Casualty Insurance Review

General Damages

"subjective" or very personal and are compensation for the injured party's "pain and suffering." They are usually determined as a percentage of special damages (usually 200% to 300%) or are determined by a jury if a prior settlement cannot be reached

Four elements of negligence

1. Duty of care 2. Breach of duty if care 3. Incurring an actual (demonstrative) injury 4. Proving the first 3 elements were the proximate cause of the loss suffered by the injured party

Surety Bond

A 3 party bond under which the insurance company guarantees performance to the obligee that the principal will fulfill a promise give. The limit on a surety bond is called the penalty

Speculative Risk

A chance of loss and gain *Not accepted in insurance

Workers Compensation

A mandatory form of insurance paid by the employer providing cash benefits to workers injured or disabled in the course of employment. Also covers lost wages, medical benefits, disability income (permanent total, temporary total, permanent partial, temporary partial), death benefits for survivors, and rehabilitation

Material Fact

A statement that would have changed the underwriting basis of a policy, had the company known of the fact

Representations

A true statement to the best knowledge and belief of the maker.

Which of the following Commercial Building and Business Personal Property Form perils is covered by the Broad form but not by the Basic form? A: Weight of snow, ice or sleet. B: Volcanic action. C: Sinkhole collapse D: Sprinkler leakage

A: Weight of snow, ice or sleet.

Terrorism Risk Insurance Program Reauthorization Act (TRIPRA)

Acts of terrorism are defined as originating either on foreign or American soil. The Act requires the Secretary of the Treasury to notify Congress not later than 15 days after the date of an act of terrorism as to whether aggregate insured losses are estimated to exceed the cap

Principal

Also called the obligor. This party has made a promise to another party that needs to be guaranteed

Surety

An Insurance company that acts as a guarantor and guarantees to the obligee that the obligor will perform as promised or the surety will make good on the obligor's promise financially to the obligee

Drive other Care Endorsement

An endorsement of a commercial auto policy when the insured does not own a personal vehicle (and therefore does not have a personal auto policy) and the insured is assigned/ uses a company car

Individual Insured Endorsement

An endorsement of a commercial, auto policy when the insured is owner/principal and a company car is a private passenger type auto the insured will also be driving for personal use and requires PAP (Personal Auto Protection) type coverage for this use

Accident

An unexpected, unintended, unforeseen, and sudden event.

Insured under auto policy

Any and everyone who can collect under the policy. Coverage follows the car as long as driver has permission

Strict Negligence

Associated with product liability when a product is defective and fails and insures the customer who used it properly, the business is liable without regard to fault of negligence

Who is automobile insurance designed to cover

Automobile insurance is designed third party claims for BI and PD arising out of the insured's negligent use of the vehicle causing damage.

Commercial General Liability (CGL)

Businesses who do not qualify for a business owners policy (BOP) will purchase a CGL as either a monoline policy or as part of a commercial package policy (CPP) to address their liability needs. The CGL covers liability issues that arise from the public (customers and vendors) it does not cover loss to employees because those needs are taken care of by the workers compensation policy `Includes: Coverage A: Bodily Injury and Property Damage, Coverage B: Personal Injury (Non-Physical) and advertising injury liability, Coverage C: Medical Payments (To others, not insured or employees

Pure Risk

Chance of loss without a possibility to gain a profit from that loss

Loss Settlement Provisions

Consent to settle a loss - in a professional liability policy that may contain this clause, the carrier can only settle a loss to a claimant if the insurance company first obtains the consent of the insured to settle the loss. No insured consent = no settlement by company.

CGL Coverage A

Coverage for customers, vendors, and guests that cover bodily injury and property damage

Employee Dishonesty

Covers loss by theft of covered property by an employee. Includes burglary and theft

4 Elements of Insurance Contract

D-I-C-E Declarations, Insuring Clause/ Agreement, Conditions, Exclusions/ Limitations

Conditions

Describes the rights and duties of the parties to which BOTH PARTIES ARE BOUND. It includes the clauses/ provisions of the policy such as Other insurance, subrogation, assignment, cancellation, nonrenewal, notice of claim, ETC.

