512 - Module 1 Flashcards
Surrender ownership of damaged property to the insurance company so that a total loss can be claimed.
Abandonment
When the insured is held responsible for damages, even when no negligence has occured.
Absolute liability
Agreeing to the terms of a proposed contract.
Acceptance
Replacement cost minus depreciation
Actual Cash Value (ACV)
Responsible for investigating insurance claims and determining the amount of payment.
Adjuster
Those with higher risk are more likely to purchase insurance.
Adverse selection
A contract where the outcome is controlled by chance, and the dollars that change hands are often of substantially unequal amounts.
Aleatory contract
Something about a property that is likely to attract or injure children. Insured must take steps to prevent harm. ie. put a fence and locks around a pool.
Attractive nuisance
Says who can legally bind an insurance company
Express Authority - specifically conferred on the agent.
Implied Authority - not expressly granted, but the agent is assumed to have in order to transact the insurer’s business.
Apparent Authority - appearance or assumption of authority based on actions, words or deeds.
Authority
Either party can enforce the contract in a court of law.
Bilateral
Individuals who represent many insurers, the agent of an insurance buyer.
Broker
Agents sell property and liability insurance for only one company (direct writers), and aren’t allowed to contract with other companies.
Captive agents
Agents sell life insurance in a company-owned branch office system. Sometimes captive agents and sometimes allowed to contract with other companies. Agents supported by the company, and have production requirements.
Career agents
Splitting of costs,
or
Minimum percentage of insurance required to avoid penalty or inadequate insurance when there are partial losses.
Coinsurance
If others cause you to suffer a loss, they are obligated to pay you for your loss, and their liability is not reduced just because you have insurance.
Collateral source rule
Reduces the defendant’s liability in some proportion based on the injured party’s contribution to the total negligence.
Comparative negligence
The intentional withholding of material information, which violates the requirement of utmost good faith, even if no specific question arises about that information.
Concealment
Insurance contracts, because the insurance company pays on the condition that a covered loss occurs.
Conditional
The act or the payment for the act. Each party must give the other something of value.
Consideration
Promise(s) that, if breached, are enforceable by law through remedy or performance.
Contract
The two parties are in conflict that cannot be resolved without the legal system.
Contract disputes
Liability related to an asset or activity; eg. acquisition of an asset resulting in liability to a lender, or a membership contract putting responsibilities on clients.
Contract law
A contract that is prepared by one party and either accepted or rejected by the other. No negotiation.
Contract of adhesion
If any negligence on the part of the injured party contributes to the injury, it absolves the other party of liability. This is a strict approach, and has been replaced by comparative negligence.
Contributory negligence
Retained risk, it is the portion of insured losses that the insured pays before the insurance company pays anything.
Deductible
Prevents a party from asserting a right because his own action or behavior misled someone (even unintentionally) who relied on this understanding to his own detriment.
Doctrine of estoppel
When a party, by their own actions (or agent’s actions) has voluntarily relinquished or surrendered a known right.
Doctrine of waiver
The result of changes in the economy, such as business cycle or inflation. Insurance does not typically cover.
Dynamic risks
How a court implements its decision once it has decided what the understanding was between the parties, or at least what it feels is fair under the circumstances.
Equitable remedies
Indirect regulation through the McCarran-Ferguson Act in 1945 in areas such as fair labor standards and anti-trust matters.
Federal regulation
When insurance companies expect their agents to make informed recommendations and assess the potential for clients to qualify for coverage.
Field underwriting
Risks affecting a large group of people. Ex: recessions and earthquakes.
Fundamental risks
Increases the potential for a loss
Hazard
Process by which the insured is made whole by the insurer.
Indemnification
Insured is restored to the financial position they were in before they suffered the loss.
Indemnity
Representatives for several insurance companies.
Independent agents
Elements include:
*Law of large numbers makes losses predictable
*Loss must be definite and measurable
*Loss must be fortuitous (accidental)
*Loss must not be catastrophic to the company
Insurable risk
Use of certain contractual concepts and characteristics, while not unique to the insurance industry, are used nowhere else in this manner.
Insurance contracts
Individuals in various distribution channels used by insurance companies to provide their products and services.
Insurance producers
Modification of contributory negligence, will not bar the injured party’s recovery if the other party had a chance to prevent the accident and failed to seize the chance.
Last clear chance
Large number of similar potential losses so that the insurer can reasonably apportion the expected financial loss.
Law of large numbers
The purpose of the contract. Not enforceable if the object is illegal.
Legal object
The series of steps taken when an insured property loss occurs.
Loss adjustment process
When a false statement is made that at least partially induces the insurance company to issue a contract. It must be material or significant to void a contract.
