Ch 1 Flashcards
Alteration or addition made to a building at the expense of an insured who does not own the building and who cannot legally remove them.
Improvements and betterments.
What are the three factors to decide if something is a fixture?
Attachment
Adaptation (a net is a fixture of a tennis court)
Intent (to move items to new property)
What are the steps in determining coverage?
1) determine if direct physical moss
2) cause of loss covered?
2a) review policy definitions for clarification
3) Do any additional coverages apply to the loss?
4) do any exclusions apply?
5) have all conditions been met?
What is the order of sources in determining s definition?
1) policy definition
2) court precedence
3) dictionaries
4) common usage
What are the extended coverage perils?
WHARVES
wind, hail, aircraft, riot, vehicles, explosion, smoke
What are the broad form perils?
V&mm
Glass
Falling object
Weight ice snow sleet
Collapse
Steam/hot water heat
Accidental discharge or overflow of water/steam
Freezing of plumbing, hear, a/c, appliances
Suddenly and accidental damage from artificially generated electrical current.
“If a loss is caused by a covered peril and a noncovered peril, the loss is covered if the “dominant,” “efficient,” “prime,” or “moving cause is a covered peril.”
Efficient cause approach to concurrent causation.
The entire loss is covered as long as on of the causes is a covered cause of loss.
Liberal approach to concurrent causation.
If a covered cause of loss and an excluded cause of loss combine to produce the loss, then the loss is covered.
Conservative approach to concurrent causation.
What does a jurisdiction following the “efficient cause” to concurrent causation to with an an “all-risks policy?”
Insurer has to provide the policy excluded the dominant cause
3 purposes of the insurance interest requirement.
1) indemnify the right people the right amount
2) prevent wagering on losses
3) deter fraud
5 things someone with personal ownership can do with their property.
Change, use, sell, rent, dispose of it how choose
Different between joint owner and tenant in common.
Joint owner has interest to full value of property. When one dies, remaining tenant has full own their
Tenant in common owns varying percentage and estate gets their share. No survivorship.
Difference between corporations and proprietorships/partnerships with regard to owning and having interest in business property.
Corporation is like a person; entity can own. Partnership is a shared interest of each owner.
Tenants interest in leased property.
Insurable interest arises out of property’s use value got time remaining on lease. Have interest in any improvements or betterments for rest of lease.
Mortgagee’s interest in house.
Loan’s unpaid balance is extent of interest.
George and wife live in tenancy by entirety state. They have a mortgage and have no other debt. What is the nature and extent of insurable interest in their property?
The bank has an interest on balance owed.
Insureds each have 100% interest.
Alice and Peter have a partnership, A&P, Casino, which leases a building owned by Tump. A&P is 15 years into their 20 year lease. All slots and tables become Trumps when the lease is up. What is the nature and extent of insurable interest in their property?
Alice and Peter have interest in slots and tables for rest of lease and interest in occupancy for rest of lease.
Trump has ownership interest in full value of property plus tables and slots.
Mortgages’ rights, separate from owners.
Right to separate loss settlement even if insured can’t recover. Entitled to cancellation notice.
Phil got laid off after buying a house and stopped paying mortgage. Insurance was mortgagee billed. Before foreclosure a fire made home a total loss. Phil didn’t comply with conditions of policy. What should US bank do?
Bank pays unpaid premium and still makes claim even if insured’s claim is denied. They can receive loan balance.
Why is it important to distinguish personal property from real property?
Possibility of overlapping coverages. Covered by different sections of policy and valued differently.
3 factors to determine if something is a fixture or personal property.
Attachment, adaptation, intent
What happens to tenants improvements when lease is up?
Leases usually say items can or must be removed at end of lease OR that ownership goes to landlord at end of lease.
Direct vs. indirect loss
Direct: results immediately. Store burning down.
Indirect: loss of customers due to the fire.
What is difference between physical and nonphysical loss?
Physical: tangible property damaged, destroyed, disappeared
Nonphysical: financial loss (inventory change due to obsolescence, loss of value of investment)
Which perils were added to fire insurance by ECE?
