Unit 2: Property & Liability Insurance Concepts Flashcards
20-44 Personal Lines Agent Pre-Licensing Course (198 cards)
1
Q
_______ is a condition that introduces or increases the likelihood of loss from a peril.
A
Hazard
2
Q
______ from an insurance perspective means the change of financial loss
A
Risk
3
Q
___ ___ is ONLY the change of a loss
A
Pure Risk
4
Q
________ ____ is the change of loss and gain
A
Speculative Risk
5
Q
is designed to offset the financial impact upon an insured of pure risk
Remember: Risk is the change of loss and insurance is designed to handle pure risks only
A
Insurance
6
Q
is a statistical concept that suggest that the more exposure units we have to study the more likely that any projections we make are likely to equal what actually occurs.
Ex: If we were to toss a fair coin five times it is possible that we could toss heads all five times. However, if we were to toss that same coin 5,000 times it is very, very likely that we would toss approximately 2,500 heads and 2,500 tails.
A
law of large numbers
7
Q
Policy a ____ is a written contract or agreement for or effecting insurance, or the certificate thereof, by whatever name called, and includes all clauses, riders, endorsements and papers
A
Policy
8
Q
is a contract whereby one undertakes to indemnify another or pay or allow a specified amount or benefit upon a contingency.
A
insurance
9
Q
An ____________ is a modification to the original policy which changes it in some way. It may add coverage, modify the policy in some way to confirm to a state requirement; or changes the insured’s coverage in some way
- Adding coverage: the insured adds towing & labor to her auto policy
- Modifying Coverage to Conform: FL Property policies statutorily add Catastrophic Ground Collapse coverage
- Changing Coverage: the insurered buys a new car and adds the new veh to his/her policy
A
Endorsment
10
Q
Black’s Law Dictionary defines a ______ as an agreement between two or more parties creating obligations which are legally enforceable
Characteristics: Offer, Communication, Mutuality of Obligation, capacity, Oral/Written, Acceptance, Consideration, Competency, Legality
EX: “if a buyer places an order to buy goods at a certain price, and the seller responds by shipping the goods, the seller’s actions signal acceptance of the offer and the parties have a ________”
A
Contract
11
Q
made by one party to others
promise one party makes in exchange for another party’s performance; ie an invitation to enter into a contract on certain terms.
EX: “The ____ is when the buyer places the order to buy the goods at a certain price.”
A
Offer
12
Q
___________ of the acceptance in the prescribed manner and time frame
A
Communication
13
Q
all parties must have an obligation to act
A
Mutuality of Obligation
14
Q
all parties must have legal standing to engage in the agreement
is a person’s legal status to enter into contracts. There are several things that make a person legally able to do so, including age (18+), state of mind (mental health/drugs/alcohol)
A
Capacity
15
Q
can be ________ or _________; however, some contracts require a written agreement.
contracts can be mediated in either manner
A
Oral or Written
16
Q
___________: unequivocal acceptance of the offer
is an express act or indication that demonstrates an agreement to the terms of an offer in a manner required by the offer so that a binding contract is formed.
EX: “The seller shipping the goods is the _________ of the offer and the parties have a contract.”
A
Acceptance
17
Q
something of value exchanged between the parties
A
Consideration
18
Q
all parties must have the mental wherewithal to fairly engage in the agreement.
A
Competency
19
Q
the agreement must have a legal intent
A
Legality
20
Q
is when two parties have agreed upon something and are prepared to enter into a contract. In other words, both parties agree to the same thing.
Ex: “The buyer has placed a specific order to buy goods at a certain price. The seller understands what the buyer wants and how much the buyer is willing to pay AND the seller wishes to sell the exact products/services at that price. Each party understands the other completely and agrees to enter into the transaction with an exact mutually understood and agreed to purpose.”
A
Meeting of the Minds (mutual assent)
21
Q
a promise that is prohibited because the performance, formation, or object of the agreement is against the law. –technically speaking, an ______ _______ is not a contract at all bc it cannot be enforced.
EX: prostitution
A
illegal contract
22
Q
_____ is the “value” given to someone in return for something of “value” or a promise of something of value. A valid contract MUST include _________ for every party involved.
is the something for something (“kinda like you scratch my back I’ll scratch yours“) or what you might call the basic reason parties enters into contracts.
A
Consideration
23
Q
___ is a written law passed by a legislature on the state or federal level.
______ set forth general propositions of law that courts apply to specific situations.
A
Statutes
24
Q
binders temporary insurance polices, which can be made orally or written
A
binders
25
where payment is made directly to the insured or other named interests
Property Insurance
26
where payment is made on behalf of the insured to another
Liability Insurance
27
Insurance contracts are ______ ______ wherein property and liability insurance policies cover losses sustained by persons.
The focus is on the person or persons, NOT the insured property or insured operations.
Personal Contracts.
28
The insured person has to satisfy certain conditions in order for the insurer to perform, that is, pay any claim.
Conditional Contract
29
Parties have unequal bargaining power, such as the insured cannot negotiate the terms of the insurer.
