Property & Casualty Insurance Core Concepts Overview Flashcards
(316 cards)
1
Q
Insurance:
A
An economical way for an individual or group to transfer the financial risk of loss to an insurance company.
2
Q
Property insurance
A
transfers to a property insurance company the risk of financial loss resulting from damage or destruction of the insured’s personal or commercial property.
3
Q
Casualty insurance
A
(also called liability insurance) transfers to a casualty insurance company the risk of financial loss resulting from damage to a person or commercial property due to the insured’s words, actions or failure to take corrective action.
* Damage may be tangible (e.g. a damaged automobile) or intangible (e.g., a person or business’s reputation).
4
Q
Liability Insurance
A
A basic Insurance that protects insureds for losses arising out of their legal liability to others
5
Q
Risk
A
Chance of loss
6
Q
Loss
A
Unplanned reduction in economic Value
7
Q
Exposure
A
The state of being subject to possible loss: high exposure means high risk
8
Q
Peril
A
The cause of loss: common covered perils- fire, explosion, windstorm, flood, theft, collision
9
Q
Hazard
A
A condition that that Increase likelihood or severity of loss the chance of peril: moral, morale, physical
10
Q
Risk Management
A
Process we all use to manage life’s risk
11
Q
Risk Transfer
A
the risk management role played by insurance
12
Q
Insurable risk
A
-loss must be definable, measurable. outside of applicant’s control, not catastrophic
-only pure risks risks are insurable
13
Q
Adverse selection
A
Tendency of high risks to seek insurance
14
Q
Law of Large Numbers
A
Mathematical principle of probability underlying insurance
15
Q
Mutual companies
A
(owned by policyowners) issued participating policies which pay policy dividends to their policyowners
16
Q
Stock companies
A
do NOT issue participating policies, and pay Stock dividends to Stockholders
17
Q
County Mutual
A
Mutual companies that operate in a limited geographical area: originally property insurance insurance, now other types also
18
Q
Reciprocal Insurers
A
groups of members that insure each other through contracts of indemnity
19
Q
Fraternal Insurers
A
sell insurance to members of a fraternal benefit society
20
Q
Federal and State Government Insurance Programs
A
-Federal: NFIP, Crop Insurance, Social Security, Medicare
-State: Workers Compensation, Unemployment, Medicaid, FAIR plans
21
Q
Admitted vs. Non-admitted
A
Admitted companies need a Certificate of Authority from the state
22
Q
Domestic, Foreign, Alien
A
An insurer is a domestic company in the state where it is domiciled (i.e., headquartered).
An insurer is a foreign company in every state outside of its state of domicile.
A company that is domiciled outside the United States is an alien company in every U.S. state where it is admitted.
23
Q
Agent and Principal
A
-Agent (Producer): acts on behalf of principal (insurer)
-Exclusive (captive): represents one insurer
-Independent Producer: can represent multiple insurers
24
Q
Producer’s Authority
A
Express Authority: Defined in contract with insurer
Implied Authority: Understood to be part of job
Apparent Authority: producer’s actions not approved by insurer
25
Producer's Responsibilities to applicant and insureds
- Full disclosure of all relevant information
-Honest Representation (NO MISPRESENTATION)
-Suitable recommendations
26
Errors and Omissions (E&O) Insurance
Protects producer against unintentional mistakes (NOT willful misconduct)
27
Offer and Acceptance
-Signed application and initial premium is the applicant's offer
-Issuance of policy as applied for is the insurer's acceptance
28
Consideration
By applicant: premium payment
By insurer: Good faith promise to honor contract
29
Contract of Adhesion
Ambiguities in the contract are interpreted to the benefit of the policyowner
30
Indemnity Contracts
Reimburse loss (most property insurance)
31
Valued Contracts
Pay policy face amount (hard-to-value property)
32
Representations
Applicant's truthful statements on application.
-Not a Misrepresentation if applicant truly believed statement was truthful
-Misrepresentations discovered within contestable period may void contract
33
Warranties
Insurer's promises in contract
34
Fraud
Deliberate act to deceive (misrepresentation)
35
Real property
Land and structures attached to land (buildings, patios, fences)
36
Personal Property
Anything tangible that is not Real property (contents in buildings, autos, jewelry)
37
4 Types of Construction
Frame, Masonry, Masonry Veneer, Superior (non-combustible, masonry, fire-resistive)
38
Insurable Interest
-Must exist at all times (including time of loss)
-Policyowner must have financial interest in property insured
39
Loss Valuation
the process by which insurers, using and of several different methods, measure the value of a loss.
* Replacement Cost (valuing houses and commercial property)
* Functional Replacement Cost (valuing older buildings)
* Actual Cash Value (ACV) (valuing household contents and other personal property)
* Market Value (valuing cars)
* Stated Amount (values are listed in a schedule in the policy)
* Agreed Value (valuing paintings, antiques and other items that are difficult to value)
40
Actual Cash Value valuation
method that is replacement cost minus physical depreciation, commonly used in valuing household contents and other personal property.
40
Replacement Cost valuation
method that bases benefits on the cost to replace the damaged or destroyed property
41
Stated Amount Valuation
Method that bases an Object's value on what is listed in a schedule that is made part
42
Market Value Valuation
Method that determines values of car and other personal property
43
Functional Replacement Cost valuation
used with older buildings that have components no longer found in modern buildings
44
Agree Value Valuation
A property insurance loss valuation method in which the insurer and the applicant agree on the value of the item when the policy is written, which is then listed in a schedule
45
Moral Hazard
Personal traits or tendencies
46
Morale Hazard
Bad attitude or indifference to loss
47
Physical Hazard
Physical Conditions
48
Named Perils (specified)
Policy lists perils that ARE COVERED
Policyowner has burden of proof that named peril was cause of loss
49
Open Perils (Special)
Policy lists perils that are NOT COVERED
Insurer has burden of proof that cause of loss was an excluded peril
50
Concurrent Causes of loss
If a loss involves at least one covered peril, loss is covered even if other perils not covered
51
Difference in Conditions (D-I-C)
Separate policy that covers perils not covered by commercial not covered property policy (earthquakes and floods)
52
Liability (Casualty insurance = "Lawsuit protection"
Protection against civil wrongs (involves tort law)
- Plaintive (claimant) brings suit against the defendant (insured)
53
Negligence
failure to use degree of care reasonably necessary to avoid causing injury
54
What are the 4 conditions that existed for the plaintiff to hold defendant (insured ) liable?
Duty of Care (does defendant have a duty of care?)
* Breach of Duty of Care (did defendant fail in that duty of care?)
* Causation (was the accident’s proximate cause the result of defendant’ breach of duty of care?)
* Damages (did the accident result in legally compensable injury or damage?)
* Compensatory damages (special damages and general damages)
* Punitive damages
55
Compensatory Damages
sum of money a defendant is required to pay to compensate an injured party for harm done by the defendant.
-special damages (tangible losses)
-general damages ("pain and suffering")
56
Punitive Damages
Amounts a defendant is required to pay as punishment for committing a civil wrong in an egregious or deliberate manner
57
Defense to negligence
- assumption of risk
- contributory negligence
- comparative negligence
58
Comparative Negligence
method by which juries determine the percentage of fault each party bears in an injury-producing accident.
