AD BANKER CHAPTER 3

Certificate of Insurance

A Certificate of Insurance is a document stating that an insurance policy is in force. It is used to provide proof of insurance to property owners, contractors, and others who may require liability insurance. Perils would be included in a binder, not a certificate of insurance. The premium amount appears only in the policy, not on the certificate of insurance or binder.

Proof of Loss

A formal statement made by the insured and provided to the insurer that provides necessary details for the insurer to determine its liability under a policy.

Additional Insured(s)

A person or organization not ordinarily protected by a policy but which, through the addition of an endorsement to the policy, is granted status as an insured. Under a liability policy, an additional insured is often a party to an indemnification or hold harmless agreement

Insured

A person or organization protected by an insurance contract.

Proximate Cause

A proximate cause is any action on inaction leading to a loss by a chain of events unbroken by any intervening cause.

Accident

A sudden, unforeseen, unintended, and unplanned event from which loss or damage results.

Tort

A tort is a wrongful act, other than a breach of contract, that violates a duty or the rights of another and for which compensation may be sought from the responsible party. Torts are civil, not criminal. Torts are either intentional or unintentional. An intentional tort is a deliberate act that harms another and for which the injured party is permitted by law to sue the wrongdoer. Liability insurance provides coverage for most unintentional torts and excludes intentional torts.

Subrogation

After an insurer pays a loss, it is granted the insured's rights to seek recovery from the party responsible for the loss. For example, if Bob is legally responsible for injuring Sue in a car accident, Sue's insurance company may seek reimbursement from Bob for the claim payments it made to Sue.

Occurrence

An accident includes continuous or repeated exposure to the same general harmful conditions.

Attractive Nuisance

An artificial condition on land that attracts children, such as a swimming pool, and requires the owner to exhibit a special duty of care. Legally, children are considered invitees to the premises if it contains an attractive nuisance even when they are not expressly invited.

Punitive Damages

An award to an injured party, in addition to compensatory damages, to punish and discourage a wrongdoer from repeating negligent acts or omissions. Most liability policies do not provide coverage for punitive damages.

Excess

An excess policy makes payment only after all other insurance in place exhausts its limits or denies coverage.

Compensatory Damages

Awarded to the injured party for the actual loss sustained. Damages are Special or General. .

Loss of Consortium

Compensation to a husband or wife for the loss of companionship of a spouse.

Medical Payments Coverage

Coverage for the bodily injury of third parties sustained on an insured location or as a result of the insured's activities. Coverage is provided for the payment of necessary medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, and funeral expenses. Payments are made regardless of the insured's negligence. This coverage is provided to discourage liability claims and lawsuits and, when payments are made, are not an admission of liability.

Comparative Negligence

Damages are reduced in proportion to the degree of the claimant's negligence. For example, if the claimant is 5% negligent and the wrongdoer is 95% negligent, the claimant may only recover 95% of damages.

Limits of Liability

Each policy includes a provision that specifies the most it will pay in the event of loss. Certain limits of liability apply to any one loss; other limits apply to the total of all losses that occur within the policy period. In addition, the manner in which limits of liability are designated vary by coverage and policy type. The limit of liability, or limits of insurance, are shown on the policy declarations page and are the most paid by the policy regardless of the number of insureds, claims made, lawsuits filed, or parties making claims or filing lawsuits. -Per Person Limit The most the policy will pay for loss to any one person injured in any one loss, regardless of other policy limits. Example: The limit of liability for medical payments coverage on an auto policy is a per person limit.

Gross Negligence

Failure to exhibit any sort of care through recklessness or deliberate indifference to the well-being of others. For example, driving while under the influence of alcohol.

Negligence

Failure to use ordinary care. For example, running a red light. An unintentional tort, also known as negligence, is an act, or failure to act that is committed without the same level of care a reasonable individual would have exhibited given the same knowledge and set of circumstances

Elements

In order for an act or failure to act to be negligent, it must contain 4 elements: DUTY IS OWED, VIOLATION OF DUTY, VIOLATION OF DUTY IS PROXIMATE CAUSE, FORESEEABLE CONSEQUENCE

General Damages

General Damages are an award to an injured party for pain, suffering, mental anguish, disfigurement, and similar types of losses. General damages are paid for losses that cannot be calculated objectively and assigned a specific dollar value.

Strict Liability Applies to Products

If a claimant can prove that a product caused the injury, the manufacturer will be held liable whether or not the product was defective.

Primary

If the policy is primary, it makes payment before all other policies in place make payment for a loss.

Notice of Loss

Insured must notify the insurer in writing as soon as possible in the event of any Loss or occurrence. The written notice should include the named insured, policy number, and details about the time, place, circumstances of the occurrence, and names and addresses of any claimants and witnesses.

Negligence

Is the failure to use ordinary care. It is wrongful act that is neither criminal nor a breach of contract that violates a duty or the rights of another - and for which the injured party may demand compensation. It is the failure to use the same degree of care a reasonable and prudent person would use when given the same knowledge and set of circumstances.

Common Law

Law practiced as the result of judicial or court decisions (i.e., case law and precedents).

Property Damage Liability

Legal liability arising from physical damage to tangible property, including loss of use of that property, caused by the acts of an insured. Property damage liability expenses include the actual cost of repair or replacement of the damaged property as well as the inability to use damaged property (loss of use).

Bodily Injury

Legal liability arising from physical injury, including sickness, disease, and death caused by the acts or omissions of an insured. Bodily injury liability expenses include medical bills, lost wages, mental anguish, pain and suffering, etc.

