Law and Risk Management Concepts Flashcards
1
Q
Direct Property Loss
A
This usually involves damage to the property itself. Common causes include fire, vandalism, theft, wind, and explosion.
2
Q
Minor Damages
A
Damages or hazards that need a few days to repair.
3
Q
Moderate Damages
A
Damages or hazards that need 1-2 weeks to repair or abatement.
4
Q
Major Damages
A
Damages that require partial renovation or abatement of a building.
5
Q
Severe Damages
A
Damages or hazards that require total renovation of a building.
6
Q
Unlikely Frequency
A
Not likely to occur under normal circumstances (every 5-9+ years.)
7
Q
Possible Frequency
A
May occur at some point during the buildings life cycle (every 3-4 years)
8
Q
Likely Frequency
A
Expected to occur at some point in time (every 1-2 years)
9
Q
Highly Likely
A
Expected to occur regularly under normal circumstances (multiple times within a year)
10
Q
Indirect Property Loss
A
This results from direct damage to property causing a temporary or long-term interruption of a business following a fire, hurricane, or other loss. May also lead to a loss of rental income or a tenant cancellation of a lease due to damage on the premises.
11
Q
Liability
A
This results from claims alleging that a person suffered some form of injury caused by another party’s negligence. Examples include claims from slip-and-fall incidents, injuries from pollution, landlord defamation of a tenant.
12
Q
Personnel
A
This usually involves damage to the property itself.
13
Q
Loss runs are
A
a historical record of past losses suffered by a business that are very valuable and critical to measuring loss exposure.
14
Q
First step in risk management process:
A
identify floss exposures.
15
Q
Being a bona fide purchaser of a property at fair market value means that:
A
you, as a buyer, have no reason to doubt that the seller has good title.
16
Q
Premises liability is usually attributed to:
A
the person in possession of the property.
17
Q
What is the key difference between easements appurtenant and easements in gross:
A
How they are transferred.
18
Q
What is a freehold estate?
A
Life estate.
19
Q
An ____________ is always attached to the dominant estate, so it is automatically transferred when the dominant or servient property is sold.
A
easement appurtenant.
20
Q
The characteristics of a license do not include
A
the creation of an estate in land.
21
Q
A fee simple estate is __________, meaning it is transferable.
A
Alienable
22
Q
Which of the following is not a right of property ownership?
A
Taxation
23
Q
What is true of fee simple estates:
A
They provide the most legal rights and powers
24
Q
An easement implied by necessity involves the presumption that a grantor would not convey a portion of his or her property without retaining __________ to allow access to the property that he or she keeps.
A
an easement.
25
A __________ easement allows the holder to go onto someone else's property for a specific purpose.
affirmative
26
A __________ easement restricts the holder from going onto onto someone else's property for a specific purpose.
negative.
27
Recording a document in the public records:
gives legal (constructive) notice of its contents.
28
Termination
The lease typically allows the landlord to terminate the tenant's possessory interest in the leased premises upon a tenant's default.
29
Eviction
The legal act of expelling a person from real property, most often for a breach of the lease. When a tenant is evicted by the landlord, the tenant is no longer liable to pay rent, unless the lease states otherwise. The landlord can still sue for collection of rental amounts owing under the lease as damages.
30
Lawsuit and Rent for Damages
A landlord can file a suit for unpaid rent and other damages after or instead of evicting the tenant for failure to comply with the lease terms.
31
What are the five steps in the risk management process?
identify loss exposure, measure loss exposure, decide on a plan, implement the plan, monitor loss exposures and evaluate the decision making process.
32
What is direct property loss?
damage caused directly to the property; common causes include fire , vandalism, theft, wind, and explosions.
33
What is an example of indirect property loss?
loss of business income due to the temporary interruption of a business following a fire or hurricance.
34
What is an example of liability loss?
a person who trips and falls in the parking lot of your building and files a claim of negligence on your part.
35
What are four tools used for identifying loss exposures?
using published checklists, making physical inspections of the property, communicating with other employees, and consulting outside experts.
36
What are three resources where you can likely get published checklists to help identify loss exposures?
major insurance companies, RIMS, the insurance and employee benefits division of the American Management Society.
37
Is it more important to identify and prepare for the infrequent and severe loss or for the frequent and small loss
the infrequent and severe loss.
38
Even if you are not in a hurricane zone, if you are evaluating the worst case scenario for a hurricane, what would you focus on?
severity of loss
39
Why are large businesses more accurate in predicting loss frequency and severity?
Larger businesses can take advantage of the law of large numbers.
40
What is separation of loss exposures?
Dividing the loss exposure into parts to decrease the severity of loss.