Ambiguities found in the policy are usually found in favor of the
insured
Contracts of Adhesion
30
One party should be put back in the same financial condition
| they were in before the loss. (Never profit from a loss)
Indemnity Contracts
31
Exceptions to the ____ __ ________:
- the Replacement Cost Endorsement
- Agreed Value
- Direct payments to claimants in liability claims
the rule of Indemnity
32
Insurance is a contract whereby one (the insurance company) undertakes to _______ another (the insured) or pay or allow a specified amount or a determinable benefit upon determinable contingencies (e.g. the payment to a third party due to the insured's negligence).
Indemnify
33
______ _____ is the actual, lawful and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage or impairment.
_____ ______ MUST exist at the time of loss and the insured would suffer economic loss
Insurable Interest
34
______ ______ is the insured's exposure to loss & economic interest
Insurable Interest
35
______ ______ are made up of 4 basic parts/sections: Declarations Page, Insuring Agreements, Exclusions, and Conditions
Contract Elements
36
describes the insurance company’s name and address, the named insured’s name and address, the subject(s) of insurance, policy period, coverages types, coverage limits, and the cost/premium for the policy.
Declarations Page
37
broadly define the coverages given under the policy.
Insuring Agreements
38
establishes property, situations, persons, or perils not covered by the policy. The FAIA Study Manual list the following three reasons for policy exclusions:
(1) duplication of coverage found in other policies; or
(2) uninsurable exposures; or
(3) specialized exposures requiring specialized underwriting and coverage more appropriately handled in another policy.
Exclusions
39
establish the “rights and duties” of the insurance company and the insured to each other.
Conditions
40
_______ __________ (this document) includes:
- Insurance Company Name
- Insured Name
- Insured Address
- Coverage Types
- Coverage Amounts
- Deductibles
- Premium
- Policy Number
- Inception Date of Coverage
- Expiration Date of Coverage
The Declarations
| aka Declarations Page / Dec Page
41
states what is covered and is located at the very beginning of each policy
Ex: “We will provide the insurance described in this policy in return for the premium and compliance with all applicable provisions of this policy”.
Insuraing Agreement
42
```
qualifies and places limitations on the insurer’s responsibility to perform and/or pay –
includes:
- States the insurer’s limit of liability for payment
- Policy Period
- Concealment or Fraud
- Liberalization Clause
- Cancellation
- Subrogation
- Severability
- Duties after a Loss
- Suit Against Us
- Bankruptcy of an Insured
- Other Insurance
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Conditions
43
Other Insurance states how the insurance policy will coordinate with any other "valid and collectible" insurance.
Other Insurance
44
broadens policy coverage if policy language has been broadened (60 days prior to or during policy) .
Liberalization Clause
45
assignment of recovery to insurance company after payment to insured and assumption of rights against responsible third party
Subrogation
46
Policy ______ sections state what is not covered by the insurance policy either reducing what is covered or eliminating it altogether.
EX: “We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.”
Exclusions
47
is the reduction and/or destruction in use, value, access, custody, or function of persons, property and/or intangible property rights.
Loss
48
physical characteristics which increase the probability or severity of loss.
Physical hazard
49
a conscious mental attitude which increase the probability or severity of loss.
Moral hazard
50
unconscious mental attitude which increase the probability or severity of loss.
Morale hazard
51
may be defined as a contingency that may cause a loss
EX: fire or windstorm
Peril
52
_____ is a condition that introduces or increases the likelihood of loss from a peril.
_____ may be classified as physical, moral, morale
Hazard
53
states that when there is an unbroken chain of events between an occurrence and damage that grows out of the occurrence, then the resulting damage is all part of the same occurrence.
(For example, fire is proximate cause of damage done by water used in extinguishing it.)
Proximate Cause
54
EX: While shopping one day Winston forgets that he is in a supermarket and starts eating one of the bananas in his cart. After he has eaten the banana, Winston carelessly tosses the peel on the floor of the supermarket. Edgar, Winston’s neighbor, just happens to be shopping at the same time; Edgar’s left foot strikes the peel and Edgar tumbles head over heels with his steaming hot triple caramel mocha frappe latte spilling all over Pastor Jones, Pastor Jones’ wife, and three choir boys. In this unfortunate event the ______ ______ of the incident would be Winston carelessly throwing the banana peel on the ground.
Proximate Cause
55
physical harm to tangible property
Direct Loss
56
______ ______ means economic loss which flows as a consequence of direct loss.
Indirect Loss
57
Fire Loss to Dwelling; home is uninhabitable and the insured is forced to live in a hotel for two weeks. Identify the Direct & Indirect Loss.
Direct Loss – Fire Loss to Dwelling
| Indirect Loss – Two Week Hotel Rental
58
Automobile Collision rendering the vehicle in operable; repair shop takes three weeks to repair car and the insured has a Rental Vehicle for three weeks. Identify the Direct & Indirect Loss
Direct Loss – Collision Damage to Insured Vehicle
| Indirect Loss – Loss of Use of the Car; Insured’s Three Week Car Rental
59
varies from policy to policy. Virtually all property insurance covering
real property provides for naming mortgagees and gives them special protection such as:
1) Advanced notice of cancellation
2) Protected even if insured is prevented from recovery
3) Allows mortgagee to continue payments in order to continue the
policy even if
Lender Interest
60
Joe Insured owns a $200,000 Home and has a $150,000 mortgage with Gold Coin Mortgage Company. Joe loses his job and in a panic believes he can't make his mortgage payment any longer; Joe subsequently sets fire to the house and the house is a Total Loss. Which if any of the following are true regarding a claims payment by the insurance company?
