Chapter 2/ Modual 3 Flashcards
(21 cards)
What are three theory’s used to determine when a loss has occurred
- Exposure theory
- Exposure in residence theory
- Manifestation theory
Explain the exposure theory
Assumes injury occurred when person was in physical contact with a harmful substance. The policy is place at the time of the exposure is expected to provide coverage.
Explain the exposure in residence theory
Assumes that the disease or other bodily injury continues even after the exposure to the hazardous substance has ceased.
Coverage would be expected from all policies in effect from exposure, to diagnosis
Explain the manifestation theory
Assumes the injury occurred only when recognized and diagnosed. The policy in place at the time of diagnosis would provide coverage
What are three features of the claims made form?
- Coverage is triggered when a claim for damage is made
2.coverage is limited by a retroactive date - The reporting period may be extended for additional premium
What two things must be present to use the extended reporting period endorsement?
- They arose from an occurrence that took place on, or after the retroactive date stated
- They arose within the policy period
When should a broker recommend the “Extended Reporting Period Endorsement”
- They are going out of business
- Changing from claims made to an occurrence policy
- Replacing a claims made policy with one from another insurer
What do professional liability policies provide?
Payment for damages arising out of the rendering or failure to render professional servicea
Define “Professional”
Someone who possesses or claims to possess the special knowledge and skill necessary to render a professional service
Give examples of those who administer health care, and what kind of insurance they need
Dentists, surgeons
Malpractice insurance
Give an example of those who give advice and counseling, and what insurance the need
Lawyers, accountants
Errors and omissions insurance
What are the three recognized levels of performance
- Complete or satisfactory performance
- Substantial performance
- Material breach
When does a performance meet “complete or satisfactory performance”
- level of performance meets accepted standards
- when this standard has been met, the professional is entitled to contract price
When does “substantial performance” apply
- falls short of complete performance, in minor respects
-entitled to contract price, less any damages the client may have incurred
When is a performance considered a material breach
-professionals performance is grossly inadequate
-no entitled to recover contract price, may be liable for damages
What are the two basic groups common to all corporations
- Body of shareholders
2 board of directors (elected by shareholders, specific duties owed)
What are the duties owed by the board of directors
- owe legal duty to shareholders, creditors, employees and the public
-may be liable for mistakes and misconduct - can purchase coverage against liability resulting from failure to properly exercise their legal duties
When will an umbrella policy respond?
When limits under the primary policy are inadequate
Discuss two ways that the claims made policy helps reduce claims costs associated with latent bodily injuries
- prevents stacking limits (only one policy will respond)
- ensures it does not pay for injury or damage occurring prior to the inception date of the policy
Under what conditions should a business purchase an umbrella policy?
When the complete liability insurance needs of a business are not covered due to
- inadequate coverage
- inadequate limits
Umbrella policies have unique drop down features. How does this work?
Unless it contains the same exclusions, the umbrella policy will pay when coverage is not provided by primary policy. The insured must pay a deductible