41
What is a loss prevention program?
A program deigned to prevent a loss from occurring or at least reduce the chance of it occurring.
42
Why are smaller companies more likely to use insurance as their primary risk financing tool?
a smaller company will transfer loss exposures of any size of great frequency.
43
What are the factors involved with those companies that can effectively use planned risk retention as a risk financing tool?
the company must be financially strong, the risk being retained should have predictable severity and frequency, the company should have many years of data on relevant losses.
44
What are three factors that favor the purchase of insurance over risk retention?
Transferring the payment responsibility for sever or unanticipated losses to the insurances company will relieve uncertainty about the business's ability to finance future losses. Insurance premiums are deductible business expenses that occur on a regular basis and can be budgeted. Companies that deal with ta business on a regular basis may be more confident of the ongoing viability of the business if they can be shown a comprehensive insurance program is in place.
45
Who has the responsibility for helping a business implement and monitor a loss control program?
Insurance companies
46
Who has the responsibility for standardizing codes and workforce safety standards as well as enforcing them?
The government
47
What are the five types of documentation necessary for managing risk?
Property valuations, records of past losses, copies of insurance policies, current and historical records, risk management manual.
48
How are criminal prosecutions different from civil lawsuits?
Criminal prosecutions are brought by government officers on behalf of the public. Civil lawsuits are usually brought on by a private plaintiff.
49
Describe compensatory damages
compensatory damages are awarded to compensate the plaintiff for actual harm or loss suffered, and nothing more. Includes payment or reimbursement for medical expenses, for past and future loss of earnings, and for pain and suffering.
50
Describe nominal damages.
Nominal damages refer to a small or trifling sum awarded to a plaintiff when a tort or breach of contract has been shown but no actual damage or loss has been proven.
51
Describe punitive damages
a monetary sum awarded to a plaintiff in situations where the defendant has acted in an outrages our extremely egregious manner. They are generally awarded with compensatory damages.
52
Define intentional tort and the three elements that a plaintiff must prove in order to recover damages.
Is an intentionally committed wrongful act for which the law provides a remedy in the form of action or damages. To prevail and recover damages in a legal action for an intentional tort, the plaintiff must prove each of the followings three elements: an act was committed by the defendant, the defendant intended such act, the act caused the resulting harm to the plaintiff, giving rise to legal liability.
53
Identify and describe five defenses to intentional torts.
Consent, defense of self and others, defense of property, repossession of property, necessity.
54
Three elements that must be present for there to be negligence.
The defendant breaches a duty of care owed to the plaintiff, the defendant's breach of duty of care is the proximate cause of the plaintiffs injury, there are damages to the plaintiff's person or property as a result.
55
Under the duty of care, persons owe a duty to avoid subjecting others to what?
Unreasonable risk of injury.
56
What are traditional duties owed by a building owner to invitees?
warning of dangerous conditions, inspecting the property periodically, keeping the property reasonably safe.
57
Define contributory negligence, comparative negligence, and assumption of risk
Contributory negligence is behavior by the plaintiff that contributes as a proximate cause of the injury suffered by the plaintiff. Comparative negligence, the plaintiff is not completely barred from recovering damages from the defendant. Damages are based on the defendants percentage of fault. Assumption of risk is a legal defense to negligence based on express or implied assumption by the plaintiff of the risk of injury resulting from the negligent act.
58
Strict liability extends to what three situations?
Situations involving wild and dangerous animals, commercial suppliers of products, and ultrahazardous activites.
59
Under premises liability, who is held accountable for an injury to a person entering a property?
The person who is in possession.
60
Define commercial general liability (CGL) insurance.
liability coverage for protection against claims of negligence involving bodily injury, property damage, or personal and advertising injury that arise out of an occurrence or defense.
61
If you are the sole owner of a business and your spouse is covered by your commercial general liability insurance, when is the spouse actually covered?
When acting on behalf of the business.
62
Who is insured under a standard CGL policy covering a partnership or join venture?
you, your partners, and your members, and along with spouses when conducting company business.
63
Who is insured under a standard CGL policy covering a limited liability partnership?
you, your members, and managers when conducting company business
64
What is bodily injury?
in commercial general liability insurance, physical injury, sickness, or disease sustained by a person.
65
As far as owners and managers of commercial property are concerned, what is the most likely cause of bodily injury claims?
the most likely cause of bodily injury claims is a condition on the premises relating to safety, maintenance and upkeep, or general management; probably the most common claim is what is generally known as a slip and fall claim
66
What are the eight typical exclusions of a CGL policy?
intentional bodily injury or property damage, obligations under workers compensation, bodily injuries to employees or their relatives arising out of and in the course of employment, personal injury for which an insured has assumed liability under contract or agreement, most kinds of pollution claims, claims involving autos, professional liability claims, property damage to your owned or rented property.
