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C12 Property Insurance > Chapters 1-3 > Flashcards

Chapters 1-3 Flashcards

1
Q

Define Property Insurance

A

Property Insurance is first party insurance that indemnifies the owner/user of the property for it’s loss, or the loss of its income-producing ability; when the loss of such property is caused by a covered cause of loss such as fire or explosion

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2
Q

Define Insurance

A

The pooling of funds from the many to pay for the losses of the few

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3
Q

Define Insurable Interest

A

An interest that the insured must have in the subject matter of the insurance purchased so that if the event insured against occurs, the insured will suffer a pecuniary loss

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4
Q

Define Indemnity

A

A contract, express or implied, to repay in the event of a loss. The insured neither gains nor loses from this process

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5
Q

What are the 5 elements of a Common Law contract?

A

1) Agreement
2) Between legally capable parties
3) For Consideration
4) Demonstrating intent
5) To do something that is legal

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6
Q

Define Contract (Common Law)

A

An agreement or promise between two or more persons that is intended to be legally enforceable

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7
Q

Define Contract ( Code Civile, Quebec)

A

An agreement of wills by which one or several persons obligates themselves to one or several other persons to preform a ‘prestation’ (Civil Code of Quebec, Article 1378)

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8
Q

Define Prestation

A

A duty, a payment or service

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9
Q

Define Uberrimae Fidei

A

Of the utmost good faith. The Basis of all insurance contracts, it calls for the highest standards of integrity from the insured and the insurer

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10
Q

Define Mortgagee

A

The lender in a financial agreement. Typically a Bank or other Financial Institution

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11
Q

Define Mortgagor

A

The borrower in a financial agreement. They promise their collateral to the mortgagee in the event that they are unable to repay their loan

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12
Q

Name 9 different classes/Lines/Types of insurance

A

1) Habitual
2) Commercial
3) Aviation
4) Boiler
5) Builders Risk
6) Crop
7) Earthquake
8) Flood
9) Marine

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13
Q

What are the 9 elements that are present in a written insurance contract?

A

1) The name of the insured
2) The name of the insurer
3) The name of the person(s) to whom the insurance is payable
4) The amount ( or method for determining the amount ) of premium to be paid
5) the subject of the insurance
6) the indemnity for which the insurer may become liable
7) The event that triggers liability to accrue
8) The effective date
9) The expiry date

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14
Q

What are limitations of liability?

A

Clauses that limit the insured’s recovery for a loss to a predetermined specified value (policy limit). One such example is a deductible clause.

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15
Q

Define deductible

A

an agreed specified amount for which the insured is responsible before the policy would respond in order to cover the balance of the loss to a specified limit.

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16
Q

What is included in the Basic Fire Policy?

A

The Basic fire policy covers losses as the result of fire, lightning, and explosion. Explosion refers to coal, natural or manufactured gas.

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17
Q

Define Peril

A

The cause of loss (as defined within the policy) such as a fire or windstorm

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18
Q

What are exclusions?

A

Exclusions are risks, perils, hazards or properties that are defined in the policy as “not covered”

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19
Q

Which 3 (types of) items are considered “ Excluded Property “ in a habitual personal lines policy?

A

Excluded property: there is no coverage for loss or damage to:

1) Money, books of account, securities for money, evidences of debt or title
2) Automobiles, tractors, and other motor vehicles
3) Aircraft or watercraft

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20
Q

Describe the alterations and additions exclusion

A

Unless the insured has secured prior consent or has amended their policy terms and coverage by way of endorsement, any damage to ( or that is caused by ) the addition of (or alteration to) a part of the property in question is excluded from coverage

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21
Q

Describe the volatile substance exclusion

A

This excludes loss or damage that occurs where the insured is aware of the presence of a gallon (or more) of gasoline, benzene, naphtha, or other substances with low flashpoints in close proximity to (or housed within) the property

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22
Q

What is a flashpoint?

A

The lowest temperature at which a liquid gives off enough vapors to form an ignitable mixture in the air

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23
Q

What is the ‘By-Law’ exclusion?

A

This exclusion provides no coverage for increased costs of repair or replacement arising from the enforcement of a by-law, regulation, ordinance, or law that regulates zoning or the demolition, repair or construction of buildings

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24
Q

What are statutory conditions (all but Quebec)?

A

Special prescribed and standardized conditions that the provincial Insurance Act requires insurers to include in all fire, auto, and illness/injury policies. They must be identified and printed on every fire policy, however conditions will still govern the policy even in their absence. No omission, variation, or addition to a statutory condition is binding on the insured. These conditions only apply to fire policies. Quebec has no equivalent.

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25
Q

What are the two Basic Fire Policy Extensions?