Gold Coin Mortgage can collect up to their $150,000 of equity
61
Which of the following does NOT apply to the Mortgagee Clause:
1. Mortgage Company has the right to cancel a policy
2. Mortgage Company has the right to pay past due policy premiums
3. Insurer required to give advance notice of cnacellation to Mortgage Company
4. Coverage may be extended to Mortgagee even if the insured's actions prevent recovery by the insured
1. Mortgage Company has the right to cancel a policy
Answer: #1
62
_______ _______ Includes:
- Loss payments are payable to both the insured and the mortgagee up to the level of loss and in proportion to their level of economic interest in the property.
- A Mortgage company may have a right of recovery even if the insured has been denied.
- Has the right to pay (past due) premiums.
- The Mortgagee is entitled to prompt notice of all policy Non-Renewals and Cancellations.
Mortgage Clause
63
basic property insurance policies state that direct losses will be settled based on the ________ of the property at the time of the loss, but not more than the amount required to repair or replace (and subject, of course, to the dollar limit stated in the policy).
the current cost to replace the item minus depreciation.
Actual Cash Value (ACV)
64
is generally the purchase price in an open and fair market among equally knowledgeable buyers and sellers.
Market Value
65
Many property insurance policies provide _________ _____ Valuation where depreciation is not deducted and the insured receives payment to replace the item with its current cost.
Claims settled as cost brand new WITHOUT any deduction for depreciation.
Replacement Cost Valuation
66
In the event of damaged property being determined to be a “total loss” the residual value of the damaged property is referred to as _____ ____
Salvage Value
67
as a valuation method for paying a claim. When this valuation method is used the insured and insurer have agreed to the value of the underlying insured property utilizing bills of sale or appraisals at the time the insurance was purchased (i.e. jewelry coverage).
Agreed Value
68
Ginger has purchased a pearl necklace and has a bill of sale in the amount of $4,200. If she insures the necklace on an “____ ____ ____” she will submit the bill of sale to her insurance company at the time she applies for the insurance. If the necklace is stolen Ginger will receive $4,200 (the agreed value) less any deductible in the policy. There will be no need to determine the market value at the time of the loss nor any depreciation (depreciation does not normally apply to Jewelry the way it does to other classes of property as Jewelry normally appreciates over time).
Agreed Value Basis
69
This statute states, in part, that if there is a total loss by a covered peril to a building, structure, mobile home or manufactured housing unit, the insurer must pay the amount stated in the policy for which premium has been paid.
Florida’s Valued Policy Law
70
Florida’s Valued Policy Law (F.S.627.720) states: If there is a total loss by a covered peril to a structure, the insurer must pay _________
The amount stated in the policy
71
- encourages an insured to insure their property to its full replacement cost value.
- limit the insurer’s responsibility in a loss to the proportion of a loss which the limit of insurance bears to the value of the property at the time of loss times the coinsurance percentage.
Forumula: Loss X Limit of Insurance ÷ [Value of Property (X) Coinsurance Percentage] = Loss Settlement
Coinsurance
72
Loss X Limit of Insurance ÷ [Value of Property (X) Coinsurance Percentage] = Loss Settlement
NOTE: If the coverage amount is equal the agreed percentage of the property value, or more, the coinsurance clause does not have an impact on the claim payment to the insured.
Co-Insurance Formula .
73
Coverage limit is $30,000, 80% coinsurance, loss of $20,000
1. If the value of the covered property 50,000 at the time of loss, the insurer's loss payment resposibility us calculated.
$20,000 x $30,000 / [$50,000 x 80%= $40,000] = $15,000
TIP: Formula
Loss X Limit of Insurance ÷ [Value of Property (X) Coinsurance Percentage] = Loss Settlement
74
The insured owns a $1,000,000 home but only insures it for $600,000. The policy the insured bought has an 80% Coinsurance provision. Unfortunately the insured has suffered a $300,000 loss. Not including the policy deductible how much will the insured be paid? Why did the insured receive that percentage of his loss as a payout?
Step One: Amount of Loss $300,000
Step Two: Actual Amount of Insurance $600,000
Step Three: Building Value $1,000,000
Step Four: Coinsurance 80%
Computed as: $300,000 X [$600,000 ÷ ($1,000,000 X .8)] = $225,000 Loss Settlement (Claim Payout)
Answer: The insured will collect $100,000 of the $100,000 loss as the $400,000 of Dwelling coverage met the coinsurance requirement of 80% of the value of the dwelling at the time of the loss.
75
represent the amount of loss that is retained by the insured.
come in three types or styles: (1) straight deductibles; (2) percentage deductibles; and (3) franchise deductibles.
Deductibles
76
specify the deduction of a flat amount from a loss payment, regardless of the size of the loss.
