Exam Fx (PROPERTY & CASUALTY)

Market Value

amount a willing buyer would be willing to pay to a willing seller for the property prior to loss. *seldom used*

Theft

any act of stealing that encompasses both burglary and robbery

General damages

compensates an injured person for pain & suffering, mental anguish and disfigurement

What is a hazard?

conditions or situations that increase the probability of a loss occurring

Replacement cost

cost to replace damaged property with like kind and quality at today's price without deduction for depreciation. * May provide excess of acv

Direct loss

direct, physical damage to buildings and/or personal property

Mysterious disappearance

disappearance of property without knowledge of how it disappeared. *Excluded from most policies*

Negligence

failure to use the care that a reasonable, prudent person would have taken under similar circumstances

Burglary

forced entry into or out of the premises of another with felonious intent. *Must have visible signs of forced entry or exit*

Punitive damages

form of punishment for extreme, outrageous behavior, gross negligence or willful intent

Absolute liability

imposed on defendants engaged in hazardous activities such as harboring wilding animals, using explosives etc.

Exclusions

Details the perils that are not insured against & what persons are not insured. *Earth movement excluded if by earthquake, mudflow or volcanic eruption *Flood, subsurface water, water backed up from a sewer & drains from sump pump or water below ground that seeps through basement walls

Insuring Agreement

Establishes the obligation of the insurance company to provide the insurance coverages stated in the policy. *List parties to the contract, effective & renewal dates and description of coverage & perils.

Salvage value

Estimated value an asset will realize upon its sale at the end of its useful life. * may be sold as whole or in part*

Endorsements

Printed addendums to a contract that are used to change the policy's original terms, conditions or coverages. *May be used to add or delete coverage or correct *Must be in writing, attached to the policy & signed by executive officer of the insurer to have any effect.

Consideration

Something of value that each party gives to the other. *Binding force in any contract

Named Peril

Specific covered perils. There is no coverage for unlisted perils

Representations

Statements believed to be true to the best of ones knowledge. It is NOT guaranteed to be true.

Acceptance

Takes place when an insurer's underwriter approves the application & issues a policy.

Binder

Temporary agreement issued by an agent or insurer providing temporary coverage until a policy can be issued. * expires when policy issued.

What is pure risk?

It can only result in a loss or no change

Occurrence

losses caused by continuous or repeated exposure to conditions neither intended or expected.

Aggregate Limit

maximum limit of coverage available under liability policy during a policy year regardless of losses. *Limits are restored at the anniversary of the policy.

DP 00 01

named peril coverage form * most limited coverage *no minimum amount of insurance required for basic form

Unoccupancy

nobody living or working in structure for a period of time, but some property is stored.

If an insured covered under a Mobile Homeowners policy moves the mobile home to protect it from a covered peril, the policy will pay up to

$500

Declarations contains basic underwriting info such as:

*Insured's name * Address *Amount of coverage & premiums *description of insured locations *first page of policy

In the event of a loss covered by a policy, the named insured is required to:

*Protect property from further damage *Prepare an inventory of damage *Cooperate with the insurer in settling the loss *Notify the policy in the case of theft loss *Submit to the insurer a signed sworn proof of loss within allotted amount of time after requested.

Dwelling property policy

-developed by ISO to be used primarily as property coverage form *can insure dwelling only, contents only or both *basic, broad, special *Liability not included but can be added

What are the 4 essential elements of a contract?

1) Agreement (offer & acceptance) 2) Consideration 3) Competent Parties 4) Legal Purpose

Policy Structure: Every property or casualty policy is comprised of:

1) Declarations 2) Definitions 3) Insuring Agreement 4) Additional Coverage 5) Conditions 6) Endorsements 7)Exclusions/policy limits

The three elements of insurable risk are

1) Financial 2) Blood (relative) 3) Business

Types of risks are

1) Pure risk 2) Speculative risk

In commercial general liability, what is an occurrence form?

1)The most common form and is used for a wide variety of businesses.

How long is the waiting period after the application has been accepted before flood coverage goes into effect?

30 days

If the premiums for a policy will be increased by more than 15%, how much warning must the insured get?

45 days

Additional coverage (supplementary)

A provision in an insurance policy that provides an additional amount of coverage for specific loss expense at no additional premium.

Blanket insurance

A single property policy that provides coverage for multiple classes of property at one location or multiple classes at multiple locations.

Material misrepresentation

A statement that if discovered , would alter the underwriting decision of the insurance company. If it is intentional, it is considered fraud.

Open Peril

ANY risk of loss not specifically excluded

Which type of liability does not require that the injured party prove negligence?

Absolute liability

Warranty

Absolutely true statement upon which the validity of the insurance policy depends.

Proximate Cause

Act or even considered a natural & reasonably forseeable cause of the damage or event that occurs & damages property or injures plaintiff. *Negligence must have been proximate cause *Unbroken chain of events *direct liability

Stated value

An amount of insurance scheduled in a property policy that is not subject to any coinsurance requirements in the event of a covered loss. *scheduled amount is the max insurer will pay*

Insured

Anyone who is covered under the policy

An insurance company in return for premium must:

Be fair in underwriting & must pay covered losses.

What is vicarious liability?

Being held liable for acts of others. For example: Parents responsible for negligent act of kids or employers liable for employees.

Definitions

Clarifies terms used in the policy

Deposit Premium Audit

Condition that allows the insurer to audit the insured's books or records at the end of the policy term to make sure adequate premium has been collected for the exposure. *insurer has up to 3 years from the expiration to perform the audit.

