Property & Casualty Policy Provisions & Contract Law 24 Questions

Sources of underwriting information

Application, inspection reports, investigative consumer reports, insurance agent. Sources may be soft (subjective) such as the information used to give an initial quote pending verification or Hard or Objective (third-party reports) such as MVR's, Claims History Reports and other third-party information products such as additional drivers, title history or accident history for specific vehicle by vin.

Supplementary payments

B - Bail bond costs up to $250; A - Appeal Bonds or release attachment bonds; I - Interest on judgments; L - Loss of pay up to $200 per day; E - Expense incurred at the companies request; D - Defense No $ limit (addition to policy limits) remember acronym BAILED.

Declarations

Identifies named insured, mailing address, policy period, coverages (limits & premium) and loss payees (lien holders)

Obligations of the insurance company

Insurance company does not have same freedom to cancel as insured. Must notify insured of cancellation in writing within a specified number of days before effective date of cancellation and returned unearned premium on a pro-rata basis. Company only retains earned premium and is not permitted to keep extra amount for expenses.

Cancellation and nonrenewal provisions

Insured may cancel for any reason, insurer may short rate unearned premium for allowable expenses such as issuing the policy. Insurer may only cancel or non-renew in writing and must returned unearned premium on a pro rata basis. If policy is canceled by named insured or insurance company on effective date it is a flat cancellation.

Elements of a contract

Must include offer, acceptance, consideration and other requirements of Competence, Consent and Legality. Offer: proposal to make a deal; Acceptance: Acknowledgment by person to whom offer was made that offer is accepted; Consideration: The legal benefit received by one person and the legal detriment imposed on the other person-usually takes the form of money, property or services; Competence: Must be 18 years of age and of sound mind; Consent: Each part must agree to terms of contract; Legality: Must involve legal activity (A contract is an agreement entered into voluntarily by two parties or more with the intention of creating a legal obligation.)

Policy application

The insurance application signed by the applicant and sent to the insurer through the producer is the offer. If the policy issued does not conform to the application which is the initial offer the policy is a counteroffer requiring the applicant's acceptance. The insured accepts it by paying the premium-the offer and acceptance is concluded. If the policy is a new offer with coverage or rates different than what the applicant requested the applicant can accept or reject the new terms

Terrorism Risk Insurance Act (TRIA)

Under the program, insurers must offer certain types of terrorism risk coverage. If losses from an attack exceed a set amount, the federal backstop kicks in

Notice of claim

an obligation of the insured to the insurer after a loss. Insured must give prompt notice of claim to the insurance company or agent

Definition of the Insured

clarifies the meanings of terms

Privacy Protection (Gramm Leach Bliley)

companies that offer consumers financial products or insurance to explain their information sharing practices to their customers and to safeguard sensitive data. Regulates Bureau of Banking

Subrogation

company owns rights against any third party for damages paid to the insured

Duties of the insured after a loss

condition found in property-casualty policies that explains the insured's responsibilities after a loss occurs-prompt notice of claim; protect from further damage; detailed proof of loss (official inventory); make available for inspection by company; submit exam under oath if required; assist insurer as required during claim investigation

Conditions

describes the rights and duties of the insured and the insurance company under the contract

Proof of loss

form completed by an insured after a loss that provides an official inventory of damages. after receipt of proof of loss claim must be paid with 60 days. Must be in writing and set forth the injuries or damage sustained. A valuation of the loss should also be provided. Insurance company can submit proof of loss to the insured based on the adjuster's contract for repairs. An Insurance Agent does not have authority to waive a written proof of loss. Statute (law) allows an insurance company to deny coverage if insured fraudulently misrepresents items in a proof of loss (inflated valuation of a claim is not necessarily fraud).

Loss settlement provisions including consent to settle a loss

how much $$ for loss. May be paid: 1. Actual Cash Value: (ACV) Cost to replace today less depreciation (adheres to the principle of indemnity) 2. Replacement Cost: Actual cost to repair or replace without depreciation. (New for Old). 3. Valued Policy Law: Total loss by a covered peril (building), face amount of policy paid (prevents the sale of over insurance) 4. Agreed Value: insurer agrees in advance to pay a given amount; usually requires an appraisal. Option to repair or replace with like kind and quality within 30 days of receiving insured's statement of loss. Deductible clause only the amount of loss over deductible will be paid up to limit of liability. pair or set insurance co not obligated to pay value of entire set may repair or replace or pay difference between ACV before and after the loss. Other insure company only pays its proportion of the loss. Recovered property condition if insured/insurer recovers other party must be notified, insured may have property returned and loss payment will be adjusted or allow company to have property.

Other insurance provisions

if two or more polices respond to the same loss, the Dwelling policies pay "pro-rata."

Exclusions

losses not covered

Mortgagee rights

mortgagee Clause: Protects lenders interest in real (house) property (1) advance notice of cancellation (2) protect Mortgagee even if the insureds act prevent recovery (3) Mortgagee can continue policy payments. Loss Payable Clause: Protects lender interest in personal (car) property

Fair Credit Reporting Act

only those with a permissible purpose: Insurance company underwriting, when you apply for credit, collection agencies for your debt, employers - only with your permission. No friends, family, coworkers without your permission

Arbitration

policy condition that is similar to the appraisal condition; may be used to resolve other areas of disagreement besides those regarding the value of a loss

Insuring agreement

types of property covered and perils insured against

Appraisal

when the insured and insurer cannot agree on the amount of the loss. Each choose an appraiser; if they fail to agree, select an umpire. Agreement of two out of three will be binding. (Not about if claim is covered, claim is covered, arguing about how much $)