Straight deductibles
77
specify the deduction of a percentage of the insured property or amount of loss Florida’s windstorm insurance is written with deductibles of 2%, 5% or 10% of the dwelling or building policy stated limits.
Percentage deductibles
78
specify that no payment shall be made until the loss equals or exceeds a prescribed amount, then the loss is paid in full.
Franchise deductibles
79
Timmie Tiger has a $500 Collision deductible on his auto policy. He lightly backed into a wall scratching the rear bumper cover resulting in $300 in damages. What amount will Timmie receive from his insurer?
$0 payout from the insurance company (Timmie's deductible is greater than his damages)
80
Tammy Tiger, backed into a tree at a destroying her trunk resulting in $3,500 in damages. What amount will Tammy receive for her insurer if she has a $250 Collision Deductible?
$3,500 in damages less $250 deductible = $3,250 claim payment from insurance company.
81
- calculated as a percentage of the insured property/dwelling.
- are used mostly in property insurance policies and then specifically with regard to the Wind/Hurricane peril.
- Typical ____ ______ offerings on a Florida property insurance policy are: 2%, 5% or 10% of the dwelling or building stated limits.
Percentage deductibles
82
It is important that you discuss with your insureds that the _____ _______ is a percentage of the dwelling/building and not of the loss.
percentage deductible
83
$300,000 Building with 2% Hurricane Deductible = ?
$300,000 Building with 5% Hurricane Deductible = ?
$300,000 Building with 10% Hurricane Deductible = ?
- $6,000 Hurricane Deductible expressed in dollars.
- $15,000 Hurricane Deductible expressed in dollars
- $30,000 Hurricane Deductible express in dollars.
84
Jack and Jill Insured have an insurance policy with Acme Insurance Company with a $300,000 Dwelling limit. The policy has a 2% Hurricane Deductible and an All Other Peril (AOP) Deductible of $2,500. What is the dollar amount of their Hurricane Deductible? How much will they be paid in a $50,000 Hurricane Loss? How much will they be paid in a $5,000 Hurricane Loss?
- $6,000 (calculated as $300,000 Dwelling x 2% stated hurricane deductible)
- $44,000 payment by the insurance company (calculated as $50,000 damages - $6,000 deductible)
- $0 payment by the insurance company as the damages are less than the hurricane deductible
85
Fred and Wilma Fieldstone have an insurance policy with Acme Insurance Company with a $100,000 Dwelling limit. The policy has a 5% Hurricane Deductible and an All Other Peril (AOP) Deductible of $1,000.
- What is the dollar amount of the hurricane deductible?
- How much will they be paid in a $50,000 hurricane Loss?
- How much will they be paid in a $10,000 hurricane Loss?
- $5,000 (calculated as $100,000 Dwelling x 5% stated hurricane deductible)
- $45,000 payment by the insurance company (calculated as $50,000 damages - $5,000 deductible)
- $5,000 payment by the insurance company (calculated as $10,000 damages - $5,000 deductible)
86
An insured has a $500 Franchise deductible and suffers a loss of $400, how much will the insured be paid on their claim?
No payment will be made
*NOTE: Franchise Deductibles are often referred to as “disappearing deductibles” as 100% of the claim is paid if the damages exceed the deductible.
87
1-2-3 steps to calculate a claim settlement
Step One: determine the damages or claim for recovery.
Step Two: determine the applicable deductible.
Step Three: apply insurance coverages.
FORMULA:
damages – deductible = recoverable amount
88
contain an insuring agreement wherein the insurer agrees: “to pay on behalf of the insured all sums the insured becomes legally obligated to pay as damages.“
Liability Policy Insuring Agreements
89
one limit will apply to all claims for bodily injury and property damage arising from a single accident; and the single limit is frequently called a Combined Single Limit and is abbreviated as “CSL”.
EX: A private passenger automobile policy has a single bodily liability limit of $300,000 which is the most the insurer will pay for any one injured party’s claim and also the total the insurer will pay in total for all claims.
Single Policy Limit
90
three separate limits are listed and apply as follows =
1. the first number is for the maximum limit to any one person injured in an accident.
2. the second number is for the maximum limit to all of the people injured in an accident.
3. the third number is the limit for all property damage in an accident.
EX: A private passenger automobile policy has split limits of $100, 000 per person and $300,000 per occurrence (written as 100/300 on many declarations pages). The policy will pay out no more than $100,000 for any one person and no more than $300,000 for any one occurrence.
Split Policy Limits
91
is really a “total limit” and it represents the maximum total insurance coverage that will be paid for the policy term for the perils to which the aggregate limit applies.
EX: A Commercial General Liability policy with a $1,000,000 Aggregate limit wil not pay out more than $1,000,000 in a policy term no matter how many claims are brought against the insured.
