Casualty Basics

Question 1

What is the difference between an accident and an occurrence?

Answer 1

Accident is a sudden, unplanned and unexpected event

An occurrence includes losses caused by continuous or repeated exposure to certain conditions.

Question 2

Failure to behave in the same manner as would a reasonable and prudent person constitutes what?

Answer 2

Negligence

Question 3

An act or event considered a natural and reasonably foreseeable cause of the damage to property or injures a plaintiff is considered what?

Answer 3

Proximate cause

Question 4

The injured party must be completely free of fault in order to collect under this type of negligence.

Answer 4

Contributory negligence

Any negligence on the part of the injured party that contributed to the injury normally will defeat the claim.

Question 5

In which of the two types of damage - property damage and bodily injury - is it more difficult to determine the monetary value of the loss?

Answer 5

Bodily injury.

Why?
Since it may lead to claims by the injured party not only for medical expenses and lost wages, but also for disfigurement, pain and suffering, mental anguish, and loss of consortium.

Question 6

Any deliberate act that causes harm to another person defines what term?

Answer 6

Intentional Tort

Question 7

When absolute liability is involved, does the injured party need to prove negligence?

Answer 7

No

Question 8

If a product is unsafe, what kind of liability applies to the manufacturer?

Answer 8

Strict liability

Question 9

Evaluating applications submitted to the insurer and determining whether a policy should be issued is a function of?

Answer 9

An underwriter

Question 10

This formula calculates what?

(incurred losses + loss adjusting expense) / earned premium = __________

Answer 10

Loss ratio 
(incurred losses + loss adjusting expense) / earned premium = loss ratio

Question 11

The practice of computing a price per unit of insurance that applies to all applicants possessing a given set of characteristics defines what type of rating?

Answer 11

Class rating

Question 12

Basic underwriting information: insured’s name, address, amount of coverage and premiums, and description of insured locations.
Also any supplemental representations by the insured.

The above listed information is included in a policy’s _____________?

Answer 12

Declarations

Question 13

Additional amount of coverage for specific loss expense, at no additional premium describes what types of payments?

Answer 13

Additional or supplementary payments

Question 14

What is included in the conditions section of a policy?

Answer 14

General rules or procedures that the insurer and insured agree to follow.

Question 15

What does the exclusions section of a policy specify?

Answer 15

What perils are not insured against and what persons are not insured.

Question 16

What is the difference between cancellation and nonrenewal?

Answer 16

Cancellation is the termination of a policy by either party prior to the expiration date
Nonrenewal is the termination of a policy at its expiration date by not offering a continuation of the policy.

Question 17

Why does an insurance company discourage abandonment?

Answer 17

May lead to further loss

Question 18

The acquisition by an insurer of an insured’s rights against any third party for indemnification of loss or other payment, to the extent that the insurer pays the loss defines what term?

Answer 18

Subrogation

Question 19

The other party’s negligence or fault will not necessarily defeat the claim, but will be used to mitigate the damages payable to the other party describes what form of negligence?

Answer 19

Comparative negligence

Question 20

This type of rating is used when credible statistics are lacking or when the exposure units are so varied that it is impossible to construct a class.

Answer 20

Judgment rating

Question 21

In this type of rating, rates are developed by applying a schedule of charges and credits to some base rate to determine the appropriate rate for an individual exposure.

Answer 21

Schedule rating