Rules & Regulationds

McCaran -Ferguson/Public Law 15 (1945)

1) 2 things this law did: redefined the role of federal and state governments, and makes federal and state governments cooperate. 2) Returned regulation powers to states as long as they performed adequately Ex: if it is too difficult to obtain a particular kind of insurance (such as flood), the federal government steps in.

Reinsurance

1) Ceding Company writes policy over normal limits and transfers some of the risk to the assuming company (Re insurer) 2) Does not need prior consent of DOBI (for ordinary insurance company)

Loss Conditions

1) Cooperation with the Company 2) Notification of Police 3) Notice of Loss 4) Protect the Property 5) Examination of Books & Records (Insurer has every right to examine the books and records of the insured within 3 years.) 6) Inspection of the Property 7) Sworn statement of loss 8) Legal Action Against Insurer 9) Loss Payable (30 days after determination)

Organization License

1) If license is denied one can REQUEST a HEARING from the COURT ADMINISTRATIVE LAW 2) License valid from issuance companies of temporary certificate (good for 60 days)

Paul Vs Virginia

1) Insurance is NOT interstate 2) The individual states have right to regulate

Business name must be

1) Jones Insurance Brokerage 2) Cant use name name closely related to other insurance.

What exclusions appear in all Floater Policies?

1) Nuclear Reaction 2) Radiation

Branch Offices

1) Office of insurance in NJ other than main office. 2) Must be registered and receive Branch Office Certificate 3) Hours must be reasonable and similar to main office.

Personal Property Floater (PPF)

1) Provides an insured with extensive coverage on UNSCHEDULED PERSONAL PROPERTY. Usually the property is kept at the insured's property but there is WORLDWIDE COVERAGE when the property is temporarily away from the insured's residence. 2) A) silverware, gold ware and pewter ware B) clothing C) Rugs and draperies. D) Musical instruments and electronic equipment E) Paintings and other art objects F) China and glassware G) Cameras and photographic equipment H) Guns and other sports equipment I) Major appliances J) Bedding and linens K) Furniture L) All other Personal Property and professional books and equipment while in the residence M) Building additions and alterations 3) PROPERTY NOT COVERED A) Animals, fish or birds B) Boats, aircraft, trailers and campers C) Motor vehicles (including motorcycles and motorized bicycles) designed for transportation or recreational use D) Equipment and furnishings for the above vehicles unless they are removed from the vehicle and are at the insured's residence E) Owned property pertaining to a business, profession, or occupation (however, professional books, instruments and equipment are covered while in the insureds residence) F) Property normally kept other than at the insureds residence throughout the year. 4) Exclusions A) Acts or decisions of any person, group, organization or governmental body B) any work on covered property (other than furs, watches and jewelry) C) Animals owned or kept by the insured D) Dampness or extreme changes of temperature (except if caused by rain, snow, sleet, hail or bursting of pipes or apparatus) E) Wear and tear, deterioration, or inherent vice F) Mechanical or structural breakdown (except by fire) G) Marring or scratching of property, breakage of eye glasses, glassware and other fragile articles (but not if the loss is caused by fire, lightning, theft, vandalism or malicious mischief, and several other causes of loss specifically named in the policy) H) Insects or vermin

Personal Articles Floater (PAF)

1) Scheduled item 2) Covers 9 classes of Personal Property against risks of Direct Physical Loss. Coverage is worldwide except for fine arts. 3) Jewelry, furs, cameras and musical instruments, are automatically covered for 30 days if the insurance is already written on that particular class of property. 4) EXCLUSIONS- A) Theft from any unattended automobile (unless shipped as registered mail) B) Loss to property not part of a Stamp or Coin Collection C) Loss to property in the custody of transport companies D) Damage from being handled or worked on E) Mysterious disappearance unless the item is scheduled or specifically insured, or is mounted in a volume and the page to which it is attached is also lost F) Transfer of colors, inherent defect, dampness, extremes of temperature, or depreciation G) Damage from fading, creasing, denting, scratching, tearing or thinning.

The amount of payment that comes into play when an insured fails to carry the sufficient amount of insurance is sometimes referred to as the

1) an offer and an acceptance of the offer, (2) the parties to the contract must be legally competent, (3) consideration must be exchanged, and (4) the contract must be for a legal purpose.