59
Strict (Absolute) Liability
Liable by nature of the cause of loss even when not careless
60
Vicarious Liability
Legally responsible for the actions of another
61
Underwriting
Insurer determines if applicant is insurable (that is, acceptable to insurer), and if so, at what premium amount.
62
Agency Underwriting
Binder: provides temporary coverage while supplication goes through underwriting process
63
Underwriter's Risk Analysis Uses:
* application
* agency report
* loss history data and loss control report
* motor vehicle record (MVR)
* Inspection report (inc. photos) and credit information
64
Loss Control Report
describing what the applicant has done to reduce the possibility or severity of a major loss, usually included with every inspection report.
65
Agency Report
agent prepares that presents information about the applicant not contained on the application but that the underwriter may find useful.
66
Inspection Report
by an insurer or one of a number of inspection services available, assessing the moral, financial, and physical aspects of a risk
67
Monitor and Measure the Results
* loss ratio (compares insurer’s losses and premiums)
* expense ratio
* combined ratio
68
Rates
Cost of insurance per unit of exposure
69
Premium
Periodic Payment required to maintain coverage (equal to insurance rate times number of exposure units)
70
Insurance Rate
the price of insurance for a basic unit of exposure and the basic for determining a policy's premium
71
Declarations
Information unique to the policy
* Insured name and address, premium, deductible(s), policy limits, policy period
72
Definitions
Key terms that relate to the policy
* Determines who or what is covered under the policy
73
Insuring Agreement(s)
Sets forth the insurer’s basic promise under the policy
74
Conditions
Requirements needed to qualify for or maintain coverage
75
Endorsements
Modify coverage by adding exclusions or expanding coverage
76
Exclusions:
Limits policy coverage
* Purposes:
* Eliminate/reduce overlapping coverage
* Remove coverage not typically needed
* Reduce incentive to create losses
* Remove coverage for uninsurable risks
* Common exclusions:
* Building ordinance or law
* Earth movement or earthquake
* Nuclear hazard
* Flood and leakage or seepage
* Maintenance wear or tear and mechanical breakdown
77
Building Ordinance or Law exclusion
A property insurance policy exclusion that limits or eliminates coverage for the extra expenses, over and above the cost of replacing damaged property, that might be necessary to comply with a community's building codes.
78
Parties entitled to coverage
Insureds and secured creditors (mortgage holders, loss payees)
* “No Benefit to Bailee” Provision
* Bailees (who temporarily hold insured’s property) not covered
79
No Benefit to Bailee Provision
A condition that makes clear that there is no coverage for outside parties who are bailees
80
Liberalization clause
Named insured benefits from policy enhancement at next renewal
81
Conditions after loss
By Insurer:
* Salvage: Insurer may salvage total loss property
* Subrogation: Insurer may recover claim payment from party responsible for loss
* Appraisal: Independent appraisal when insured and insurer cannot agree on value
82
Salvage
property after it has been partially damaged by an insured peril.
83
Subrogation
A process where insurers seek to recover its claim payment from parties that were responsible for the loss
84
Conditions affecting property insurance coverage
* Policy limits (limit of liability)
* Deductibles
* Coinsurance (requires the insured to buy a limit of insurance at least equal to a specified percentage of the full insurable value of the covered property, e.g., 80%)
* Restoration of limits
* Policy period
85
Deductibles
The part of a covered loss that is the insured's responsibility.
86
Conditions after loss
By Insured:
* Notify insurer of loss
* Notify police if theft or other law violation
* Protect property from further harm
* Cooperate with insurer
* Sworn proof of loss within 60 days of insurer’s request
87
Proof of Loss
formal statement the insured makes by to the insurer regarding a claim, which provides evidence of the loss. (must generally be provided within 60 days after the insurer requests it)
88
Federal Regulation
Insurance primarily State-regulated, but there are important federal regulations
89
Fair Credit Reporting Act (FCRA)
* Protects consumers when credit reporting agencies (CRAs) collect personal data on them
* Application includes Notice of applicant’s rights under FCRA
* If coverage denied on basis of consumer report, insurer must notify applicant
90
Gramm-Leach-Bliley (GLB)
* Insurers barred from disclosing consumers’ nonpublic personal information
* Insurers must provide customers with privacy notice upon application and annually thereafter
91
Federal Trade Commission Act (FTCA)
* Makes deceptive or unfair trade practices illegal
* Violation of insurer’s privacy policy is illegal
92
Health Insurance Portability and Accountability Act (HIPAA)
Enforces privacy rules regarding consumer protected health information
93
Terrorism Risk Insurance Act (TRIA)
Federal law that guarantess the availability of insurance coverage against acts of international terrorism
-P&C Insurers in U.S. must offer coverage for "Certified acts of terrorism"
94
National Flood Insurance Program (NFIP)
Makes Flood coverage available on residential and commercial buildings and personal property
95
Common P&C State Insurance Law Topics*:
* Mandatory P&C Policy Provisions
* Policy Cancellation and Nonrenewal Standards
* Property and Casualty Insurance Minimum Requirements
* State Property and Casualty Guaranty Association
* Federal Terrorism Insurance Program
96
HO 2 (Broad Form)
-Dwelling, other structures, personal property on named perils basis
-Loss of use, personal liability, medical payments
97
Homeowners Insurance
Package policy that combines 2 or more separate coverages (e.g., property and liability)
98
HO 3 (Special Form)
-Dwelling and other structures on open perils basis
-Personal property on a named perils basis (16 specified perils)
-Loss of use, personal liability, medical payments
99
HO 4 (Contents Broad Form)
-Tenants coverage (house or apartment)
-Personal property on named perils basis
-Loss of use, personal liability, medical payments
100
HO 5 (Comprehensive Form)
-Broadest homeowners coverage
-Dwelling, other structures and personal property on open perils basis
-Loss of use, personal liability, medical payments
101
HO 6 (Unit Owners Form)
-Condo and co-op apartment coverage
* Limited dwelling coverage
* Personal property on named perils basis
* Loss of use, personal liability, medical payments
102
HO 8 (Modified Form)
Insures older homes when replacement cost exceeds market value
* Dwelling and other structures coverage based on cost to repair or replace
* Loss of use, personal liability, medical payments
103
Homeowners Property Coverage: Section I of the HO Policy: Coverage A (Dwelling)
* Insured’s house and attached structures
* Attached garage and toolshed
* Construction materials on or next to dwelling
104
Homeowners Property Coverage: Section I of the HO Policy: Coverage B (Other Structures)
* Structures not attached to dwelling
* Detached garage, gazebo, driveway, swimming pool, fence
* Excludes structures rented to non-tenant; business structure
105
Homeowners Property Coverage: Section I of the HO Policy: Coverage C (Personal Property)
* Covers all ‘stuff’ owned by insured
* Coverage applies anywhere in the world (including hotels)
* Excludes animals, motor vehicles, tenants property, separately scheduled property
106
Homeowners Property Coverage: Section I of the HO Policy: Coverage D (Loss of Use)
* Three Benefits:
* Additional living expenses
* Fair rental value
* Prohibited use (civil authorities)
107
Additional Coverages
Provided through HO 3 property section
108
Homeowners Liability Coverage: Section II of the HO Policy: Coverage E (Personal Liability)
* Insurer provides defense, regardless of lawsuit’s merit
* Policy will pay up to the limit of the policy’s liability coverage
* Coverage provided only when insured is legally responsible for damages
109
Homeowners Liability Coverage: Section II of the HO Policy: Coverage F (Medical Payments to Others)
* Goodwill Coverage: Medical payments made due to moral obligation
* Pays reasonable and necessary medical expenses within three years from the date of the accident
* Covered Persons: Does NOT cover the insured or regular residents of the insured
110
Liability Exclusions
* 12 exclusions applicable to both personal liability and medical payments
* 6 exclusions applicable only to personal liability
* 4 exclusions applicable only to medical payments coverage
111
3 common endorsements:
* Home business insurance coverage
* Permitted incidental occupancies
* Home day care coverage
112
Dwelling Policy: When an HO Policy is inappropriate or too much
Property Coverage Only (no liability, except as supplemental coverage)
113
Dwelling Property 1 (DP 1)
* Basic form
* Coverages A, B, C , D
* Coverage E by endorsement
* 3 covered (named) perils: fire, lightening, internal explosion
* other perils optional
114
Dwelling Property 2 (DP 2)
Broad form
* Coverages A, B, C , D, E
* 10 covered perils
115
Dwelling Property 3 (DP 3)
Special form
* Coverages A, B, C , D, E
* Open perils for Dwelling and Structures; 10 named perils for Personal Property
116
Coverages
* Coverage A – Dwelling
* Coverage B – Other Structures (10-20% of Coverage A)
* Coverage C – Personal Property (50-70% of Coverage A)
* Coverage D – Fair Rental Value (20% of Coverage A)
* Coverage E – Additional Living Expense (20% of Coverage A)
117
Key Commercial Property (CP) policy forms:
Insurance to cover business and commercial buildings and contents
118
Common Policy Conditions form (IL 00 17)
Standard policy conditions (e.g., cancellation, changes, premiums, etc.)
