Chapter 2 - Property

Question 1

1st Party

Answer 1

Insured

Question 2

2nd Party

Answer 2

Insurer

Question 3

Accident

Answer 3

A sudden, unforeseen, unintended, and unplanned event from which loss or damage results.

Question 4

Occurrence

Answer 4

An accident includes continuous or repeated exposure to the same general harmful conditions.

Question 5

Cancellation

Answer 5

The termination of an insurance policy before its expiration date. Once cancelled, a policy provides no coverage. A policy may be cancelled by the insured or insurer.

Question 6

Pro Rata Cancellation

Answer 6

A proportionate cancellation of insurance that refunds premium to the insured based on the precise number of days coverage was in effect. The earned premium is the premium charged and retained by the insurer for the number of days coverage was in place; the unearned premium is the premium refunded to the insured for the number of days coverage was not in place.

Question 7

Short Rate Cancellation

Answer 7

A cancellation of insurance that incurs a financial penalty. Sometimes when the insured cancels the policy before its expiration date, a short-rate cancellation is issued. The insurer retains a portion of the unearned premium to cover costs.

Question 8

Flat Cancellation

Answer 8

A cancellation of insurance that is retroactive to the effective date of the policy. No coverage is provided and the insurer must refund the policy premium paid by the insured.

Question 9

Nonrenewal

Answer 9

The termination of a policy at the expiration of its term. The policy does not renew and no coverage is provided after the expiration date.

Question 10

Proximate Cause

Answer 10

The primary cause of loss. If only one peril caused the loss, the proximate cause is the first event in the unbroken chain of events that resulted in loss. If more than two perils caused or contributed to the loss, the proximate cause is the peril having the most significant impact in generating the loss or damage.

Question 11

Personal injury liability includes which of the following?

A. Medical payments

B. Libel and slander

C. Theft

D. Sickness and disease

Answer 11

B. Libel & Slander

Personal injury liability is the legal liability for injury other than bodily injury or property damage. Examples of personal injury include libel, slander, false arrest, invasion of privacy, and copyright infringement.

Question 12

Hostile Fire

Answer 12

A fire that burns outside its intended boundaries, or becomes uncontrollable. Examples of a hostile fire include a wildfire or a fire that damages a home when a spark from a fire in the fireplace ignites a piece of furniture.

Question 13

Friendly Fire

Answer 13

A fire that was intentionally set and stays within its intended boundaries (e.g., a fireplace) and results in smoke damage to the inside of a fireplace. Property insurance does not cover damage from a friendly fire.

Question 14

Inherent Vice

Answer 14

A quality within property that causes it to damage or destroy itself. Examples include rust, rot and the fading of paint. Inherent vice is not covered by a property policy.

Question 15

Binder

Answer 15

A legal agreement issued by an insurance company or a producer that provides temporary proof of insurance until the insurer is able to issue an insurance policy. Binders are issued for specific time periods (maximum of 60 days) and automatically end when the policy is issued. Binders contain the name of the insurer, the amount and type of insurance, and the perils insured against.

Question 16

Arbitration

Answer 16

Process whereby a disputed claim is decided by a neutral third party. The disputing parties choose the impartial third party and agree in advance to accept the final decision of the arbitrator, who makes a decision after a hearing where both parties offer evidence.

Question 17

Right of Salvage

Answer 17

The right of the insurer to take possession of damaged property after paying for its loss. The salvage belongs to the insurer.

Question 18

Salvage Value

Answer 18

The amount for which property can be sold at the end of its useful life. In property insurance, the salvage value is the scrap value of damaged property.

Question 19

Endorsement

Answer 19

A policy form that alters or adds to the provisions of a property and casualty insurance contract.