Aggregate Policy Limit
92
Liability insurance policies contain an insuring agreement which essentially state that the insurer agrees :
To pay on behalf of the insured sums the insured becomes legally obigated to pay
93
What amount will be paid to an insured who has an insurance policy with a combined single limit of $600,000 on three $200,000 individual buildings if a $250,000 loss occurs to one of the buildings
The policy will pay $250,000
94
The insuring agreement in a liability policy states that the insurer agrees to pay on behalf of the insured “all sums the insured”____________________________
Is legally obligated to pay
95
What amount will be paid to an insured who has an insurance policy with separate limits of $200,000 per building on three buildings and $250,000 loss occurs to one of the buildings
The policy will pay $200,000
96
A private passenger automobile policy has split liability limits of 100/300. The insured is involved in an At-Fault accident and two individuals in the other car have injuries of $100,000 each. How much will the policy pay in total?
$200,000
97
__________ __________ award money for tangible & intanglble economic loss suffered by a third party claimant
Compensatory damages
98
award money for the intangible losses such as pain & suffering, mental anguish, permanent injury, disfigurement, future loss of employment and pecuniary opportunity, and loss of reputation among others.
General damages
99
____ _______ are the tangible and calculable losses such as: medical bills, repair invoices, lost wages
Special damages
100
are awarded by the court to a third party claimant to punish, to provide equitable relief when compensatory damages are deemed inaqdequate, and as a warning to others regarding a similar breach or duty or failure act
Punitive damages
101
an act or omission by one party that injures or damages another party or parties for which the law recognizes as liability of one party to the other. Further the law recognizes the liability and affords a remedy to the injured or damaged party by and from the party which caused the injury or damage.
*NOTE: That acting or omitting party is referred to as a “tortfeasor” and the act is referred to as a tort.
Tort
102
________ Torts the tort by means of an intentional act and with premonition.
Intentional Torts
103
the tort by means of failing to act as a normal prudent person would.
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Unintentional Torts
(ordinary negligence)
```
104
a tort by means of an ultra-hazardous exposure or act.
Strict Liability
105
the tortfeasor did something which should not have been done which led to injury or damage.
EX: the operator of a motor vehicle drives through a red light and hits another vehicle.
The Act
106
the tortfeasor did not do something which they should have done which has led to injury or damage.
EX: a property owner does not advise an “invitee” of a dangerous condition on the property and the invitee is injured as a result.
An Omission
107
is where one party has damaged another and as a result is legally responsible for the injury or damages sustained by the other party.
Legal Liability
108
The failure to exercise that degree of care that the law requires to protect others from an unreasonable risk of harm. The failure to act as a prudent person would have acted under similar circumstances
Negligence
109
Occurrence
is the property damage or bodily injury from an incidence, accident or continuous and/or repeated exposure to substantially the same general harmful conditions.
110
Absolute Liability and Strict Liability
is liability placed on a party as a result of ultra-hazardous activities undertaken by or products produced by that party that exposes the public to such a degree of harm that no degree of care provides a defense to the imputed party.
EX: a dynamite factory is so inherently dangerous that even the prudent management of the factory would not absolve the factory from legal liability in the event of a factory explosion that injured third parties and damaged their property.
111
Vicarious Liability
is when the act or omission by one party is placed on another. Examples include the liability placed on parents for the acts of their children; acts of an employee placed on the employer; and acts of an independent contractor placed on their principal.
112
Criminal Liability & Civil Liability
two forms of Legal Liability
113
Criminal Liability
legal responsibility for breaking the law – prosecuted by a governmental body for violating a criminal law.
114
Civil Liability
legal responsibility between parties (most normally not a government body) concerning matters of breach of contract, intentional torts, strict liability, vicarious liability, and the run of the mill common negligence.
115
Consequences for Criminal Liability
imprisonment and fines
116
Consequences for Civil Liability
required contractual performance, injunction, payment for damages, payment for gross negligence (punitive), payment for bad faith
117
Civil Lawsuit
is a court-based process through which one person or entity seeks to hold another person or entity liable for some injury or damage.
118
A complaint
is a legal filing that starts a lawsuit and informs the party being sued of the claim against them. It states the facts and reasons for the claim against that party and also states the relief sought by the filing party and importantly “why” they are entitled to it.
119
The answer
is the legal filing by the defending party responding to the complaint by denying or admitting to the allegations of the complaint.
120
Assumption of Risk
The defense argues that when a perso knows of a risk of an activity AND that person voluntarily accepts the risk they do so at their own peril. It is argued that the person cannot recover for damage or injury which occurs as a result of the activity. In a nutshell, if you or I know that doing something poses a risk of harm to us and we sustain an injury while voluntarily engaging in it, we may be barred from any recovery from any other party.
* two tenants of the Assumption of Risk doctrine*
121
2 Tenants of the Assumption of Risk doctrine
1. the injured or damaged party knew of the risk including a full appreciation of the extent of the danger
2. the injured or damaged party voluntarily exposed themselves to the danger
122
Comparative Negligence
the doctrine of ______ _______ apportions liability to responsible parties and bars recover for whatever portion of a loss a party is deemed to be responsible for.
EX: In an auto accident where a prty is 60% at fault in an accident they coud recover 40% of their damages from the other party that was deemed 40% responsible. Conversely, the other party could collect for 60% of their damages but would be barred from the 40% for which they are responsible.
