State Insurance Regulation and Contract Law Flashcards
(434 cards)
1
Q
admitted insurer
A
an insurer entitled and certified to transact insurance business in California (or one’s state they reside)
2
Q
non admitted insurer
A
an insurer that is not entitled or certified to transact business in CA having not complied with the laws (or the state they reside).
3
Q
domestic insurer
A
an insurer organized under the laws of CA, whether or not admitted
4
Q
foreign insurer
A
an insurer NOT organized under the laws of California, whether or not admitted
5
Q
alien insurer
A
an insurer organized under the laws of another country, whether or not admitted
6
Q
insurance
A
to indemnify another against loss, damage, or liability arising from a contingent or unknown event
7
Q
insurable event
A
Any contingent or unknown event, whether past or future, which may harm a person having an insurable interest or create a liability against him or her
8
Q
insurance policy
A
The written instrument in which a contract of insurance is set forth
9
Q
insurer
A
Any person who undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event
10
Q
claimant
A
A first or third party who asserts a right of recovery or payment under an insurance policy
11
Q
contract
A
agreement between two or more parties. focusing on the rights, obligations, duties, and responsibilities arising from the agreement between the parties
12
Q
Concealment
A
Neglect to communicate when a party knows they ought to communicate
13
Q
warranty
A
a promise that a proposition of a fact is true (expressed or implied aka opinion)
14
Q
express warranty
A
assertion or fact
15
Q
California regulates the insurance business within its state lines. However, the federal government regulates insurance business that is associated with
A
interstate commerce
16
Q
Transacting insurance in violation of federal law governing interstate commerce is punishable by
A
imprisonment for up to 15 years, a fine of up to $50,000, or both
17
Q
tort
A
A breach of a duty that originates by law and not by agreement
18
Q
The parties to an insurance contract include the
A
insurer and policyowner
19
Q
How long must agents keep their business records available for inspection by the California Insurance Commissioner?
A
5 years
20
Q
Property Insurance
A
indemnifies (covers) the owner or user of property for its loss, or the loss of it’s income producing ability when the loss is caused by a covered peril (fire, earthquake, flood)
21
Q
What are the two types of Insurable property?
A
- Real property (buildings and land) & 2. Personal Property (tangible item other than real property)
22
Q
direct loss
A
loss incurred due to direct damage to a property. Ex: fire burns house
23
Q
indirect loss
A
related to a direct loss. ex: fire damages home and owner incurs additional living expenses to stay somewhere else until home is repaired
24
Q
consequential loss
A
loss related to equipment failure. ex: food that spoils because refrigeration system is out of operation
25
Insurable interest
a policy owner's financial interest in a property. Must always have insurable interest
26
Secondary Insurable Interest
other party that may have insurable interest in property. Es: Bank or Mortgage holder. or Loan financer
27
indemnity contracts
Reimburse a percentage of the loss. Most p & c insurance policies are this
28
Valued contracts
pay a lump sum or agreed listed amount. ex; for artwork, jewelry, etc
29
Functional Replacement Cost
how much it would cost to repair or replace a damaged OLDER building with out of date components. Modernizing the building after damage
30
Cash Value
replacement cost minus physical depreciation. Mainly for household contents & other personal property. Over time items depreciate in value so the cash value lowers
31
Market Value
establishing the value of cars and other personal property. For a building, the market value is the value of the land & location
32
Agreed Value
"Valued Contracts" pays the dollar amount listed in the policy without regard to the objects depreciated or replacement value
33
For an insurer to pay a property insurance claim, when must the policyholder have an insurable interest in the insured property?
at the time of the loss
34
proximate cause of loss
What caused the loss. sets in motion an unbroken chain of events
35
named perils
loss is covered by a peril that is clearly stated in the policy. the burden of proof lies with the policyholder
36
What is theft?
a broad term that includes any type of stealing or attempted stealing. There are certain types of theft: burglary or robbery
37
Burglary
theft of property from within a premises by a person who unlawfully enters the premises
38
Robbery
is theft during which force is used or threatened against a person (think armed robbery)
39
Mysterious Disappearance
where property dissapeared from a known place and was probably stolen
40
Vandalism
willful & malicious damage to covered property WITHOUT theft (covered in open & named perils policies generally)
41
Open Perils policy
lists the perils that are not covered. The insurer has to prove the cause of the loss was an excluded peril. the burden of proof lies with the insurer to prove a loss was caused
42
concurrent causation
if a given loss involves two or more given perils, and at least one is a covered peril under the policy, then the loss is covered
43
Difference-In-Conditions (D-I-C)
property insurance policy purchased in addition to a commercial property policy to obtain coverage for perils that the commercial property policy does not cover (think like gap coverage)
44
What is Liability Insurance?
Casualty Insurance. "lawsuit protection" insurance. It involves an area of law known as tort law
45
plaintiff
the person suing
46
defendant
person being sued. With liability insurance the insured is the defendant
47
What are the two types of compensatory Damages?
1. Special Damages - based on factawarded when there's a tangible loss (ex: doctor bill. prescription, & loss of income)
2. General Damages - award designed to compensate for an injured person's pain & suffering (can't be measured in dollars)
48
Punitive Damages are imposed when?
When the defendant acts in a deliberate manner & is required to pay a punishment
49
What is an example of an Assumption of Risk?
The owner of a sports stadium is not responsible for someone in the stands getting hit by a fly ball. They voluntarily sat there in that setting
50
Contributory Negligence
if the plaintiff (person suing) is even 1% at fault AS WELL AS the defendant, then the defendant is free from liability (not as common)
51
Comparative Negligence
Where the plaintiff is held reliable for their portion of his or her fault & same for the defendant. They are held liable for their portion
52
Strict (absolute) liability
is imposed when an act or situation is inherently dangerous. Involves injury or damage
53
Vicarious Liability
exists when on person is legally responsible for the acts of another. Ex: a parent is vicariously liable for the injury or damage done by their child to another OR an employer responsible for it's employees negligence (think "living vicariously through one another")
54
Attractive Nuisances
someone can be held accountable for maintaining something on its property that appeals to curious children even if trespassing (Ex: neighborhood child falls into an unfenced pool)
55
When can a Binder be issued?
When an application is pending and before a policy has been issued. provides temporary coverage
56
What is a loss control report?
report describing what an applicant has done to reduce the possibility or severity of a major loss (what preventative measures were taken?)
57
Loss Ratio
dividing incurred losses by earned premiums
58
Earned Premium
Paid premium
59
Expense Ratio
divides the insurer's incurred expenses with its written premium (include: commissions, underwriting expenses, general expenses, and taxes)
60
Combined Ratio
determines an insurer's profitability. The sume of the Loss Ratio + the Expense Ratio
61
Class Rating
all insureds with similar characteristics are charged the same rates. (Used for High Volume Insurance such as auto & homeowners)
62
Individual Rating
Used when ever insured is unique and could not readily be placed in a "Class". (used with property insurance on complex commercial buildings)
63
Loss Costs
reflect past claims & estimated future claims
64
Expenses
include commission to its producers, employee salaries, office expenses, taxes, & other costs of doing business
65
Insurance rates are what?
the cost of insurance per unit of exposure
66
Insurance premiums are what?
Equal to the insurance rate times the number of exposure units. What the policyholder pays
67
What is an endorsement?
A change or addition to the provisions included in a policy
68
Declarations of a policy:
the front page of the policy. declares information about the policy like name and policy period & limits
69
Who is an an automatic insured?
covered by a policy by not named on the policy. (ex: business's employees or family members who live in the same household
70
Is earthquake coverage included?
Because of it's potentially catastrophic nature, earthquakes are usually excluded. Unless, coverage was added through an endorsement for those willing to pay for it
71
Are Nuclear Hazards included in P & C policies?
Most all policies excluded Nuclear Hazards because of the possible catastrophic consequences
72
Where can you obtain Flood Insurance?
Only through the federal government through the National Flood Insurance Program (NFIP)
73
Is Leakage or Seepage covered or excluded?
Excluded usually. Unless it's sudden water damage
74
What is an Artificially Generated Electrical Current? & is it covered or excluded?