A

1) Removal or insured property- any property the insured removes from the original location to mitigate further loss is covered (but is still subject to policy limits). This applied for 7 days from the date that property removal begins and ends at the end of the policy term, whichever is first.
2) Removal of Debris- The removal of debris is covered up to and including the policy limit, and does not go beyond that.

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26
Q

Name 5 of the 9 named Perils ( or states of occupancy ) that are EXCLUDED from the “Basic Fire” and “Fire and EC coverage”

A

1) Electrical devices
2) Application of heat
3) War risk
4) Nuclear incident
5) Excluded property
6) Alterations and additions
7) Vacancy, Unoccupancy, Disuse
8) Volatile Substances
9) By-Laws

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27
Q

What is Extended Coverage Insurance? (Basic Fire Policy) Who is R. LEWIS?

A

An endorsement that increases the coverage afforded by the primary policy. Perils such as windstorm, hail, smoke, and riot are extended coverages on a fire policy.
R. Lewis- an acronym for extended coverage’s:
1) Riot
2) Leakage from fire protective equipment
3) Explosion
4) Windstorm/Hail
5) Impact by air, space, or land vehicle
6) Smoke

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28
Q

What is a Multi-Peril Policy?

A

An insurance policy that typically combines fire and casualty (or fire, casualty, and inland marine coverage’s) in a single contract, such as a modern day home owners policy.

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29
Q

Where can the named insured(s) be found on the policy?

A

They are listed on the “declarations” page or the “coverage summary” page

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30
Q

What is a mortgage?

A

A Mortgage conveys an interest in the property as a security for a debt. The mortgagor ( borrower) retains the possession and use of the property, while the lender (mortgagee) acquires an interest in the property and the right to sell if the borrower defaults on the debt. The lender must be repaid even if the property is damaged/destroyed

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31
Q

What is a mortgage clause?

A

A clause in an insurance policy that stipulates the rights and obligations of the insurer and the mortgagee. • The main characteristics of this clause are that the mortgagee is granted protection in the event a loss is denied due to the actions of the insured, and in return, the mortgagee accepts responsibility to advise the insurer of any misrepresentation or change in risk of which the mortgagee is aware

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32
Q

What is the ‘Subject matter’ of insurance?

A

Property described in the policy for which the insured will be indemnified should there be an insured loss

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33
Q

Define First Party Insurance

A

Protects first parties—the named insured and others with an insurable interest in or mortgage on the property or who entrust their property to the insured—against loss or damage to the insured property.

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34
Q

What is Third Party Insurance?

A

Liability insurance that is purchased by the insured (First Party) from an insurer (Second Party) to compensate or indemnify another (Third Party) for damage or loss for which the insured is lawfully liable.

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35
Q

What are the two main classifications of property Insurance?

A

Personal Lines: Insurance for individuals and families, such as private passenger auto insurance and homeowners policies.
Commercial lines: Insurance for businesses, such as a commercial property or liability insurance.

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36
Q

Define “Precedent”

A

A legal decision that serves as a basis to resolve subsequent disputes in similar cases

37
Q

What is Case Law?

A

The body of previously decided cases that courts review for guidance on cases currently in dispute.

38
Q

Define “Statute Law”

A

A law set down in a government act and passed by legislature.

39
Q

What is Contra Proferentem?

A

A legal term that provides that any ambiguity in a contract must be interpreted against the person who drew the contract because they were the individuals to create the terms to which the other is bound, and so should have been as clear as possible. This term is Latin for “against the offer-er”

40
Q

What is Relief from Forfeiture?

A

A decision made by the court, on grounds of equity, to excuse the insured in whole or in part from perfect compliance with a particular policy condition. (Marche V Halifax(2005))

41
Q

Name 10 of the 15 Statutory Conditions that govern ownership, settlement details, loss payable details, et cetra

A

1) Misrepresentation
2) Property of Others
3) Change of Interest
4) Material Change
5) Termination
6) Requirements after loss
7) Fraud
8) Who may Give Notice and Proof
9) Salvage
10) Entry, Control, Abandonment
11) Appraisal
12) When Loss Payable
13) Replacement
14) Action
15) Notice

42
Q

Define “Material Facts”

A

A fact that would affect a contract of insurance enough to influence an insurers decision regarding whether to accept or reject the risk or the premium to be set.

43
Q

What does “Ab Initio” mean

A

A Latin term meaning “ to go back to the beginning”. When a policy is rejected or made “ void ab initio”, premium is refunded entirely as if the contract had never existed to begin with. The burden of proof in this case rests with the insurer if this is done as a result of misrepresentation.

44
Q

What is the common law doctrine of “Privity of Contract”?

A

The relationship that exists between two parties or more by virtue of their having entered into a contract

45
Q

In which 2 instances is an insurer obligated to insure a new interest in lieu of the original insured?

