Chapter 2 - Property Flashcards
1st Party
Insured
2nd Party
Insurer
Accident
A sudden, unforeseen, unintended, and unplanned event from which loss or damage results.
Occurrence
An accident includes continuous or repeated exposure to the same general harmful conditions.
Cancellation
The termination of an insurance policy before its expiration date. Once cancelled, a policy provides no coverage. A policy may be cancelled by the insured or insurer.
Pro Rata Cancellation
A proportionate cancellation of insurance that refunds premium to the insured based on the precise number of days coverage was in effect. The earned premium is the premium charged and retained by the insurer for the number of days coverage was in place; the unearned premium is the premium refunded to the insured for the number of days coverage was not in place.
Short Rate Cancellation
A cancellation of insurance that incurs a financial penalty. Sometimes when the insured cancels the policy before its expiration date, a short-rate cancellation is issued. The insurer retains a portion of the unearned premium to cover costs.
Flat Cancellation
A cancellation of insurance that is retroactive to the effective date of the policy. No coverage is provided and the insurer must refund the policy premium paid by the insured.
Nonrenewal
The termination of a policy at the expiration of its term. The policy does not renew and no coverage is provided after the expiration date.
Proximate Cause
The primary cause of loss. If only one peril caused the loss, the proximate cause is the first event in the unbroken chain of events that resulted in loss. If more than two perils caused or contributed to the loss, the proximate cause is the peril having the most significant impact in generating the loss or damage.
Personal injury liability includes which of the following?
A. Medical payments
B. Libel and slander
C. Theft
D. Sickness and disease
B. Libel & Slander
Personal injury liability is the legal liability for injury other than bodily injury or property damage. Examples of personal injury include libel, slander, false arrest, invasion of privacy, and copyright infringement.
Hostile Fire
A fire that burns outside its intended boundaries, or becomes uncontrollable. Examples of a hostile fire include a wildfire or a fire that damages a home when a spark from a fire in the fireplace ignites a piece of furniture.
Friendly Fire
A fire that was intentionally set and stays within its intended boundaries (e.g., a fireplace) and results in smoke damage to the inside of a fireplace. Property insurance does not cover damage from a friendly fire.
Inherent Vice
A quality within property that causes it to damage or destroy itself. Examples include rust, rot and the fading of paint. Inherent vice is not covered by a property policy.
Binder
A legal agreement issued by an insurance company or a producer that provides temporary proof of insurance until the insurer is able to issue an insurance policy. Binders are issued for specific time periods (maximum of 60 days) and automatically end when the policy is issued. Binders contain the name of the insurer, the amount and type of insurance, and the perils insured against.
Arbitration
Process whereby a disputed claim is decided by a neutral third party. The disputing parties choose the impartial third party and agree in advance to accept the final decision of the arbitrator, who makes a decision after a hearing where both parties offer evidence.
Right of Salvage
The right of the insurer to take possession of damaged property after paying for its loss. The salvage belongs to the insurer.
Salvage Value
The amount for which property can be sold at the end of its useful life. In property insurance, the salvage value is the scrap value of damaged property.
Endorsement
A policy form that alters or adds to the provisions of a property and casualty insurance contract.
Hostile fire
i.e. wildfire, fire that begins with a spark from fireplace
Friendly Fire
Intentionally set, stays within its boundaries (i.e. smoke damage to inside of fireplace) NOT covered by property insurance
Inherent Vice
rust, rot, faded paint (NOT covered)
Binder
Temporary proof of insurance, 60 days MAX
Arbitration
neutral 3rd party decides outcome of claim
Right of Salvage
Insurer takes possession of damaged property, belongs to insurer
Salvage Value
Scrap Value
Endorsement
policy form with provisions to insurance contract
Accident
Sudden, unforeseen, unintended, unplanned, results in damage or loss
Occurrence
an accident w/continuous exposure to same harmful conditions
Cancellation
Termination of policy before expiration date
Pro Rata Cancellation
cancellation that results in earned premium or unearned premium
Short Rata Cancellation
cancellation that results in a financial penalty, insurer keeps portion of unearned premium
Flat Cancellation
cancelled back to effective date
Nonrenewal
policy does not renew
Proximate Cause
Primary cause of loss, if there are multiple perils it is the peril that resulted in loss
Deductible
Amount of each loss insured must bear
Concurrent Causation
When 2 perils simultaneously cause a loss, insurer must pay even if 1 is excluded
Concurrency/Concurrent Policies
More than 1 policy that covers same exposures, can cause coverage gap
Definitions
words, terms, and phrases purposefully used in a policy to clearly lay out the intent of insurer to avoid coverage disputes.