Usually excluded. Does not cover damage caused by short circuits, power surges, burnouts, and so forth
75
Steam Boiler Explosion. Is it covered or excluded?
Excluded. Boilers require their own specific insurance policy
76
A statement in an auto insurance policy that reads: "We will pay damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident" is from which standard policy provision?
insuring agreement
77
Policy Conditions do what?
set forth the RULES that determine what is required to qualify for coverage
78
Who is entitled to coverage in a P or C policy?
First named insured, named insureds, additional insureds, AND secured creditors or lendors
79
Who is the loss payee in a property owner's policy?
The lending institution or creditor. (ex: who you finance your car through)
80
What does the loss payable clause ensure?
that the loss payee will be included in any claim payment. By making a check payable to both parties
81
What does the mortgage (mortgagee) clause do?
Gives certain rights to the mortgagee. They get paid if the property suffers a loss, their coverage continues even if the policy was voided by the insured, and has advanced written notice of cancellation
82
What is a mortgagee?
a financial institution that lends money to a borrower to purchase a home or other real estate
83
What is a bailee?
an outside party that offers a service. (repair man or dry cleaner). THEY DO NOT GET COVERAGE.
84
Liberalization clause
a change in coverage that expands coverage to deal with court decisions, new exposures, or a need to clarify the insurer's intentions
85
what is a policy limit?
the maximum amount an insurer will pay for a covered loss
86
What are sublimits?
the maximum amount the insurer will pay for a SPECIFIC type of property. (ex: money, jewelry, or trees)
87
What do deductibles do?
1. encourage insureds to exercise care by making them share in losses
2. help keep premiums low by not covering small losses
88
Per Occurence Limitation of Liability provision establishes what?
the maximum amount the insurer will pay for all claims resulting from a single occurrence no matter how much damage there is
89
What is a per person limit?
the maximum amount the insurer will pay for one person's injuries
90
What are the 3 split limits?
1. per person limit
2. per occurrence limit
3. a per occurrence limit that applies to property damage claims
91
Insurance is regulated at what level?
Primarily the state level (every state has a DOI)
92
What is the federal government's role in insurance regulation?
1. Privacy Protection
| 2. Special Coverages
93
Gramm-Leavh-Bliley Act did what?
stopped a financial institution from disclosing a consumer's nonpublic personal information to an unaffiliated third party
94
Federal Trade Commission Act did what?
makes deceptive or unfair trade practices illegal
95
Violent Crime Control & Law Enforcement Act did what?
made it a criminal offense for anyone who has been convicted of a felony involving breach of trust or dishonesty to willfully engage or participate in the business of insurance without first obtaining written consent from the commissioner
96
National Flood Insurance Program
most P & C policies do not cover major floods. This program is very important in that it makes this coverage available
97
Under the Terrorism Risk Insurance Act, all of the following lines of insurance are covered EXCEPT:
homeowners and dwelling insurance
98
What is covered under a TRIA or Terrorism Risk Insurance Act?
an act must be intentionally violent or dangerous to human life, property, or infrastructure; have resulted in damage within the U.S., to an air carrier, to a U.S. flag vessel, or on the premises of a U.S. mission such as an embassy or consulate; and produce total losses of over $200 million
99
What is a Libel?
an intentional Tort this is a written or printed untrue statement that damages a person's reputation
100
What is Slander?
intentional tort that is a spoken statement that damage's a person's reputation
101
What is a false arrest?
an unlawful physical restraint of somebody's freedom. (ex: store employee detains an innocent customer suspected of shoplifting)
102
What is Gross Negligence?
worse than ordinary negligence because it involves willful and wanton conduct
103
What is Vicarious Liability?
the legal responsibility of a principal (parent or a teacher) for acts of its agents (children or employees)
104
What does a package policy do?
combines two or more coverages. (Property & liability). Referring to Homeowners insurance
105
In property coverages, who is We, Us, and Our?
The insurance company
106
In property coverages, who is You, Your, and Insured?
The named insured and spouse. whether or not the spouse is named. Including other household residents
107
How much does one need to make in order to be considered a "Business"?
At least $2,000 a year
108
What is a single-family dwelling?
Residence premises that is used strictly for private residence. Where the named insured lives. Anything listed in the declarations
109
What is a Motor Vehicle?
a self propelled vehicle or trailer connected to it. Not just cars but also motorcycles, self-propelled lawn mowers, and even motorized wheelchairs
110
"Coverage A-Dwelling", covers what?
covered the named insured's house or structures attached like a garage or tool shed. Also permanent attachments like central AC. Construction materials on or next to the premises that will be used to build or repair the dwelling is also considered part of the dwelling
111
"Coverage B - Other Structures", covers what?
covers structures on the residence premises that are not attached to the dwelling (Ex: gazebo, She Shed, driveway, swimming pool, fence)
112
What does "Coverage B- Other Structures" NOT cover?
1. Structures rented to someone who is not a tenant of the dwelling
2. Structures in which a business is operated
3. Structures that store business property unless owned by an insured or a tenant of the dwelling
113
What is covered under "Coverage C- Personal Property"?
TV's, washing machine, or clothes. Also, items outside like patio furniture or a lawn mower. Applies ANYWHERE in the world. Subject to a $1,000 limit if at another residence (not including a hotel or temporary residence)
114
What personal property is not covered? (Coverage C)
1. items insured by another insurance policy;
2. animals, birds, or fish;
3. Motor vehicles (accept electric wheelchairs);
4. Aircraft & parts designed to carry people or cargo
5. Hovercraft
6. Personal property of room mates
7. personal property thats frequently rented out to others
8. Credit Cards
115
What do Sub limits do?
They further restrict a policies limitations. They apply to property of higher value and attractive to thieves
116
What does "Coverage D- Loss of Use" protect?
a policyholder whose residence premises cannot be used because of an insured loss
117
What is "Additional Living Expense Coverage"?
When a covered loss makes the residence unfit to live in the insurer covers the increased living expenses so that the household can maintain its normal way of living while the house is being repaired or they are relocated
118
What is "Fair Rental Value Coverage?"
When a covered loss included part of a residence premises that is rented out to other, the insurer subtracts the usual expenses that stop while the home is unlivable from the insurance payment
119
What is the "Civil Authority Prohibits Use Coverage"?
Where a federal, state, or local government agency or state police can prohibit residents from living in undamaged houses in damaged neighborhoods or communities. Additional living expenses & lost rents are covered up to 2 weeks
120
When is Debris Removal Covered? & what all does it cover?
If a covered peril causes the loss or any volcanic ash damages the covered home or personal property. Covers $500-$1,000 for each fallen tree due to wind, hail, snow or sleet. Also a neighbors tree that falls on the insured's premises
121
What are Reasonable Repairs?
reasonable expenses to protect covered property from further damage following initial damage by a covered peril
122
What is a Fire Department Service Charge?
The policy will pay up to $500 for fire department charges when they are called to protect a property from a covered peril
123
What does "Property Removed" coverage protect?
covered property from direct loss due to any cause while it is being removed from the premises that is endangered by a covered peril & up to 30 days while it is removed
124
What is a "Loss Assessment"?
Many homeowners belong to an association of property owners. If the associations coverage is inadequate or unavailable to cover a property loss, the homeowners are assessed to pay for the damage. This policy will pay up to $1,000
125
When is "Collapse" coverage applied?
Only if all or part of a building has fallen or caved in. DOES NOT APPLY to structural deterioration
126
What is covered under "Landlord's Furnishings"?
covers up to $2,500 in losses to appliances, carpeting & other household furnishings. Must be caused by a peril. DOES NOT COVER theft
127
What does the "Ordinance or Law" cover?
coverage for loss caused by construction regulation
128
How much coverage for Grave Markers?
covers up to $5,000 of a loss form a covered perils to grave markers on or away from the residence premises
129
HO 3's form's (the most common) dwelling coverage is based on Open or Named Perils?
Open Perils
130
HO 3's form's (the most common) personal property coverage is based on Open or Named Perils?
Named Perils
131
What is does the Liberalization Clause do?
If the insurer broadens the policy's coverage without increasing the premium, the change automatically takes effect on the date of the change. Change has to happen within the first 60 days of the policy period
132
What does an Assignment do?