67
What are the six limits found in CGL policy?
for bodily injury and property damage: combined limit of $1M, for personal and advertising injury claims: separate single limit of $1M payable to any thing in any one year, for fire legal liability: there is a limit of $50K for any one loss, for premises medical payments coverage: the limit is $5K per person, the general aggregate limit applies to all of the coverages described in one policy year: $2M, for products and completed operations coverage: $1M for single occurrence and $2M for annual aggregate.
68
Who are the two categories of people covered as an insured under a standard auto policy?
yourself for any covered vehicle and anyone else using an auto you own.
69
For insurance purposes, auto insurance will also cover what other vehicles?
trailers and equipment being towed by the insured vehicle
70
If, during a business errand using their own vehicle, a business's employee hits another motorist, what insurance will cover the liability?
non-owned automobile liability insurance.
71
What is the purpose of non-owned and hired automobile liability coverage?
this coverage will protect the business when borrowed, leased, or rented autos are used on its behalf.
72
What part of auto insurance policy covers broken glass
comprehensive insurance
73
What are some common exclusions in an automobile insurances policy?
expected property damage, employment related injuries, and mobile equipment injuries.
74
What is umbrella liability insurance?
Umbrella liability insruance is a catastrophe liability policy that provides excess liability coverage beyond that of underlying liability policies and also provides liability coverage in some situations excluded by the underlying liability policies.
75
What are the essential elements of a valid contract?
Offer, acceptance, and consideration
76
What circumstances terminate the power of the offeree to accept a pending offer?
the death or insanity of the offeror
77
In what instances are contracts related to real estate not required to be in writing in order to satisfy the statute of frauds?
Agreements forming partnerships to trade or otherwise deal with real esate or real estate interests d ono need to be in writing; there may, however, be other statuatory obligations that require a written partnership agreement.
78
How long can a contract exist without being performed before it must comply wit the requirement of the statue of frauds?
one year.
79
What does an amendment to a contract change?
An amendment to a contract varies only those terms addressed in the amendment; if the amendment is not accepted, the terms of the original contract still apply
80
What four circumstances of intent can negate a contract?
Duress, undue influence, mistake, fraud and misrepresentation.
81
When can the defense of impossibility of performance be raised?
When the promisor commits to doing something that becomes impossible through no fault of his or her own
82
What is accord and satisfaction?
Accord and satisfaction is a means of discharging contractual duties in which one party owes the other a debt, and performance or accord is substituted for the debtors contractual obligations.
83
What is novation?
novation is a three-party agreement whereby a new party to a contract is substituted for an old party, either as a promisor or as a promise.
84
What are the elements required to form a binding amendment or modification to a contract?
The same elements required to form the original contract
85
What are general damages?
General damages are those that arise directly from a default of a party under contract.
86
What is meant by restitution?
A remedy to restore the parties to the same status as before the contract was formed.
87
What are some of the rights of property ownership?
The right to possess property, use the property, sell or give away the property, pledge the property as collateral, and destroy the property.
88
Define the concept of ownership.
The exclusive right to use, possess, and dispose of a property.
89
Define the concept of possesion
The exercise of control over a property.
90
Define the concept of title.
Legal ownership of property.
91
What are fixtures and trade fixtures?
A fixture is an article of personal property that is permanently affixed to real property so that it is commonly considered part of the real property. a trade fixture is personal property affixed to real property by a tenant specifically for use in the tenants particular trade or business and is removable by the tenant at the lease end.
92
What is the major difference between the transfer of personal property and the transfer of real property?
real property transfer involves publicly recorded deals.
93
What is a bonafide purchaser
a person who buys property for value and without reason to doubt that the seller has the good title.
94
What are the duties of bailees??
The bailee is legally obligated to care for the bailed property and to redeliver it to the bailor; unless the bailee has signed a contract to the contrary, he or she is not liable for damage to the property's unless direct blame can be established. the bailee is usually strictly liable for failure to redeliver the property or if the property is delivered to the wrong person.
95
Which type of estate provides the most legal rights and powers
fee simple estate.
96
What are the four classifications of nonfreehold estates?
estate for years, periodic tenancy, tenancy at will, and tenancy of sufferance.
97
What happens to an easement appurtenant when the dominant estate is sold?
because the easement appurtenant is attached to and part of a dominant estate, the easement is automatically transferred with the dominant estate.
98
What is an example of an easement implied by necessity?