Formula for Actual Cash Value (ACV)

Current replacement-depreciation= ACV

What is the most prevalent indirect loss for homeowners?

Extra living expense that may be incurred by the insured while the home is being repaired.

Loss valuation

How a loss to an insured property will be valued at the time of loss. It is also a factor in determining the premium and amount of insurance required

Strict Liability

Implied warranty that product is safe. The business is then liable for defective products regardless of negligence. * If a product causes injury & claimant can prove defect, defendant will be strictly liable

What is coinsurance?

In consideration of a reduced rate, the insured agrees to maintain a certain minimum amount. *encourages the insured to insure the property closer to its full value *partial loss paid in full if insurance percentage maintained *total loss, coinsurance clause does not operate & the face amount of the policy is paid. Insurance carried / Insurance requirement * Loss Amount = Loss Payment

Conditions

Indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy

Named Insured

Individual whose name appears on the policy's declaration.

Additional Insureds

Individuals or businesses that are not named as insureds on declaration page but are protected by the policy, usually in regard to a specific interest. *Usually added by endorsement

Personal Injury Liability

Injury to the character of another person caused by libel, slander, false arrest, invasion of privacy & other acts

Concealment

Intentionally withholding of information of a material fact that is crucial in making a decision.

In commercial general liability, what is a claims-made form?

It is used for specialty coverages, malpractice, errors & omissions, employment practices, liability, etc.

Property Damage Liability

Legal liability arising from physical damage to tangible property of others caused by the negligence of an insured.

Bodily Injury Liability

Legal liability arising from physical trauma to a person or death arising from the negligent or purposeful act & omissions by an insured.

Per Person (Limit of Liability)

Maximum amount available for payment of bodily injury to a single person in an accident regardless of policy limits in the policy. 25/50 for example

Policy Limits

Maximum an insured may collect or for which an insured is protected under terms of policy.

Arbitration

Method of casualty claim settlement when insured & insurer cannot agree on how to settle a claim. *decision may or may not be binding on both parties dependent on state law.

Vacancy

No people and no property stored for a period of time (usually 60 days)

Appraisal

Occurs if there is a disagreement between the insured & the insurer on the value of any property loss. *Each party will select a competent appraiser who will then select an umpire if they are unable to agree on a fair value

What is speculative risk?

Opportunity for loss or gain. For example, gambling.

Specific insurance

Property policy that covers a specific kind or unit of property for a specific amount of insurance.

Pro Rata

Provision found in some property insurance policy that provides for the sharing of loss with other insurance that may be written on the same risk in the same proportion as their limits of insurance bear to the total of coverage of all polices covering the risk whether collectible or not.

Other Insurance

Provision in policy that defines how policy will respond if there is other valid insurance written on same risk.

Insurance to Value

Provision usually in homeowners policies provides a replacement cost settlement to the policyholder who carries adequate insurance, which means the property is insured to the exact dollar amount or percentage value. *If insurance is less than the value assumed in the premium rate calculation, the insured would still be indemnified at least to the amount of the ACV

What type of risk does insurance cover?

Pure risk

Deductible

The dollar amount an insured must pay on a claim before the insurance policy provides coverage. * higher the deductible usually lowers premium*

Deposit Premium

The estimated premium paid in advance at the time the policy is issued that may be adjusted based on actual exposures. *actual premium can be determined by the audit of the insureds records at the end of the insuring period.

First name insured

The individual whose name appears first on the declaration *commercial policies first named has control of policy & only insured who may cancel or request changes & responsible for paying & reporting losses.

Law of Large Numbers

The larger the number of people with a similar exposure to loss, the more predictable actual losses will be.

What is the primary type of indirect loss for commercial property?

The loss of profits a business may suffer from closing business while repaired.

What are Limits of Liability?

The maximum amount of money the insurance company will pay for a particular loss or loss during a period of time.

What does "per occurrence" mean?

The sublimit in a liability policy that puts a ceiling on payment for all claims that arise from a single accident occurrence

Accident

The sudden, unplanned and unexpected event not under the control of the insured. Neither expected or intended.

Assignment

The transfer of a legal right or interest in an insurance policy. * valid only with the prior written consent of insurer (property & casualty)

Risk

The uncertainty or chance of a loss occurring

Insurance

Transfers the risk of loss from an individual or business entity to an insurance company

Offer

Usually made by applicant when submitting the application.

What term comes from old English law "respondeat superior?"

Vicarious Liablility

Certificate of insurance

Written evidence showing that an insurance policy has been issued. * Indicates both the amounts & types of insurance provided, but does not obligate the insurer to the person to whom the certificate was issued.

What is a peril?

a specific cause of loss

Subrogation

insurer's legal right to seek damages from third parties after it has reimbursed the insured.

What is indemnity?

provision in an insurance policy that states that in the event of loss, an insured can only collect to the extent of the financial loss. The insured is not allowed to gain financially.

Actual cash value

recognizes reduction of value as property ages and wear & tear

What is a loss?

reduction, decrease or disappearance of value of the person or property insured.

Indirect Loss (consequential)

results of a direct loss

Split Limits

separately stated limits of liability for different coverages *per person *per occurrence *per policy period (think of an auto policy)

Combined Single

single dollar limit of liability applying to the total of damages for bodily injury & property damage combined resulting from one accident/occurrence *single limit to split between injuries and damage to property*

Special damages

specific out-of-pocket expenses for medical, miscellaneous and loss of wages

What type of risk is not insurable?

speculative risk

Robbery

taking of property from care or custody of a person through threatening or causing bodily harm.

Property damage loss

value of property and loss of use