Transfers the rights of a party to a contract to a third party
133
What property losses are settled on an Actual Cash Value (ACV) basis at the time of the loss?
Personal Property; awnings, carpeting, household appliances, outdoor equipment; structures that are not buildings; grave markers
134
What does the 80% Rule do?
To get coverage without a deduction for depreciation in the event of a partial loss, the insured must provide a dwelling coverage limit of at least 80% of the ACV
135
When does the Appraisal process come into play?
If the insurer and the named insured cannot agree on the loss payment amount
136
When can the insured sue the insurer?
There are a statute of limitations, however the insurer can't get sued if the insured has complied with the terms of the policy & the lawsuit begins within 2 years after the loss (CA state is 1 year and can extend to 2 years in the case of a state of emergency)
137
The liability coverage in all Homeowner's policies are the same. True or False?
True
138
The property coverage in all Homeowner's policies are the same? True or False?
False
139
HO2 form?
Lists the covered perils in a homeowners policy (Not open perils)
140
HO3 Form?
Further improvement of HO2 form but still keeps HO2 contents. Broadens coverage to the building on an "all risks" basis. (OPEN PERILS BASIS)
141
HO4 Form is for who?
People who don't own homes or the building. (Ex: people who live in apartments) "tenants policy" - has the same contents as HO2 & HO3 but NO BUILDING coverage
142
HO5 Form:
The Cadillac of all the forms. Includes Open Perils for both the building & the contents or personal property (Most expensive)
143
HO6 is form is for:
Those with condo's. They are a little different than those with apartments.
144
HO8 form is for:
For the more difficult to insure homes. Usually for much older homes where the current market value is MUCH lower than the replacement value of the home.
145
Josefa sells her house. She wants to end her homeowners insurance policy nine months before the end of the policy term and get a refund of the unused premium. What must she do to end coverage?
Cancel
146
Owen's house is damaged when Latrice's car crashes into it. After Owen's insurer pays to repair the house, the insurer tries to recover its costs from Latrice. What provision in Owen's policy gives the insurer this right?
subrogation
147
Section I of a homeowner's policy provides what?
Property coverages
148
Section II of a homeowner's policy provides what?
The liability coverages
149
Bernard's homeowners insurance policy refers to an "insured location." Which one of the following locations would NOT qualify as an insured location?
Bernard's office in a downtown building owned by his employer
150
Homeowner's Insurance comes in a package policy combining what?
Property & Liability coverage in a single policy
151
Section II- Coverage E in a homeowner's policy is for:
Personal Liability
152
Section II Coverage F in a homeowner's policy is for:
Medical Payments to others
153
Home Business Insurance Coverage Endorsement does:
extends coverage to certain risks from a home business (not usually covered)
154
Permitted Incidental Occupancies Endorsement does what?
it covers incidental types of business conducted on the residence premises, such as offices, schools, & studios
155
Home Day Care Coverage Endorsement does what?
provides property & liability coverage for a home day care center that an insured operates on the residence premises
156
When is a Boat owner's Policy needed?
To cover their watercraft. Many HO policies do not cover watercraft so this policy is needed
157
What are the "Medical Payments to Others" Exclusions?
1. Residence Employee Exclusion- not covered outside the scope of employment
2. Any Person Eligible to Receive Other Benefits (workers comp or nonoccupational disability)
3. Nuclear Exclusions
4. Other Persons Exclusion- only covers the residence employee
158
A deck collapses during a party at an insured's house, and the guests sustain minor injuries. The medical payments to others coverage of the insured's homeowners policy will pay for whose medical bills?
Sanford's, the guest of honor (does not cover the insured's or people living in the home)
159
Does a Bankruptcy release the insurer from its contractual obligations under the HO policy?
No. they are still responsible for any loss if an insured files bankruptcy before a claim is submitted
160
What does the mortgage clause protect?
the mortgage holder against losses to the mortgaged property
161
A homeowners insurance policy does NOT provide liability coverage for anyone who:
makes false statements with respect to the insurance
162
Because Ahmad has a home-based business with three employees, his homeowners insurance policy includes the home business insurance coverage endorsement. This HOBIZ endorsement includes all the following coverages EXCEPT:
workers compensation coverage
163
Bert faced two personal liability claims during the past year. His homeowners insurance policy has a $100,000 personal liability limit. The first claim was $125,000 for bodily injury and $50,000 for property damage. The second claim was $2,000 for bodily injury. How much did Bert's insurer pay in damages?
$102,000
| ; The insurer will pay the $100,000 limit for the first occurrence and $2,000 for the second.
164
Marcus sells homemade jams and jellies from his home in a town that is popular with tourists. Marcus wants the broad protection of a home business insurance coverage (HOBIZ) endorsement. Which factor makes him ineligible for coverage under this endorsement?
His business involves the sale of food products.
165
Unlike the medical payments to others coverage, liability coverage applies only when:
an insured is legally responsible to pay damages because someone has been injured.
166
The term "Damages" refers to:
the monetary compensation to someone who has suffered a loss or damage
167
When is a Dwelling Policy used?
When a Homeowners policy is unsuitable
168
What is the difference between a Homeowners policy & a Dwelling policy?
Homeowner policies cover Property & Liability risks while a Dwelling policy only covers property risk; A HO policy is a comprehensive insurance package (insureds can't tailor the policy to their needs) while a dwelling policy covers only basic property insurance (additional coverage can be added through endorsements)
169
When is a house ineligible for a homeowners insurance?
1. A tenant who is renting is ineligible for a HO policy because it is not occupied by the owner
2. A residence that houses a certain number of families may be ineligible for a HO policy because it exceeds the maximum number of families that can inhibit an insured home
3. A house may be ineligible for a HO policy because it is below the insurance company's minimum insurable value
4. A house that is under construction in ineligible for homeowners insurance
170
If the policy form included Coverages A,B, or D then who is considered the "Insured"?
The building's owner
171
If the policy form includes only Coverages C & E then who is considered the "insured"?
The tenant may be the insured & the policy owner. Sometimes called "renters insurance"
172
"Dwelling Property 1- Basic Form: Limited Property Insurance coverage" covers what?
overs losses to all property—including the dwelling—on an actual cash value (ACV) basis. It is the least comprehensive form.
173
"Dwelling Property 2- Broad Form: Broad property coverage" covers what?
covers the same perils as the basic form and several more. covers the dwelling and other structures on a replacement cost basis. However, it covers personal property on an actual cash value basis
174
"Dwelling Property 3- Special Form: Open Perils property coverage" covers what?
covers all perils unless they are excluded. It is the most comprehensive form. Provides Open Perils coverage for the dwelling & structures but it covers personal property on a named perils basis
175
Coverage A:
mainly covers the dwelling listed in the declarations. Also protects structures attached to the dwelling
176
Coverage B:
Other Structures- other structures on the residence that are physically separated from the dwelling or only connected by a fence or wall
177
Coverage C:
Personal Property
178
Coverage D:
Fair Rental Value- protects an insured when a loss makes part of the covered premises that is rented to others or held for rental unfit to live in
179
Coverage E:
Additional Living Expense- covers any increase in living expenses for the household to maintain its normal standard of living, such as hotel charges and restaurant bills.
180
DP 1 Basic Form - First group included what?
fire, lightning, and internal explosion, all mandatory coverages.
181
DP 1 Basic Form - Second Group includes what?
Extended coverage perils (Hail, riots, aircraft, smoke etc)
182
DP 1 Basic Form - Third Group includes what?
vandalism and malicious mischief
183
What are the 9 exclusions (not covered) applied to all property coverages?
1. Ordinance or Law
2. Earth Movement
3. Water Damage - loss from flood, backed up sewers or drains, & water that seeps through a building/foundation
4. Power Failure- has to be on the premises to be considered covered (think a neighborhood losing power & someones pipes rupture in their house)
5. Neglect
6. War
7. Nuclear Hazard
8. Intentional Loss
9. Governmental Action
184
The 3 Exclusions pertaining to the Dwelling & Other Structures:
1. Weather Conditions - (think a mudslide caused by heavy rains damages a homes foundation- the policy will not cover the damage to foundation)
2. Acts or Decisions (when a person fails to take action or decide the face of a loss about to happen
3. Faulty, Inadequate, or Defective Processes, Procedures, Materials, or Maintenance
185
What are the 4 most popular standard dwelling policy endorsements?
