lawns , etc
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The HO-Series cover theft and the Dwelling Policies do not. This also shows up on the Dwelling Policies in the coverage for Trees, Plants, etc. Theft is missing Get it??
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You are involved in a serious liability claim arising out of an accident at your home. Your liability insurer says you are needed downtown to give a deposition and it could go on for a few days. How much can you be paid for your lost wages?
up to $250 a day for lost wages/earnings
SECTION I-CONDITIONS C. Duties After Loss: DO YOU HAVE TO: 7. As often as we reasonably require: a. Show the damaged property; b. Provide us with records and documents we request and permit us to make copies; and c. Submit to examination under oath, while not in the presence of another "insured", and sign the same????
yes you do
A policy with the SPLIT LIMIT design has 3 sub-limits that state how much can be paid on a given claim. (This is what makes it different from the Combined Single Limit design.) If your SPLIT LIMIT POLICY says your coverage is: 30/60/25 - these numbers are telling you how much coverage you have. These numbers are telling you about your two coverages: BI/BI/PD. The first two positions are telling you about your BI coverage. So, what is the third position telling you about?
your PD limit
Instead of having you be out of business while your place is re-built, is there an option to maybe get you back in business sooner? Maybe at a temporary location? Or do we always just let you sit there dead while you lose all of your customer base?
YES, the Extra Expense coverage says that instead of just letting you sit there out of business and paying your losses, we will spend the same amount of money or less (but not more) to get you up and running in a temporary location. Whatever makes sense.
LOSS SETTLEMENT PROVISIONS: SO IT IS PRETTY MUCH THE DP-1 THAT IS THE ODD-BALL?
YES. THE DP-1 IS THE ONLY ONE THAT HAS NO REPLACEMENT COST COVERAGE FOR COVERAGE A AND B
FORM HO-3 What are the coverage triggers for Coverage D Loss of Use?
1- Home is "Unfit to live in" AND 2 - Civil Authority Prohibits Use. Plain and Simple - Loss of Use coverage is triggered when the home is left UNFIT TO LIVE IN after a covered loss, or when CIVIL AUTHORITY PROHIBITS USE.. There is no requirement of a TOTAL LOSS.
Insurance Terms and Related Concepts L. Co-Insurance (80% Rule): A house has a calculated Replacement Cost of $200,000. What is the minimum amount the house has to be insured for in order to avoid the Co-Insurance Penalty?
$160,000 ex -200,000 x .8 =160,000
I. Types of Policies C. Commercial Builders Risk h. Lawns, Trees, Shrubs And Plants The Builders Risk has coverage for this. The perils are the "Specified Causes of Loss" ( Except for Wind and Weight of Ice) There is a Limit per claim and a max per plant, just like always. What is the limit per claim and max per plant?
$25,000 per claim and $1000 per tree
Premium Audit and Deposit Premium At the end of the policy period you will have to open your books and records to the insurance company so they can see if the estimate you gave about your sales or payroll or whatever was accurate. The company will examine your records in a process called a
A Premium Audit
OTHER INSURANCE "If there is other applicable liability insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits." _______________________________________________________________________ You decide to switch insurance companies. You start your new policy, but you forget to cancel the old one. A few days later, you have an at-fault accident. So both polices are in force. How will they pay your claims according to this OTHER INSURANCE clause?
The two companies will share the loss using the PRO-RATA method
IV. TYPES OF POLICIES B. Automobile: Business Auto: Policy Structure of Business Auto: Section 1 - We have to establish what kind of vehicles are covered. Cars, trucks, vans, cranes, cement mixers - who knows what. Section 2 - Now we just describe the Liability Coverage for the vehicles Section 3 - Now we just describe the Comp and Coll for the vehicles Section 4 - Conditions Section 5 - Definitions
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In the SPLIT LIMIT design, the coverage is being expressed as THOUSANDS. So, 30/60/25 is really $30,000/$60,000/$25,000. They just leave off the $ and the zeros. Get it?
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One of the many things the BOP has in common with the HO-Series is a special limit of coverage for theft of certain kinds of items. The following are the special theft limits found on the BOP:
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How much does the BOP allow for Fire Department Service Charge?
$2500
Which of the following two Insuring Agreements for Coverage C provides better coverage?
"we cover all of your stuff anywhere in the world" is a lot better than "we only cover household goods and only while on the residence premises" or We cover personal property owned or used by an insured while it is anywhere in the world"
Replacement Cost of house - $200,000 Minimum Coverage Required - $160,000 (80%) Coverage Selected - $120,000 How will the company and the customer share a claim under this policy? What is the percentage that the company will pay and what is the percentage that the customer will have to pay?