119
Commercial Property Conditions form (CP 00 90)
Standard property conditions (e.g., misrepresentation, control of property,
liberalization, no benefit to bailee, policy period, etc.)
120
Coverage Forms
* Describe property that is insured, plus limitations or exclusions
* Different forms for different types of property (e.g., Building and Personal
Property, Condominium Association, Builders Risk, etc.)
121
The Businessowners Policy (BOP)
Package policy provides both property and general liability coverage
* Designed for small to medium-sized businesses
* Business cannot exceed 35,000 sq.ft. and $6 million in annual gross sales
122
BOP Eligibility Conditions
Size of Business (square footage and revenue)
Type of Business
* 11 Eligible Types
* Excludes:
* manufacturers
* auto repair or service stations
* auto and motorized vehicle dealers
* parking lots, garages or motorized vehicle self-storage facilities
* bars and pubs
* places of amusement
* banks and other financial institutions
123
Three Sections to BOP Form
* Section 1 – Property
* Section II – Liability
* Section III – Common Policy Conditions
124
The Businessowners Policy (BOP) – Property Provisions
Property Coverage for Buildings, Business Personal Property, or Both
125
Building Coverage in BOP
Applies to building or structures identified in declarations
126
Business Personal Property Coverage in BOP
Covers property on or within 100 feet of premises, including:
* business-owned property used in the business
* personal property of others in insured’s care or custody
* leased personal property that insured contractually obligated to insure
* tenant’s improvements or betterments
* exterior building glass owned by or in care of insured tenant
* Excluded property includes money and securities; illegal goods; vehicles subject to motor
vehicle registration; valuable papers; electronic data; outdoor fences and detached signs
* Losses are valued on a replacement cost basis
* Open perils coverage
127
Additional Coverages
Covers many indirect expenses (e.g., debris removal; pollutant cleanup; fire department
charges; preservation of property; counterfeit money)
128
The Businessowners Policy (BOP) – Liability Provisions: * Three categories of liability coverage:
*Business liability coverage pays damages for which insured is liable
*Supplementary payments for claims and suit-related expenses, payable in addition to limits of insurance
* Includes defense cost coverage
*Medical expenses related to accident on insured’s premises or involving insured’s operations (regardless of fault)
* Payable only to the other party (not the insured, a tenant or person hired by the insured)
129
Business Liability Coverage
* bodily injury (injury, sickness, disease, death)
* property damage (inc. fire or explosion damage to rented premises)
* personal and advertising injury, including:
* slander or libel
* violation of privacy rights or invasion of private occupancy rights
* false arrest or detention, or malicious prosecution
* copyright infringement, or use of another’s advertising idea, trade image, or slogan
130
Exclusions
expected or intended injury
* contractual liability
* liquor liability
* workers comp and employers liability
* pollution
* professional liability
* war
* product recall
* other
131
The Businessowners Policy (BOP) – Selected Endorsements
Endorsements provide state-specific coverages or conditions mandated by the state
* They can broaden, limit, clarify, or otherwise modify a policy
132
Protective Safeguards (BP 04 30)
* Maintenance of protective safeguards are a condition of coverage
133
Utility Services – Direct Damage (BP 04 56)
* Covers direct damages to insured’s property due to interruption of utility services
* Service interruption must result from damage to utility company property from a covered cause of loss
134
Utility Services – Time Element (BP 04 57)
* Covers lost income or expenses incurred due to interruption of utility services
135
Hired Auto and Nonowned Auto Liability (BP 04 04)
* Covers bodily injury or property damage from use of hired auto by insured or employee
* Appropriate for business that does not own automobiles
* An employee using his/her own car must rely on a personal auto policy (PAP) for auto protection
136
Inland Marine Insurance
Insures exposures that are not confined to a fixed location or cannot be insured under a standard form
137
Identity Fraud Expense Coverage (BP 14 01)
* Covers specified expenses incurred as a direct result of identity fraud
* $250 deductible
138
Floater
Inland marine policy that covers specific items for individuals, families and businesses
* Covers property that frequently moves (“floats”) from one location to another
139
Personal inland marine insurance (“floater policy”)
Either a separate policy or endorsement to a homeowners policy
* jewelry, furs, cameras, musical instruments, art, stamp & coin collections, etc.
