P&C Chapter 2 Policy provisions and contract law

If Joe has two property insurance policies on his house each for 50k totalling 100k in insurance and he suffers damage of 40k. Under pro rate, how much will each policy cover if both are collectable?

20k each.

The 4 elements to a contract

Agreement or offer and acceptance, Consideration, competent parties, and Legal purpose.

What are some of the sources that may be used in the underwriting process

Application form, motor vehicle records, interviews with neighbors, friends and employers, inspection of property, and insurance history

The binding force in any contract is the

Consideration. It's something of value that each party gives to one another. Payment of premium and promise to pay in the event of a loss.

Additional information about a particular risk from an outside source are generally fall into two report categories which are

Consumer reports and investigative consumer reports.

In insurance, the applicant makes a (blank)

Offer

In the event of a loss covered by the policy, the named insured is required to

Protect property from further damage, prepare an inventory of damaged property, cooperate with the insurer in settling the loss, notify policy in the case of a theft loss, and submit to the insurer sworn proof of loss in a timely manner.

Who certifies acts of terrorism in consultation with the secretary of homeland security as of 2015?

The secretary of treasury

The Gramm-Leach-Billey Act requires two disclosures to a customer:

When the customer relationship is established (policy purchased) and before disclosing protected information.

Notice of claim is

a form or statement from an insured to an insurer, informing the insurer that events leading to a possible claim have occurred. Includes, how, when, and where the loss took place.

Arbitration is

a method of casualty claim settlement used when the insured and insurer cannot agree on how to settle a claim. The arbitrator's decision may or may not be binding on both parties dependent on state law.

Pro rata is

a provision found in some property insurance policies that provides for the sharing of loss with other insurance that may be written on the same risk in the same proportion as their limits of insurance bear to the total of coverage of all policies covering the risk, whether collectible or not.

Other insurance is

a provision in an insurance policy that defines how the policy will respond if there is other valid insurance written on the same risk.

A representation is:

a statement believed to be true to the best of one knowledge, but not guaranteed to be true. Answers on an insurance application.

A material misrepresentation is

a statement that if discovered, would alter the underwriting decision of the insurance company.

Proof of loss is

a sworn statement that must usually be furnished by the insured to an insurer before any loss under a policy can be paid. Typically used in the settlement of first-party losses, includes date and description of occurrence and the amount of indemnity claimed. Must be in writing.

A warranty is

an absolutely true statement upon which the validity of the insurance policy depends. Breach of warranties can be considered grounds for voiding the policy or return of premium.

In property and casualty insurance, an insured is

anyone who is covered under the policy, whether named or not. Unnamed spouse or resident relative member of the insured's household

A mortgagee clause is

attached to a policy to protect the interest of the mortgagee in the mortgaged property. Loss will be paid to mortgagee as interest appears. the mortgagee's rights of recovery will not be defeated by any negligence of the insured. Can also bring a suit in their own name to recover damages.

The parties to a contract must

be capable of entering into a contract in the eyes of the law. Legal age, mentally competent, and drug free.

The definitions of a contract are

component of an insurance policy that clarifies terms used in the policy. Bold, italicized, or quoted words have a definition as to their meaning in the contract.

The exclusions section of an insurance policy

details the perils that are not insured against and what persons are not insured. Exclusions restrict some of the broad terms used in the insuring agreement. Can exclude people (except spouse), property, and perils.

Named insured means

the individual whose name appears on the policy's declaration.

Additional insureds are

the individuals or business that are not named as insureds on the declaration page, but protected by the policy usually in regard to a specific interest. Additional insureds are added by endorsement.

Concealment is

the legal term for the intentional withholding of information of a material fact that is crucial in making a decision. Creates imprecise underwriting decision and may void a policy.

Policy limits or limitations are

the maximum amount an insured collect, or for which an insured is protected under the terms of the policy.