$120,000 ÷ $160,000 = 75%, so the split is 75 Insurance and 25 Customer
Insurance Terms and Related Concepts G. Loss Valuation Methods: Stated Value and Agreed Value Loss Settlement Agreements: These provisions are commonly used on Personal Articles Floaters, as we have studied. Going forward, it is good that you remember that the price of the insurance on these forms is a % of the insured value. So, if an annual policy premium is 1.5% of value and you have a $10,000 ring insured, what is the annual premium ( hint $10,000 x .015)
$150 a year. The answer is A. $10,000 x .015 = $150 a year.
The point and purpose of a Floater policy is to provide the broadest possible coverage with the fewest possible restrictions.
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You are asked a question and the answer you give is considered your best recollection at the time you were asked, but it is not guaranteed to be correct. What kind of statement have you made?
A Representation
You are asked a question and the answer you give is considered guaranteed to be correct, or the contract can be voided. What kind of statement have you made?
A Warranty
If we insure a commercial building, how do we know when it is "Vacant"?
A commercial building is vacant if less than 31% of the total available square footage is in productive use.
II. Insurance Terms and Related Concepts Q. Liability: Strict Liability: What is the marker for Strict Liability?
A consumer product liability case THIS IS DIRECT LIABILITY, B - THIS IS CONTRACTUAL LIABILITY, D - THIS IS VICARIOUS LIABILITY
Which of the following connections to the Dwelling would turn a garage into a Coverage A element?
A framed breezeway physically attached to both.
Which of the following two businesses is most likely to need Extra Expense coverage after the office burns down?
A large business that needs 15,000 square feet to operate. The larger and more complex a business is, the harder it is to get them back up and running and the more likely they are to want to protect that exposure.
PART C UNINSURED MOTORISTS COVERAGE INSURING AGREEMENT. " We will pay compensatory damages which an "insured" is legally entitled to recover from the owner or operator of an "uninsured motor vehicle" because of "bodily injury": [We do not provide Uninsured Motorists Coverage for punitive or exemplary damages.] _________________________________________________________________________ So we see that Uninsured Motorist (UM) pays for Compensatory Damages but not Punitive Damages, both of which are test terms that we learned in another unit. Which of the following would NOT BE COVERED?
A punitive damages award to punish a repeat drunk driver
Tom and Jerry are neighbors who hate each other. They also happen to work at the same place. If they get into a fight at work over a personal dispute as neighbors, having nothing to do with conditions or events at work, are their injuries going to be paid on Workers Comp?
B) No way! This is a personal dispute Personal disputes, domestic violence, stalking - any of this that happens to do down at your work is not covered under Workers Comp.
Bob just opened a business and took out a BOP on his new building. Working with the agent, he decided on a coverage amount for the building of $100,000. Bob knows that one year from now, the replacement cost of the building will be higher due to inflation in labor and materials. He wants to make sure his coverage limit will keep up from one year to the next. What does Bob have to do?
Bob does not have to worry. The BOP has an automatic inflation guard feature. Every year when the policy renews, the building coverage will increase by 8% to account for inflation. Naturally, there will be a premium increase associated with the coverage increase.
PART B MEDICAL PAYMENTS COVERAGE Medical Payments (MED PAY) is optional coverage. You can have it if you want it, or you can pass on it. It pays medical bills to you and your passengers, without regard to fault. Unlike LIABILITY, which is never paid to you (rather to others on your behalf), MED PAY is paid TO YOU. _________________________________________________________________________ Who gets the money in a MED PAY claim?
I do. And my passnegers do.
Exam Section 2 Texas Statutes Part III WORKERS COMP Sec. 406.031. LIABILITY FOR COMPENSATION. (a) An insurance carrier is liable for compensation for an employee's injury without regard to fault or negligence if: (1) at the time of injury, the employee is subject to this subtitle; and (2) the injury arises out of and in the course and scope of employment. (b) If an injury is an occupational disease, the employer in whose employ the employee was last injuriously exposed to the hazards of the disease is considered to be the employer of the employee under this subtitle.
I get it true
FORM ALL HO SECTION 1 EXCLUSIONS #8 Intentional Loss: Intentional Loss means any loss arising out of any act an "insured" commits or conspires to commit with the intent to cause a loss. In the event of such loss, no "insured" is entitled to coverage, even "insureds" who did not commit or conspire to commit the act causing the loss. Are we paying you to burn your own house down? Punch holes in your own walls?
