Key Point Review Questions Study 3

Question 1

1) What is the scope of coverage under a property insurance policy determined by?

Answer 1

It is determined by the interplay of all its elements. Such as exclusions, perils and hazards.

Question 2

2) How does the definition of peril differ with respect to property insurance?

Answer 2

The definition is extended to note that a peril may or may not be insurable.

Question 3

3) What is risk?

Answer 3

A term with several meanings but generally an underwriting term that refers to the subject matter or insurance.

Question 4

4) What is the difference between named-perils coverage and all-risks coverage?

Answer 4

Named-perils coverage insures against direct physical loss or damage caused only by the listed perils. The onus is on the insured to prove the loss or damage was caused by an insured peril and that no exclusion of coverage applies.

All-risks coverage insures against direct physical loss or damage caused by any peril, provided that the peril is not excluded – and that the insured satisfies the other conditions of the policy. The onus is on the insurer to prove that an exclusion applies; otherwise the physical damage is insured.

Question 5

5) What is outlined under the exclusion list?

Answer 5

The exclusions list provides:
• types of property that are not insured; and
• perils that are never or sometimes not insured against.

Question 6

6) What are specified perils?

Answer 6

A set of perils identified, or specified, in an all-risks form as applying to property that would otherwise be covered for all risks.

Question 7

7) How is fire defined in the named-perils forms?

Answer 7

Fire: Combustion manifested in light, flame, and heat for useful purposes (friendly fire) or destructive purposes (hostile fire).
Hostile fire is the subject of insurance. Friendly fire is not covered.

Question 8

8) What is war risk?

Answer 8

An umbrella term for a collection of related perils that may include riot, civil commotion, war, invasion, an act of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, or military power.

Question 9

9) What coverage is provided for lightning under IBC’s named-perils forms?

Answer 9

Lightning is shown together with fire as the first of IBC’s named perils and is included in the named-perils forms.

Question 10

10) What is covered under the Explosion peril?

Answer 10

An explosion of natural, coal or manufactured gas in a building not forming part of gas works, whether fire ensues or not.

Question 11

11) What is water hammer?

Answer 11

The shock wave created by closing a faucet or tap.

Question 12

12) How is smoke defined in IBC’s named-perils forms?

Answer 12

Smoke due to a sudden, unusual and faulty operation of any heating or cooking unit in or on the premises, but not smoke from fireplaces.

Question 13

13) What constitutes a falling object in IBC’s named perils forms?

Answer 13

Any falling object that strikes the exterior of the building.

Question 14

14) How is impact defined in IBC’s named perils forms?

Answer 14

Loss of or damage to insured property caused by being struck by an aircraft or a land vehicle.

Question 15

15) How is vandalism defined?

Answer 15

Wilful or malicious destruction of or damage to property.

Question 16

16) How is malicious damage defined?

Answer 16

Originally a peril in property insurance but later broadened to malicious acts to better describe the intended scope of policy protection.

Question 17

17) What are four scenarios involving water damage covered in IBC’s named-perils forms?

Answer 17

• Sudden and accidental escape of water from a water main
• Sudden and accidental escape of water from within a plumbing, heating, sprinkler, or air conditioning system or domestic water container located within the dwelling.
• Sudden and accidental escape of water from a domestic water container located outside the dwelling (hot tub)
• The entrance of water through an aperture created concurrently with another insured peril (hurricane blowing the roof off allowing rainwater to enter the building)

Question 18

18) What is covered under the Windstorm or Hail peril?

Answer 18

The 9th of the named perils forms, it covers tornadoes and hurricanes, wind and hail.

Question 19

19) How is glass breakage defined?

Answer 19

Accidental breakage of the building glass or doors howsoever causes unless the breakage results from an excluded peril.

Question 20

20) What does the Transportation peril encompass?

Answer 20

It encompasses the loss or damage to insured personal property caused during the transportation of the property by a collision of the automobile transporting the property.