Mutual Company

1)Owned by policy holders who elect the board directors. 2) A corporation owned and operated by and for its insureds. Every owner of the company is an insured; every insured is an owner.

Insurance Related Conduct

1)Solicit, negotiate coverage & premium, effectuate/ bind coverage. 2) Clerical and managers do not need license as long as that's all they do.

Deceased/Disabled Producer

1)Temporary continuation can be entered into with another producer w/ the same kind of license for 6 months 180 days.

DOBI (Dept of Banking and Insurance

1)They CANNOT change insurance laws. or set commission rates 2) Issues rules and regulations and enforces laws. 3) Does NOT enact legislation or enact laws.

Advanced Notice of Hearing

10 Days

Oral Written Binder

10 Days

Insurance Commissioner Complaint letter

15 CALENDER DAYS

Earthquake

168 Hrs

After Branch Closes

20 Days

Before Branch Closes

30 Days

To reapply a producer must appeal withing how many days if an insurance license application is declined?

30 Days

Remittance of Premiums

5 BUSINESS DAYS

Notice of Revocation

5 Days

Disabled/Deceased Producer

6 Months

Temporary Certificate

60 Days

Insurance Service Office ISO

A "Rating Bureau" Developes and files rates and policy forms wih the various states on behalf of their insurance co. Members may choose to adopt filings or not.

Fraud

A false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury

Fair Credit Reporting Act

A federal act aiming to promote the fairness and accuracy of information contained in consumer reports, such as a credit report.

ADVERTISING INJURY

A general liability coverage, combined in standard commercial general liability (CGL) policies with personal injury (PI) coverage, that insures the following offenses in connection with the insured's advertising of its goods or services: libel, slander, invasion of privacy, copyright infringement, and misappropriation of advertising ideas.

Surety Bond

A performance Bond. Principle/contractor/obligor Obligees receive benefit of promise Entitled to full reimbursement unless original contractor is bankrupt

Mysterious disappearance

A term used to give broader coverage than named perils like robbery. This term refers to a property disappearance that cannot be explained.

Assignment

A transfer of legal rights under, or interest in, an insurance policy to another party. In most instances, the assignment of such rights can only be effected with the written consent of the insurer. An Umpire has to be an impartial, unbiased and a disinterested party.

Theft

Act of stealing

Market Value Clause

All stock is valued at its selling price and is used only when the stock is of a type which is bought and sold at an established market exchange where market prices are posted and quoted.

Stock Company

An insurance company that has, in addition to surplus and reserve funds, a capital fund paid in by stockholders, as distinguished from mutual or cooperative companies, which have no stockholders. Shares of stock companies are usually traded on one of the organized stock exchanges.

Appraisal

Appraiser's opinion (not determination) of the current worth of a property based on factors such as area, location, improvements, and amenities. Generally, this value is arrived at by using one of three methods: (1) Cost approach, (2) Income approach, or (3) Market comparison approach. Not to be confused with assessed value. Also called appraised value. Settled by an Umpire who

Punitive Damages

Awarded when the injury was caused by gross negligence: often are triple the amount of general damages awarded and are sometimes not covered by insurance.

Building Ordinance Coverage

Building Ordinance Coverage - Coverage may be acquired to cover the losses suffered when a loss has destroyed a portion of a building but an ordinance or law requires the insured to raze the undamaged portion.

Peril

Cause of Loss

Risk

Chance of loss

A valid contract must have the following four conditions?

Coinsurance penalty

Commissioner of Insurance has the power to perform?

Commissioner of Insurance has the power to conduct investigations, administer oaths, and interrogate licensees and others.

Commissioner of Insurance has the power to issue?

Commissioner of Insurance has the power to issue subpoenas to any licensees or other persons with regard to any investigations, hearings, or other proceedings. Subpoenas are issued in the name of the Commissioner (or the deputy Commissioner or other designated employees). Any person failing to comply with a subpoena may be penalized for contempt.

Cancellation by Company?

Company must give notice as required by state law, after which time policy may be canceled after 30 days, unless the cancellation is a result of non - payment of premium, in which case only 10 days notice is allowed.

Concurrency

Coordination of the coverage, terms, and conditions of a reinsurance agreement with those of a contract reinsured or between reinsurance agreements. Reinsurance agreements are said to be concurrent when there are no gaps or overlaps.