Question 20

Hostile fire

Answer 20

i.e. wildfire, fire that begins with a spark from fireplace

Question 21

Friendly Fire

Answer 21

Intentionally set, stays within its boundaries (i.e. smoke damage to inside of fireplace) NOT covered by property insurance

Question 22

Inherent Vice

Answer 22

rust, rot, faded paint (NOT covered)

Question 23

Binder

Answer 23

Temporary proof of insurance, 60 days MAX

Question 24

Arbitration

Answer 24

neutral 3rd party decides outcome of claim

Question 25

Right of Salvage

Answer 25

Insurer takes possession of damaged property, belongs to insurer

Question 26

Salvage Value

Answer 26

Scrap Value

Question 27

Endorsement

Answer 27

policy form with provisions to insurance contract

Question 28

Accident

Answer 28

Sudden, unforeseen, unintended, unplanned, results in damage or loss

Question 29

Occurrence

Answer 29

an accident w/continuous exposure to same harmful conditions

Question 30

Cancellation

Answer 30

Termination of policy before expiration date

Question 31

Pro Rata Cancellation

Answer 31

cancellation that results in earned premium or unearned premium

Question 32

Short Rata Cancellation

Answer 32

cancellation that results in a financial penalty, insurer keeps portion of unearned premium

Question 33

Flat Cancellation

Answer 33

cancelled back to effective date

Question 34

Nonrenewal

Answer 34

policy does not renew

Question 35

Proximate Cause

Answer 35

Primary cause of loss, if there are multiple perils it is the peril that resulted in loss

Question 36

Deductible

Answer 36

Amount of each loss insured must bear

Question 37

Concurrent Causation

Answer 37

When 2 perils simultaneously cause a loss, insurer must pay even if 1 is excluded

Question 38

Concurrency/Concurrent Policies

Answer 38

More than 1 policy that covers same exposures, can cause coverage gap

Question 39

Definitions

Answer 39

words, terms, and phrases purposefully used in a policy to clearly lay out the intent of insurer to avoid coverage disputes.

Question 40

Bailee

Answer 40

Person or Organization that property has been entrusted with to repair, service or store (coverage excluded)

Question 41

Bailor

Answer 41

Person or Organization that entrusts property to a Bailee

Question 42

Primary Insurance

Answer 42

Coverage that responds to a loss before all other coverage

Question 43

Excess Insurance

Answer 43

provides protection ONLY after loss/damage exceeds limits

Question 44

Unoccupancy

Answer 44

A property with things (personal property) but no people (occupants)

Question 45

Vacancy

Answer 45

provision that limits or eliminates coverage for buildings w/o sufficient personal property to support intended occupancy or use.

Question 46

Burglary

Answer 46

stealing property via forcible entry

Question 47

Robbery

Answer 47

stealing property w/threat of bodily harm

Question 48

Theft

Answer 48

Broad, any act of stealing

Question 49

Mysterious Disappearance

Answer 49

cause of loss unknown

Question 50

Direct Loss

Answer 50

Loss that causes direct damage to property w/o an intervening cause (fire damage, water pipe burst)

Question 51

Indirect/Consequential Loss

Answer 51

Loss that is not the direct result of a peril | a fire can cause a loss of income - no rent

Question 52

Named Peril

Answer 52

Only covers cause of loss or perils listed | i.e. fire or theft

Question 53

Open Peril (Special Form, All-Risk)

Answer 53

Covers all except exclusions

Question 54

Replacement Value

Answer 54

losses are covered at value, usually 80-90% to replace

Question 55

Actual Cash Value (ACV)

Answer 55

cost to repair - depreciation

Question 56

Agreed Value

Answer 56

specific value listed in policy at time of issuance

Question 57

Stated Value

Answer 57

Insurer pays lesser of the ACV of the property following a loss

Question 58

Valued Policy

Answer 58

Insurer pays full face value stated in Declarations page for a total loss, regardless of ACV

Question 59

Functional Replacement Value

Answer 59

cost to replace property w/similar property | i.e. Victorian home

Question 60

Market Value

Answer 60

the price a willing buyer will pay a willing seller for property

Question 61

Loss Settlement

Answer 61

specifies which loss valuation will be applied

Question 62

Appraisal

Answer 62

dispute resolution method, 2 appraisers 1 umpire, they compromise on amount of loss

Question 63

Other Insurance

Answer 63

each policy pays no more than its share of the loss

Question 64

Legal Action Against Us

Answer 64

no one can bring suit against insurer until all terms and conditions of policy are met

Question 65

Loss Payment

Answer 65

how payment is made by insurer, time frame for necessary documents/steps to be taken

Question 66

Abandonment of Property

Answer 66

insurer is not obligated to accept any abandoned property by insured

Question 67

Mortgage Clause

Answer 67

specifies how the policy protects the mortgagee's financial interest

Question 68

No Benefit to Bailee

Answer 68

specifies that no coverage applies is loss payment benefits bailee

Question 69

D.I.C.E.