Question 21

21) How is theft defined?

Answer 21

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

Question 22

22) What is excluded from the Theft, Including Damage Caused by Attempted Theft peril?

Answer 22

The theft peril does not include loss or damage:
• Occurring at any other dwelling the insured owns or rents, unless the insured is temporarily living there;
• From the part of the dwelling rented to others caused by theft by the tenant, the tenant’s employee, or any member of the tenant’s household
• Caused by the theft of property or building materials from any dwelling under construction until the dwelling is completed and ready for occupancy
• To animals
• Caused by the voluntary parting of property via false pretense.

Question 23

23) How is electricity defined in IBC’s named perils forms?

Answer 23

It means sudden and accidental damage from the artificially generated electrical current. The most common example is a power surge.

Question 24

24) Where do wildfires fall within the all-risks and named-perils forms?

Answer 24

Wildfires fall within the Fire peril insured against under the property policy.

Question 25

25) What does the term earth movement mean?

Answer 25

A general term that includes earthquake, landslide, snowslide, and volcanic eruption, among other phenomena.

Question 26

26) What does the term fluvial flooding mean?

Answer 26

The overflow of a river

Question 27

27) What does the term pluvial flooding mean?

Answer 27

Flooding caused by rain. Another term for overland flooding.

Question 28

28) What is sewer backup, and does coverage exist for it?

Answer 28

Damage caused by the backing up or escape of water from a sewer or septic tank.
It is excluded whether the coverage is for named perils or all risks. Coverage can be added by endorsement.

Question 29

29) How does a sump pump work, and how does it protect against flooding?

Answer 29

Sump pump systems exist to remove groundwater from around a foundation; without a sump system, a high water table would cause water to accumulate in the dwelling basement.

Question 30

30) What does the term ice damming mean?

Answer 30

The accumulation of snow or ice on the roof or eavestrough?

Question 31

31) What is water seepage?

Answer 31

Damage caused by continuous or repeated seepage or leakage of water.

Question 32

32) What is the difference between a physical hazard and a moral hazard?

Answer 32

Physical hazard arises from the physical condition or characteristics of the object that is insured.

A moral hazard arises from the character, interest, habits and lack of integrity of the insured or person concerned.

Question 33

33) What are some of the most common fire hazards and how can they be minimized?

Answer 33

• Cooking hazards: keep the area clean and uncluttered, with all combustibles removed. A hood should be above the stove. Combustibles should be stored away to prevent a grease fire from igniting them.
• Unattended portable heaters: they can overheat and malfunction if knocked over. The best protection is not to use them. They should be ULC approved and not placed in areas in which they can be knocked over.
• Clothes-dryer lint: the dryer should be properly vented and the lint trap be cleaned after every use.
• Overloaded electrical circuits: Causes of tripped circuits should be investigated and remedied.
• Faulty or old, outdated wiring: insurance companies have guidelines regarding accepting this
• Unattended candles: a naked flame must never be left unattended.
• Wood fireplaces and wood stoves: adequate clearance of the chimney from combustible insulation and wood framing is required by fire codes. The front of the fireplace must have a screen. They should not be left unattended.
• Careless smoking and children playing with matches: smoke detectors are a life-saving requirement.

Question 34

34) What does COPE stand for?

Answer 34

Construction, occupancy, protection and exposure

Question 35

35) What are some of the factors that increase the potential for reoccurring flood hazards?

Answer 35

Often prime real estate is located on the coast or a flood-plain. Ageing and overwhelmed municipal infrastructure.

Question 36

36) How does a back-flow valve work, and why would an insured want to purchase one?

Answer 36

The valve prevents the flow of sewage back into the sewer lateral. These are used to prevent sewer backup.

Question 37

37) How does an ice-damming hazard arise?

Answer 37

Ice damming occurs when snow that has melted on the roof during a thaw then freezes again at night, clogging the eavestrough downspouts and eventually the eavestroughs themselves.

