RMI 3011 Exam 2- Stith

Licensee

-Person who enters the premises with the occupant's expressed or implied permission -The property owner must warn the licensee of unsafe conditions which are apparent

Invitee

-Person who is invited onto the premises for the benefit of the occupant -Occupant has an obligation to inspect the premises and eliminate any dangerous conditions

Governmental Functions

-Planning of sewer system, has eroded over time -Immunity from lawsuits through this function

Special Damages

-Provide compensation for medical expenses

General Damages

-Provide compensation for pain and suffering

Principle of Utmost Good Faith (2 of 4)

-REPRESENTATIONS are made by the applicant for insurance -A contract is voidable if the representation is material, false, and relied on by the insurer -MATERIAL means that is the insurer knew the true facts, the policy would not have been issured, or would have been issued on different terms. -RELIANCE means that the insurer relies on the misrepresentation in issuing the policy at a specified premium -INNOCENT MISREPRESENTATION of material fact, if relied on by the insurer, makes the contract voidable

Cyberliability

-Refers to the risk that an unauthorized party gains access to an organization's data -Individuals who have their personal information exposed through a cyberattack may seek damages

Deductibles(2 of 2)

-STRAIGHT DEDUCTIBLE, the insured must pay a certain number of dollars of loss before the insurer is required to make a payment -AGGREGATE DEDUCTIBLE, means that all losses that occur during a specified time period, usually a year, are accumulated to satisfy the deductible amount

Law of Negligence(6 of 6)

-Some legal defenses can defeat a claim for damages -LAST CLEAR CHANCE RULE states that a plaintiff who is endangered by his or her own negligence can still recover damages from the defendant if the defendant has a last clear chance to avoid the accident but fails to do so -ASSUMPTION OF RISK DOCTRINE, a person who understands and recognizes the danger inherent in a particular activity cannot recover damages in the event of an injury

Why are Exclusions Necessary? (1 of 2)

-Some perils are not commercially insurable -Extraordinary hazards are present -Coverage is provided by other contracts

Tort Reform in the States

-State tort reforms include: -Capping noneconomic damages, such as pain and suffering -Reinstating the state-of-the-art defense for product liabilty cases -Restricting punitive damages awards -Modifying the collateral source rule -Modifying the joint and several liability rule -Alternative dispute resolution, a technique for resolving a legal dispute using arbitration or mediation

Basic Parts of an Insurance Contract (2 of 4)

-The INSURING AGREEMENT summarized the major promises of the insurer -The two basic forms of an insuring agreement in property insurance are: -NAMED PERILS COVEREAGE, where only those perils specifically named in the policy are covered -OPEN-PERILS/SPECIAL COVERAGE, where all losses are covered except those losses specifically excluded

Law of Negligence(4 of 6)

-The ability to collect damages for negligence depends on state law -Under CONTRIBUTORY NEGLIGENCE LAW, the injured person cannot collect damages if his or her care falls below the standard of care required for his or her protection -Under strict application of common law, the injured cannot collect damages if his or her conduct contributed in any way to the injury

Law and the Insurance Agent(3 of 3)

-The doctrines of waiver and estoppel may require an insurer to pay a claim that it ordinarily would not have to pay. -WAIVER is defined as the voluntary relinquishment of a known legal right -ESTOPPEL is the loss of a legal defense because of previous actions that are now inconsistent with that defense

Res Ipsa Loquitur

-The event is one that normally does not occur in the absence of negligence -The defendant has an exclusive control over the instrumentally causing the accident -The injured party has not contributed to the accident in any way

Coinsurance(2 of 2)

-The fundamental purpose of coinsurance is to achieve EQUITY IN RATING -A property owner whishing to insure for a total loss would pay an inequitable premium if other property owners only insure for partial losses -If the coinsurance requirement is met, the insured receives a rate discount, and the policy owner who is underinsured is penalized through application of the coinsurance formula

Primary and Excess Insurance

-The primary insurer pays first, and the excess insurer pays only after the policy limits under the primary policy are exhausted

Other Insurance Provisions

-The purpose of OTHER-INSURANCE PROVISIONS is to prevent profiting from insurance and violating the principle of indemnity -Under PRO RATA LIABILITY each insurer's share of the loss is based on the proportion that its insurance bears to the total amount of insurance on the property -CONTRIBUTION BY EQUAL SHARES, each insurer shares equally in the loss until the share paid by each insurer equals the lowest limit of liability under any policy, or until the full amount of the loss is paid