A declaration is

the section of an insurance policy containing the basic underwriting information. Insured's name, address, amount of coverage and premiums. Usually first page.

Every insurance contract must have a legal purpose. This means:

That the contract must be for a lawful reason, and not against public policy.

The National Association of Registerd Agents and Brokers (NARAB) Reform

this title of the Program amends the Gramm-Leach-Billey Act to repeal the contingent conditions under which the NARAB may not be established. NARAB is also prohibited from merging with or into any other private or public entity.

The purpose of the Terrorism Risk Insurance Act

was to create a temporary federal program that would share the risk of loss from future terrorist attacks with the insurance industry. Requires that all commercial insurers offer insurance coverage for acts of terrorism. The government reimburses insurers for a portion of paid losses for terrorism.

After the offer, (Blank) takes place when an insurer's underwriter approves the application and issues a policy.

Acceptance

Model Bulletin

Adopted by the NAIC Property and Casualty insurance committee and its TIIWG, it includes an expedited filing form intended to help state insurance regulators advise insurers about regulatory requirments related to providing terrorism insurance under the revised program.

If there is a disagreement between the insured and the insurer on the value of any property loss, either party can make a written demand for an

Appraisal. Each party selects an appraiser who will then select an umpire if they are unable to agree on a fair value.

Every property or casualty policy is comprised of the following major comonents

Declarations, definitions, insuring agreement, conditions, Endorsements, exclusions and policy limits.

What are examples of exclusions from coverage in a property policy

Earth movement and water damage. Earth movement caused by earthquake, volcano, or mudslides is excluded. Water is floods, water back up, or underground water seeping through basement walls is excluded.

Additional or supplementary coverage is

a provision in an insurance policy that provides an additional amount of coverage for specific loss expense, at no additional premium. Claim-related expenses, reasonable expenses incurred by the insured to protect damaged property from further loss, etc.

A binder is

a temporary agreement issued by an agent or insurer providing temporary coverage until a policy can be issued. They can be oral, but mostly written. They expire when the policy is issued. If the insurer declines to issue the policy, the binder expires on the date after the receipt of the notice of cancellation.

The endorsements section of an insurance policy

consists of printed addendums to a contract that are used to change the policy's original terms, conditions, or coverages. Must be in writing, can be used to add or delete coverage, or may be used to corret items such as the insured name, address, etc.

The Fair Credit Reporting Act

established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, and properly used. Also protects consumers against circulation of inaccurate or obsolete personal or financial information.

The insuring agreement or agreement section

establishes the obligation of the insurance company to provide insurance coverages as stated in the policy. Lists parties, renewal dates, description of coverage, and perils. Usually found after declarations but may be placed after definitions.

Intentional misrepresentations on an insurance application are considered:

fraud

The Gramm-Leach-Billey Act stipulates that

in general, an insurance company may not disclose nonpublic personal information to a non-affiliated third party except for the following reasons: Insurance company clearly and conspicuously discloses to the consumer in writing that they may, the consumer is given the opportunity, before the time info is initially disclosed to direct that info not to be disclosed to the third party, or the consumer is given an explanation of how the consumer can exercise a nondisclosure option.

Untrue statements on the application are considered:

misrepresentations.

The annual privacy disclosure enables customers to

opt out, or choose not to have their private information shared with other parties.

An insurance company, in return for premium, must be fair in underwriting and must

pay covered losses

The application is a

printed form that includes questions about a prospective insured and the desired insurance coverage and limits. Misrepresentations in the application can void the policy.

The conditions section is

the section of an insurance policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy. Inspections may be made as needed by insurer, changes in policy must be made and be in writing, The liberalization clause ensures that if the insurer introduces an improved free coverage, the insured will get the benefit of the new coverage immediately and will not have to wait for a policy renewal. Return premium, etc.

When a claim is filed under a professional liability policy, the insurer can only settle the claim by offering to pay the claimant

with the consent of the insured.