140
Commercial Inland marine insurance (“commercial property floater”)
Valuation of property:
* lesser of: ACV, cost to restore, or cost to replace
Common floaters:
* accounts receivable floater
* bailees’ customers floater
* commercial articles floater
* contractors’ equipment floater
* electronic data processing floater
* equipment dealers floater
* installation floater
* jewelers block floater
* signs floater
* valuable papers and records floater
* transportation coverages
141
Ocean Marine Insurance
Two forms of ocean marine coverage: Hull and Cargo
142
Hull Insurance
Protects against loss to the vessel
143
Cargo Insurance
Protects cargo being transported on a ship
144
Hull Insurance
Agreed value approach to valuing ship
Perils of the sea
* Covered perils that are unique to ocean transportation and could not be reasonably prevented (e.g., heavy weather, gale
winds, large waves)
General average losses
* All parties to the venture share in loss incurred for common good
145
Hull Insurance
Salvage
* Save endangered property and protect from further loss
* Salvage expenses are payable to third-party “salvors” who render assistance in saving a ship and its cargo
Collision liability (‘running down clause’)
* Protects ship owner or operator against loss from liability for damages to another vessel
* Property damage only (no bodily injury liability coverage)
* Does not cover liability for damage to piers, wharves, or cost of removing navigation obstructions caused by a collision
146
Cargo and Freight Insurance
Types of cargo losses:
* total vs. partial losses
* Salvage charges
Freight insurance reimburses shipper for lost freight (i.e., charges for carrying goods)
147
Farm Property-Farm Dwellings, Structures and Household Personal Property
* Covers farm owner’s residential (non-farm) property
* Coverages A, B, C, D
148
Farm Property-Farm Personal Property (FP 00 13)
* Scheduled Farm Personal Property and Unscheduled Farm Personal Property
* Coverages E, F
149
Farm Property-Barns, Outbuildings and Other Farm Structures (FP 00 14)
* Covers 7 types of structures
* Does NOT cover: Land; Water; Field Fences; Below-Ground Structures; Wharves; Docks
* Coverage G
150
Causes of Loss Form-Farm Property (FP 10 60)
Covered causes of loss: Basic, Broad, Special
151
Farm Property-Other Farm Provisions Form-Additional Coverages, Conditions (FP 00 90)
* Eliminates need to repeat fundamental provisions in every form
* Contains: 6 additional coverages, 11 loss conditions, 6 general conditions, 13 definitions, a limits of insurance section, and a deductible section
152
Farm Inland Marine Coverage Forms: Mobile Agricultural Machinery and Equipment Coverage Form (FP 00 3
Open perils form provides coverage for mobile agricultural machinery equipment
153
Farm Inland Marine Coverage Forms: Farm Livestock Coverage (FP 00 40)
* Named perils form covers loss or damage to livestock
* Does NOT cover livestock in custody of common or contract carrier, public stockyards, slaughterhouses or packing plants
154
Farm Liability Insurance: Farm Liability Coverage Form (FL 00 20)
Operation of agricultural or aquaculture enterprise
* Includes roadside stand on farm property selling insured farm’s produce
* Does NOT include retail activity (other than roadside stand) or mechanized processing
operations
* Example: on-premises ‘general store’ or vegetable canning operations
155
Farm Liability Insurance- Three Basic Coverages:
Bodily Injury and Property Damage Liability (Coverage H)
Personal Injury and Advertising Injury (Coverage I)
Medical Payments (Coverage J)
156
Bodily Injury and Property Damage Liability (Coverage H)
* Bodily injury includes sickness and disease for which insured is responsible
* Property damage includes loss of use of undamaged property
* Insurer has a duty to defend the insured against any suit, regardless of merit
157
Personal Injury and Advertising Injury (Coverage I)
* All the standard offenses including slander, libel, violations of privacy, false arrest, wrongful eviction, etc.
158
Medical Payments (Coverage J)
* Pays reasonable medical expenses incurred within 3 years of covered accident
* Subject to exclusions common to bodily injury and property damage liability coverage
159
National Flood Insurance Program (NFIP) Fundemental
Special flood hazard areas (SFHA, i.e., flood plain) have 1% chance of being flooded in any given year (100-year flood zone)
* Standard residential and commercial property policies exclude flood loss coverage
160
NFIP Fundamentals: Write-Your-Own (WYO) Program
* Insurers write and issue their own flood policies but coverage is 100% reinsured by NFIP
* Residential and commercial owners may buy flood insurance from their property insurance company if it participates in WYO
* Property owners whose insurers do not participate in WYO can buy coverage directly from NFIP if their community participates in NFIP
* WYO is cooperative between FEMA and the insurance industry
161
3 Standard Flood Insurance Coverage Forms: Dwelling form
* Provides building and contents coverage to homeowners, residential renters, owners of residential buildings with 1-4 units
162
3 Standard Flood Insurance Coverage Forms: General property form
* Provides building and contents coverage for residential buildings with 5 or more units and certain types of nonresidential properties
163
Single peril policy (flood)
* Inundation of 2 or more acres of normally dry land from water overflow, rapid accumulation of water, or mudflow
* Collapse or subsidence of land along the shore caused by excessive waves or currents resulting in a flood as defined above
* Sewer backup, sump discharges, or water seepage resulting from a flood
164
3 Standard Flood Insurance Coverage Forms: Residential condominium building association policy (RCBAP) form
* Building coverage and (optional) commonly owned contents for residential condo buildings with at least 75% total floor area in residential use
165
Key Exclusions
* Loss of use of covered property
* Lost revenue or profits
* Loss from business interruption
166
Loss Settlement
* Replacement cost (single-family dwellings)
* Special loss settlement (mobile homes)
* Actual cash value (2-, 3- or 4-family dwellings, detached garages, personal property, appliances and carpets, outdoor equipment)
167
Equipment Breakdown Coverage
Covers business equipment and machinery excluded from standard property
coverage
168
Equipment Breakdown Policy (EB 00 20): Covered Equipment
* Pressure or vacuum equipment
* Electrical or mechanical energy-related equipment
* Communication and computer equipment
* Utility-owned equipment used solely on insured’s premises
169
Equipment Breakdown Policy (EB 00 20): Coverage Options
* 9 options (inc. property damage, expediting expenses, spoilage damage, utility
interruption, newly acquired premises, business income, ordinance or law)
170
Equipment Breakdown Policy (EB 00 20): Common Exclusions
* 18 exclusions (inc. ordinance or law, earth movement, nuclear hazard, war or
military action, flood, lack of power, explosions except with steam equipment,
fungus or rot, testing, depletion, deterioration, corrosion, others)
171
Equipment Breakdown Policy (EB 00 20): Valuation
* Replacement cost coverage if repaired within 24 months, otherwise actual cash
value
172
Special Types of Insurance Coverage: Earthquake insurance
Most standard personal and commercial policies do not cover earthquake
173
Surplus Lines and Special Coverages: Excess and Surplus (E&S) Lines Insurance
Coverage for special needs
* Underwriting problems
* Exposures difficult to evaluate
* Risks requiring especially high coverage limits
Can be sold by non-admitted insurers
* Allows insurer underwriting and premium flexibility
174
Special Types of Insurance Coverage: Mobile Home insurance
Less common today, now that HO2 and HO3 policies may cover mobile homes
175
Special Types of Insurance Coverage: Watercraft insurance
Standard homeowners policies provide limited coverage
176
Special Types of Insurance Coverage: Farmowners insurance
177
Special Types of Insurance Coverage: Crop-Hail insurance
Covers losses due to hail, drought, declining price of the commodity
178
Special Types of Insurance Coverage: Windstorm insurance
Standard homeowners policies do not cover hurricanes, tornadoes, or cyclones
179