A

1) When an authorized assignment under the ‘Bankruptcy and Insolvency Act’ occurs
2) A change of title occurs by: succession, the operation of the law, or the death of the named insured. This happens automatically in both instances

46
Q

What is a Short-Rate Cancellation?

A

the cancellation by the insured of a policy before its natural expiration in which the insurer returns the premium less any proportionate loss of earnings on the part of the insurer

47
Q

How much notice of cancellation must an insurance company give, and what are the possible methods of notifying the insured?

A

The insurer is required by statutory conditions to provide notice in writing. The length of notice depends on how the notice is given:
1) The insurer may give notice via personal delivery or registered mail. When personally delivered there is a 5 day minimum with which to give notice, and 15 days notice is required when sending the notice via registered mail. The 15 day period begins following the receipt of the letter at the post office to which it is addressed. In either case, a PRO-RATA (penalty-free) refund is required.

48
Q

What is mitigation?

A

The Protection of undamaged property against damage or further damage in order to keep losses to a minimum. The insurer incurs the reasonable costs associated with doing so.

49
Q

Once Proof of Loss is received, how long does the insurer have to issue payment?

A

60 days. Such an amount of time can be negotiated but must be done in writing before a loss has occurred.

50
Q

How many years does an insured have to place a past claim?

A

The standard for all policies is 2 years, save for in Ontario where a Fire Policy will only be given 1 year.

51
Q

Define Subrogation

A

The legal process by which an insurance company assumes the rights of the insured (after having paid out a claim) in order to recover the amount of the loss from those who are legally liable for it

52
Q

Define Superior Force/ Force Majeure

A

Something unexpected or beyond the insured’s ability to anticipate or control

53
Q

What is the “ limitation of liability” clause?

A

An Insurance Acts that requires a policy with limits to indemnity to clearly define and mark the policy to such an effect

54
Q

Describe 4 common underwriting warranties

A

A warranty in underwriting terms would be a clause that restricts coverage specifically regarding use, condition, or maintenance of the insured property. In habitational policies, they include:

1) Alarm Warranty
2) Jewelry in a Vault Warranty
3) Backwater Valve Warranty
4) Woodstove Warranty

55
Q

Define Warranty

A

A statement, stipulation, or promise in an insurance contract, the breach of which will nullify a contract. In order for it to be enforceable, it must be material to the underwriting risk and acknowledged by the insured

56
Q

What is Automatic Reinstatement?

A

Policy Limits are reset to their original terms after a loss occurs, meaning that if the same cause of loss were to occur, the insured would be entitled to the initial limit set out in the Dec pages.

57
Q

What is Fortuity?

A

it is the concept of a loss being sudden and accidental, so that it is not something that is likely to happen in the course of ordinary events.

58
Q

What is a proximate cause?

A

a cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would not have happened.

59
Q

What is the principle of “concurrent causation”?

A

it is a doctrine that holds that if a loss to a property can be attributed to more than one cause, it remains payable as long as one of these causes of loss are covered in the policy.

60
Q

What is ACV and how is it calculated?

A

ACV= Actual Cash Value. The fair market value of a property, taking into account factors that might augment or reduce the value of the property in question. ACV is calculated one of three ways:

1) Cost to repair/replace less depreciation
2) Fair market value
3) Consideration of all relevant evidence of the true value of the damage to the property.

61
Q

What is ‘replacement cost insurance’?

A

coverage that indemnifies for loss or damage to insured property at the current market price rather than at a depreciated value (it is essentially a waiver of depreciation). Thus the rating and premium are calculated based on the current cost to replace the insured property in question

62
Q

What is PIPEDA and what does it stand for?

A

PIPEDA= Personal Information Protection and Electronics Document Act. A federal statute that governs the collection and use of personal information. It stated that personal information to be collected must be relevant and that all information that has been collected, is being collected, or will be collected must be held in the strictest confidence

63
Q

What is FOIPPA and what does it stand for?

A

FOIPPA= Freedom of Information and Protection and Privacy Act. It applied to all provinces save Quebec and the Territories (North-West, Yukon, and Nunavut).It regulated public bodies like provincial government, municipalities, universities, and crown corporations, as well as professional regulatory bodies such as the Law Society and the Colleges of Physicians and Surgeons.

64
Q

What is PIPA and what does it stand for?

A

PIPA= Personal Information Protection Act, which governs private sector organizations in the course of commercial business activities and contains certain provisions regarding the collection and use of electronic data.
It applies to Yukon, the Northwest Territories, and Nunavut, and relates to information held by public bodies and the Department of Justice

65
Q

When was the IBC formed?

A

The Insurance Bureau of Canada was formed in 1964. Most Canadian insurers are members. By joining, members agree to such agreements as the “ Inter-company Arbitration Agreement” that allows insurers to agree to resolve disputes over losses of less than $50,000 without litigation

66
Q

What is a Peril?