123
Dangerous Instrumentality Doctrine
Florida’s “_______ _______” doctrine is a common law doctrine which provides that the owner of an inherently “dangerous tool” is liable for any injuries caused by that tool’s operation. Most notably the doctrine imposes strict vicarious liability upon the owner of a motor vehicle who voluntarily entrusts that motor vehicle to an individual whose negligent operation causes damage to another.
124
Statutes of Limitations
is a law created to set the maximum time after an event within which legal action may be initiated; after the time has “tolled” no action can be brought
125
Statutes of Limitations for Breach of Contract
5 Years
126
Statutes of Limitations for Negligence
4 Years
127
Statutes of Limitations for Insurance Claims Against Insurance Company
5 Years from Date of Loss
128
Statutes of Limitations for Hurricane Claims
3 Years from Date of Loss
129
Statutes of Limitations for Wrongful Death
2 Years from the date of death
130
Wrongful Death Act
When a person’s death “is caused by a wrongful act, negligence, default, or breach of contract”, the estate of the deceased person can sue for the death and any resulting losses on behalf of the deceased person’s estate and any surviving family members.
* **Surviving family members may receive compensation for:
- the value of support and services provided by the decedent to the surviving family member
- loss of companionship, guidance, and protection provided by the decedent
- medical or funeral expenses paid on behalf of the decedent
131
Workers' Compensation
is considered an “exclusive remedy” for job-related injuries as it at affords employers immunity from legal liability for an employee’s work related injury in exchange for the guaranteed coverage of medical costs, missed work, and other injury-related expenses for the employee. In a nutshell, the employee does not have the duty to prove the employer was as fault for the injury in order to be compensated.
132
Florida’s Automobile Insurance laws
also provide limited legal immunity for automobile accidents causing bodily injury.
The law requires all registered vehicles to have a minimum coverage of $10,000 of Property Damage coverage and $10,000 of first party Personal Injury Protection (PIP); and imposes penalties for failing to do so.
In a nutshell PIP coverage provides first-party benefits for economic loss, without regard to fault. When someone is injured in an auto accident their first recourse for recovery is against their own PIP coverage; precluding recovery against the responsible party within those PIP policy limits.
133
Sovereign Immunity
comes from the English common law where the monarchy barred its subjects from filing lawsuits against the king and his court. Today, _____ _____ immunity keeps individuals from suing the state for any civil wrongs for injuries or damages stemming from the performance of government duties.
134
Florida’s "sovereign immunity" law permits claims against the state government up to
up to $200,000 for any one claim and a maximum of $300,000 for all claims from one incident or occurrence.
135
Breach of Product Warranty
is a claim for injury or damage that results from a product that malfunctions or breaks leading to injury or damage; OR from the sale of a functional product which is “mis-sold” and is not intended for the use the seller alleges it to be capable of. The first is referred to as “product warranty of merchantability” and the second “implied warranty of fitness”. In any event, manufacturers and sellers have a duty to make and sell products that are not dangerous to the consuming pubilc and when this duty is breached civil liability results.
EX: The McDonald’s Hot Coffee Case
136
Insurer's Obligations /Responsibility to defend an insured in a Liability policy
EX: “Our duty to settle or defend ends when our limit of liability for the “occurrence” has been exhausted by payment of a judgment or settlement.”
137
Reservation of Rights
A “____ __ ____” letter is sent to an insured to put the insured on formal notice that a claim may not be covered by the insurer’s policy.
____ __ ____ letters to an insured do not deny the insured’s claim. However, the letter indicates that the insurer is investigating the claim and reserves the right to deny the claim after it completes its investigation.
138
interpleader
In the event of disputes between lienholders and the claimant or in the situation where policy limits do not adequately compensate all parties the insurance company may file an _______ asking the court to determine the distribution of the claims proceeds.
139
Waiver
is the purposeful forbearance of a known right OR the unintentional forbearance of the right due to the intentional actions or words by a party which are inconsistent with claiming a right a party has. With the doctrine of “_______” the party has a right and waives the right.
140
Estoppel
is a legal doctrine where a party creates an obligation for itself or loses a right based upon the party’s words, acts, or failure to act communicated to a second party. The second party’s detrimental reliance upon the words, acts, or failure to act creates an obligation from the first to the second. The doctrine of “_______” creates a right for the second party (a right that heretofore did not exists) whose detrimental reliance has exposed or caused the second party harm.
141
Waiver
EX: If an insured makes a late payment on his automobile insurance policy the insurance company does NOT have to accept the payment. If however, they accept the payment and reinstate the insured’s policy they have “_______” their right to cancel the policy for “non-payment of premium” for this one-time event.
142
Estoppel
EX: If the insured ALWAYS makes his payments late AND the “late payments” has been going on for three full years AND the insurance company ALWAYS accepts the late payment and ALWAYS reinstates the policy thereafter the insurer has created a standard practice of accepting the insured’s late payment. If the insured makes another late payment and the insurance company decides that it WILL NOT accept the late payment and WILL NOT reinstate the policy the insured could claim that the company has ALWAYS accepted his late payments without any issue and that he relied upon their consistent acceptance and reinstatement when making such payments. A court “may” force the insurer to accept the payment and reinstate the policy "estopping" the insurer from raising the defense of non-payment of premium in their policy. This is an example of Waiver or Estoppel?