Bailee
Person or Organization that property has been entrusted with to repair, service or store (coverage excluded)
Bailor
Person or Organization that entrusts property to a Bailee
Primary Insurance
Coverage that responds to a loss before all other coverage
Excess Insurance
provides protection ONLY after loss/damage exceeds limits
Unoccupancy
A property with things (personal property) but no people (occupants)
Vacancy
provision that limits or eliminates coverage for buildings w/o sufficient personal property to support intended occupancy or use.
Burglary
stealing property via forcible entry
Robbery
stealing property w/threat of bodily harm
Theft
Broad, any act of stealing
Mysterious Disappearance
cause of loss unknown
Direct Loss
Loss that causes direct damage to property w/o an intervening cause
(fire damage, water pipe burst)
Indirect/Consequential Loss
Loss that is not the direct result of a peril
a fire can cause a loss of income - no rent
Named Peril
Only covers cause of loss or perils listed
i.e. fire or theft
Open Peril (Special Form, All-Risk)
Covers all except exclusions
Replacement Value
losses are covered at value, usually 80-90% to replace
Actual Cash Value (ACV)
cost to repair - depreciation
Agreed Value
specific value listed in policy at time of issuance
Stated Value
Insurer pays lesser of the ACV of the property following a loss
Valued Policy
Insurer pays full face value stated in Declarations page for a total loss, regardless of ACV
Functional Replacement Value
cost to replace property w/similar property
i.e. Victorian home
Market Value
the price a willing buyer will pay a willing seller for property
Loss Settlement
specifies which loss valuation will be applied
Appraisal
dispute resolution method, 2 appraisers 1 umpire, they compromise on amount of loss
Other Insurance
each policy pays no more than its share of the loss
Legal Action Against Us
no one can bring suit against insurer until all terms and conditions of policy are met
Loss Payment
how payment is made by insurer, time frame for necessary documents/steps to be taken
Abandonment of Property
insurer is not obligated to accept any abandoned property by insured
Mortgage Clause
specifies how the policy protects the mortgagee’s financial interest
No Benefit to Bailee
specifies that no coverage applies is loss payment benefits bailee
D.I.C.E.
Declarations, Insuring agreement, Conditions & Exclusions
What is on the Declarations page?
Who, What, Where, When & How Much
What are the types of insured?
Named Insured, Insured, First Named Insured & Additional Insured
What does the coinsurance penalty reduce?
It reduces the amount paid in a partial loss as total losses are paid based on the coverage limit on the policy.
Liberalization Clause
Specifies that if the insurer broadens coverage with no increase in premium, that broadening of coverage will apply to existing policies without the need for an endorsement.
Vicarious Liability
assigned to one party for the conduct of another, based solely on a relationship between the two
Compensatory Damages
awarded to injured party for actual loss sustained
Special Damages
compensatory damages for tangible expenses
i.e. bills, loss of earnings, cost to repair or replace property
General Damages
compensatory damages for pain, suffering, mental anguish, disfigurement - losses that can’t be objectively calculated
Bodily Injury Liability
is the legal liability arising from physical injury, including sickness, disease, and death caused by the acts or omissions of an insured.
(medical bills, lost wages, mental anguish, disfigurement, pain and suffering, etc.)
Property damage liability
Pays for the legal liability arising from physical damage to tangible property, including loss of use of that property, caused by the acts of an insured.
(actual cost of repair or replacement of the damaged property, loss of use)
Medical payments coverage
Pays for necessary medical, surgical, x–ray, dental, ambulance, hospital, professional nursing, and funeral expenses incurred by a third party on the insured’s premises regardless of fault.
Personal injury liability
The legal liability arising from the wrongful conduct of the insured resulting in injuries to one’s mental or emotional wellbeing and not bodily injury or property damage.
Accident
Sudden, unforeseen, unintended, and unplanned event which loss results.
Negligence
Negligence is a tort and, specifically, the failure to use the same degree of care a reasonable and prudent person would use when given the same knowledge and set of circumstances.
Contributory Negligence
A defense for negligence in which the claimant was also negligent to any degree.
Comparative Negligence
involves fault on the part of all parties and the damages are reduced in proportion to the degree of negligence
Absolute Liability
claimant does not have to prove fault in order to collect damages
Comparative negligence
Involves fault on the part of all parties and the damages are reduced in proportion to the degree of negligence.
Strict liability
Applies when a manufacturer is held liable whether or not its product was
defective in causing injuries.
Excess Policy
pays a covered claim after the primary policies exhaust their limits or deny coverage.
Pro Rata Loss Payment
loss payment provision requires each insurer to pay its share of a loss in proportion to the coverage of that policy as it relates to the total of all insurance on the risk.
Limit of Liability
the dollar amount of coverage specified for a liability loss.
aggregate limit
The maximum amount payable for loss per location or per person from all
occurrences within a policy period regardless of the number of separate accidents.
Split Limit of Liability
the amount of coverage divided between bodily injury or property damage.
Combined Single Limit
policy limit applied to either bodily injury or property damage as needed or in any combination.