Misrepresentation
When a client is unethical or misrepresents themselves to obtain insurance or induce payment of a claim.
Moral hazard
Client indifference. “It’s okay, it’s insured.”
Morale hazard
The instance of losing one’s health through illness or injury.
Morbidity
The instance of death
Mortality
Insurance companies that pay profits to members
Mutual companies
Made up of commissioners from all 50 states, created model laws and gives accreditation to states that use their model.
NAIC - National Association of Insurance Commissioners
When duty of care owed by the defendant in a lawsuit is determined by reference to a statute. ie. speeding in a school zone.
Negligence per se
One party states they will do something if the other party agrees to do something.
Offer
Insurer can repair or replace only a part, to restore to a full set.
Pair or set option
When parties put their agreement into a final, complete, written form, evidence of prior understandings cannot contradict the writing.
Parol evidence rule
Risks affect individuals or small groups of people.
Particular risks
The cause of a loss
Peril
Not transferable without without written permission of the other party, because the nature of the risk is related to the individual who owns the contract. Sometimes the benefits can be transferred though, as with a lien.
Personal contracts
Marketed by private insurance companies. Ex: disability, health, long-term care, property, liability, life insurance
Private insurance
Often life insurance agents, they sell insurance personally, don’t have specified territories, and can hire other agents to work for them. Not prohibited from representing other insurers, but usually required minimum of new business.
Producing General Agents (PGA)
An uninterrupted sequence of events that brought about the damage.
Proximate cause
Designed to enhance public trust in financial institutions. Ex: FDIC, SIPC, PBGC (Pension Benefit Guaranty Corporation)
Public insurance
The chance of a loss or no loss; ie. no chance of gain.
Pure risks
The insurer is held to the terms established by the appointed agent.
Ratification
An equitable remedy by which the written instrument between the parties is changed to express the original intentions of the parties.
Reformation
An equitable remedy by which the original contract is deemed null from its beginning.
Rescission
The possibility of a loss
Risk
Risk management technique that minimizes risk of loss. Includes risk avoidance and risk reduction.
Risk control
Risk management technique that pays the costs of losses incurred. Includes risk retention and risk transfer.
Risk financing
When the insurer takes ownership of the property and sells it to reduce its loss.
Salvage
Method of risk retention. Requirements:
*Enough homogeneous exposure units to make losses predictable.
*Adequate funds to cover losses.
*Able to administer insurance functions as efficiently as an insurance company.
*Able to manage investment of self-insurance fund.
Self-insurance
Mandatory insurance administered by the government, with benefits mandated by law. Ex: Social Security, Medicare, Medicaid, and workers’ compensation.
Social insurance
Involves both the chance of loss and the chance of gain. Not insurable.
Speculative risks
States responsible for direct regulation of insurance:
Legislature passes laws
Insurance department sets regulations and administers compliance
Courts interpret laws and regulations, and provide recourse
State regulation
Result from factors other than changes in the economy, such as earthquakes for floods. They tend to occur with regularity, and can be insured.
Static risks
Insurance companies that pay profits to shareholders
Stock companies
A case in which people cause extra-hazardous situations through their activities. ie keeping wild animals or skydiving.
Strict liability
Insurance company right to recover loss payments if a different insurance company or person is found responsible for the loss
Subrogation
Insurance that cannot be purchased using normal distribution channels within a state. Agents have authority to go outside the state in needed. Almost exclusively in the property and casualty field.
Surplus-line and Excess line
When someone causes physical, emotional, or financial harm to another.
Tort
Regarding liability for a loss resulting from the use of an asset or from an activity, like a boating accident or practicing one’s profession.
Tort law
The person who causes physical, emotional or financial harm to another.
Tortfeasor
Those who have the job of determining whether a risk is reasonable, and the degree to which the insurer is willing to accept it.
Underwriters
When only one party can enforce the contract in a court of law.
Unilateral
Activities that involve negligence.
Unintentional torts
Trust that the applicant is honest, and there is no need to prove every fact when applying.
Utmost good faith
When someone is held liable for the acts of another, such as parents and a child, or employers for an employee.
Vicarious liability
Not enforceable; lacks one or more of the requirements of an enforceable contract.
Void contract
Able to be voided by a party of the contract.
Voidable
Contract where one party has the option of voiding the contract, but the other party is bound. Usu. for cases involving a minor or someone legally incompetent.
Voidable contract
Inserted into contracts to protect the insurer, states that only specific individuals have authority to approve changes or waivers.
Waiver provision
A statement by the applicant that all of the information on the application is absolutely true.
Warranty