If a parcel of land would be cut off from any access to a public way?
99
What is a lease?
a lease is an agreement between a tenant and the owner of a building for the use of space in that building for a period of time; the agreement governs the terms of the relationship between the landlord and the tenant, and conveys a leasehold interest in the property to the tenant.
100
What is rent?
Payments by a tenant to a landlord to occupy the leased premises.
101
What approaches are typically used to increase rent in a long-term lease?
increasing the base rent by a certain percentage every year and tying rent increases to cost of living determined by the CPI. Consumer price index.
102
What is an expense stop?
is a fixed dollar amount of operating expense related to the tenants leased premises that is to be paid by the landlord; tenant assumes the obligation to pay his or her share of the operating expenses in excess of that amount.
103
What is the purpose of a work letter?
in a lease document, an attachment describing tenant improvements that need to be made by the landlord.
104
Usually, what effect does a sublease have on the originals tenant obligation?
none.
105
Under common law, who has the responsibility and liability for making lease hold repairs needed due to causes other than ordinary wear and tear?
the tenant.
106
Explain the covenant of possession.
a landlord gives the tenant exclusive possession and control of the leased premises; the landlord cannot enter the tenants property unless the landlord reserves special entry rights in the lease.
107
Which covenant in the landlord tenant relationship assures the tenant freedom from interference from acts and claims of third parties?
quiet enjoyment.
108
What are the new owners obligations to valid leases when a property is old?
the purchaser has a full obligation to uphold the leases
109
What is constructive eviction?
Constructive eviction is a landlords deprivation of the tenants uses and enjoyment of a leased premises, causing the tenant to abandon or surrender the premises; the tenants obligation to pay rent ceases after moving out.
110
What is the survival clause?
a lease term that converts the tenants rent obligation into an obligation to pay damages due to the tenants breach, thus allowing the landlord to continue to collect rent as damages after a breach.
111
What is distraint and distress for rent?
a common law right of the landlord to enter the tenants property, seize the tenants goods, and hold those goods for public sale to offset unpaid rent.
112
When does legal constructive eviction usually occur?
after the landlord deprives the tenant of use and enjoyment of the premises, the tenant vacates the premises, or the tenant terminates the lease.
113
List and describe the three major forms of real property ownership.
direct individual ownership: property owned by one individual, direct concurrent ownership: property owned by tow or more persons. The property is held by them as either tenants in common, indirect ownership: property indirectly owned by one or more individuals through one of various legal entities.
114
What factors are important in a real estate investors choice of legal entity?
income tax consequences, protection from liability, and transferability of interests.
115
What most often determines the governance method for real estate ownership?
the number and participation of owners.
116
Under concurrent ownership, how are rents received from leasing the property divided among the owners.
income from the property must be divided among the con-tenants in accordance with their respective owner ship percentages
117
What is the degree of personal liability for a corporations shareholders?
None
118
What is a major drawback of operating as a general partnership?
There is no liability protection for the partners.
119
Why are limited liability companies (LLCs) preferred for investing in commercial real estate?
because of the favorable income tax treatment and liability protection they offer partners
120
What term describes the person who entrusts and authorizes another to act on his or her behalf?
The principal
121
What is an agent?
an agent is one who is entrusted and authorized to act for another
122
What is a fiduciary relationship?
a relationship characterized by trust and confidence in which an agent is bound by obligations of good faith, honesty, and loyalty.
123
Under the agents duty to disclose information, if someone gives information to the agent, what is the position of the principal?
the principal is considered to possess that knowledge as well as the agent
124
Who can end the term of employment for any lawful reason in an at-employment relationship
either the employee or employer
125
What are some special cases where contracts of employments have been implied?
when there are statements made by an employer to its employees or applicants for employment or by an employers distributing employment policies or procedures
126
What is the basis for discharging an employee for substance abuse?
substandard job performance
127
Define sexual harassment
unwelcome behavior of a sexual nature.
128
What is the purpose of workers compensation insurance?
It provides no-fault insurances that offers medical and compensation benefits for any employee sickness or injury arising out of employment.
129
What categories of employees are generally not covered by workers compensation insurance?
agricultural and domestic workers unless added by employer, longshoremen and other employees on navigable borders are not covered but they receive coverage similar to workers comp
130
What are four exclusions to workers compensation insurance?
liability assumed under contract, punitive or exemplary damages because of bodily injury to a person employed in violation of law, bodily injury intentionally caused or aggravated by the insured, damages arising out of the discharging of any employee in violation of law
131
What is the experience modification factor?
an adjustment applied to a workers compensation premium that reflects the insureds past loss history.