143
Warranty
is a policy condition, either based on information in the insured’s application or inserted by the insurer into the policy.
EX: the insured declaring in an application for crime insurance that a burglar alarm exists, with the insurer then inserting in the policy a provision that coverage is contingent on the alarm being maintained.
144
Misrepresentation
is an untrue statement by the insured, made in an application for insurance but that does not become a part of the policy.
EX: if the insured stated in the crime application that no prior crime losses had been experienced, when in fact there had been prior crime losses, it would be a misrepresentation.
145
Concealment
is the failure of the insured to reveal relevant facts known to the insurance company when applying for insurance.
146
The insurer may not have to perform if the insured (choose the overall best answer)...
1. is guilty of a material concealment
2. breaches a warranty
3. each of these may bar the insured from a claims recovery
4. is guilty of a material misrepresentation
147
Warranty
is a representation of a material fact or condition of which the issuance of the insurance policy is conditioned and the warranty is considered part of the insurance policy.
NOTE: (1) The breach of a Warranty is grounds for denying a claim; and (2) a warranty is considered part of an insurance policy.
148
Misrepresentation
Note: (1) A _________ is not normally grounds for a claim denial; and (2) a __________ is an untrue statement made by the insured when applying for insurance and is NOT a part of the insurance policy.
149
Concealment
Note: (1) A ________ is not normally grounds for a claim denial; and (2) a ________ is not a part of the policy.
150
Misrepresentation
An untrue statement made by the insured in an application which does NOT become part of the policy is
151
Misrepresentations, omissions, concealment of facts, and incorrect statements shall not prevent a recovery under the policy or contract unless (choose the overall best answer).
1. they are material to the acceptance of the risk
2. they are material to the hazard assumed by the insurer
3. they are fraudulant
4. each of these may preclude an insured from a claims recovery
152
Cancellation
An insureds can _______ at any time.
Insurance Companies ________ require advance notice to the insured.
153
Non-Renewal
Insurance companies are required to provide (45) forty-five days’ notice of either a policy renewal or _________. If the policy is being ________ the reason for the _______ must be stated on the ______ notice.
154
Insured’s Duties Following Loss
- Prompt notice of any loss must be given to the insurer.
- The Insured must cooperate with the insurer.
- The Insured must act in a way to preserve the insurer’s rights.
155
Property Insurance Policy Conditions
- inventory damaged property.
- use reasonable means to protect against further loss.
- allow insurer to inspect damaged property.
- provide records and documents as requested.
- submit to questions under oath.
- report thefts to the police.
- reveal any other insurance that exists.
- submit a “proof of loss” within a given period of time as requested.
156
Liability Policies - Insured's Duties Following Loss
- Notify the insurer of names and addresses of claimants and witnesses to any accident.
- Promptly forward all legal papers received.
- Aid the insurer in settlements.
- Avoid voluntary payments or assumption of obligations.
157
Subrogation
the right an insurance company has when an insured has a right to collect damages from another party, but instead elects to claim the damages under his/her own insurance policy, those rights against the other party are transferred to the insurer
EX: is when an insured driver’s car is totaled through the fault of another driver. The insurance carrier reimburses the insured under the terms of the policy and then pursues legal action against the driver at fault.
158
Petey’s automobile incurs $1,000 of physical damage in an accident caused by Spanky. Petey receives a claims payment of $800 from her own insurer, because of a $200 deductible clause. What subrogation right does the insurance company have?
1. Petey's insurance company now has the right of recovery against Spanky
2. Spanky or Spanky's insurance company will owe $800 to Petey's insruance company
3. Neither statement is correct
4. Both statements are correct
A: #4
159
Jill’s automobile incurs $10,000 of physical damage in an accident caused by Michelle. Jill receives a claims payment from her own insurer; she has a $200 collision deductible. How much will Jill be paid from her own insurance company if she files a Collision claim with them?
$9,800 payout to Jill ($10,000 in damages less $200 deductible).
160
Jill’s automobile incurs $10,000 of physical damage in an accident caused by Michelle. Jill receives a claims payment from her own insurer; she has a $200 collision deductible. Can Jill also file a claim against Michelle's insurance company for $10,000?
If Jill is paid by her own insurance comapny, her insurer is SUBROGATED to her right of recovery against Michelle's insurance company. Jill will not be able to collect twice.
161
Policy Assignment
Insurance policies are “personal contracts” and cannot be "assigned" to another party without specific written agreement from the insurance company.
162
Policy Changes
All policies provide that any changes to the policy must be made by the insurer, in writing.
163
Policy Period
The ____ ____ encompasses the dates the insurance policy begins and ends and thereby defines the terms when a loss is covered.
164
Policy Territory
Most insurance policies cover the geographic regions of the: United States + United States possessions + Canada.
165
The Other Insurance
___ _____ _____ condition stipulates how an insurance policy will apply in the event that more than one insurance policy may apply per occurrence.
The insured should not be able to collect more or have their legal liability indemnified for more than their actual damages.
166
Other Insurance: Pro-Rata Share
Each policy pays only the limits in relation each bears to the total of the combined policy limits.