Common State Property Insurance Law Topics*
State-Specific Policy Forms
* Minimum standards and requirements
Required Property Policy Provisions
State Insurance Access Plans
* FAIR and High Risk Auto Pool Plans
* Plan Fundamentals
* Eligibility Conditions
180
Regulation of Auto Insurance
Proof of Insurance (or Financial Responsibility) is compulsory in all states
* A few states require “evidence of financial responsibility” after-the-fact (e.g., accident); all others always require compulsory insurance (“proof of insurance”)
* Auto insurance is most heavily regulated of all types of property and casualty insurance
181
Auto Insurance Standards
Policy Term: 6 months (sometimes 12 months)
* Policy expires at end of term and either renewed or not renewed
182
Auto Insurance Standards Cancellation
Occurs only during the policy term (either by insurer or insured)
* Insurer cancels: Written notice must be mailed or delivered to insured
* Minimum 10-Day notice, and 15 or 20 days in some states
* Acceptable reasons:
* Insured did not qualify for insurance: May be cancelled only if discovered in first 60 days
* Non-Payment of Premium: May be cancelled at any time
* Misrepresentation on application : May be cancelled at any time
* Revocation of insured’s license: May be cancelled at any time
* Insured cancels: Any form of communication acceptable
* Insurer must return unearned premium
183
Auto Insurance Standards Grace Period
No formal grace period; premium due when billed
* Exceptions in some states
184
Auto Insurance Standards Renewal
Insurer sends renewal premium invoice for insured’s acceptance
* Failure to pay premium constitutes nonrenewal by insured
* If insured buys new policy from different insurer before renewal date, old policy terminates on new policy’s
effective date
185
Auto Insurance Standards Uninsured Motorists (UM) and Under-Insured Motorists (UIM)
coverage included in most auto policies
186
Auto Insurance Standards No-Fault Insurance
Insured collects from his/her own insurer regardless of fault
187
The Personal Auto Policy (PAP)
combines property and liability coverage in single policy
188
3 major parts to PAP
Declarations Page
Personal Auto Policy Coverage Form
Selected Endorsements
189
Declarations Page (PAP)
* insured, insurer, and agent’s name and address
* year, model, make of vehicle
* Vehicle must be owned (or leased at least 6 months) by named insured to be listed in declarations
* coverage limits
* deductibles
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Personal Auto Policy Coverage Form (PAP)
* Part A-Liability
* Includes damage to the other person’s car or property
* Part B-Medical Payments
* Part C-Uninsured Motorists
* Part D-Damage to Insured Auto
* Part E-Duties After an Accident or Loss
* Part F-General Provisions
191
Selected Endorsements (PAP)
May add, delete, or modify provisions in coverage form
192
Liability Coverages of the Personal Auto Policy: Part A – Liability Coverage
Insuring Agreement
* Insurer pays for damages for which insured is responsible
* bodily injury to others
* property damage of others
* “Insured” includes persons or organizations deemed liable in addition to the named insured
* Example: An organization the insured was driving for when accident occurred
* Includes defense coverage…
* …even if cost exceeds coverage limits
* Limit of Liability: Per Person Bodily Injury, Per Accident Bodily Injury, and Per Accident Property Damage
* Example: 20/40/15
* $20,000 per person for body injury
* $40,000 per accident total for bodily injury
* $15,000 per accident for property damage
* Insurance coverage follows the car
* If non-insured is the driver, the car is still covered in an accident
* If insured drives a non-owned vehicle, that vehicle’s PAP is the primary coverage in an accident
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Liability Coverages of the Personal Auto Policy: Part B – Medical Payments Coverage
Pays for relatively small amounts for medical expenses regardless of fault
* ‘goodwill insurance’
* Exceptions: fewer than 4 wheels; public livery (taxi); motor homes; workers comp; noncovered autos; business use; racing
194
Liability Coverages of the Personal Auto Policy: Part C – Uninsured Motorists
Protect insureds from at-fault drivers with no insurance
* Includes hit-and-run
* Coverage for insureds and family members hit as pedestrians as well as occupants in a car (owned or non-owned)
195
Property Coverages of the Personal Auto Policy: Part D –Coverage for Damage to Insured Auto
Collision Coverage vs. Other-than-Collision Coverage
Collision: Impact with another object by insured auto in motion
* Other-than-Collision: Open perils protection including (not limited to):
* Theft, falling objects; fire; explosion; windstorm; flood; riot; contact with animal; glass breakage
* Coverage applies regardless of insured’s negligence
196
Property Coverages of the Personal Auto Policy: Part D –Coverage for Damage to Insured Auto
Nonowned Auto Coverage
* Includes rental cars rented by insured or listed family member
* Coverage equals maximum amount of coverage on any insured auto
197
Property Coverages of the Personal Auto Policy: Part D –Coverage for Damage to Insured Auto
Deductibles
* Apply to Part D Damages coverage
* Do NOT apply to Part A Liability, Part B Medical Payments, or Part C Uninsured Motorists
198
Property Coverages of the Personal Auto Policy: Part D –Coverage for Damage to Insured Auto
Conditions
* Duties after accident or loss
* Insurer’s right to recover payments from other insured (subrogation)
199
Property Coverages of the Personal Auto Policy: Selected Endorsements
* Towing and Labor Costs Coverage
* Joint Ownership Coverage
* Recognizes joint ownership of vehicle by couples other than traditional husband-and-wife
* Extended Non-Owned Coverage (e.g., company car)
* Personal Injury Protection (PIP) Coverage
* Additional coverage for insured in no-fault states
* Limited Mexico Coverage
* Limited coverage for accident or loss incurred in Mexico
* Named Driver Exclusion
* Does not cover a person specified by name in the policy
200
Commercial Auto Insurance: Business Auto Declarations (‘decs’): Six Items
1. Named Insured
2. Coverages and Covered Autos
1. Many common auto insurance coverages (e.g., liability, personal injury, medical
payments, UM, UIM, physical damage, etc.)
2. Covered autos denoted by symbols (e.g., 1-Any Auto, 2-Owned Autos Only, 9- Nonowned Autos Only, 19-Mobile Equipment subject to insurance laws, etc.)
3. Owned Autos
1. Detailed rating and underwriting info for each covered auto
4. Hired of Borrowed Auto Coverage and Premiums
1. Estimated exposure for hired or borrowed autos
1. Post-period review and premium reconciliation
5. Nonownership Liability
1. Liability coverage for employees who drive covered autos they don’t own
6. Gross Receipts or Mileage Rating
201
Commercial Auto Insurance: Business Auto Policy (BAP)
Standard policy sections:
* Declarations
* Insuring Agreement (Coverages)
* Policy Conditions
* BAP endorsements (e.g., Nuclear Energy Liability Exclusion)
202
Liability Coverages of the Business Auto Policy: Insuring Agreement
Describes insurer’s obligation to respond to a claim or lawsuit due to bodily injury, property damage, or pollution cleanup from a covered auto
* Three categories of insured:
* Named Insured
* Permissive User
* Person responsible for permissive user insured (vicarious liability)
* Limitations and Exclusions
* Insurer only covers damages for which the insured is legally liable
* Standard exclusions (e.g., intentional injuries, workers compensation, property owned by insured,
operation of mobile equipment, war, racing or stunt driving, others)
203
Liability Coverages of the Business Auto Policy: Policy Conditions
* Duties in event of accident, claim, suit or loss
* Other insurance
* Subrogation
* Limits and Deductibles
204
Selected BAP Endorsements
* Auto Medical Payments
* Uninsured/Underinsured Motorists Coverage
* Lessor
* Mobile Equipment
* Individual Named Insured
* Employees as Insureds
* Pollution Liability
205
Other Business Auto Policy Forms: Garage Coverage Form
Only insures auto and trailer dealers
* Does NOT cover service stations or parking garages
Declarations
* Type of auto covered denoted by symbol (e.g., 21-any auto, 22-owned auto only, etc.)