Specific Application of the Law of Negligence(1 of 7)

-The standard of care owed to others depends upon the situation

Requirements of an Insurance Contract

-To be legally enforceable, an insurance contract must meet four requirements: -OFFER AND ACCEPTANCE of the terms of the contract -EXCHANGE OF CONSIDERATION-the value that each party gives to the other -COMPETENT PARTIES, with legal capacity to enter into a binding contract -The contract must exist for a LEGAL PURPOSE

Law of Negligence(5 of 6)

-Under a COMPARATIVE NEGLIGENCE LAW, the financial burden of the injuries shared by both parties according to their respective degrees of fault -Under the PURE RULE, you can collect damages even if you are negligent, but your reward is reduced in proportion to your fault -Under 50% RULE, you cannot recover if you are 50% or more at fault -Under the 51% RULE, you cannot recover if you are 51 percent or more at fault

Aggregate Deductible

All losses that occur during a specified time period, usually a year, are accumulated to satisfy the deductible amount

Principle of Utmost Good Faith (1 of 4)

HIGHER DEGREE OF HONESTY IS IMPOSED ON BOTH PARTIES TO AN INSURANCE CONTRACT THAN IS IMPOSED ON PARTIES TO OTHER CONTRACTS -Supported by three legal doctrines: -Representations -Concealment -Warranty

Principle of Insurable Interest(1 of 2)

INSURED MUST BE IN A POSITION TO LOSE FINANCIALLY IF A LOSS OCCURS -Purposes: -Prevent Gambling -Reduce moral hazard -Measure the amount of the insured's loss -Can be supported by: -Ownership of property -Potential legal liability -Secured creditor -Contractual rights

Principle of Indemnity(1 of 3)

INSURER AGREES TO PAY MORE THAN THE ACTUAL AMOUNT OF THE LOSS -Purpose: -To prevent the insured from profiting from a loss -To reduce moreal hazard

Trespasser

-Person who enters or remains on the owner's property without the owner's consent -The duty to refrain from injuring a trespasser is sometimes referred to as the DUTY OF SLIGHT CARE

Basis of Legal Liability(1 of 2)

-A LEGAL WRONG is a violation of a person's legal rights, or a failure to perform a legal duty owed to a certain person or society as whole -Legal wrongs include: -Crime -Breach of contract -Tort

Basis of Legal Liability(2 of 2)

-A TORT is a legal wrong for which the court allows a remedy in the form of money damages -The person who is injured by the action of another can sue for damages -Torts fall into 3 categories: -Intentional -STRICT LIABILITY means that liability is imposed regardless of negligence or fault -Negligence

Deductibles(1 of 2)

-A provision by which a specified amount is subtracted from te total payment that otherwise would be payable -Purpose: -Eliminate small claims that are expensive to handle and process -Reduce the premiums paid by the insured -Reduce moral and attitudinal hazard

Law and the Insurance Agent(1 of 3)

-An agent is someone who has the authority to act on behalf of a principle -Several laws govern the actions of agents and their relationship to insurers -There is no presumption of an agency relationship -An agent must be authorized to represent the principal -A principal is responsible for the acts of agents acting within the scope of their authority -Limitations can be placed on the powers of agents

Law and the Insurance Agent(2 of 3)

-An agent's authority comes from three sources: -Express authority -Implied authority -Apparent authority -Knowledge of the agent is presumed to be knowledge of the principal with respect to matters within the scope of the agency relationship -insurers can place limitations on the power of agents by adding a NONWAIVER CLAUSE to the application or policy

Respondeat Superior

-An employer can be held liable for the negligent acts of employees while they are acting on the employer's behalf -Worker must be an employee -The employee must be acting within the scope of employment when the negligent act occurred

Distinct Legal Characteristics of Insurance Contracts(1 of 2)

-An insurance contract is: -ALEATORY: Values exchanged are not equal -UNILATERAL: only the insurer makes a legally enforceable promise -CONDITIONAL: policyowner must comply with all policy provisions to collect for a covered loss -PERSONAL: Property insurance policy cannot be validly assigned to another party without the insurer's consent -CONTRACT OF ADHESION: The insured must accept the entire contract with all of its terms and conditions