Lightning, explosion, wind, hail, smoke, vehicles, aircraft, riot/civil commotion
Which perils were added to fire insurance by the broad form?
V&MM, springer leakage, Sinkhole collapse, volcano, falling objects, weight of snow/ice/sleet, water damage
Synonym for specified perils.
Named perils
Why do special-form policies, which have more exclusions than specified-peril policies, have broader coverage than specified-peril policies?
Because everything is covered unless specifically excluded. The insurer has the burden of proof and must prove that an exclusion applies.
Why is it important to determine which party has the burden of proving the cause of loss? T
Because the party who has burden of proof has a duty to prove truth of information in dispute.
Safety a insurance got a loss report from Phil’s Coffee that said “extensive water damage to inventory. “ Phil’s coffee has a specified-perils policy.
Safety found the water came from a leaky skylight. Safety wants to deny based on wear and tear (extensive rot and mold around skylight)
Phil’s fights it.
Who has burden of proof?
Phils
Why are definitions important to determining what is not covered in a specified-perils policy?
Anything not in definition is note part of peril and is not covered.
Why is distinction between hostile vs. friendly fire important?
Friendly stays in intended place and hostile escapes. Only hostile fires are covered.
Why do ground surge lighting losses pose problems?
No evidence other than damage to electrical.
What related perils aren’t included in hail peril?
Sleet, icy snow
Generally accepted definition of riot
A breach of the peace by three or more persons assembled together.
How do you prove intent to commit vandalism?
Circumstantial evidence (graffiti, pattern of similar damage)
Theft
Fraudulent taking of personal property belonging to another without consent.
Do most policies cover or exclude regular glass with safety glazing (required by code)?
Cover
What does NOT constitute collapse according to HO-3 and BPP?
Building in danger of falling down or caving in. Part of building left standing. Building with cracking, bulging, sagging, bending, leaning, settling, shrinkage, or expansion.
Why are some perils (earthquake, war) uninsurable?
Unpredictable and catastrophic. Cannot speed risk. Unavoidable.
Justification for uninsurable loss exposure exclusion.
Difficult to spread risk
Justification for gradual hazards exclusion.
Unavoidable.
Justification for moral or morale hazards exclusion.
Excludes damage caused by character defects or disposition to be careless.
Justification for specialized coverage exclusion.
Duplicates other specialized policies.
How does an adjuster figure out the value of increased cost of construction or demo resulting from ordinance or law?
Must complete 2 estimates. One - repair replace as existed before loss. Two - repair of rebuild in compliance with code.
Doug puts in claim for awnings vandalized by squirrels. How does adjuster reply?
No intent.
Phils Widgets had a water pipe rupture while closed. Part of building eroded away and the wall fell. Ruptured pipe covered but not earth movement or erosion. How is concurrent causation handled under the efficient cause approach?
Water was efficient cause so loss is covered.
Explosion
Sudden and violent release of pressure or energy that causes a bursting or breaking often accompanied by noise.
Under which provision of the Building and Personal Property Coverage Form (BPP) is the maximum payment $10,000 or five percent of the building limit, whichever is less?
Increased Cost of Construction
Worldwide Warehousing has a Building and Personal Property Coverage Form (BPP) with a $1,000,000 limit on a building and a $5,000 deductible. The warehouse suffers a $1,010,000 fire loss. Which one of the following amounts will Worldwide’s insurer pay?
$1,000,000. Wouldn’t pay more than the limit. Since loss exceeded the limit the deductible is not held.
Under which provision of the Building and Personal Property Coverage Form (BPP) is the maximum payment $10,000 or five percent of the building limit, whichever is less?
Increased Cost of Construction
Worldwide Warehousing has a Building and Personal Property Coverage Form (BPP) with a $1,000,000 limit on a building and a $5,000 deductible. The warehouse suffers a $1,010,000 fire loss. Which one of the following amounts will Worldwide’s insurer pay?
$1,000,000. Wouldn’t pay more than the limit. Since loss exceeded the limit the deductible is not held.