NO. Intentional Acts are not covered and one insured can ruin it for all the others B) All day long
You are a plumber and you have been sub-contracted to install pvc plumbing in a new house. When you are all done, the building inspector comes to check it out and finds that you have installed the wrong type of pipe. The whole job is not done to code and fails inspection. You call in a claim under your CGL because the building owner wants you to pay the cost of having another plumber come out and do the job right. Is you CGL going to pay this claim?
NO. The CGL is not going to pay this claim. This is a case of "impaired property". There is no actual property damage done. The problem is that you did your work improperly and it was caught. This type of claim is EXCLUDED.
Types of Policies E. National Flood Insurance Program - Coverage Effective Date You buy a policy with the following limits, the maximum allowed: Building - $250,000 Contents - $100,000 You pay the full year premium, as required. Six days later your house floods and is wrecked. Under the Standard 30 Day Waiting Period, do you have coverage?
NO. There is no coverage during the Standard 30 day wating period. You are out of luck.
FORM ALL HO SECTION 1 EXCLUSIONS #7 Nuclear Hazard: This Exclusion A.7. pertains to Nuclear Hazard to the extent set forth in N. Nuclear Hazard Clause under Section I - Conditions. Are we paying for Nuclear Radiation, Contamination ETC?
NOPE
TYPES OF POLICIES B. Automobile: Business Auto Policy Structure of Business Auto The Coverage Symbols OK, now that we know what an " AUTO" is and when it becomes "Mobile Equipment" - here is how you tell the insurance company what kinds of vehicles your commercial customer needs coverage for. We use SYMBOLS 1-9 for "Autos" and SYMBOL 19 for "Mobile Equipment". (1) Any "Auto" - owned, leased, borrowed, whatever (2) Owned "Autos" Only - only those "AUTOS" that the business OWNS (3) Owned Private Passenger "Autos" Only - so no trucks, vans etc. (4) Owned "Autos" Other Than Private Passenger "Autos" - so no CARS (7) Specifically described "Autos" only - HAS TO BE LISTED ON DEC PAGE (8) Hired "Autos" Only - Only those "autos" you lease, hire, rent or borrow. _________________________________________________________________________ Which symbol gives coverage for ANY AUTO whether it is owned, leased or whatever and listed on the DEC PAGE or NOT?
Symbol 1
Exam Section 2 Texas Statutes PART II Sec. 541.056. REBATING It is an unfair method of competition or an unfair or deceptive act to GIVE A CUSTOMER ANYTHING IN RETURN FOR FILLING OUT AN APPLICATION OR TAKING A POLICY. YOU AS AN AGENT CANNOT GIVE ANYTHING TO A CUSTOMER IN RETURN FOR AN APP OR A POLICY. YOU CAN DO PROMOTIONS WHERE EVERYONE GETS A LITTLE PRIZE IF THEY LET YOU GIVE THEM A QUOTE - BUT IT CAN'T BE ONLY THOSE WHO APPLY - EVERYONE HAS TO GET IT (NO PURCHASE NECESSARY TO WIN)
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Exam Section 2 Texas Statutes Part III Sec. 862.053. FIRE INSURANCE: TOTAL LOSS OF REAL PROPERTY. (a) A fire insurance policy, in case of a total loss by fire of property insured, shall be held and considered to be a liquidated demand against the company for the full amount of such policy. This subsection does not apply to personal property. (b) An insurance company shall incorporate verbatim the provisions of Subsection (a) in each fire insurance policy issued as coverage on real property in this state. (In the case of a total loss by fire, you get paid the full amount of your COVERAGE A AND B. The adjuster does not have to do an estimate and it does not matter if you were over or under the 80% threshold. But, you still have to fill out an itemized contents inventory.)
The Liquidated Demand Provision also makes the policy a VALUED POLICY for total loss by fire. A VALUED POLICY is one that automatically pays a stated amount. Life Insurance, for example, is a VALUED POLICY. When someone dies and leaves $250,000 to a beneficiary, we don't send out an adjuster to determine if the beneficiary actually needs and deserves the money. It is a done deal. It is a VALUED POLICY. Texas HO polices are only VALUED POLICIES in one situation - TOTAL LOSS BY FIRE
In an Named Peril insuring agreement, which party has the burden of proof when determining coverage?
The Policyholder, also known as The Insured. In a named peril agreement, coverage will only apply when the policyholder can demonstrate that covered property has been damaged by a covered peril. Coverage is not assumed and the policyholder has the burden of proof in establishing coverage.
Where do we get the amount of coverage for Coverage C?
There is no hard and fast rule. Most companies use either 50 or 75% of Coverage A as the Coverage C limit.
