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Contract (def)

agreement between parties


What are the four parts needed for a legal, binding contract

1. each party must agree to terms
2. sufficient consideration or value
3. parties must have legal capacity to enter into a contract
4. Contract must be legal and not against public policy


Insurance (def)

contract that undertakes to indemnify or pay a certain amount in the event a covered loss occurs


Indemnify (def)

to make whole


Consideration (def)

value for an insurance contract


What is the consideration in an insurance policy/contract

1. Premium paid by the insd
2. Promise given by the insurance company


How is temporary insurance put into effect

through binders


What is included in a binder

all of the usual terms, conditions and exclusion contained in a policy


When is cancellation/non-renewal notice required on a binder

1. No notice of cancellation or non-renewal required unless the binder has term of 61 or more days
2. Auto binders are exception - 5 days notice required to cancel an auto binder


Difference between property insurance and liability insurance

1. Property: payment is issued to the insd or others with interest similar to insd
2. Liability: payment only issued to a 3p that the insd has injured or caused damage (insd will never rec pmt under their own lx policy


Four fundamental parts of all property and liability insurance contracts

1. Declarations
2. Insuring Agreement
3. Exclusions
4. Conditions


Declarations (def)

portion of policy contract that includes info on:
□ Insured
□ Premium
□ Period of coverage
□ Policy limits


Insuring Agreement (def)

defines coverages contained in the policy


What does an exclusion do

eliminates coverage


Conditions (def)

requirements that must be met before payment will be made


Conditional Contracts (def)

contract in which insd has certain duties that must be met following a loss


Duties of an insured to meet the conditional contract (5)

1, INSD must give prompt notice of loss
2. Cooperate with insurance company
3. Act in away that preserves the ins company rights
4. Send copies of notices or legal papers to insurer
In property policy
5. Must submit written proof of loss


Proof of loss (def) (2)

evidence offered by the insd to support the claim for damages, and a sign sworn statement by insd verifying what is required according to the policy/insd company


Proof of loss requires ID of what 5 things

1. Origin of loss
2. Proximate cause of loss
3. Interest of the insd and all other parties in the property
4. All contracts of insd that applied to the property
5. Any changes in title, use, location, possession of the property


Subrogation (def)

when insd collects damages from their own insd company, and those damages were caused by a negligent 3p, the insd's insurance company acts as insd and is entitled to have reimbursement of those damages from the 3p


Insurance policies are considered what type of contract (personal, third party, commercial)



What must be done for a change to a policy to be permitted

must be made in writing by the insurance company


Coverage applies to a loss that does what in a policy period?

begins and take place


most policies have a condition that limits coverage to “what” in regard to policy period and policy territory

take place in a geographic location


What is an excess policy

policy that pays secondary to a primary policy for the same loss, when all applicable limits on the primary policy have been exhausted


what is an equal share policy

pay an equal share of the loss, but will not pay more than its policy limits


What is a pro rata policy

□ This policy pays the proportion that its limit bears to all limits that apply to the loss
□ Example:
® Poly A = $25K limit
® Poly B = $50K limit
® Total limits = $75K
◊ A = 1/3 of total limits
◊ B = 2/3 of total limits
® Loss is $6K
◊ A = 6000 * 1/3 = 2000
◊ B = 6000 * 2/3 = 4000



If ins company revises a type of policy to broaden the coverage w/out requiring an additional premium, then an insd who has already purchased it will automatically receive the benefit of the better coverage as long as the benefit takes place w/in specified time period (usually 60 days) from policy origination


What is the appraisal process (6)

1. If disagreement occurs between insd and insd company on value of loss, each party may select an appraiser
2. These two appraisers then select a 3rd to umpire
3. The umpire will determine the amount of the loss
4. An agreement between any two of the 3 will be binding on both the insd & insurance company
5. Appraisal has nothing to do with whether or not a loss should be paid
6. LX must be determined before the appraisal process takes place


What is the principal of Severability (2)

§ Insurance applies separately to each insd as if the other didn't exist
§ Wrongdoing on the part of one insd, does not prevent recovery under the policy for the other insd
Ex: homeowner who commits arson will not prevent the mortgage co from recovering insurance for damage done to the house