1. Personal Liability Supplement - covers medical payments
2. Broad Theft Coverage - theft and vadalism
3. Automatic Increase in Insurance endorsement - "inflation guard provision"; gradually increases the limit of insurance over a specified period of time
4. Dwelling Under Construction - endorsement added to the adjust the policy to accommodate the increasing value of the home under construction
186
Caleb wants a dwelling policy that will protect the trees and shrubs on his property. He should therefore avoid buying:
a DP 1 policy
| - does not include "other coverage" for trees, shrubs, & other plants
187
Because his home does not qualify for the homeowners coverage he wants, Olin buys a DP 3 special form for its comprehensive coverage. What kind of coverage and valuation basis does Olin have under this policy?
open perils coverage on a replacement cost basis
188
Which coverage does a homeowners insurance policy provide that a standard dwelling policy does not?
liability
189
Despite the lower cost of a DP 1 basic dwelling policy, Jerrold buys a DP 2 policy on his home and his personal property. Which causes of loss does the DP 2 cover that the DP 1 does NOT cover?
weight of ice, snow, or sleet
190
The dwelling policy provides more comprehensive coverage for less premium.
True or False?
False
191
The Jones family spends $500 every month on groceries. A fire leaves their kitchen unusable, so they eat their meals in restaurants while the kitchen is being repaired. They spend $2,000 in one month. Their dwelling policy includes coverage for additional living expenses. How much of their expenses will the insurer pay?
$1,500 (Subract the 2 numbers)
192
Under an insurance contract, the uncertainty of events can lead to unequal financial results for the two parties. This means that insurance is what kind of contract?
Aleatory
193
A mutual insurance company is:
Is owned by its insureds.
194
At DEF Insurance Company, agents are employees of the company who are paid a salary plus commissions. This is an example of what type of insurance marketing system?
Direct writer - (the insurer's agents are actually employees)
195
Agent Blondell is offering a free television to every applicant who agrees to buy insurance through his agency. In most states, this is an illegal practice known as:
Rebating
196
To void a policy, misrepresentation or concealment must be which of the following?
Concern material facts
197
An agreement between the insured and the insurer that certain conditions will be met is which of the following?
Warranty
198
What is a self- contained policy?(Commercial Property Insurane)
a single doc. that contain all agreements between the insurer and the insured(ex: workers comp polich)
199
What is a Modular Policy? (Commercial Property Insurance?)
(think it includes not just 1 single document but MULTIPLE document)
contains a matched set of components designed around one basic component
200
Commercial Package is what?
a policy that includes two or more coverage parts
201
Module Definition
Descriptive term. - "Any in series of standardized units for use together"
202
Why are single package policies more beneficial?
they can include several different types of insurance, so fewer form are need to address a wide range of needs.
* Better to interpret a policy that uses consistent terms and definitions
* AND because it's easier for an INSURER to process a single policy,, insurers will then offer a discount
203
What i a Monoline Policy?
one that covers only one "line" or type of insurance.
204
What is the basic direct damage coverage?
is the Building and Personal Property Coverage Form
205
What do Cause of Loss Forms do?
describe the causes of loss to property that the policy covers. They also state limitations and Exclusions in coverage
206
How is an emendatory endorsement used?
to modify the policy to conform to a states specific requirements
207
Earthquake shock or Volcanic eruptions are treated if?
The earthquake of volcanic eruption happened with a 168-hour period
208
Do Commercial Property Coverage Forms list there covered perils in these forms?
No. Instead, they describe them in a separate cause of loss form.
209
Covered Property is valued as what?
Cash Value & subject to a coinsurance provision
210
What is a fixture?
an item that has been physically attached to land or a building or structure in a manner that indicates an intent that it remain part of the land or structure.
211
Debri Removal Coverage? (Additional coverage you have to add)
Up to 25% of the amount of the direct damage loss + the amount of the deductible + plus $25,000 if the combined loss from property damage and debris removal exhuasts the limit of insurance
212
What does the pollutant cleanup and removal cover?
| Additional coverage you have to add
removes pollutants from land or water at the insureds premises UP TO $10,000, IF the release of the pollutants is caused by a covered cause of loss
213
What is covered under the fire department service charge?
| Additional coverage you have to add
Service charges imposed by a Fire Department called to protect a property/community from a covered cause of loss. (Up to $1,000 of coverage)
214
Preservation of Property coverage does what?
| Additional coverage you have to add
Loss to covered property that must be moved to another location to protect it from a covered cause of loss. Coverage applies during the move and for up to 30 days at the new location.
215
What is covered under the Increased Cost of Construction?
| Additional coverage you have to add
Coverage applies only to costs related to damaged property. Coverage for demolition or increased cost of construction of undamaged portions of the property must be added by endorsement.
216
What is covered under the electronic data?
| Additional coverage you have to add
Cost of replacing or restoring electronic data destroyed or corrupted by a covered cause of loss, including a computer virus, up to an annual aggregate limit of $2,500
217
What is the Newly Acquired Property Extension?
Temp coverage for loss to buildings under constructions at scheduled locations up to $25,000 per building;
temporary coverage for loss to personal property at newly acquired premises up to $100,000 a building;
Coverage ends 30 days after acquisition or start of construction, when values are reported or when the policy expires whatever comes first
218
personal effects and property of others (Coverage extension)
Loss to personal effects of the insured and the insured's employees, and to personal property of others, up to $2,500 at each location. No coverage for theft.
219
valuable papers and records (coverage extension)
Loss to valuable papers and records, including the cost to research and restore information contained in valuable papers and records damaged by a covered cause of loss, up to $2,500
220
property off-premises (coverage extension)
Loss to property at a fair, exposition, or trade show; property stored at a location leased after the policy takes effect; and property temporarily away from the insured premises at a location that the insured does not own, lease, or operate, up to $10,000.
221
Outdoor Property-(Coverage Extension)
Loss to outdoor property consisting of trees, shrubs, plants, detached signs, fences, and antennas, up to $1,000. A sublimit of $250 each applies to trees, shrubs, and plants. Covered perils are limited to fire, lightning, explosion, riot and civil commotion, and aircraft.
222
nonowned detached trailers (Coverage Extension)
Loss to nonowned detached trailers used in the insured’s business and in the insured’s care, custody, and control, up to $5,000 (unless the declarations show a higher limit)
223
What does the Builders Risk Coverage Form protect?
1. Buildings under constructions and the materials and supplies and machinery and equipment that are intended to be permanently located in or on the building or within 100 feet of the premises
2. temp structures (ex: scaffolding)
* unless covered by other insurance* Coverage applied ONLY to property located at the insureds premises
224
What is not covered under the Builders Rick Coverage Form?
land, signs that are not attached to buildings, or radio and television antennas.
225
What is the coverage extension to the Builders Risk Coverage Form?
A coverage extension covers damage to sod, trees, and plants caused by fire, lightning, explosion, riot or civil commotion, or aircraft, up $1,000 per occurrence and up to $250 per tree, shrub, or plant. Any other damage to lawns, trees, shrubs, and plants is not covered.
226
What is Consisted in a Commercial Property Policy?
1. has a declarations page
2. common policy conditions form
3. endorsements (where applicable)
4. coverage forms
5. Cause of Loss Forms
6. and endorsements (where applicable)
227
he common conditions form has conditions that apply to any ISO commercial lines policy, such as:
cancellation and change provisions, and premiums
228
The commercial property conditions form applies only to coverage when?
under an ISO commercial property policy.
229
Causes of loss forms describe what?:
the causes of loss that the policy covers and the coverage limitations or exclusions.
230
Interline endorsements can do what?
apply to more than one line of coverage
231
A complete commercial property policy has at least one:
causes of loss form.
232
Cause of loss form- Basic From VS. Broad Form- which one covers more perils?