Solve this problem using the EQUAL SHARES METHOD Company A's Policy - $100,000 Company B's Policy - $400,000 Company C's Policy - $500,000 A $200,000 loss occurs that is covered under all 3 policies. How much will each company pay. (Forget deductibles and 80% rule)
They each pay 1/3 of the loss. With the equal shares method, the relative sizes of the policies do not matter and the 3 companies just share the payment 3 ways
PART B MEDICAL PAYMENTS COVERAGE B. "Insured" as used in this Part means: 2. Any (NON-FAMILY MEMBER) while "occupying" "your covered auto". _________________________________________________________________________ Do your passengers get the benefit of your MED PAY when they are riding in your car?
They sure do yes
IV. TYPES OF POLICIES B. Automobile: Business Auto Policy Structure of Business Auto Liability Exclusions (1) Expected or Intended Injury - just like always (2) Anything Workers Comp Related - obviously (3) Operations or completed operations (CGL picks this up) Remember, while the Business Auto form can be used alone (as a mono-line form), it is often used by a business that also has a BOP or a BPP/CGL package. Let's see what we're talking about here _________________________________________________________________________ You are a demolition contractor. You have a crane with a big wrecking ball. The crane is insured on your Business Auto, so if you have an accident driving it to the job site, you are good. BUT, once you get to the job site and start swinging that big bad wrecking ball around, the Business Auto is out - and your CGL is in. The Business Auto exclusions for both Operations and Completed Operations are pointing you back toward your BOP or your CGL. _________________________________________________________________________ You have a cement mixer insured in your contracting business. You drive the cement mixer 25 miles to the job site with no problems. Then , when you get to the job, you accidently open the valve thingy and fill up someone's car with cement. Which policy is going to respond? 1) Your BOP or CGL, whichever you have 2) Your Business Auto Policy
This is Operations Liability and would be convered by your BOP or CGL, but clearly excluded on the Business Auto
FORM HO-3 Perils Insured Against: Have you learned the difference between Open Peril and Named Peril??
Yes
II. Insurance Terms and Related Concepts G. Loss Valuation Methods: Stated Value: When we are not sure exactly what an item is worth, we still have to use some value to set the rate on the policy. Let's say the yearly rate on your Personal Articles Policy is 1.5% of the item's value. So, an item insured for $8,000 would cost you 1.5% of that in premium for a year of coverage or, $120. Do you see why we MUST STATE A VALUE FOR RATING PURPOSES???
Yes, I get it. If the rate is a % of value, then there has to be a value.
What does it mean that an item is "scheduled" on a policy?
it means that the item is identified individually, numbered, described and insured for a specific amount of coverage, rather than just being lumped in as "aggregate contents"
Liability insurance pays claims only when you are......
legally liable
Is your Homeowners insurance designed to deal with any of the following losses? 1) Losses arising out of your cars or boats 2) Losses arising out of your intentional acts 3) Losses arising out of your business or professional conduct 4) Losses arising out of damage that you did to your own stuff
of course not. These types of losses are specifically excluded. I've read the policy, Dude
Your liability insurer owes you two duties under the policy. What are they?
the Duty to Indemnify and the Duty to Defend
Exam Section 2 Texas Statutes A. (Commissioner of Insurance and Department of Insurance::) These are the Duties of the TDI Sec. 31.002. DUTIES OF DEPARTMENT. The department shall: (1) regulate the business of insurance in this state; (2) administer the workers' compensation system of this state as provided by Title 5, Labor Code; (3) ensure that this code and other laws regarding insurance and insurance companies are executed; (4) protect and ensure the fair treatment of consumers; and (5) ensure fair competition in the insurance industry in order to foster a competitive market. Do you get it?
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Exam Section 2 Texas Statutes PART II APPLICATION FOR LICENSE AFTER DENIAL OF APPLICATION OR REVOCATION OF LICENSE. An individual whose license application has been denied or whose license has been revoked under this subchapter may not apply for an agent license FOR 5 YEARS
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Exam Section 2 Texas Statutes PART II APPOINTMENT REQUIRED. A person who obtains a license may not engage in business as an agent unless the person has been appointed to act as an agent by an insurer. NOTIFICATION TO DEPARTMENT OF CERTAIN INFORMATION. (a) An individual licensed as an agent shall notify the department on a monthly basis of: (1) a change of the license holder's mailing address; (2) a felony conviction of the license holder; or (3) an administrative action taken against the license holder by a financial or insurance regulator. MAINTENANCE OF RECORDS. An agent shall maintain all insurance records, including all records relating to customer complaints, separate from the records of any other business in which the agent may be engaged.
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