Assignment 2 - Common Policy Conditions

The Insurance Services Office, Inc. (ISO) Commercial Lines Manual (CLM) requires that a common policy conditions form be attached to every Commercial Package Policy (CPP) or monoline policy. The Common Policy Conditions (IL 00 17) form contains six conditions, which apply to all coverage parts in the policy unless a particular coverage part states otherwise. This approach avoids the need to repeat these common conditions in each coverage part. These are the six conditions contained in the form:

- Cancellation - Changes - Examination of Books and Records - Inspections and Surveys - Premiums - Transfer of Rights and Duties Under This Policy

All of the following are common policy conditions EXCEPT:

Exclusions

Who is the only person who can request policy changes?

First named insured

The inspections and surveys condition, a common policy condition attached to the ISO Commercial Package Policy, makes it clear that the insurer has the right to inspect the insured premises and

May recommend changes.

Which one of the following is included in the Cancellation condition of the Common Policy Conditions of an ISO Commercial Package Policy?

Notice of cancellation for nonpayment of premium must be mailed or delivered to the insured at least ten days before the date of cancellation

One Common Policy Condition in the Commercial Package Policy (CPP) is the examination of books and records. The intent of this policy condition is to

Reserve the right of an insurer to inspect and audit the insured's books and records.

The Common Policy Conditions form

The Common Policy Conditions form is attached to every CPP or monoline policy written subject to ISO Commercial Lines Manual rules. The form contains these conditions: Cancellation; Changes; Examination of Your Books and Records; Inspections and Surveys; Premiums; and Transfer of Your Rights and Duties Under This Policy.

Premiums

The first named insured is responsible for paying the policy premium. If the insurer owes a return premium, it will make payment only to the first named insured

Transfer of Rights and Duties Under This Policy

The insured cannot transfer any rights or duties under the policy to any other person or organization without the insurer's written consent. For example, if the insured sells a building covered by the policy, the insurance cannot be transferred to the new owner of the property without the insurer's written consent.

An insured is reviewing the Commercial Package Policy (CPP) to determine which conditions apply to all coverage parts in the policy. One of those conditions states that

The insurer has the right to do an on-site inspection of the insured's books and records.

Inspections and Surveys

The insurer has the right, but not the obligation, to inspect the insured's premises and operations at any reasonable time during the policy period. The inspections may be made by the insurer's own personnel or by another organization acting on the insurer's behalf. Such inspections are important in determining the insurability of the insured's property and operations, in setting proper insurance rates, and in making risk control recommendations.

Examination of Books and Records

The insurer reserves the right to examine and audit the insured's books and records related to the policy at any time during the policy period and for up to three years after the policy's termination. This provision is included because many commercial insurance policies are issued with estimated premiums. The final premium is determined after the policy expires, based on reported values of the insured property, the amount of the insured's sales or payroll, or some other variable premium base. The insured is required to report the final figures to the insurer, and the insurer may accept the insured's reports without verification. However, if the insurer prefers to verify the reports by making an on-site inspection of the insured's books and records, the condition permits the insurer to do that. An insurer may also choose to exercise its rights under this condition in the process of investigating a claimed loss.

Under an ISO Commercial Package Policy, the insurer reserves the right to examine and audit the insured's books and records related to the policy at any time during the policy period and for up to how many years after the termination of the policy?

Three