The broad form
233
Jodi's real estate office leases a photocopy machine from an office equipment supplier. Which coverage in Jodi's building and personal property coverage form would apply if the machine is damaged by a covered peril?
personal property of others
234
Marjorie has a mail-order business and insures her building and its contents under a building and personal property coverage form. The special causes of loss form applies to all covered property. While taking inventory, Marjorie discovers that several cases of stock are missing, so she submits a theft claim. Her claim is:
not covered because the cause of the missing inventory is not known
235
What is a businessowners policy (BOP)?
a "package policy" (combination policy) that provides property AND general liability coverage for small to medium-sized businesses
236
What is a BOP?
Business Owners Policy - provides most if not all the coverage a typical small to medium biz would need
237
Do large businesses buy BOP policies?
No. BOP will not meet large businesses needs
238
When is a business eligible for BOP coverage?(Business Owners Policy)
coverage is based on the size and nature of a business. To qualify for a BOP policy, a business cannot exceed certain limits in physical size and annual revenue
239
What type of businesses are not eligible for BOP coverage, regardless of their size?
Manufacturers, auto repair shops, bars & pubs. amusement places, banks, &self storage storing motor vehicles
240
How many sections are in a ISO Businessowners Policy?
3 - Property, Liability, & Common Policy Conditions
241
What does the common policy conditions section in a BOP policy pertain to?
cancellation, changes, fraud, audits, inspections, other insurance, liberalization, premiums, recovery rights against others, assignment of the policy, and premium audits. (applies to property and liability coverage sections)
242
While a business owners policy combines coverages that might otherwise be written on several forms, it does NOT include coverage for:
workers compensation
243
The BOP covers not only direct damage to buildings & personal property, but also indirect losses like lost business income & extra expenses. True or False?
True
244
Building coverage values losses on what kind of basis?
A replacement cost basis
245
What does Business personal property coverage protect?
protects property in the open or in a vehicle within 100 feet of the building
246
Which property is not covered under a BOP?
money, illegal goods, aircraft or watercraft, trees & fences, valuable papers/records, electronic data, and animals
247
The property section of the BOP provides open or closed perils?
Open. It covers all losses except those that it specifically excludes
248
What is the Utility Service Exclusion in a BOP?
it does not cover loss resulting from electrical power failure- from a source away from the premises
249
When is fungus or mold covered in a BOP policy?
If water used to extinguish a fire create the mold. NOT covered if there is a plumbing leak
250
What is the Product Errors Exclusion in a BOP policy?
no coverage for manufacturing errors that result in worthless or defective products
251
What is the false pretenses or voluntary parting exclusion in a BOP policy?
no coverage for property lost because it was willingly transferred to a person or place beyond the insured premises on the basis of unauthorized instructions.
252
What does the BOP's inflation guard provision do?
Automatically increases the building coverage limits by 8 percent annually unless the declarations specify a different percentage
253
What does Peak Season Coverage in a BOP do?
increases the business personal property limit by 25 percent (unless the declarations show a different percentage) to accommodate seasonal variations in the insured's business
254
The "Optional Coverage Deductible" of the BOP applies to what optional coverages?
money & securities, employee dishonesty, outdoor signs, & forgery or alterations
255
Replacement cost coverage only applies when in a BOP?
when the property is actually repaired or replaced. Otherwise, the loss is settled at actual cash value
256
Vacancy for more than 60 consecutive days voids coverage for losses from vandalism, sprinkler leakage, building glass breakage, theft, and attempted theft. True or False?
True
257
What is a party wall?
a shared wall that divides two adjoining buildings owned by different parties
258
The declarations in a BOP give a dollar limit for each category of covered property. True or False?
True
259
Clare, a convenience store owner, accepts a $100 bill from a customer who buys a pack of cigarettes. Her bank tells her the bill is counterfeit. Does her businessowners policy cover this loss?
Yes, because the policy provides up to $1,000 coverage for loss due to the insured having accepted counterfeit money.
-
The money orders and counterfeit money additional coverage provides $1,000 coverage for loss due to the insured having accepted counterfeit money.
260
Which statement is correct about businessowners policy coverage for loss of income from a business interruption?
The BOP covers business income and extra expense coverage when the business premises are inaccessible.
261
The glass expenses additional coverage applies to what?
the expense of temporarily boarding up openings of broken glass that is part of a building, subject to the applicable limit of insurance.
262
What are the 3 catefories of liability coverage in a BOP & what do they pay?
1. business liability coverage- pay damages for which the insured is legally liable, subject to the applicable limit of insurance
2. supplementary payments- pay expenses associated with claims and lawsuits against the insured, which are in addition to the limits of insurance
3. medical expenses arising from an accident on the insured's premises or involving the insured's operations, regardless of fault. subject to a limit
263
What does Bodily Injury include?
injury, sickness, disease, and death
264
Personal and Advertising injury consists of what?
Slander, violation of privacy rights, false arrest, or use of another's advertising idea
265
Supplementary payments are made in addition to the policy limit and cover the cost of what?
*THINK LAW SUIT DEFENDED BY THE INSURER* investigation & defense (Private investigator fees, attorney's fees, court costs) * pre and post judgement interest on the amount the insured is ordered to pay
266
When are Medical Expenses paid for on a BOP general liability?
if the incident incurred and was reported within 1 year of it happening. they are paid in connection with an accident on the insured's premises, without regard to fault
267
When are Medical Expenses NOT paid for on a BOP?
does not apply to the bodily injury expenses of an insured, a tenant, or persons hired, or anyone covered by workers compensation. Also, it does not apply to injuries from physical exercises or sports
268
Who is Insured under a BOP if the named insured is designated an individual?
The named insured & the insured's spouse are covered
269
Who is insured under a BOP if the insured is a partnership or joint business?
its members and partners and their spouses are covered
270
In a BOP, if the insured is a limited liability company, who is covered?
It's members & managers
271
The liability risks that the BOP excludes from coverage can still be covered through an endorsement of by a separate policy. True or False?
True
272
Is bodily injury or property damage arising from the transportation of mobile equipment by an auto owned or operated by the insured covered?
NO
273
What is "continuous injury" and is covered under business liability coverage?
It is an injury or damage that occurs during more than one policy period. & yes it is covered under a business liability policy
274
What are the 5 limits of insurance a BOP has?
1. liability expense limit
2. medical expenses limit
3. fire legal liability limit
4. a products-completed operations aggregate limit
5. general aggregate limit
275
Merrill's insurance agency has an ISO businessowners policy. A customer claims that Merrill failed to recommend the necessary insurance policies for his firm. What will Merrill's insurer do?
deny coverage- The BOP excludes coverage for liability arising from the insured's providing or failing to provide professional service.
276
Which is NOT one of the business owners policy's three categories of liability coverage?
damage to the property of others
277
Which pollution-related liability claim would an ISO business owners policy cover?
carbon-monoxide fumes from a defective furnace that make motel guests ill
- (Despite the breadth of the BOP's pollution exclusion, it covers bodily injury from fumes emitted by a building's heating equipment.)
278
The Protective Safeguards Endorsement requires what?
the insured to maintain the working order & protection of the biz (Such as an automatic sprinkler system). The insured cannot neglect the maintenance on these
279
The Utility Services-Direct Damage endorsement in a BOP adds what?
coverage for loss resulting from an interruption of electricity or other utility service (usually excluded in BOP hence the endorsement)
ex: an interruption of electrical supply could ruin perishable food in a restaurant
280
The Utility Services- Time Element endorsement in a BOP adds what?
covers lost income or extra expense that the insured incurs as a result of an interruption in utility service. The interruption must be caused by damage from a covered cause of loss to the type of utility service property identified in the endorsement schedule
281
The Hired Auto and Non owned Auto Liability endorsement in a BOP covers what?
bodily injury or property damage caused by the maintenance or use of a hired auto by the insured or the insured's employees in the course of the insured's business. *excludes covering any damage to the rented auto. Only for bodily injury and damage to OTHER vehicles
282
A company executive rents a car to attend a business conference. The car is a:
Hired Auto
283
A pizza parlor employee uses her car to deliver pizzas for her employer. The car is a:
Non owned auto
284
The identity fraud expense coverage endorsement covers stolen property. True or False?