Answer 69

Declarations, Insuring agreement, Conditions & Exclusions

Question 70

What is on the Declarations page?

Answer 70

Who, What, Where, When & How Much

Question 71

What are the types of insured?

Answer 71

Named Insured, Insured, First Named Insured & Additional Insured

Question 72

What does the coinsurance penalty reduce?

Answer 72

It reduces the amount paid in a partial loss as total losses are paid based on the coverage limit on the policy.

Question 73

Liberalization Clause

Answer 73

Specifies that if the insurer broadens coverage with no increase in premium, that broadening of coverage will apply to existing policies without the need for an endorsement.

Question 74

Vicarious Liability

Answer 74

assigned to one party for the conduct of another, based solely on a relationship between the two

Question 75

Compensatory Damages

Answer 75

awarded to injured party for actual loss sustained

Question 76

Special Damages

Answer 76

compensatory damages for tangible expenses i.e. bills, loss of earnings, cost to repair or replace property

Question 77

General Damages

Answer 77

compensatory damages for pain, suffering, mental anguish, disfigurement - losses that can't be objectively calculated

Question 78

Bodily Injury Liability

Answer 78

is the legal liability arising from physical injury, including sickness, disease, and death caused by the acts or omissions of an insured. (medical bills, lost wages, mental anguish, disfigurement, pain and suffering, etc.)

Question 79

Property damage liability

Answer 79

Pays for the legal liability arising from physical damage to tangible property, including loss of use of that property, caused by the acts of an insured. (actual cost of repair or replacement of the damaged property, loss of use)

Question 80

Medical payments coverage

Answer 80

Pays for necessary medical, surgical, x–ray, dental, ambulance, hospital, professional nursing, and funeral expenses incurred by a third party on the insured’s premises regardless of fault.

Question 81

Personal injury liability

Answer 81

The legal liability arising from the wrongful conduct of the insured resulting in injuries to one’s mental or emotional wellbeing and not bodily injury or property damage.

Question 82

Accident

Answer 82

Sudden, unforeseen, unintended, and unplanned event which loss results.

Question 83

Negligence

Answer 83

Negligence is a tort and, specifically, the failure to use the same degree of care a reasonable and prudent person would use when given the same knowledge and set of circumstances.

Question 84

Contributory Negligence

Answer 84

A defense for negligence in which the claimant was also negligent to any degree.

Question 85

Comparative Negligence

Answer 85

involves fault on the part of all parties and the damages are reduced in proportion to the degree of negligence

Question 86

Absolute Liability

Answer 86

claimant does not have to prove fault in order to collect damages

Question 87

Comparative negligence

Answer 87

Involves fault on the part of all parties and the damages are reduced in proportion to the degree of negligence.

Question 88

Strict liability

Answer 88

Applies when a manufacturer is held liable whether or not its product was defective in causing injuries.

Question 89

Excess Policy

Answer 89

pays a covered claim after the primary policies exhaust their limits or deny coverage.

Question 90

Pro Rata Loss Payment

Answer 90

loss payment provision requires each insurer to pay its share of a loss in proportion to the coverage of that policy as it relates to the total of all insurance on the risk.

Question 91

Limit of Liability

Answer 91

the dollar amount of coverage specified for a liability loss.

Question 92

aggregate limit

Answer 92

The maximum amount payable for loss per location or per person from all occurrences within a policy period regardless of the number of separate accidents.

Question 93

Split Limit of Liability

Answer 93

the amount of coverage divided between bodily injury or property damage.

Question 94

Combined Single Limit

Answer 94

policy limit applied to either bodily injury or property damage as needed or in any combination.