167
COMPUTING PRO-RATA SHARE
Set up the “proportions” in Pro-Rata Share (Other Insurance).
EX: A loss has occurred and two liabilities polices are determined to apply to the same loss. The first policy has a $500,000 limit and the second a $1,000,000 limit.
Each policy is responsible for its policy limit divided by all applicable limits
The first policy $500,000/$1,500,000.
The second policy’ $1,000,000/$1,500,000.
168
Pro-Rata Example:
The insured has had a $100,000 loss and it has been discovered the she has two liability policies which both apply to the same loss.
The first policy has a $500,000 limit and the second policy has a $1,000,000 limit.
What amount will the first policy be responsible for?
$33,333 of the loss ($500,000/$1,500,000 X $100,000 loss)
169
Pro-Rata Example:
The insured has had a $100,000 loss and it has been discovered the she has two liability policies which both apply to the same loss.
The first policy has a $500,000 limit and the second policy has a $1,000,000 limit.
What amount will the second policy be responsible for?
$66,667 of the loss ($1,000,000/$1,500,000 X $100,000 damages)
170
Pro-Rata Example:
The insured has had a $100,000 loss and it has been discovered the she has two liability policies which both apply to the same loss.
The first policy has a $500,000 limit and the second policy has a $1,000,000 limit.
Can the claimant collect $100,000 against both the first and second policy?
No, the claimant's recovery will be relegated to their total damages of $100,000.
171
Primary
The policy that is “_______” must exhaust all of its applicable limits before any other insurance policy/coverage applies.
172
Excess
The policy that is “_____” does not apply until all other applicable polices have been exhausted.
173
Equal Shares
Each policy pays an _____ _____ irrespective of the liability limits of each.
174
Cancellation
__________ conditions in general allow the insured to cancel at any time. However, the insurance company must provide some specific number of days as advance notice so the insured will have time to replace the coverage.
175
Liberalization
is a policy provision which states that if the insurer adopts a revision to the insurance policy which would broaden coverage without additional premium within some period of time prior to the policy period (i.e., 60 days) or during the policy period, the insured receives the benefit of such broadened coverage. Of course the insurer can never reduce, narrow, or eliminate coverage during the policy term.
Note: Liberalization results in broader coverage for no additional premium.
176
Abandonment
The _______ clause states that an insured cannot “dump” (a.k.a. abandon) damaged property on the insurer and demand its full value.
177
Severability
Standard liability insurance policies provide for “_______ of interests” which means the insurance coverage applies separately to each insured as if other insureds did not exist.
178
Appraisal
The _________ condition in a policy is used to resolve differences between the insured and insurance company when there is a dispute as to the amount of loss in a claim.
The ________ condition provides for the insured and insurance company to each select an appraiser, and for the two appraisers that were selected to then select a third appraiser with agreement by any two of the three appraisers considered binding.
NOTE: The Appraisal Clause/Condition only applies to the amount of loss in a claim, and does not address questions to whether a loss has occurred or if the loss is covered by a given policy.
179
Vacancy
is by and large when the property is without occupant or content (entirely and materially empty).
180
Unoccupancy
is by and large when the property has contents but the owner, tenant, or property custodian are not present for some extended period of time. The amount of contents necessary to satisfy the “content” requirement is normally implied to be that necessary to maintain a functional and habitable dwelling.
NOTE:
Dwelling Under Construction = Occupied
Dwellings Being Renovated = Vacant
181
Burglary
the unlawful entry into a building with the intent to commit a crime usually theft.
182
Robbery
unlawful taking of property by force/intimidation directly from a person or in his/her presence.
183
Theft
the unlawful taking of property without the owner’s consent.
184
Mysterious Disappearance
property disappearance which cannot be explained and the probability of theft have been eliminated.
185
Indemnity
The principle of insurance which provides that when a loss occurs, the insured should be restored to the approximate financial condition occupied before the loss occurred, no better, no worse.
186
Declarations
The section of an insurance contract that shows who is insured, what property or risk is covered, when and where coverage is effective and how much coverage applies.
187
Peril
A contingency which may cause a loss.
188
Hazard
A condition that introduces or increases the likelihood of loss from a peril.
189
Direct loss
Physical harm to tangible property
190
Market Value
The purchase price in an open and fair market among equally knowledgeable buyers and sellers.
191
Salvage Value
The residual value of the damaged property.
192
Coinsurance Clause
The clause that requires an insured to pay part of a loss if the coverage provided under the policy limits is less than a specified percentage of the value of the property at the time of loss.
193
Specific Insurance
Property insurance policies issued with separate limits for each individual building.
194
Blanket Insurance
Property insurance policies issued with a single coverage limit for two or more coverage items.
195
Waiver
The purposeful forbearance of a known right OR the unintentional forbearance of the right due to the intentional actions or words by a party which are inconsistent with claiming a right a party has.
196
Estoppel
The legal doctrine where a party creates an obligation for itself or loses a right based upon the party's words, acts, or failure to act communicated to a another.
197
Warranty
A specific agreement between the insured and the insurer that certain conditions will be met. This agreement becomes a part of the policy.
198
Other Insurance Clause