Moral Hazards

Dishonesty or bad habits of the insured make the loss greater

4 Types of Professional Liability Coverages

Errors & Omissions, Medical Malpractice, Directors and Officers (D&O), Employer Practice Liability (EPLI)

Errors & Omissions

For real estate agents, insurance agents, and stockbrokers when a client suffers financial loss because the insured gave incorrect advice or failed to advise them on an important issue

Hired Auto (Business Auto Endorsement)

For use by an owner/ partner but not an employee when the vehicle used is not owned by the business or the business owner. (It is liability coverage not physical damage)

Consent to settle a loss provision

If this clause is present in a professional liability policy it means that the insurance company cannot settle a claim against the insured without first getting the insured's permission to settle the claim. Not included in all Professional Liability coverages, mostly malpractice.

Duties of the Insured

Immediate notice, prevent further loss of property, separate and inventory damaged and undamaged property, claim verification (receipts, bank statements), police reports (theft situations), proof of loss (within 60 days

Mini-Tail

In a claims made form the period for reporting a loss is extended to 60 days after the coverage ends

Midi-tail

In a claims made form, if a loss was reported during the mini-tail period, the claim will be paid up to 5 years after coverage has expired

Indemnity

In p/c insurance contracts of indemnity's purpose is to make the insured "whole" again, to reimburse the loss and not to make the insured better off than they where. Insured shall not profit or gain by their loss.`

Vicarious Liability

Legal responsibility placed on one person for the acts of another person. "Respondeat Superior or let the master answer"

Non Owned Automobile (Business Auto Endorsement)

Liability coverage when a business non owned vehicle is used by an employee for business tasks

Part A (AUTO)

Liability, mandatory coverage that pays for bodily injury and property damage liability created by use of the auto. It can pay either on a split limit (20/40/15) or combined single limit

Exclusions/ Limitations

Limit the scope of coverage as to people, perils and property. They tell us what is NOT covered

Part C (AUTO)

Mandatory coverage that provides protection against uninsured/ underinsured motorists including hit and run Insured's Limit - Driver's BI Limit = Amount Paid by UIM Coverage

CGL Coverage C

Medical payments aka Goodwill; pays for medical expenses incurred for BI caused by an accident on premises for OTHERS within 1 year of the date of the accident; made without regard to fault

Damages

Money amounts awards to an injured party when a negligent party is liable. Pays compensatory damages on bodily injury compensation.

Claims-Made Form

More recent product innovation requires that a claim be brought forth within the policy period to be paid if the loss occurred on or after the retroactive date.

Definition of the Insured

Named insured - the person whose names appears in the Declarations section of the policy, First Named Insured - used in commercial policies and this is the sole person the insurer will acknowledge as this party has control of the policy for all contractual purposes, in the eyes of the carrier. Additional Insureds - People or entities that are added to the declarations usually for specific risk or interests (bank for copier loan for instance). They are usually added by by endorsement. Insured - Anyone who is covered (unnamed spouse) or entitled to collect (a victim of the insured) under the coverage of a policy whether named or not

Elements of a contracts

Offer and acceptance: each party knows what they are agreeing upon Con$ideration: the exchange value (money) Competent Parties - Humans must be of legal age and of sound mind while companies and products must be licensed properly by Dept of Insurance Valid/ Legal Object: Contracts for an illegal purpose will not by enforced by the courts

Occurrence coverage form

Oldest coverage form that covers bodily injury or property damage occurring during the policy period even if the loss is not discovered until after the policy has expired.

Employers' Liability

Optional Coverage which protects the employer when sued by qualified third party (not the injured or ill employee) for legal cause of actions such as loss of consortium (because the insured is no longer the same person family suffers a loss a well) by a spouse or other family members or rights arising out of dual capacity (insured is hurt as an customer instead of employee) coverage ranges between $100,000 to $500,000

Part D (AUTO)

Optional coverage for damage to your auto, includes collision and anything other than collision except for named perils specified in exclusions. Insurer pays the lesser of ACV or replacement/ repair costs

Part B (AUTO)

Optional coverage that provides medical payments

Additional (Supplementary) Payments

Paid in addition to the applicable limits of liability, without any extra premium costs (court fees, investigative fees)

4 Auto Coverage Areas

Part A: Liability Part B: Medical Payments Part C: Uninsured Motorists Coverage Part D: Coverage for Damage to your auto *Four separate coverages that are included in the policy with their own insuring agreement and exclusions

Directors and Officers (D&O)

Past and present officers and board of director members are protected for wrongful acts (includes misstatements, neglect, and breach of duty) causing loss while they were acting for the insured entity. Policy does not pay for fines or punitive damages.

