Key Point Review Questions Study 6

Question 1

1) What is the purpose of an exclusion?

Answer 1

Exclusions remove certain losses from a policy’s coverage.

Question 2

2) What are two types of exposure typically listed in exclusions?

Answer 2

• Types of property that are not insured

* Perils that are never or sometimes not insured against

Question 3

3) What is an exception?

Answer 3

A case where a rule does not apply. In an exclusion under an insurance policy, an exception is a case where the exclusion does not apply.

Question 4

4) What does named-perils coverage insure against?

Answer 4

Named perils coverage insures only against loss or damage caused by the listed perils.

Question 5

5) Outline the extended instructions under Step 3 in reading a policy.

Answer 5

1. Determined whether there is coverage under the policy by looking at what is insured under the policy and under what circumstances. The onus is on the insured to show that the loss or damage falls within coverage.
2. If there is coverage, next determine whether any exclusions apply to the circumstances of the loss or damage. The onus shifts to the insurer to demonstrate that the coverage is excluded.
3. If an exclusion applies, determine whether there is an exception to the exclusion that restores coverage despite the exclusion. The onus falls back to the insured to establish that an exception is triggered.

Question 6

6) What are perils typically excluded under the Homeowners’ forms?

Answer 6

Buildings for Business or Farming: These buildings should be insured under commercial or farm policies.
Property on Exhibit: Property of exhibit faces unique exposures not meant for homeowners forms. Exhibition floater would cover this.
Property Illegally Acquired or Subject to Forfeiture: If an insured stole the property they have no legal claim to indemnity for the loss.
Evidence of Debt or Title: denies coverage for property that may be insured by other forms specifically designed for it.
Sporting Equipment: Sporting equipment, where loss or damage is due to its use, is excluded.
Animals, Birds, or Fish: Excluded, unless the loss or damage is caused by a specified peril other than impact by aircraft or land vehicle.
Property Lawfully Seized: excludes loss to property lawfully seized or confiscated, unless it’s destroyed by govt to prevent spread of fire.
Outdoor Radio and TV Antennae, Including Receiver: loss to these items are included when caused by windstorm, hail, weight of ice, snow or sleet, or collapse.

Question 7

7) What are the main differences in how exclusions are applied in the various Homeowner’s forms?

Answer 7

The main differences in how corresponding exclusions are applied between the Basic, Broad, and Comprehensive Forms lie in the progression in the three forms from named-perils to all-risks coverage for Coverages A, B, C.

Question 8

8) Why does property on exhibit face unique exposures?

Answer 8

There a numerous different circumstances surrounding exhibits and the unique exposures they face. Exhibits are insured under an Exhibition floater at terms reflective of the risk and according to the circumstances.

Question 9

9) Why does the Homeowners Comprehensive form exclude property illegally acquired or subject to forfeiture?

Answer 9

If an insured stole the property they have no legal claim to indemnity for the loss. It is also against public policy to provide coverage for property that can be lawfully subject to forfeiture.

Question 10

10) What is excluded under Evidence of Debt or Title?

Answer 10

Denies coverage for property that may be insured by other forms specifically designed for it.

Question 11

11) Why is sporting equipment excluded from the Comprehensive Form?

Answer 11

Sporting equipment, where loss or damage is due to its use, is excluded. Equipment should be designed and manufactured to standards appropriate to the stress it will sustain when used for its intended purpose. The risks that it is defective or may sustain excessive stress or even abuse is more than the premium contemplates.

Question 12

12) Why is property lawfully seized excluded under the Comprehensive form?

Answer 12

Excludes loss to property lawfully seized or confiscated, unless it’s destroyed by the government to prevent the spread of fire. The exclusions support public policy by denying coverage for the property with which the insured has no legal claim.

Question 13

13) Under what conditions is coverage for outdoor radio and TV antennae receivers excluded?

Answer 13

A loss to these items is excluded when caused by windstorm, hail, the weight of ice, snow or sleet, or collapse.

Question 14

14) What is excluded from the Scratching Abrasion, Chipping or Breakage exclusion of the Comprehensive form?

Answer 14

Many types of personal property may be scratched or abraded; small accidents may damage them seriously, even irreparably, severely reducing their worth. Fragile or brittle articles break or chip easily with normal handling or when dropped.

Question 15

15) Why is wear and tear excluded?

Answer 15

It’s purpose is to avoid disputes about what a risk is. In this case, the excluded causes of loss are not unexpected events but inevitable or inherent in the objects concerned. The remedy for them is adequate maintenance or to accept them as business or inevitable losses.

Question 16

16) Why is faulty material and workmanship excluded under the Comprehensive Form?

Answer 16

These are losses due to lack of expertise, lack of care, or both. Insurers do not want to pay for someone else’s poor workmanship.

Question 17

17) What loss is excluded under the Settling, Expansion, Contraction, Moving, Bulging, Buckling or Cracking exclusion?

Answer 17

This exclusion was intended to exclude damaged from gradual, naturally occurring events. Such as heavy rain over long periods erodes soil.

Question 18

18) What is a hacker?

Answer 18

A hacker uses the Internet features of many computer systems and software applications to interfere with, steal, or corrupt data, disrupt communications or otherwise wreak havoc on businesses and individuals who depend on their systems and the Internet.

Question 19

19) What is a virus?