Definition of "Insured"

-An insurance contract must identify the persons or parties who are insured under the policy -NAMED INSURED is the person or persons named in the declarations section of the policy -FIRST NAMED INSURED has certain additional rights and responsibilities that do not apply to other named insureds -A policy may cover other parties even though they are not specifically named -Additional insureds may be added using an endorsement

Dram Shop Law

-Business that sells liquor can be held liable for damages that may result from the sale of liquor

Deductibles in Health Insurance

-CALENDAR-YEAR DEDUCTIBLE is a type of aggregate deductible that is found in basic medical expense and major medical insurance contracts -ELIMINATION PERIOD is a stated period of time at the beginning of a loss during which no insurance benefits are paid

Coinsurance(1 of 2)

-COINSURANCE CLAUSE in a property insurance contract encourages the insured to insure the property to a stated percentage of its insured value -If the coinsurance requirement is not met at the time of the loss, the insured must share in the loss as a coinsurer

Law of Negligence(3 of 6)

-COMPENSATORY DAMAGES compensate the victim for losses actually incurred -SPECIAL DAMAGES provide compensation for medical expenses -GENERAL DAMAGES provide compensation for pain and suffering -PUNITIVE DAMAGES are designed to punish people and organizations so that others are deterred from commiting the same wrongful act

Principle of Utmost Good Faith (3 of 4)

-CONCEALMENT is intentional failure of the applicant for insurance to reveal a material fact to the insurer -To deny a claim based on concealment, a nonmarine insurer must prove: -Concealed fact was known by the insured to be material -Insured intended to defraud the insurer

Basic Parts of an Insurance Contract (4 of 4)

-CONDITIONS are provisions that qualify or place limitations on the insurer's promise to perform -If policy conditions are not met, the insurer can refuse to pay the claim. -Insurance policies contain a variety of misc. provisions

Specific Applications of the Law of Negligence

-Owners and operators of auto mobiles who drive in a careless manner can be held liable for property damage or bodily injury sustained by another person -Charitable institutions are no longer immune from lawsuits, especially with respect to commercial activities

Distinct Legal Characteristics of Insurance Contracts(2 of 2)

-Courts have ruled that any ambiguities or uncertainties in the contract are construed against the insurer -PRINCIPLE OF REASONABLE EXPECTATIONS states that an insured is entitled to coverage under a policy that he or she reasonably expects it to provide, regardless of policy provisions

Basic Parts of an Insurance Contract (1 of 4)

-DECLARATIONS are statements that provide information about the particular property or activity to be insured -Usually on the first page of the policy -In property insurance, it contains name of the insured, location of property, period of protection, amount of insurance, premium and deductible information -Insurance contracts contain DEFINITIONS -For example, the insured is reffered to as "you' and the insurer is "we"

Coordination of Benefits Provision

-Designed to prevent over insurance and the duplication of benefits if one person is covered under more than one group health insurance plan

Contribution by Equal Shares

-Each insurer shares equally in the loss until the share paid by each insurer equals the lowest limit of liability under any policy, or until the full amount of the loss is paid.

Pro Rata Liability

-Each insurer's share of the loss is based on the proportion that its insurance bears to the total amount of insurance on the property

Law of Negligence(2 of 6)

-Elements of negligence -Existence of a legal duty to use reasonable care -Failure to perform that duty -Damage or injury to the claimant -PROXIMATE CAUSE relationship between the negligent act and the infliction of damages, which requires an unbroken chain of events

Coinsurance Clause

-Encourages the insured to insure the property to a stated percentage of its insurable value Amount of Insurance carried/amount of insurance required xLoss=Amount of recovery

Principle of Indemnity(3 of 3)

-Exceptions: -VALUED POLICY pay the face amount of insurance if a total loss occurs -VALUED POLICY LAW requires payment of the face amount of insurance to the insured if the total loss to real property occurs from a peril specified in the law -REPLACEMENT COST INSURANCE is when there is no depreciation -Life insurance contract

Proprietary Function

-Governmental unit can be held liable if it is negligence through this function

Sovereign Immunity

-Has been modified over time

Attractive Nuisance

-Hazardous condition that can attract and injure children -The occupants of land are liable for the injuries of children who may be attracted by some dangerous condition, feature, or article