Fidelity Bond

Covers dishonest employees Employees- Obligors Employer- Oblige

Proximate Cause

Covers loss by which fire is the proximate cause. Proximate is defined as very close in space or time that creates a result without interference or intervention of any force or factor from an independent source.

Personal Effects Floater (PEF)

Designed for use by TOURISTS who wish COVERAGe on their PERSONAL ARTICLES while TRAVELING. The Personal Effects Floater provides ALL RISKS Coverage on the Personal Property of tourists and travelers ANYWHERE IN THE WORLD, but only while the covered property is NOT on the RESIDENCE Coverage will apply to the named insured, his/her spouse and any unmarried children who permanently reside with the named insured.

Which type of authority does an insurer give to its agents by means of the agent's contract?

Express.

NFIP policy

Flood generally refers to an overflow of inland or tidal waters; unusual and rapid accumulation or runoff of surface water from any source; mudslides; and collapse of land as a result of excessive erosion due to flood. Sewer backup into a dwelling is not covered.

Misrepresentation

Fraudulent, negligent, or innocent misstatement, or an incomplete statement, of a material fact. If a specific misrepresentation induces the other party to enter into a contract, that party may have the legal right to rescind the contract or seek compensation for damages.

Property coverage may be secured under the FAIR Plan if the applicant provides evidence that:

He has been unable to secure property insurance from an authorized insurer in the normal market.

Abandonment of Property

IF you suffer a total loss, you must still stick around and assist the insurer in the claims settlement process.

Electrical Apparatus Clause

If damages are suffered to electrical appliances or wiring because of electrical injury from artificial causes, losses are not covered. If fire damage follows, the fire damage is covered, and damage to such equipment because of lightning is covered.

Non-Resident License

In order to be able to sell in your own state. 1) Must hold comparable license in home state. 2) Must get a certification/clearance (reciprocity) 3) Must get a CERTIFICATE/CLEARANCE LETTER from HOME state stating you have a valid license and you are in good standing. 4) Most business must be done outside of NJ. Because if you have resident license in more than one state, you can choose which state is your home state. 5) Once you obtain NJ non residence license, you appoint NJ Insurance Commissioner to be your agent in order to receive your papers.

Domestic Insurance

Instate (company found in NJ doing business in NJ)

Coinsurance formula

Insurance carried X loss = Settlement insurance required

Concealment

Intentional suppression or withholding of, or neglect to communicate, a material fact. In contractual arrangements, fraudulent concealment may provide grounds for setting aside (rescission) of a contract and for a claim of damages.

Certificate of authority

Is issued by the Commissioner of Insurance to grant an insurer the authority to transact insurance business in the state. 2) Comes form the treasury department, gives authority of insurer to transact insurance in NJ (Insurance companies get licensed of authority.

Newly Acquired or Constructed Buildings

It is not uncommon for businesses to expand operations or to move to a better or secondary location. These buildings will be covered under this plan.

Vacancy

Losses that occur in a building which has been vacant for more than 60 consecutive days before a loss is not covered under the policy.

Insurance License Authorities

Love To Study Very Hard P&C Life- Ordinary Life and Fixed Annuities Title- Has to be a title search to make sure there is no problem with you ownership Surplus- need 3 UNSUCCESSFUL ATTEMPTS from open market, dont need office n NJ, but need P&C License adn Surplus Lines License Variable Life- Variable Life & NASD (Mutual Funds) can SELL variable life, annuities, and mutual funds Health- Disability adn long-term health care P&C- WC, BOP, CGL, SMP, Bonds, HO/DP, Auto (PAP/BAP), B&M (Boiler & Machinery) includes fired and allied lines.

Commercial Insurance Deregulation Act

MEC Prevent Monoploy Increase Efficiency Encourage Competition

Commissioner

May place on probation, suspend, revoke, or refuse to issue or renew an insurance producer's license, levy a civil penalty, or any combination of these actions for knowingly accepting insurance business from an unlicensed insurance producer.

Resident License

Must be 18 yrs. old, have at least a green card, reside or work in NJ.

Limited Lines

Need to be registered w/company & work for licensed producer.

Indirect Loss

Occurs as a consequence of the direct loss: Fire would be a direct loss: loss of rental dollars due to fire that would be the indirect loss.

Direct loss

One that happens suddenly due to a covered peril.