Answer 19

A virus uses the Internet to surreptitiously enter a computer system and destroy or corrupt data, disable the system, use the system to distribute itself to other systems, or any combination of these actions.

Question 20

20) What coverage is provided for data under the homeowners forms?

Answer 20

Property policies excluded data. They also exclude loss or damage caused directly or indirectly by a data problem. The exclusion of loss due to data problem does not apply to loss or damage directly caused by resultant fire, explosion, smoke or water damaged as described in the Specified Perils clause.

Question 21

21) What coverage is provided for vacant dwellings under the comprehensive form?

Answer 21

The same coverage applies for vacancy for the first 30 days. After 30 days there is no coverage, as coverage is then excluded due to a vacancy.

Question 22

22) What is the difference between un-occupancy and vacancy?

Answer 22

The distinction in the definition lies in whether the occupants intend to return. If they do, then the property is not vacant but merely unoccupied.

Question 23

23) What is nuclear incident and why is it excluded?

Answer 23

Due to the sheer magnitude of the loss, both direct or indirect loss caused by nuclear incident are excluded.

Question 24

24) Why are war risks excluded?

Answer 24

Loss or damage caused by war, invasion, act of foreign enemy, hostilities, civil war, rebellion, revolution, insurrection or military power is excluded.

Question 25

25) What is excluded under the intentional criminal acts exclusion?

Answer 25

Excludes loss from an intentional or criminal act by any person insured by the policy or any person at the direction of a person insured by the policy.

Question 26

26) What is excluded from the Property Being Worked On Exclusion?

Answer 26

Applies to property undergoing any process or while being worked on, where the damage results from that process or work Resulting damage to other property is still covered.

Question 27

27) Outline the Four (4) sources of water damage covered under the Comprehensive Form?

Answer 27

1. The sudden and accidental escape of water from a water main
2. The sudden and accidental escape of water or steam from within a plumbing, heating, sprinkler or air conditioning system or domestic water container located inside the dwelling.
3. The sudden and accidental escape of water from domestic water container located outside the dwelling.
4. Water that enters the dwelling through an opening created suddenly and accidentally by an insured Specified Peril other than Water Damage.

Question 28

28) Outline the Nine (9) sources of water damage that are excluded from the Homeowners forms.

Answer 28

FCEGSSCWB

1. Freezing During Heating Season
2. Continuous or Repeated Seepage or Leakage of Water
3. Escape from a sewer, sump or septic tank
4. Ground Water
5. Surface Water
6. Shoreline Ice Building and Water-Borne Ice
7. Water mains
8. Water System or Domestic Water Container
9. Building Under Construction or Vacant

Question 29

29) What is a seiche?

Answer 29

A temporary disturbance or oscillation in the water level of a lake or partially enclosed body of water, especially one caused by changes in atmospheric pressure.

Question 30

30) What is a tsunami?

Answer 30

A series of ocean waves that are sometimes generated at the same time an earthquake occurs beneath the sea floor

Question 31

31) What loss is excluded under the Pest exclusion?

Answer 31

Loss due to birds, vermin, raccoons, rodents, or insects is excluded except for loss to building glass.

Question 32

32) What is a smudge pot and why is it excluded?

Answer 32

Containers of slow-burning combustible material used in agricultural smudging. A loss is excluded because it comes from friendly fire.

Question 33

33) What loss is excluded under the Earth Movement exclusion?

Answer 33

Excludes loss or damage caused by snowslide, earthquake, landslide, or any other earth movement is not covered.

Question 34

34) What loss is excluded under the Theft from Part of the Dwelling Rented to others exclusion?

Answer 34

Loss or damage due to theft is excluded in part of the insured’s dwelling is rented to others partially or fully furnished and the tenant or a tenant’s employee or household member steals insured property from the rented portion.

Question 35

35) What loss is excluded under the Vandalism or Malicious Acts or Glass Breakage while dwelling under construction exclusion?

Answer 35

Loss is excluded while dwelling is under construction or vacant, even if permission for construction or vacancy has been given by the insurer.

Question 36

36) What loss is excluded under the Theft from Dwelling under construction exclusion?

Answer 36

Loss or damage due to theft from a dwelling under construction is excluded for the same reason as vandalism or malicious acts, in the previous exclusion.

Question 37

37) What loss is excluded under the Rust or Corrosion, Wet or Dry Rot, Fungi or Spores exclusion?

Answer 37

Losses due to rust or corrosion, wet or dry rot, or fungi or spores is excluded. These events occur naturally but can be prevented or controlled by adequate maintenance.

Question 38

38) What loss is excluded under the Fuel Oil exclusion?

Answer 38

Many insurers are unwilling to cover damage caused by heating oil leaking from residential oil tanks unless the tanks are relatively new. The cause of leaks occur inside the tanks, making meaningful inspection almost impossible. Loss due to the release, discharge or dispersal of fuel oil is excluded.

Question 39

39) What loss is excluded under the Trickory or Fraud exclusion?

Answer 39

Loss due to trickery or fraud is excluded. Most insurers will not cover the risk that someone is honourable and will act in good faith.

Question 40

40) What loss is excluded under the Terrorism exclusion?

Answer 40

Excludes loss or damage caused directly or indirectly, in whole or in part by terrorism as defined or by any activity or decision of a government agency or other entity to prevent, respond to, or terminate terrorism.