FALSE
285
An employee accidentally damaged a sprinkler head that is part of Jumbo Store's automatic sprinkler system. The manager shuts off the system's main valve and notifies the sprinkler company, which schedules the repair for that evening. Shortly before the store closes that night, a fire breaks out in the storeroom. How will the protective safeguards endorsement to Jumbo's businessowners policy respond to the claim for fire damage?
The policy will cover the loss because the protective system was shut off for less than 48 hours.
286
The Utility Services-direct damage endorsement covers direct damage loss only. True or False?
True
287
Cathy's business does not own or lease any autos. When necessary, she and her employees use their own cars on business errands. Why should Cathy's businessowners policy include the hired auto and nonowned auto liability endorsement?
Nonowned auto coverage will protect the business if an employee has an accident while using a personal car on company business.
288
Dairy products in Bette's ice cream shop would be destroyed if her freezers failed for more than a few hours. So Bette added the utility services-direct damage endorsement, scheduling overhead transmission lines, to her businessowners policy. When the shop loses electrical power due to a mechanical breakdown of the utility company's equipment:
Bette's loss will not be covered because mechanical breakdown is not a covered peril
289
Earl's businessowners policy has an endorsement that excludes coverage for a fire loss if he does not maintain his building's automatic sprinkler system. Which endorsement is attached to Earl's BOP?
protective safeguards endorsement
290
Marine Insurance provides what type of coverage?
which provides coverage for the transportation of goods by land (inland marine insurance) and over water (ocean marine insurance) as well as protection of property that has no fixed location
291
What do Marine Insurers call "Floaters"?
which provides coverage for the transportation of goods by land (inland marine insurance) and over water (ocean marine insurance) as well as protection of property that has no fixed location
292
Are Floater Policies Open or Closed perils?
Open Perils - they cover "all risks" except those specified in the policy
293
In case of loss or damage to a part of covered property that consists of several parts, the most the insurer will pay is the value of the lost or damaged part.
True or False?
True
294
Accounts Receivable Floater does what?
pays the increased costs of collecting accounts, the cost to reestablish the accounts. The destruction of accounts receivable records can make it difficult or impossible for a business to collect on accounts due
295
Bailees’ Customers Floater:
A bailee coverage floater covers customers’ property for loss or damage by a covered peril while it is in the insured bailee’s custody, regardless of whether the bailee is legally liable for the loss. Coverage is available on either a named perils or open perils basis.
296
Commercial Articles Floater:
The commercial articles coverage form insures either camera equipment or musical instruments used commercially or by nonprofit organizations (e.g., movie producers, professional musicians, orchestras, school districts, and churches).
297
Contractors' Equipment Floater:
coverage on equipment and tools ranging from gigantic earthmovers and tunneling equipment to wrenches and hammers. Because equipment tends to depreciate quickly, contractors' equipment policies are typically written on an actual cash value basis (not a replacement cost basis)
298
Electronic Data Processing (EDP) Floater:
cover computer equipment, software, and data. provide open perils coverage
299
Installation Floater:
covers property while it is in transit and while it is being installed and tested during its installation. The floater usually provides open perils coverage
300
Signs Floater:
covers lighted signs owned by the insured. Coverage does not apply to billboards or other signs that are fixed and not lighted. Open perils coverage
301
The protection of records provision in the ISO valuable papers and records form requires that insured papers and records be kept in the containers described in the declarations whenever the premises is closed for business and whenever the records are not in use.
True or False?
True
302
There are two causes of lost for which carriers are generally not liable:
1. "acts of God," such as a flood or tornado
| 2. fault of the shipper, such as improper packing of cartons
303
Motor truck cargo and transit coverage forms generally do include a coinsurance provision.
True or False & why?
False. generally do not include a coinsurance provision because, as a practical matter, insurers presume shippers want to cover the full value of property for which they are liable
304
Can Insureds can have an insurable interest in property they don’t own, as long as they are liable for its safe transit?
Yes
305
After the insurer receives the sworn proof of loss from the insured, the insurer will give the insured notice of its intentions within _____ days.
30
306
Inland Marine Insurance refers to what?
Floaters because they float in transit
307
Five years ago, Joe bought a piece of business equipment that he insured under a commercial inland marine floater. When a water leak damaged the equipment, its actual cash value was $1,000, but it would cost $5,000 to replace it. A qualified repairman bid $2,000 to repair the water damage. Disregarding any deductibles that might apply, what will Joe's insurer pay?
$1,000
| (the ACV)
308
Adeline purchased a personal articles floater that covers her ring because her homeowners policy, form HO 3, has a sublimit on theft of jewelry. Why should Adeline also cover her expensive camera under the personal articles floater?
The floater includes coverage for breakage, which her homeowners policy would not cover.
309
If the owner of a dry-cleaning shop wishes to insure customers' clothes in her shop, what kind of floater should she buy?
bailees' customers floater
310
Hull insurance in regards to Marine insurance does what?
protects a ship’s owner against loss to the vessel
311
Cargo insurance in regards to Marine insurance does what?
protects an owner of cargo being transported on a ship
312
In an ocean marine policy, the insured party is referred to as the:
Assured
313
What is "particular average" in regards to Marine insurance?
a partial loss sustained by a specified cargo or vessel (think percentage %)
314
The adventure clause requires what?
requires the insured to provide the insurer with a detailed description of the voyage
315
"Perils of the Sea" refers to what?
extraordinary forces of nature (e.g., heavy weather, gale winds, and large waves) that can result in the sinking, stranding, or collision of the vessel.
316
Maritime law requires that all parties participating in a venture share the loss when one party’s goods are sacrificed to save the venture.
True or False?
True
317
Collision Liability clause in regards to Marine insurance protects what?
the insured against loss to another ship or its cargo resulting from a collision
318
pilotage and towage clause:
he insurer is obligated to pay collision damages related to a pilot’s or tugboat’s actions in the midst of towing
319
Salvage charges in regards to
| Ocean Marine insurance are what?
expenses paid to third-party “salvors” (which may be other ships in the area) that render assistance in saving property exposed to loss.
320
In the context of ocean marine insurance, freight is?
is the charge for carrying goods.
321
What is a "general charge" in regards to Ocean Marine Insurace?
is a loss incurred for the common good that is shared by all parties to the venture.
322
What kind of insurance is the coverage in an ocean marine insurance policy that protects a shipowner against a covered loss to the vessel but not to its cargo?
hull insurance
323
After striking a shoal, the freighter Benita was in danger. The fishing vessel Flossie was in the area and provided assistance. Flossie then billed the Benita to recover its expenses, which marine insurers refer to as:
Salvage charges which are are expenses paid to third-party "salvors" (including other ships) who render assistance in saving property that was exposed to loss.
324
Twenty percent of Aubrey's cargo was damaged when the ship transporting it encountered a violent storm in the Bermuda triangle. In terms of ocean marine insurance, what is this partial loss to Aubrey's cargo called?
a particular average
325
What does ISO stand for?
Insurance Services Office, inc
326
Is a barn considered a dwelling?
No because a barn is used in agricultural operations while a "dwelling" is a residential building
327
The Farm Property-Barns, Outbuildings and Other Farm Structures Coverage Form (FP 00 14) can cover all the following types of structures, EXCEPT:
field or pasture fences
328
When reading his livestock coverage form, Tad discovers that it excludes coverage for some perils he thought would be covered and covers some perils he thought would be excluded. For instance, he finds that the policy covers loss to covered livestock caused by:
flood
329
Why do the ISO farm forms combine homeowners coverage with property & liability coverage?
because Farms have residential as well as commercial risks
330
The Farm Liability Coverage Form can be a stand-alone policy or combined with farm property forms to form a package policy.
True or False?
True
331
Coverage for personal and advertising injury is on an occurrence basis.
True or False?
False. It's on an offense basis
332
Medical payments coverage extends to reasonable medical expenses incurred within_____ years of the accident that causes bodily injury.
three
333
The three basic coverages for Farm Insurance are:
bodily injury and property damage (Coverage H), personal and advertising injury (Coverage I), and medical payments (Coverage J).