Alien Insurance

Out of Country (Company formed under laws of another country doing business in NJ) Ex: Canadian Inusrer

Foreign Insurance

Out of State (Company formed under laws of another state doing business in NJ)

Split Limits

Pays a certain amount for each injured person and a total amount per accident for all injured persons. This type of liability limit is expressed in three numbers, such as 250/500/100. Using this example, the first number means that $250,000 would be paid for bodily injury to each person, $500,000 is the amount of bodily injury that would be paid to all persons per accident, and $100,000 refers to the amount of all property damage that would be paid per accident. Liability limits can be offered as Split Limits or Single Limits, also known as Combined Single Limit.

Limit of Bond

Penalty

Short Rate

Penalty for and INSURED CANCELLING the policy

Law of large numbers

Probability of Loss

When a producer offers an applicant something of value that is not specified in the insurance contract, he is guilty of:

REBATING (No company, officer, agent, or broker may pay, allow, or offer to pay or allow, in connection with placing or negotiating any policy of insurance, any valuable consideration or inducement not specified in the policy or contract or any special favor or advantage in the dividends accrued on these policies.)

Arbitration

Referral of a dispute to an impartial third party chosen by the parties in the dispute who agree in advance to abide by the arbitrator's award issued after a hearing at which both parties have a chance to be heard.

A contract in which one insurer cedes all or part of a risk to another insurer is known as:

Reinsurance

Extended Reinsurance

Reinsurance of reinsurance (retro session)

Rebating

Returning a portion of the premium or the agent's/broker's commission on the premium to the insured or other inducements to place business with a specific insurer. Rebating is illegal in the majority of states. Insurers must use filed rate credits or have supporting methodology.

Representations

Substantially true incidental statement preceding the formation f a contract

Twisting

The act of inducing or attempt to induce a policy owner to drop an existing life insurance policy and to take another policy that is substantially the same kind by using misrepresentations or incomplete comparisons of the advantages and disadvantages of the two policies. Most states have enacted legislation making twisting a crime.

CANCELLATION

The building has been vacant or unoccupied for more than 60 consecutive days.

Cancellation by Insured?

The first - named insured in the policy declarations may cancel at any time by written advance notice, and will receive refund of premium, generally on a PRO RATA BASIS

Negligence

The lack of reasonable care required to protect others from the unreasonable chance of harm. (If the insured is to be held liable for a certain event or action, the individual must have been negligent.)

What is meant by aggregate limit of liability?

The maximum amount the policy will pay per policy period regardless of the number of claims.

Robbery

Theft during which force is used or threatened.

Burglary

Theft of property from within a premises by a person who unlawfully enters or exits from the premises.

Vicarious liability

There are times when a person may be held responsible for the negligent acts of another person. ( involves the relationship between an employer and an employee. Often, the negligence of an employee can be imputed (charged) to an employer because the employer has control over the employee.) EX: a pizza delivery driver may negligently cause an accident that injures two pedestrians. The employer becomes responsible for the negligence because the employee was driving a company vehicle and the accident occurred on company time.

Protection and Indemnity Coverage

This coverage is a form of Marine Liability Insurance. The owner of the boat is covered for Bodily Injury and Property Damage on an Indemnity Basis. Example: if the boat owner falls asleep at the wheel and negligently crashes into a marina and injures a number of people, the loss to the dock and any Bodily Injury Claims would be covered.

Absolute liability

When one is considered liable regardless of fault. (Absolute liability is most frequently applied to activities involving dangerous materials, hazardous operations, or dangerous animals.) EX: Suppose Larry keeps seven boa constrictors in a trailer for use in his nightclub act. Despite precautions, one of the reptiles escapes and seriously injures a child. Larry may not have been negligent, but he could still be held responsible by virtue of absolute liability.

Pro Rata

When the INSURER CANCELS, must refund unearned premiums to a client within a specified number of days.

Subrogation

Whereby the insurance company acquires certain rights upon paying a claim of loss under the policy. These rights include the right to (1) take legal action on behalf of the insured party to recover the amount of loss from the party who caused it, and/or (2) to receive full or proportionate amount of benefits (such as disability compensation) paid to the insured under a statutory plan or scheme. The objective of this clause is to prevent the insured party from profiting from an insurance policy.

A producer who has misappropriated funds belonging to policyholders or insurers may:

have his license suspended or revoked, or be levied a penalty.

Loss Payable Clause

that any loss would be payable to a third party (by name) thereby placing the mortgagee in the same position as the insured.