* 11 types of covered autos (symbols 21 thru 31)
Liability Coverage
* Two insuring agreements:
* General liability exposures
* Covers damages due to bodily injury or property damage resulting
from garage operations
* Auto liability
* Covers damages due to ownership, maintenance or use of covered
autos resulting from garage operations
206
Other Business Auto Policy Forms: Garagekeepers Coverage
Property coverage for autos in care of garagekeeper (as bailee)
207
Other Business Auto Policy Forms: Truckers and Motor Carrier Coverage Forms
* Truckers Policy: Motor carriers that operate on a “for hire” basis
* Discontinued by ISO in 2010 but still used in some states
* Motor Carrier Policy: Motor carriers that operate either “for hire” or privately
208
Commercial General Liability (CGL) Policy
Provides a business’s general liability coverage
* Does NOT cover auto or professional liability
209
Commercial General Liability (CGL) Policy
Covers four exposures:
* Premises and operations liability
* Products and completed operations liability
* Contractual liability
* Independent contractor liability
210
Commercial General Liability (CGL) Policy three coverages:
* A – Bodily injury and property damage
* Property damage does NOT cover electronic data loss
* Two versions of CGL:
* Occurrence policy: Coverage for loss occurring while policy was in force, even if policy is expired when claim is made
* BERP – Up to 5 years after expiration
* SERP – Indefinitely upon expiration of BERP
* Claims-Made policy: Coverage for loss only if claim is made while policy is in force
* B – Personal and advertising injury
* C – Medical payments
* Pays without regard to legal liability of the insured
211
Commercial General Liability (CGL) Insurance: Selected Endorsements
* Limited Fungi or Bacteria Coverage (CG 24 25)
* Limited Pollution Liability Extension (CG 24 15)
* ISO Pollution Liability Coverage (CG 00 39, CG 00 40)
212
Workers Compensation: State-Mandated Employer Liability Insurance
Provides worker benefits regardless of employer fault or negligence
* Not necessary to sue employer for benefits
Most states: Compulsory (i.e., employer must accept the law and pay WC benefits)
Two states (TX and NJ): Elective (i.e., employer can accept or reject state law
* Injured employees must sue employer for benefits…
* …but employers are denied three common defenses: assumption of risk; contributory negligence; and fellow employee negligence
Exclusive remedy
* WC benefits provided by law are sole remedy available to injured employee (i.e., employee cannot also sue for more
213
WC: Workers Compensation Benefits
* medical benefits
* disability benefits (lost wages)
* Four classes of disability: temporary total; permanent total; permanent partial; temporary partial
* rehabilitation benefits
* death (Survivor) benefits
214
WC: Qualifying for Benefits
Burden of proof on employee to prove that:
* Injury or illness has occurred;
* It occurred in the course of employment; AND
* It arose out of employment with the employer
215
WC: Workers Compensation Insurance Markets
* Monopolistic state fund
* Voluntary private market
* Competitive state fund organization
* State residual market plan
216
Federal Workers Compensation Laws
* US Longshore and Harbor Workers Compensation Act (LHWCA)
* Outer Continental Shelf Lands Act (OCSLA)
* Jones Act
* Federal Employers Liability Act (FELA)
217
Workers Compensation and Employers Liability Insurance
“Information Page” = declarations page
* Who is insured: Employer ONLY
* Employees, officers are NOT ‘insureds’
* No protection against law suits brought by co-workers
* Covered workplaces
* Estimated premium
218
Workers Compensation and Employers Liability Insurance Policy
Part One: Workers Compensation Insurance
* Policy benefits (inc. limits) are prescribed by state law
219
Workers Compensation and Employers Liability Insurance Policy
Part Two: Employers Liability
* Covers employer against claims brought by employees or dependents falling outside statutory coverage
* Injury must still arise out of employment with the insured employer
* Ex.: Dependent files a consequential bodily injury suit related to worker’s employment
220
Workers Compensation and Employers Liability Insurance Policy
Part Three: Other States Insurance
* Covers liability claims payable under other states’ laws
* Useful when covering traveling employees who pass through states not listed on Information Page
221
Workers Compensation and Employers Liability Insurance Policy
Part Four: Employer’s Duties If Injury Occur
* Notify and cooperate with insurer, do not interfere with insurer’s right to recover from others, make no voluntary payments
222
Workers Compensation and Employers Liability Insurance Policy
Part Five: Premium
Part Six: Conditions
* Insurer must give insured 10 days’ written notice before canceling policy
223
Workers Compensation and Employers Liability Insurance Policy: Voluntary Compensation and Employers Liability Coverage
Covers exempt employees not usually covered by workers comp
224
Workers Compensation Premium Calculation - Premium Factors
Job classification
* Construction worker has a higher rate than a clerical worker
Payroll
Adjustment Upon Audit
* Actual premium determined at end of policy period
Experience Modification Factor
* Rate adjusted to reflect employer’s actual loss history
* Modifier of 1.0 indicates average loss experience
Greater than 1.0 = higher losses; less than 1.0 = lower losses
Premium Discount
* Think: Volume Discount
225
Workers Compensation and Employers Liability Insurance Policy: Sole Proprietors, Partners, Officers, and Others Coverage
Used when an owner or officer elects to become covered by workers comp
226
Workers Compensation Premium Calculation - Premium Definitions
Rate = Price of insurance per unit of exposure
* Based on employer’s risk profile
* Example: $1.75 per unit of exposure
* Higher risk means higher rate
Unit of Exposure = $100 of payroll
* Example: $250,000 payroll = 2,500 units of exposure
Net Premium = Rate x Units of Exposure
* Example: $1.50 rate x $2,500 units of exposure = $3,750 premium
Gross Premium = Net premium with experience adjustments
227
ISO Crime Coverage Form: 8 Coverages in One Policy: Computer fraud
Excludes loss due to credit or debit card transactions
228
Why the Need for Commercial Crime Insurance?
* Employee dishonesty is NOT covered in property insurance policies
* Money and securities do NOT qualify as property in property policies
* Named peril policies do NOT cover theft as a covered loss
229
Crime Peril
A range of perils associated with crime insurance policies, including theft, burglary, robbery, mysterious disappearance, and vandalism.