CGL Coverage B

Personal (Non-physical) and Advertising Injury; false arrest, malicious prosecution, wrongful entry or eviction, libel, slander, invasion of another's right to privacy

Deposit Premium Audit

Refers to the initial premium (deposit) paid by an insured at the beginning (inception date) of certain polices which is estimated and subject to later adjustment based on audits which may be conducted later. After an audit takes place, subsequent premium adjustments are made to the deposit premium amount. Insurer has up to 3 years after policy ends to perform an audit.

Absolute negligence

Result of a hazardous/ dangerous condition, including the idea of harboring a wild animal. Victim does not have to establish negligence to collect money damages

Other State Coverage

Since Workers Compensation is a state law and varies from state to state, this optional coverage enables the insured to be automatically covered for up to 30 days when creating a new business presence in another state.

Insureds in a CGL

Sole proprietor (insured is the business and is personally liable for all business activity), partnership, corporations, LLC (limited liability corporation), trusts. Coverage extends to employee for acts within scope of their employment, the insured's real estate agent as long as not employee, the estate representatives of the insured if the insured dies, newly acquired organizations for up to 90 days after acquisition

Binders

Temporary insurance contract issued by a carrier or agent that places coverage in effect prior to issuance of the policy, can be verbal or written. Expires once a policy is issued or is rejected.

Pro Rata Cancellation

Termination of an insurance policy by company, with a refund of the premium charge in proportion to the exact coverage that has been in force.

Coverage Trigger

The action that makes a policy respond to a claim. If the cause of loss happened while an occurrence form was in effect then it is an "occurrence trigger" If the cause of loss happened while a claims made for was in effect then it is a "claims made trigger"

Short Rate Cancellation

The cancellation of a policy for which the premium refund is calculated according to a short rate table whereby the insurer retains a portion of the premium.

Appraisal

The condition in the property policy that addresses a situation in which the insured and the insurer cannot agree on the value of the loss. Each party selects a disinterested third party to assess the loss value.

Nonrenewal

The contract is not canceled but instead it goes to the termination point listed in the declarations at which point but the insured has decided the policy will not be continued. *Advanced notice must be given by the company to the insured

Obligee

The party to whom a pricipal has made a promise

Insuring Clause or Agreement

The promises between the two parties are exchanged (insured promises to pay premium on time and that the told the truth in the application and carrier agrees to pay loss under the terms of the clause and provide fair underwriting and pricing

Supplementary/ Additional Payments

These are paid in addition to the policy and include: any expense incurred by the insurance company, bail bonds up to $250, reimburse loss income to the insured up to $250 a day, judgement interest on court appeal bonds and all court costs, attorney fees are paid to defend insured in a suit as long as they cooperate and if limit of liability has not been used up (company selects the attorney)

A car crashes into a telephone phone

This is an accident - sudden, unplanned

A car is stored for a month in a garage without use and is slowly leaking gas from the tank such that the fumes build up over several weeks causing an explosion

This is an occurrence

Retroactive Date

This is the first date that a business is covered on a claims made form after switching from an occurrence form, without any interruption coverage from one carrier to another carrier.

Professional Liability

This specialized coverage is necessary because certain professional business activities are not covered under any other form (When a professional fails to render service equal to the degree of skill required and expected of a person in the particular profession) Medical Practitioners hurt people physically when they make a mistake while a lawyer injures someone's pockets or legal rights rather than their body

Declarations

Usually the first page of the policy, it contains the basic underwriting information; name of insured, address, amount of coverage, premiums, describes the insured locations and names of parties in the contract. It lists the parties to contract, the date coverage begins and ends, it describes the coverage provided and it indicates whether open or named perils

Medical Malpractice

Usually written on a claims made basis. This is for doctors, hospitals or other medical practitioners. These also cover some intentional acts such as performing the wrong surgery in error.

Endorsements

Written additions that are added to a contract of insurance while policy is in force. Can be used to add or delete coverage.

Certificate of Insurance

Written evidence from the insurance company that shows that a policy was issued, including the amount and types of coverage provided (does not mean coverage is active)

Arbitration

a claim settlement method utilized when the insured and the carrier cannot agree as to how to settle a claim. A claim is submitted to an arbitrator(s) and their decision may or may not be binding to both parties.