Personal Injury Liability

Legal liability arising from specific offenses committed by an insured that results in injury other than bodily injury or property damage. Examples of personal injury include libel, slander, false arrest, invasion of privacy, and copyright infringement. Personal injury is generally understood to affect one's reputation or emotional well-being and is not bodily harm or property damage.

Liability

May be asserted even in the absence of negligence. For example, the manufacturer of a dangerous product is always legally liable if the product causes injury or damage.

Intervening Cause

Prevents or limits recovery from the wrongdoer when a second, distinctly separate negligent act occurs after the original negligent act, but before damage occurs, and interferes with the chain of events that brings about the loss. The intervening cause must be unexpected and unforeseen.

Contributory Negligence

Prevents recovery for damages caused by a negligent party if the claimant was negligent to any extent. For example, if the claimant is 5% negligent and the wrongdoer is 95% negligent, the claimant is not permitted to collect damages.

Assumption of Risk

Prevents recovery if the claimant knowingly assumed the risk.

Foreseeable Consequence

Requires the injured party to prove the actual injuries or damages were a reasonably foreseeable consequence at the time the negligent action or inaction occurred.

Violation of Duty

Requires the injured party to prove the alleged wrongdoer not only owed a duty but also violated that duty. Basically, the alleged wrongdoer didn't exhibit reasonable care.

Duty is owed

Requires the injured party to prove the alleged wrongdoer owed a duty to the injured party or to the public.

Special Damages

Special damages are awarded to an injured party for actual and known expenses such as medical bills, loss of earnings, and the cost of repairing or replacing damaged property.

Pro Rata Liability

Specifies the process to be followed when more than one policy covers the same loss. Each policy pays no more than its share of the loss and the method of sharing varies by contract. Some policies require sharing of losses by the ratio of applicable limits of insurance each insurer writes with respect to the total of all limits available for the loss (pro rata). Other policies require the insurers to share the loss by contributing equal shares until each insurer has paid its limit of insurance (contribution by equal shares).

Statute of Limitations

Statute of limitations is the length of time from the date of claim that legal proceedings may be initiated. This time period is established by federal or state law.

Vicarious Liability

The liability assigned to one party for the conduct of another, based solely on a relationship between the two. Examples include employer/employee relationships and parent/child relationships.

Per Person Limit

The most the policy will pay for a loss to any one person injured in a single loss, regardless of other policy limits

Per Occurrence Limit

The most the policy will pay for all losses arising out of any one occurrence, regardless of other policy limits

Aggregate Limits

The most the policy will pay for all losses submitted during the policy period, regardless of other policy limits. Each loss payment made under a per occurrence limit or per person limit reduces the aggregate limit of liability. Ex: a commercial general liability policy has a medical payments coverage per person limit of $5,000, a liability per occurrence limit of $1 million and a $2 million general aggregate limit, payment of a $3,000 medical payments claim would use up $3,000 of the general aggregate limit, leaving $1,997,000 available for the payment of future claims submitted during the balance of the policy term.

Combined Single Limit

The most the policy will pay for all losses total (any type of damage) resulting from any one occurrence, regardless of other limits. For example, the per occurrence limits on homeowners and general liability policies provide coverage for the sum of all bodily injury liability and property damage liability claims that arise from one occurrence.

Split Limit

The most the policy will pay for each type of damage that occurs as a result of a single loss, regardless of other limits. For example, the limits of liability on an auto policy for bodily injury might be represented as 100/300/100 ($100,000 is the per person limit for bodily injury liability, $300,000 is the per occurrence limit for bodily injury, and $100,000 is the per occurrence limit for property damage liability).

First Named Insured

The name of the person or organization that appears first on the Declarations page of a policy as "named insured."

Assignment

The owner of a liability policy cannot transfer policy ownership without the insurer's written consent. For example, a business owner cannot sell his business and then transfer ownership of the business' general liability insurance policy to the new owner without the written consent of the insurance company.

Named Insured

The person or organization designated on the Declarations page of the policy as being protected by an insurance contract.

Defenses

When a claimant accuses an insured of negligence, the insured may use one of several defenses:

No Fault Liability

When a no-fault liability system or law is in place, the injured party collects insurance benefits from his or her own insurance as if it were first-party coverage, thus eliminating the process of determining negligence or legal liability. No-fault laws vary by state and typically apply to auto insurance.Most no-fault laws restrict the rights of the injured party to sue unless the injuries are severe (e.g., paralysis or death) and meet certain conditions. These conditions are called a threshold and can either be a monetary limit (e.g., $5,000) or described verbally (e.g., death, facial injuries, or broken bones).Some no-fault laws allow the insured to choose whether their policy operates under a no-fault or tort basis. Other states allow policyholders to "add-on" no-fault benefits to their auto policies that are otherwise subject to tort liability. PIP

Liberalization

When coverage under a particular form of insurance issued by an insurer is broadened without an additional premium charge, it automatically applies to all policies currently in effect. For example, Carrier A adds coverage enhancements to its Special Form homeowners policy, without an additional charge. Those changes automatically apply to all policies currently in effect.

Statutory Law

Written law enacted by legislatures.

Other Insurance

a provision that specifies the process to be followed when more than one policy covers the same loss.

Strict and Absolute liability

legal principle that imposes legal liability based on conditions, activities, or products that exhibit very high hazards; the degree of care exercised by the insured isn't considered when making a determination of liability.

Absolute liability

most often associated with dangerous animal ownership, abnormally dangerous activities, and employers liability for injuries sustained by their employees. Dangerous animals include lions, bears, and certain dog breeds such as pit bulls and rottweillers. Absolute liability applies to the storage of explosives, highly flammable material and weapons or firearms.