334
NFIP stands for what?
National Flood Insurance Program
335
In Write Your Own (WYO) policies, who has full responsibility for covering losses?
The Federal Government
336
Who is FEMA & What do they do?
Federal Emergency Management Agency. They set the flood insurance coverages and premium rates & they are the same regardless of which insurer issues the policy
337
For its residents to be eligible for flood coverage, a community must participate in the NFIP program.
True or False?
True
338
What is FIRM & what doees it do?
Flood Insurance Rate Map which identifies all of the flood hazard zones in the community
339
For a building to be insurable under a flood policy, it must:
1. have two or more outside rigid walls
2. have a fully secured roof
3. have at least 51% OF the property above ground level
4. resist flotation, collapse, and sideways motion
340
What type of buildings/structures are ineligible for flood insurance coverage?
1. ones that violet a flood plan management law
2. container structures
3. when 50% or more of the structure is below ground level
4. boat repair docs
5. buildings constructed entirely over water
6. greenhouses (unless has two rigid walls and a roof)
341
To be eligible for coverage, contents must be located in a fully enclosed building or secured to prevent flotation out of the building.
True or False?
True
342
Coverage on Building property (Coverage A) under Flood Insurance includes what?
additions and extensions attached to the building by means of a common wall, stairway, walkway, or roof. It also includes attached fixtures, machinery, and equipment within the building
343
Besides applying at the location described on the declarations page, building property coverage also applies at another location—for up to _______ days—if the property is moved there to protect it from the imminent danger of flood.
45
344
Covered Personal Property (Coverage B) under a Flood Insurance policy covers what?
personal property that is inside the fully enclosed building described in the application. It also covers, at the insured's option, property owned by guests or servants.
345
How does one obtain flood coverage under the NFIP?
directly through the insurer who writes their other property coverage
346
Mortgage lenders require flood insurance on property in high-risk flood zones.
True or False?
True
347
What are the 3 standard flood insurance policy coverage forms?
the dwelling form, general property form, and residential condominium building association policy (RCBAP) form
348
For flood coverage to apply, the flood must be what?
a general condition that covers two or more acres of normally dry land area or two or more properties (at least one of which is the insured's property)
349
In a flood policy, coverage is provided for loss of use of the covered property, lost revenue or profits, loss from interruption of business or production, or any other economic loss.
True or False?
FALSE. there is no coverage for such things under a flood policy
350
The NFIP provides no coverage for what?
no coverage for loss of use, lost revenue, or lost profits
351
under an NFIP Residential Condominium Building Association Policy, if desired, provides what?
provides coverage for commonly owned contents for residential condominium buildings with 75 percent or more of their total floor area in residential use
352
The NFIP makes flood insurance available only on properties located in participating communities.
True or False?
True
353
After a flood severely damaged Serena's home, floodplain management ordinances required her to reconstruct it at a higher elevation. Some or all of Serena's expenses to comply with these ordinances may be available from what kind of coverage from her National Flood Insurance Policy?
increased cost of compliance coverage
354
When is Equipment breakdown insurance needed?
must be purchased to close these potentially important gaps in insurance coverage. AKA covering boilers.
intended to pay for unexpected breakdowns of equipment
355
In the equipment breakdown policy, which of the following losses is subject to a sublimit regardless of the policy's coverage limits?
data and media losses
356
Which of the following does NOT qualify as covered equipment under the equipment breakdown coverage form?
laboratory beakers
357
Excess and surplus lines (E&S) insurance is:
any type of coverage that cannot be placed with an insurer admitted to do business in a certain state
358
Excess and surplus lines (E&S) insurance is:
any type of coverage that cannot be placed with an insurer admitted to do business in a certain state (risks under these are usually unusual i.e. earthquake, watercraft, windstorm insurance)
359
Excess and surplus lines (E&S) marketplace usually involves a "wholesale agent or broker" who does what?
they middle man between the insurer and the retail agent who is admitted in a different state
360
What is a surplus lines broker?
a broker who is licensed to place coverage with non admitted insurers (insurers not licensed to do business in a given state)
361
What does a managing general agent (MGA) do?
perform certain functions ordinarily performed only by insurers, such as binding coverage, underwriting and pricing, appointing retail agents, and handling claims
362
Premium taxes must be collected and remitted to each state involved in an E&S transaction. This is the responsibility of the surplus lines licensee.
True or False?
True
363
A boat owners policy generally covers watercraft up to _____ feet in length
26 (anything above uses a "yacht policy")
364
Liability coverage in regards to a boat owners policy:
the insurer promises to pay covered damages that an insured becomes legally obligated to pay arising from the operation, maintenance, or use of the described watercraft or newly acquired watercraft
365
What is crop-hail insurance?
A common type of crop insurance is crop-hail insurance, which is often used to fill the gap in other types of crop insurance that may not cover hail
366
A standard crop-hail policy, offered and underwritten by private insurers, is not subsidized by the federal government.
True or False?
True
367
Crop-hail insurance may be purchased at any stage of the growing season prior to harvest as long as ____ percent of the crop is visible and provided the crop has not already suffered hail damage
50
368
Federal Crop Insurance does what?
protects farmers against production or revenue losses when a particular insured crop does not meet a preset production guarantee
369
Malcolm is a surplus lines broker who places a customer's risk with a nonadmitted insurer who later files for bankruptcy just as the insured filed a claim. Which of the following will likely be responsible for payment of the claim?
Malcolm
370
The uninsured watercraft coverage of a boatowners insurance policy:
pays compensatory damages arising from bodily injury that insured Jonathon is legally entitled to recover from the owner or operator of another watercraft that is uninsured
371
Dewey Insurance Company is a nonadmitted insurer that is on a state's white list. From this information, it seems most likely that Dewey:
writes excess and surplus lines insurance in that state
372
What does Short Rate Cancellation do?
discourages the named insured from canceling the policy before its normal expiration date (think a fee)
373
What is a flat cancellations?
he cancellation of an insurance policy or bond as of its effective date, before the insurer has covered anything
374
Does a flat cancellation require a full return of the premium?
Yes - because the insured has never been covered under the policy
375
What is a Pro Rata Cancellation?
cancellations where the insurer has to return the full proportion of unearned premium for the unexpired term of the policy, without penalty for cancellation
376
What is the difference between unearned and earned premium?
earned premium is the portion that the insurer has collected while unearned premium is the remainder of the premium that has been paid
377
Who is the first party to an insurance company?
the insured
378
Who's a third party to an insurance contract?
someone who is not listed in the contract but what affected by someone in the contract. (think pedestrian getting hit ina crosswalk by a car)
379
Shauna's insurance premium is lower than Louise's. Shauna has had no traffic citations or accidents during the past three years. Louise has a poor driving record in comparison. Shauna's premium is lower because her insurer probably uses what rating system?
Merit rating
380
In deciding what insurance his company should buy, Ward bases his decisions on the company's past loss history. What is the biggest disadvantage of this approach?
It overlooks the types of losses that have not happened yet but could happen in the future.
381
Based in New Jersey, Insurance Services Office (ISO) provides several important services in California. However, ISO does not
ISO does not rate insurance companies' financial stability
382
Estelle transferred the legal title to her home to her son Jimmie. However, she cannot transfer her insurance policy to Jimmie without the insurer's permission because of what clause in her policy?
Assignment
383
Colby purchased an open-perils property policy on the building that houses his business and a separate named-perils policy on his business personal property. Some personal property, such as his outdoor furniture, is covered by both policies. With respect to the items that both policies cover, Colby's policies are
Nonconcurrent - Two policies that cover the same property for different causes of loss are nonconcurrent.
384
Colossal Casualty has introduced a new property insurance policy form that provides broader coverage with no increase in premium. Its current policyholders will also benefit from these coverage enhancements if their policies include what provision?
Liberalization
385
When is a Return of Premium applied?
When an insurance policy is terminated before its expiration date
386
Differences between HO3 & HO5:
The HO-3 covers personal property on a specified perils basis, which means that a loss is covered if it is caused by one of the causes listed in the policy. The HO-5 provides broader coverage on personal property by insuring this property on an open-perils basis, meaning that a loss is covered unless the cause of the loss is excluded.