Occurrence

a continuous or repeated exposure to conditions that results in injury or loss, it is not as time specific as an accident

Other Insurance (Pro Rata Liability)

a formula for indemnification when coverage by more than one company is in effect on the same property at the time of a loss. The loss is shared by the various carriers in the same proportions as their respective policy limits. Prevents the insured from collecting more than one time AOL = CCA / TTAIL X LA AOL: Amount of Liability CCA: Company Coverage Amount TTAIL: Total Amount of Insurance LA: Loss Amount

Hazard

a possibility which will give an increase tot he chance that peril will occur. A hazard makes it more likely that a peril (loss) will occur due to actually happening (Morale, Physical, Moral)

Garage Coverage Form

a specialized coverage for vehicles when the commercial entity is engage in: auto dealership, sells trucks or commercial trailers, motorcycles, RVs, mobile homes, car washes, auto repair shops, public parking storage, and parking garages.

Special Damages

actual out-of-expenses suffered by the injured party and include such items as medical expenses incurred and lost wages. These are easily established and are sometimes referred to as "objective," meaning everyone can determine them by looking at the facts of the situation

Subrogation

aka Transfer of Recovery Rights, the insurance company, by assignment from the insured as stipulated in the insurance contract has the right to recover from third parties any recoverable loss which was reimbursed by the insurance company to the insured during the settlement of the claim. A concept related to indemnity, or the prevention of the insured to profit, in this case, from collecting for sustained damages twice.

Warranties

an absolutely true statement - Do not hold insurance applicants to this standard

Covered Auto

any listed in the declarations section of the insurance contract, a private passenger vehicle, vehicles with a gross weight of less than 10,000 pounds, nonowned temporary substitute vehicles, owned trailer

Punitive Damages

are a punishment to the offending party (whose is called a "tortfeasor" in a civil or tort action). They are set by either a judge or jury and are designed to be financially painful to the tortfeasor as well as to others who might engage in behavior similar to the party to whom punitive damagers were assessed

Physical Hazards

are conditions left in a manner making a loss more likely to occur

Voidable Contract

contracts that start as valid contract but have circumstances that can be struck down at a later date (contracts of minors)

Morale Hazard

depends upon the subjective makeup of the insured and can arise from the state of mind related to indifference of the insured to the loss that may occur

Split-Limit Coverage

divides the limit of liability into 3 parts: the limit for each person, the limit for two or more people, and limit for property damage ex: 100/300/100 would have a limit of liability of $100,000 for each person, a total limit of $300,000, and a limit of $100,000 for property damage

Exposures

factors most likely to causes of liability for which a business will responsible due to negligence including premises (building or real property ownership), operations (conduct or activity of business or employees), products (manufactures) and completed operation, and operations liability.

negligence

failure to provide care that a reasonable or prudent person would have supplied given the same or similar circumstances. It is careless but not intentional

Law of Large Numbers

insurance companies can spread risk among a large number of insureds who have similar exposures to loss, making the risk of loss predictable which allows premium rating. The greater the number of insured in the same risk pool, the closer the actual loses will be to those predicted.

Fidelity Bond

insurance policy that guarantees the honesty of an employee in the areas of potential misconduct such as theft, embezzlement, forgery, misappropriation or other dishonest acts. Includes Indidiviudal, Named Schedule (2+ associates are named), position schedule, commercial blanket (all employees covered on per loss basis), blanket position (all employees are covered on a per employee basis

Insurable Interest

must have it to own insurance. Insurance interest exists as to any individual when damage or destruction of property will result in a financial lost to that individual. In a property or casualty contract, insurable interest must exist at the time of loss

Actual Cash Value (ACV)

replacement cost minus depreciation (use or wear and tear). ACV reinforces the principle of indemnification

Garagekeepers

section that covers damage to a customer's car left with the insured for service, repairs, parking or storage when the insured is liable

Risk

strictly defined as an uncertainty regarding financial loss

Concealment

the failure to disclose a known material fact, which if intentional, will void a contract

Aggregate Limit

the limit the policy will pay for ALL covered loss in a policy period regardless of the total number of claims brought

Cancellation

the policy is ending early, before the policy end date

Combined Single Limit

this limit expresses a single dollar amount that will be paid for both bodily injury (including death) and property damage, there is no separate category limits

Void Contract

unenforceable from the beginning, was never a contract (contract to steal a car)

Negligence Liability

when one party harms another they must pay "damages" to the injured party. Provides coverage only for acts which are not intentional