A

It is an insured cause of loss that can be either natural or man made. It is the event that causes loss or damage to property.

67
Q

To what do we refer when mentioning a “ risk” in underwriting terms?

A

Generally an underwriting term that refers to the subject matter of the insurance

68
Q

What is a Named-Perils Policy?

A

Coverage against direct physical loss or damage caused by only the listed perils

69
Q

What is a “All-Risk” Coverage?

A

Coverage against direct physical loss or damage caused by any peril, provided that the peril is not excluded- a policy that is defined by it’s exclusions in that it covers everything outside of a specified list of perils.

70
Q

What are Specified Perils?

A

a set of perils identified or specified in an all risks form as applying to property that would otherwise be covered for all risks. Exclusions apply to all losses aside from those specified in a list.

71
Q

Define “Fire”, and name the 3 Province mandated Statutory conditions that would allow insurers to deny a claim?

A

Fire includes an uncontrolled or unintended ignition, howsoever caused. By provincial statute, a fire policy may only EXCLUDE fire if it was a result of:

1) Property undergoing a heat process
2) Riot, civil commotion, war
3) Radioactive contamination

72
Q

What is Lightening?

A

A natural phenomenon produced by electrical discharge between clouds or between clouds and the ground.

73
Q

Define “ Water Hammer”

A

A water hammer is the shock wave created by closing a faucet or tap. It is generally EXCLUDED from coverage

74
Q

Describe the coverage offered for Smoke in a property policy

A

the coverage offered is for smoke that results from sudden, unusual, and faulty operation of any heating or cooking unit in or on the premises, but not smoke from fireplaces.

75
Q

When are malicious acts EXCLUDED from coverage? How/when/under what circumstances must they have occurred?

A

anything:

1) occurring while the building is under construction, even if a builder’s risk endorsement is present
2) occurring while the building is vacant, even if a vacancy permit exists
3) perpetrated by the insured
4) caused by theft or attempted theft

76
Q

According to the IBC, which 4 scenarios are included in standard coverages for water damage?

A

Water damage must result from one of the following scenarios. It must be:

1) Sudden and accidental escape of water from a water main
2) Escape of water from within a plumbing, heating (water or steam), sprinkler, or AC system. This also includes domestic water containers such as washing machines, sinks, toilets, etc.
3) Accidental escape of water from a domestic water container located outside of the building such as a pool or hot tub
4) Entrance of water through an opening created concurrently with another insured peril ( ex: a hurricane blows off part of the roof allowing rainwater to enter the interior of the dwelling)

77
Q

What is the difference between “personal property” and “real property”?

A

Personal property is movable, whereas real property would be things that are stationary and set, like a building.

78
Q

Glass breakage is included in all named-perils forms, however there are exclusions. List the 4 types of habitational policy forms that exclude this coverage

A

1) Tenants basic form
2) Condominium unit owner’s basic form
3) Residential basic form
4) Seasonal residence form

79
Q

What is ‘transportation coverage’ in the context of a property policy?

A

It extends coverage to the insured’s personal property while in transit or while being temporarily removed from the premises

80
Q

Define theft

A

The wrongful taking of the property of another. It is a broad term and includes larceny, pilfering, holdup, robbery and pick-pocketing

81
Q

What are the 5 exclusions for the peril of theft?

A

Anything:

1) Occurring at any dwelling outside of the principal location, unless specifically insured as such
2) From any rented dwellings (by tenant, employee, or tenants employees)
3) Caused by theft of goods from a property under construction
4) Animals/ pets
5) Caused by voluntary parting, even if it was under false pretenses

82
Q

When is glass breakage assumed to be excluded from coverage?

A

When insuring Items that are fragile, brittle, or under the process of creation

83
Q

What is Fluvial flooding?

A

it is the overflow of water (ground water- coming from below)

84
Q

What is pluvial flooding?

A

flooding caused by rain- overland flooding

85
Q

What is Sewer Backup?

A

damage cause by the backing up or the escape of water from a septic or sewer. It is excluded unless added to a policy (additional coverage)

86
Q

What is ice damming? is it included in standard coverage?

A

No- ice damming is a typical exclusion but can be added by endorsement. It is the accumulation of ice or snow on the roof

87
Q

Define Hazard and give a brief overview of the two subcategories.

A

there are two types of hazards: physical and moral. 1)PHYSICAL: is a physical condition, such as the storage of volatile substances on the premises.
2)MORAL: is something arising from character, interest, habits, and lack of integrity.

88
Q

What is a sub-limit?

A

a limitation in an insurance policy on the amount of coverage available to cover a specific type of loss

89
Q

Define “ Fire”

A

It is the combustion that generates/ appears as light, heat, and flame. In insurance, fire coverage is specific to hostile fires.

C12 Property Insurance (4 decks)

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