387
The following types of property can be scheduled:
```
Jewelry
Furs and garments
Cameras and related items
Musical instruments and related items
Silverware and related items
Golfer’s equipment
Fine arts
Postage stamps
Rare and current coins
```
388
Insured Perils Under Standard Fire Policy:
Fire & lightning
389
Differences between HO4 & HO6:
The HO-4 provides no building coverage; tenants don’t need it (apartment/renters coverage)
390
Subject to policy limits, deductibles, or other applicable constraints, loss to property valued on a replacement cost basis is covered for its full replacement cost if the applicable limit of insurance in the policy equals at least 80 percent of the property’s replacement cost value.
True or False?
True
391
The specified additional amount of insurance for coverage a—dwelling (HO 04 20) endorsement does what?
provides extended replacement cost coverage, increases the dwelling limit when the loss to the building insured under the dwelling coverage is greater than the dwelling limit listed on the declarations,
392
when is a FAIR plan issued?
The FAIR Plan issues insurance as a last resort, and it should be used only after a diligent effort to obtain coverage in the voluntary market has been made.
393
Angela's personal articles floater, like most inland marine policies, excludes losses caused by
Normal wear and tear
394
Building contractors' costs skyrocket when many homes in the same area are damaged by a wildfire. Therefore, some California insurers have offered homeowners policies with extended replacement cost coverage, in which the insurer
Agrees to pay 25 to 50 percent more than the policy limit, if necessary, to replace the covered property.
395
In the ________ system, the insurer's agents are actually employees. They can receive a salary, be paid on commission, or both
direct writer
396
Agent Blondell is offering a free television to every applicant who agrees to buy insurance through his agency. In most states, this is an illegal practice known as
Rebating
397
What rating method makes modifications to manual rates to reflect the unique characteristics of each risk?
Merit rating
398
To void a policy, misrepresentation or concealment must be which of the following?
Concern material facts.
399
An agreement between the insured and the insurer that certain conditions will be met is which of the following?
Warranty
400
Walt and Joanna are co-owners of a bagel shop. Both Walt and Joanna are listed in the declarations of the policy that insures the business, with Joanna's name appearing first. The declarations also list First State Bank, which has an outstanding loan on the business. Who is considered a named insured on the policy?
Both Walt and Joanna
| First State Bank has an insurable interest as the mortgagee, but is not a named insured
401
Renata's home is demolished in a fire that started when a neighbor misdirected the fireworks he set off to celebrate the Fourth of July. Renata's insurance company pays her for the damage, and then files suit against the neighbor to recover the amount it paid for the loss. This is an example of the application of what policy condition?
Subrogation
402
Property insurance provides protection against _____ claims, and liability insurance protects against ______ claims
first party; third party
403
Adding a scheduled personal property endorsement or a personal articles floater to a personal policy provides better coverage for eligible types of _______ items.
valuable
404
An action that, in a natural and continuous sequence, produces a loss is the
Proximate cause.
405
Liability that is imposed as a matter of law without regard to negligence is called what?
Absolute liability
406
Liability that an insured incurs because of the actions of others, such as employees, is called what?
Vicarious liability
407
Theresa, a spectator at a baseball game, is injured when an errant ball hits her in the head. She sues the stadium owners for negligence. Which one of the following defenses against negligence would the owners probably use?
Assumption of risk - applies when a person knowingly exposes himself or herself to danger or injury.
408
As a result of a successful lawsuit, Agnes receives $10,000 to cover her specific losses, an additional $40,000 for pain and suffering, and because the defendant was considered to have acted with willful disregard for others' safety, Agnes was awarded an additional $75,000. This additional $75,000 award can best be described as what type of damages?
Punitive damages
409
Liability coverage does pay for property or bodily injury to an insuredone's own property and medical insurance is needed for that.
True or False?
False- Liability coverage DOES NOT pay
410
Four months ago Betty purchased a strip mall building that can house five businesses of equal size. Although she has been trying to find tenants, only one of the five units is in use when vandals break into one of the empty units causing $10,000 in damage. Betty has a standard building and personal property coverage form with a vacancy clause. Assuming the amount of building insurance is adequate and vandalism is a covered peril, and ignoring deductibles, how much will Betty's insurer pay for this loss?
nothing - Since the building has been vacant (less than 31 percent occupied) for more than 60 days and the loss was caused by vandalism, this loss is not covered.
411
Agustin's building has an insurable value of $100,000, but he has insured it for only $80,000 in a property policy with a 90 percent coinsurance clause. If Agustin's building has a $10,000 loss caused by a covered peril, the insurer will pay him (ignore any deductible that might apply)
$8,889 - To avoid a coinsurance penalty, Agustin should have carried at least $90,000 insurance. He will recover $80,000/$90,000, or 8/9 of his $10,000 loss, which comes to $8,889.
412
Vicente's business property is insured by a standard building and personal property coverage form to which no endorsements or optional coverages apply. This tells us that Vicente's building and personal property are covered
On an actual cash value basis and are subject to a coinsurance provision.
413
Joaquin plans to buy a businessowners policy (BOP) to cover the building and contents of his small retail store. Unless modified by endorsement, a current ISO BOP
Provides open-perils coverage on the building and contents.
414
The Special Dwelling policy form provides which of the following?
Open peril coverage for the dwelling and broad coverage for personal property
415
Which of the following Other Coverages is not included in the Basic Dwelling coverage form?
Collapse
416
After a PAP has been in effect for at least _____ days or has been renewed, the insurer can cancel it only for nonpayment of premium, for suspension or revocation of the insured’s driver’s license, or because the policy was obtained through material misrepresentation.
60
417
Which is better? Compulsory insurance laws or financial responsibility laws in a PAP?
Compulsory insurance laws are better than financial responsibility laws because they provide more protection to the public against loss.
418
Which homeowners form provides broad coverage for both the dwelling and its contents?
HO-2
419
What is the limit on coverage for grave markers under the homeowners policy?
$5,000
420
_________ protects the vehicle from loss due to fire or collision. __________ protects the owner or operator if the vehicle is involved in an accident that results in injury or death.
Property Insurance; Liability Insurance
421
What is a newly acquired auto?
an auto that the named insured takes ownership of during the policy term
422
Carol has been convicted twice for driving while intoxicated (DWI). Insurers refuse to issue a personal auto policy (PAP) to cover her husband Perry's car unless he is willing to buy a policy with a:
named driver exclusion
423
Because Hallie's employees often use their personal vehicles for business-related errands, the liability coverage of her business auto policy (BAP) should show either symbol 1 or:
symbol 9
424
What is the standard deductible under the regular program of the National Flood Insurance Program?
$500
425
What is the maximum amount of coverage that can be purchased for a single-family home under the emergency Flood insurance program?
$35,000 for buildings and $10,000 for contents
426
In addition to maximum floor space, the BOP eligibility rules limit eligible risks to what maximum?
$3 million in annual sales
427
The fellow servant rule defense states:
that an employer is not liable for an injury to an employee that results solely from the negligence of a fellow employee
428
The exclusive remedy provision stipulates that
an injured employee is legally entitled to the workers compensation benefits provided by law but is not permitted to sue the employer.
429
Which one of the following federal acts provides employment-related benefits to employees of interstate railroads?
Federal Employers Liability Act
430
Will is employed as a roofer for Shingle-Minded Roofing. While working one day, Will falls from a roof and is injured. When he seeks to file a workers compensation claim, he discovers that Shingle-Minded failed to secure workers compensation insurance which is a violation of state law. In most states, what should Will do?
Will should seek statutory workers compensation benefits and sue his employer for negligence if allowed by statute.
431
Coverage for seamen protected by the Jones Act can be obtained under a standard workers compensation policy by adding what kind of endorsement?
a maritime coverage endorsement
432
For how long after the date of a direct physical loss will the insurance company pay for extra expenses under the extra expense additional coverage?
12 months
433
Unless a higher limit is shown in the declarations, what is the limit on coverage for business income from dependent properties?
$5,000
434
What is Embezzlement?
theft by an employee, typically achieved in the course of the employee’s performance of his or her duties.