Question 38

38) How can an insured reduce a roof-collapse hazard?

Answer 38

The exposure is increased for flat and low-peaked roofs where the snow is allowed to accumulate. Such structures require professionals to shovel off excess snow accumulation during extreme years.

Question 39

39) How do earthquakes occur?

Answer 39

As the continent drifts, it grinds against other plates or sub-plates. As a part of the plate moves tremendous force is unleashed. The resulting waves travel from the epicentre out through the bedrock creating earthquake shock waves.

Question 40

40) What factors can increase the exposure to earthquakes?

Answer 40

• The underlying geology of the insured’s premises:
o The combination of certain soil types and certain depths of bedrock.
o Some soil types will actually liquefy from repeated shaking
• The method of construction
o Concrete construction has a poor tensile strength and so will crack or crumble. Brick walls often collapse during an earthquake.
o Reinforced concrete provides better tensile strength
o Wood frame allows flexibility and so poses less exposure than concrete
o Steel construction poses the least exposure
• The age of the structure:
o Building codes have been revised as we learn more about earthquake damage
o Any structure built before 1980 would pose a higher exposure because it predates building code changes
• The height of the structure:
o Taller buildings sway unless the structure has earthquake dampening features installed.

Question 41

41) What exposure does dwelling heat to fuel oil pose?

Answer 41

External fuel tanks are exposed to theft, vandalism and impact that can lead to an oil leak.
If there is a fire, then the oil represents a fuel source and the tank could explode
Oil can be spilled during filling by the delivery truck

Question 42

42) What is a sub-limit and when is it used?

Answer 42

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

Question 43

43) What is a hoarding hazard and how might it result in a loss?

Answer 43

People sometimes accumulate large amounts of property of certain types to which they feel could be useful to them.
Such accumulations can be significant sources of fuel in the event of a fire, as well as obstacles to firefighters as they try to move about the property.

Question 44

44) Why is it important that premises not be vacant for long periods of time?

Answer 44

When a property is occupied, the owner can identify when the furnace breaks down and rectify the problem before the pipes freeze and burst, the same should hold true for a broken window or an overflowing toilet. If the property weren’t occupied, it would be hard to identify these issues and damage can increase over time. Plus an unoccupied residence invites vandalism and them and potentially arson.

Question 45

45) What are some examples of age hazards?

Answer 45

• Roof waterproofing material: once damaged or past its design life must be replaced.
• Domestic water containers: need replacing when they fail. Otherwise can lead to water damage.
• The plumbing system: increased water hammer exposure for older pipes.
• Wiring: must be properly maintained. Outdated wiring can increase fire exposure.
• Furnace: an old furnace increases the possibility that the furnace will fail.
• Food freezers: can break down creating food spoilage.

Question 46

46) What hazards increase the potential for theft?

Answer 46

• Vacancy
• Neighbourhood
• Police Protection
• Luxury items
• Children
• Physical protection

Question 47

47) What is a neighbourhood hazard, and what are some of its important features?

Answer 47

Its part of the COPE details.
•	The proximity to dwellings 
•	The proximity of the dwelling to hazards
•	The quality of fire protection
•	Local law enforcement

Question 48

48) Why is it important that a building structure is maintained?

Answer 48

• Wood surfaces must be painted to prevent wood rot and water penetration
• Window frames must be replaced if rotten
• Damage from impacts must be repaired
• Damage load-bearing members must be replaced
• Insect infestations must be eliminated and damaged structural members replaced
• Graffiti and vandalism must be removed

Question 49

49) What are some unusual hazards that may increase the potential for other hazards?

Answer 49

• Fuel
• Ham radio: tall antenna. Wind damage is excluded for an antenna, and it can attract lightning.
• Automobile maintenance: a homeowner who works on his own car will have a garage stocked with expensive tools
• Race car: spare automobile parts would be lying around.
• Other hobbies: can increase exposure to fire, theft or water damage.