Coinsurance in Health Insurance

-Health insurance policies frequently contain a COINSURANCE CLAUSE -The clause requires the insured to pay a specified percentage of covered medical expenses in excess of the deductible -The purposes of coinsurance in health insurance are to reduce premiums and prevent overutilization of policy benefits

Endorsements and Riders

-In property and liability insurance, an ENDORSEMENT is a written provision that adds to, deletes from, or modifies the provisions in the original contract -In life and health insurance, a RIDER is a provision that amends or changes the original policy

Principle of Indemnity(2 of 3)

-In property insurance, indemnification is based on the ACTUAL CASH VALUE of the property at the time of loss -There are 3 main methods to determine actual cash value: -Replacement cost less depreciation -FAIR MARKET VALUE is the price a willing buyer would pay to a willing seller in a free market -BROAD EVIDENCE RULE means the determination of AVC should include all relevant factors

Contributory Negligence Law

-Injured person cannot collect damages if his or her care falls below the standard of care required for his or her protection

Basic Parts of an Insurance Contract (3 of 4)

-Insurance contracts contain three major types of EXCLUSIONS -Excluded perils -Excluded losses -Excluded property

Straight Deductible

-Insured must pay a certain number of dollars of loss before the insurer is required to make a payment

Principle of Subrogation(2 of 2)

-Insurer is entitled only to the amount it has paid under the policy -Insured cannot impair the insurer's subrogation rights -Subrogation does not apply to life insurance contracts -Insurer cannot subrogate against its own insurers

Other-Insurance Provisions(2 of 2)

-Many states have adapted part or all of the coordination of benefits provisions developed by the NAIC, which include a number of rules, including: -Coverage as an employee is usually primary to coverage as dependent -For dependents in families where the parents are married or are not separated, the plan of the parent whose birthday occurs first during the year is primary

Why are Exclusions Necessary? (2 of 2)

-Moral hazard problems -Attitudinal hazard problems -Coverage not needed by typical insureds

Law of Negligence(1 of 6)

-NEGLIGENCE is the failure to exercise the standard of care required by law to protect others from an unreasonable risk of harm -The standard of care is not the same for each wrongful act. It is based on the care required of a reasonably prudent person

Other-Insurance Provisions(1 of 2)

-Under a PRIMARY AND EXCESS INSURANCE provision, the primary insurer pays first, and the excess insurer pays only after the policy limits under the primary policy are exhausted -The COORDINATION OF BENEFITS PROVISION in group health insurance is designed to prevent over insurance and the duplication of benefits if one person is covered under more than one group health insurance plan

Imputed Negligence

-Under certain conditions, the negligence of one person can be attributed to another -VICARIOUS LIABILITY LAW, a motorist's negligence is imputed to vehicle's owner -FAMILY PURPOSE DOCTRINE, the owner of an auto can be held liable for negligent acts committed by family members -Negligence may arise out of a joint business venture -DRAM SHOP LAW, a business that sells liquor can be held liable for damages that may result from the sale of liquor

Principle of Utmost Good Faith (4 of 4)

-WARRANTY is a statement that becomes part of the insurance contract and is guaranteed by the maker to be true in all respects -Statements made by applicants are considered representations, not warranties -Most courts interpret a breach of warranty liberally -State statutes allow the insured to recover for a loss unless the breach of warranty actually contributed to the loss

Principle of Insurable Interest(2 of 2)

-When must insurable interest exist?: -Property insurance-time of loss -Life insurance-at inception of policy -The question of insurable interest does not arise when you purchase life insurance on your own life -Insurable interest in another person's life can be shown by close family ties, marriage, or pecuniary interest

Principle of Subrogation(1 of 2)

SUBSTITUTION OF THE INSURER IN PLACE OF THE INSURED FOR THE PURPOSE OF CLAIMING INDEMNITY FROM A THIRD PARTY FOR A LOSS COVERED BY INSURANCE -Purpose: -Prevent the insured from collecting twice for same loss -Hold the negligent person responsible for loss -Hold down insurance rates

Rider

provision that amends or changes the original policy -life and health insurance

Endorsement

written provision that adds to, deletes from, or modifies the provisions in the original contract