230
ISO Crime Coverage Form: 8 Coverages in One Policy: Employee theft
Blanket coverage (standard) applies to all employees
* Scheduled coverage (by endorsement) only covers named employees
* Covered property: money, securities, ‘other property with intrinsic value’ (data and computer programs NOT covered)
* Employee theft includes forgery
231
ISO Crime Coverage Form: 8 Coverages in One Policy: Inside the premises: Robbery or safe burglary of other property
Covers loss of property OTHER THAN money and securities
232
ISO Crime Coverage Form: 8 Coverages in One Policy: Forgery or alteration (from someone OTHER THAN an employee)
Checks, bank drafts, promissory notes drawn on insured’s bank account
233
ISO Crime Coverage Form: 8 Coverages in One Policy: Inside the premises: Theft of money and securities
Includes disappearance or destruction of money and securities (e.g., due to fire or high winds)
234
ISO Crime Coverage Form: 8 Coverages in One Policy: Outside the premises
Covers theft, disappearance or damage to money, securities or other property in insured’s custody outside of the premises
235
ISO Crime Coverage Form: 8 Coverages in One Policy:
Funds transfer fraud
* Money orders and counterfeit money
236
Fidelity Bonds
Fidelity Bond
* Used in employer-employee relationships
* Indemnifies employer for employee’s dishonest act
237
Other Crime Coverages and Endorsements
* Lease of safe deposit box
* Securities deposited with others
* Guests’ properties
* Business that provide guests with safe deposit boxes
* Extortion
238
Public Official Bonds
Guarantees honesty and faithful performance of public official’s duties
239
Financial Institution Bonds
Crime coverages that meet special needs of banks, S&Ls, credit unions, other financial institutions
Applies only to losses related to:
* Embezzlement
* Counterfeit money
* Forgery or alteration
* Money in transit
240
Surety Bond
Pledge by (1) the surety guaranteeing to (2) the obligee that (3) the principal will faithfully perform specified obligations
* Surety is usually an insurance company
* Surety will respond to default by principal regardless of reason for default (even intentional act by principal)
Surety bond usually based on an underlying contract
* In event of principal’s default, surety’s obligation determined by this contract
Surety bonds are noncancellable
Insurer can subrogate against principal if forced to pay bond due to principal’s default of obligation
241
Bid Bonds
In competitive bid, guarantees that contractor awarded bid will perform work for price quoted
242
Performance Bonds
Guarantees that contractor will perform work in accordance with construction contract
243
Payments Bonds
Guarantees that suppliers and subcontractors will be paid by general contractor
244
License and Permit Bonds
245
Fiduciary Bonds
246
Aviation Insurance - Coverage for all types of privately owned aircraft:
* Light passenger or recreational aircraft, which may also be used for commercial purposes.
* Helicopters
* Experimental aircraft
* Ultralights, gliders and hang gliders
* Hot air balloons
247
Aircraft Hull Insurance
* Physical damage coverage
* Open perils coverage
* Applies also to aircraft’s tools and equipment
* Excluded perils include:
* Worn tires
* Wear and tear
* War confiscation
* Depreciation
248
Cargo and Freight Insurance
Cargo: Goods carried on aircraft
* Total loss: actual vs. constructive
* Partial loss: particular (cargo owner bears full loss) vs. general (shared by multiple parties)
Freight: Cost of carrying goods and all related paperwork
249
Protection and Indemnity (P&I) Marine Liability Insurance
provides maritime liability protection to oceangoing vessels and
their owners
* Exception: Does NOT cover liability that is cover
250
Aircraft Liability Insurance
* Covers bodily injury and property damage to others
* Separate coverages for persons inside and outside the aircraft
* Coverage exclusions include named insureds, aircraft without a certificate of airworthiness, flights where number of passengers exceeds the policy declarations, flights where air regulations were violated, unrated pilot, others
251
Ship owners may be liable for injury or damage to
* crew members
* passengers
* longshoremen
* other vessels
* third parties
252
Longshore and Harbor Workers' Compensation Act (LHWCA) of 1927
workers compensation coverage
253
Two primary sources of maritime liability
* general maritime (common) law
* statutory law (e.g., Jones Act)
254
Executive and Professional Liability Insurance: Medical Professional Liability Insurance
Five types of coverage covering medical care providers (e.g., physicians, hospitals, nurses, nursing homes, allied healthcare professionals)
255
Umbrella (Excess) Liability Policies
Maintenance of underlying insurance condition requires insured to maintain same level of primary coverage that existed when umbrella was issued
256
Jones Act (Merchant Marine Act of 1920) gives seamen three rights
* right to sue
* right to trial by jury
* elimination of the fellow servant rule
257
Umbrella (Excess) Liability Policies: Commercial Liability Umbrella Coverage Form (CU 00 01)
* Provides excess limits to supplement general liability, auto liability or employers liability insurance
* Also ‘drops down’ to provide liability protection for some claims not covered by underlying policy
258
Umbrella (Excess) Liability Policies: Personal Umbrella Liability Policy (DL 98 01)
* Also called an excess liability policy, it provides high limits of coverage to protect against catastrophic liability loss
* Supplements primary liability coverage of insured’s homeowners or any other type of liability policy
259
Death on the High Seas Act (DOHSA) of 1920
Allows representative of deceased seaman or passenger to recover damages when death is caused by wrongful act
260
Voluntary market:
preferred, standard, and nonstandard risks
261
Executive and Professional Liability Insurance: Employment Practices Liability Insurance (EPLI)
Covers employee claims alleging violations of workplace responsibilities by company
262
Liquor Liability Coverage Forms
Covers liability exposure of businesses that make, sell, distribute or serve alcohol
Coverage is excluded if a required liquor license is not in effect or the injury arises from the product itself (e.g., contaminated liquor)
263
Executive and Professional Liability Insurance: Directors and Officers (D&O) Liability Insurance
Protects corporation’s directors and officers against liability arising out of non-willful wrongful acts
264
Auto Residual Market
Automobile Insurance Plans (Assigned Risk Plans)
* Drivers with poor driving records (e.g., DUI, multiple at-fault accidents, etc.)
