Property Policy Provisions & Contract Law

Binders

A temporary insurance contract that may be verbal or written. a binder is deemed to include all the usual terms of the policy for which it was given, plus endorsement.

Elements of a Contract

Consideration Clause-An exchange of values. Offer-every legal contract must have an offer from one to the other. Acceptance-If the insurance company issues the policy, they have made an acceptance of the applicant's offer. Legal Purpose and Capacity-Legal age(18) and not under the influence of alcohol or drugs.

Obligations of the insurance company

Found in the insuring agreement, the obligations of the insurance company will vary depending upon which policy is purchased. The insuring agreement states which losses will be covered, what property is covered, and which perils are insured against.

Declarations

Found on teh first page of the policy. It contains the name of the insurance company (1st party) and the name of the insured (2nd party). It also conatins the address of the property covered and the policy limits

Notice of claim

Line 90 of the Standard Fire Policy requires tha tthe insured give immediate written notice to the company of any loss. This is a condition that applies to the insured. Immediate is defined to mean "as soon as reasonably possible".

Conditions

Normally contained in the 165 lines of text, the conditions apply both to the insured and the insurer. For example, it is the insurer's duty to protect the property from further damange. This is condition.

Compliance with the provisions of the Fair Credit Reporting Act

Pre-notification: No one may order a Consumer Investigative Report without applicant's written permission. Fair Credit Reporting Act prevent abuse in consumer reporting and requires pre-notification and post-notification. If the insurance company rejects an applicaiton or cancels a policy based on information they receive in one of these reports, they must advise the client of the specific reason for the rejection or cancellation and tell them which credit reporting agency supplied them with this negative information. The client then has the right to go to that consumer reporting agency and request a free copy of their credit report. If the informaiton contained in the report is incorrect, the consumer reporting agency must correct it.

Warranties, Representations and Concealment

The insurance company will require that the applicant tell the "truth to the best of their knowledge" on the application, these are representations. Of course if the client knowingly lies, this is a misrepresentation. Material misrepresentations may have the effect of voiding the policy, if discovered Warranties are guarantees of truth, such as the existence of a burglar alarms, or sprinkler system.

Subrogation

This is when another party damages to your property. Your insurance company pays the claim, but then takes your right of recovery and sues the negligent party to recover the money they paid out to you. They stand in your place.

Assignment

This is when the ownership of the policy itself is changed. For example, you sell your house and you (assignor) assign your property insurance policy to the buyer (assignee). This may be done, but assignments are not effective until approved by the insurer and, in reality, are seldom done.

Insuring Agreement

This states what Perils the property is covered for.

Exclusions

Usually listed in a separate section of the policy, this is a list of things that are NEVER covered, such as flood, war, earthquake, etc.

Sources of Insurability Information

information gathered fromt eh answers contained on the application. Applications have a section entitled Agent's Report for the agent to complete regarding the applicant. Many property insurance companies order actual inspections of properties to be insured, including photograhps. Insurance companies also often order Consumer Investigative Reports, which contain personal information about the applicant's credit and character.

Mortgagee rights

rights granted to a mortgagee (lender), under a property contract issued to a mortgagor, by virtue of the mortgagee's interest in the property. Mortgagee holders have the right to notice of cancellation, and the right to continue paying the premium themselves.

Proof of loss

the complete claims forms the insured is required to send back to the insurance comapny in connection with a pending claim. Normally, the company will send a particular form to be completed by the insured. If they don't, Prood of loss may be reported to the company on any form.

Duties of the insured after a loss

this is a conditon also found in teh 165 lines of text. It states tha tthe insured msut give immediate written notice of claim to the insurer, protect the property from further damage and furnish proof of ACV.

Appraisal

this is similar to arbitration, except arbitration applies to liability insurance and appraisal applies to property and auto insurance. If the insured and insurer fail to agree on teh ACV or replacement cost of a claim, both sides may hire their own independent appraiser and bear theat cost. The 2 appraisers then select a disinterested umpire and all the parties are bound by the decision of any 2 of the parties involved.

Other Insurance provision

this is something called the Pro-Rata Liability Clause. This policy provision protects the insurance company against a client who purchases more than one policy on the same property. If a loss occurs, each policy will pay a propoetionate share depending on what % its policy limits bears to the entire policy limits in force on all policies. This is in accordance with the principle of indemnity, which staes that you cannot make a profit from insurance. Pre-rata liability sharing is not necessarity equal.

Definition of the Insured

this states who is covered on the policy.