All admitted insurers must participate in their state’s plan and share risks
* In FL, HI, MI, MO: Joint Underwriting Associations (JUAs)
265
Executive and Professional Liability Insurance: Employee Benefits Liability (EBL) Insurance
Deals with claims involving errors or omissions in administering employee benefit plans
266
Residual market consumers
pay higher premiums, with limited benefits, than voluntary market
* Due to higher risk and reduced policy availability
267
Executive and Professional Liability Insurance: Fiduciary Liability Insurance
Covers claims alleging breach of fiduciary duties involving employee benefit plans or their assets
268
Executive and Professional Liability Insurance: Errors and Omissions (E&O) Liability Insurance
Covers liability arising out of unintentional errors and actions in various professions e.g., lawyers, accountants, insurance agents, architects)
269
Most common residual market coverages:
* workers compensation (risky industry)
* personal auto liability (bad drivers)
* property insurance (risky location)
270
Common State Casualty Insurance Law Topics*
* State requirements for:
* Homeowners’ Insurance liability coverages
* Minimum coverages and standard endorsements
* Auto Policy coverages
* Medical payments limits
* Uninsured and underinsured motorists
* Policy cancellation and nonrenewal
* Notices and Disclosures
* Workers Compensation rules
* FAIR Plans and Risk Retention Groups
* Guaranty Funds and Compulsory Associations
* Producer Conduct and Behavior
271
Residual Markets
provides insurance to consumers unable to obtain it in the voluntary market
272
FAIR: Fair Access to Insurance Requirements
* Property insurance residual market
* Federally mandated state programs provide insurance to qualifying inner-city markets
* All admitted insurers must participate in their state’s FAIR program and share risks
* Exceptions: Indiana and Kansas
* FAIR losses assessed to insurers in proportion to their share of voluntary market
* Covers dwellings and commercial property that is not in poor condition
* Dwellings: Homeowners coverage (including liability)
Commercial: Property coverage only
273
USDA Risk Management Agency
Oversees and administers crop insurance program
274
Mine Subsidence Insurance Plans
Not a residual market, but way to provide property coverage for mine subsidence peril
275
Common General State Insurance Law Topics*:
* Department of Insurance
* Duties of the Commissioner (Director, Superintendent)
* Hearings
* Penalties
* Producer and Insurance Company Regulation
* Licensing and renewals
* Resident vs. non-resident producers
* Agent appointment
* Property and Casualty Insurance Minimum Requirements
276
Loss Control
A risk management technique that seeks to reduce the possibility that a loss will occur and/or reduce the severity of those that do occur
277
Tort
A civil wrong that gives rise to legal liability for which the law provides monetary damages as a possible remedy
278
Loss Ratio
A ratio, expressed as a percentage, that compares the insurer's incurred loss to its earned premiums
279
Policy Nonrenewal
The action an insurance company takes at the policy anniversary date to not renew the policy for another term
280
Masonry Veneer Construction
A type of building construction in which the building's exterior walls are made of combustible material and an outside veneer (layer) of brick or stone
281
Endorsements
An attachment to an insurance policy that modifies its coverage in some way
282
Policy Cancellation
the termination of an insurance policy before its normal expiration date
283
Concurent Causation
a basic insurance principal that requires insurers to cover a loss involving multiple perils if at least one was a covered perils
284
Masonry Construction
a type of building construction in which the building's exterior walls are constructed of brick or stone, which support the structure
285
Split limits approach
Approach to defining policy limits, commonly used in auto insurance policies, that combines per-person and per-occurrence limits for bodily injury liability and another limit for property damage liability
286
Loss Payable Clause
the insurer is under no obligation to make payment to the loss payee if payment for a loss can be denied to the insured.
287
Coinsurance Provision
A provision that requires insureds to maintain coverage equal to a certain percentage of the property's value
288
Mortgage Clause
-ensures that loss to mortgaged property is payable to the mortgagee
-grants continuing coverage for the benefit of the mortgagee if the policy is voided by some act of the insured
-promises advance written notice to the mortgagee of any policy cancellation
289
Per Occurrence Liability Limit
bases the maximum amount payable on a single occurrence regardless of the number of claimants or the number of people injured
290
Direct vs Indirect loss
The two basic types of loss to real or personal property.
-Direct loss is measured by the cost to repair or replace the damaged property. -
-Indirect loss (also called consequential loss) is measured by the cost of dealing with the direct loss.
291
Certificate of Insurance
document issued by an insurance company certifying that insurance is owned by the party being required to prove it has adequate insurance coverage.
292
McCarran-Ferguson Act of 1945
Federal law that exempts insurance from federal regulation as a form of interstate commerce, thus permitting it to be regulated primarily by the individual states.
293
Superior Construction
type of building construction in which the building's exterior walls, floors, and roof are constructed of noncombustible material. (noncombustible, masonry noncombustible, and fire resistive)
294
Per Person Liability Limit
limit definition that specifies the maximum amount the insurer will pay for one person's loss without necessarily limiting the number of persons who may claim a loss.
295
Proximate Cause
having the most significant impact in bringing about the loss when two or more independent perils operate at the same time (i.e., concurrently) to produce a loss.
296
Expense Ratio
expressed as a percentage, that compares the insurer's incurred expenses to its written premiums.
297
Frame Construction
the building's exterior walls are made of wood or other combustible material.
298
Combined Ratio
that indicates an insurer's profitability after losses and expenses are considered.
299
Mississippi has two insurance guaranty associations:
Mississippi Insurance Guaranty Association (MIGA)
Mississippi Life and Health Insurance Guaranty Association
300
If an insured member becomes insolvent, the association is obligated for the payment of covered claims if the claims
-existed before the determination of insolvency,
-arose within 30 days after the determination of insolvency,
-arose before the policy expiration date but less than 30 days after the determination of insolvency, or
-arose before the insured replaced or canceled the policy if he or she did so within 30 days of the determination of insolvency.
301
the board of directors may
request that the Commissioner order an examination of any member insurer which the board in good faith believes may be in a financial condition hazardous to policyholders or to the public (Within 30 days of receiving the request, the Commissioner must begin the examination.);
302
The Commissioner must examine an insurer's books and records
at least once every five years.
303
this does not apply to nonpayment of premium unless there is a named creditor loss payee,
case at least 10 days' notice is required.
304
Cancellation of a homeowners insurance policy is not valid unless it is accompanied by an explanation for the cancellation in writing
The notice must be sent or delivered at least 30 days before the cancellation
305
If the insurer does not intend to renew a policy
must send the policyholder and his or her creditors a notification of nonrenewal at least 30 days before the end of the policy period or the renewal is not valid.
306
An insurer cannot refuse to renew a policy unless it mails or delivers to the named insured
at the address shown in the policy and to the named creditor loss payee, at least 30 days' advance notice of its intent not to renew.
307
A named insured who wants to contest the cancellation of a policy
has been in effect for at least 60 days must mail or deliver to the Commissioner a written request for a hearing no less than seven business days from the date of receipt of the cancellation or nonrenewal notice
308
A fire insurance company or its agent who does so is guilty of a misdemeanor and, upon conviction
will be fined between 250 and 1,000 for EACH offense
309
The Commissioner may examine the books and records of an insurer as often as necessary, but
at least once every five years
310
Failure by an insurer or regulated entity to supply information requested by the department during a financial or market analysis may subject the insurer or regulated entity to either
revocation or suspension of its license, or
a fine of up to $10,000 per occurrence.
311
All rates, supplementary rate information, policy forms, and endorsements
must be filed with the Commissioner at least 30 days before the proposed effective date (excluding inland marine insurance).
312
A person is guilty of a misdemeanor, if either as a principal or agent or pretending to be one, commits any of the following acts and is not licensed to do so under Mississippi law:
solicits, examines, or inspects any risk;
adjusts or aids in adjusting any loss;
receives, collects, or transmits any insurance premiums; or
performs any other act in the soliciting, making, or executing of an insurance contract.
If convicted, the person will be
fined between $200 and $500,
imprisoned one or two years, or
both fined and imprisoned.
313
The Commissioner may place on probation, suspend, revoke or refuse
issue or renew the license of an insurance producer or may levy a civil penalty in an amount not to exceed $1,000 per violation
314
If an offender is guilty of violating a provision of the insurance code and that provision does not include a specific penalty for the violation
the offender is guilty of a misdemeanor if convicted and may be fined up to $5,000, which is the general penalty in Mississippi.
315
The referral fee
will be a one-time nominal fee of a fixed dollar amount for each referred customer.
cannot depend upon whether the referral results in the sale of an insurance product nor can it be based on a percentage of the premiums or commissions collected by the licensed agent
cannot be paid to the prospective insured.