132
What is retrospective rating?
a workers compensation plan for larger risk employers that allow the insured to estimate its projected losses and then pay premiums based on actual losses and loss reserves wit ha predetermined maximum and minimum payment.
133
What is employee benefits liability insurance?
coverage for employers involved in handling various health, dental, and retirement plans that may be so complicated that mistakes can be made
134
What is a comprehensive major medical plan?
a standard comprehensive health plan underwritten by an insruance company or by BCBS, it usually requires a deductible and an applicable coinsurance percentage of the medical expense bill.
135
What is the employee retirement income security act of 1974?
ERISA is the law that sets standard for pension plans and prevents employer abuse in withholding or restricting pension benefits.
136
What are some characteristics that apply to defined contribution pension plans?
The employees periodic contributions are fixed, the success of the retirement fund determines the amount of retirement benefits, the plan is simpler to administer than other types of retirement plans.
137
Explain the purpose of a group thrift/savings plan.
allows employees to contribute part of their salary toward a savings account before taxes are taken out. 401K is common type, some employers provide a match.
138
What must a signed contract for the sale of land include to satisfy the statue of frauds?
it must identify both buyer and seller, have a description of property, and indicate the intent to sell the property.
139
What is the significance of due diligence as part of pre-closing activites?
the buyer needs to complete an investigation of the property while arranging for financing.
140
What are three common forms of a legal description of property?
Government survey system, metes and bounds description, description referencing a lot and block number of a recorded plat
141
What are deeds recorded?
Deeds are recorded primarily to protect the holder against claims of other grantees
142
What is the purpose of title insurance?
it provides compensation against later discovery of a title defect in real property.
143
What is equity fiancing?
the method of paying for commercial real estate with personal funds
144
What are some reasons a buyer may not want to make a cash purchase?
the necessary assets may not be available, or the buyer may wish to use the cash in other ways.
145
What is a refinance?
to enter into a new mortgage loan transaction in order to pay off an existing mortgage loan covering the same real estate.
146
Normally, what is the term of a construction loan
between 6-18 months
147
What is an escrow account?
money held in reserve by the lender to cover taxes and insurance in case the borrower defaults on those payments.
148
What is an estoppel certificate?
a written document from a borrower to a lender verifying that the leasing information is accurate.
149
What are the most important loan documents?
promissory notes, mortgages and deeds of trust, security agreements, financing statements
150
In real estate default action, who is a receiver?
a person appointed by the court to take custody of a debtors property for the purpose of preserving it and applying the property's or its income to claims of creditors.
151
Describe the scope of country's environmental problem according to the EPA.
The EPA estimates that an estimated 57 million tons of hazardous waste were produced yearly and 90 percent of this total was disposed of in an unsafe manner.
152
What is the purpose of super lien provisions, enacted by many states?
they are designed to recover the costs involved in the clean up of contaminated properties.
153
When is it necessary to remove asbestos-containing materials from commercial buildings?
when the material begins to deteriorate and become friable
154
What type of contamination may be discovered in land that once was a storage facility for electric transformers?
polychlorinated biphenyls (PCBs)
155
What is the primary purpose of a Phase II environmental site assessment?
to inquire if contamination is present from suspected sources/
156
What steps in the leasing process should a landlord take to provide protection against environmental liability?
review a prospective tenants environmental compliance record, obtain a PHASEI Site Assessment prior to commencement of the lease, negotiate terms into the lease agreement to protect itself.
157
What are the six terms that tenants should ensure are included in a lease in order to protect themselves?
Representation as to past use, continuing's compliance with environmental laws, notice, indemnification, termination provisions, environmental audit.
158
What will provide baseline information on the environmental condition of a site at the end of a lease?
a Phase I Site Assessment
159
What determines just compensation for land take by the government?
Fair market value
160
What areas do zoning regulations commonly cover?
permitted uses, permits and approvals, and development specifications.
161
What are nine potential sources for environmental hazards potentially found in building or on properties?
building materials containing asbestos, paint containing lead, PCBs in transformers and light ballasts, chemicals from new building materials, finishes, or cleaning materials, contaminants brought into the building thorough the air and trapped inside the building, unknown but pre-existing contamination on-site pollution migrating on-site from an off-site source, pollution resulting from the activities of a third party on the property, pollution arising from building operations or processes.
162
What are eight costs that can be anticipated related to pollution/environmental compliance
capital expenditures for the best available control technology or waste minimization systems to comply, environmental expertise, administration of record-keeping and reporting requirements, health and safety training programs, raw material and waste disposal expense, legal costs, general business accounting for environmental costs, costs of evaluating real estate transfer opportunities
163
What data will insurance underwriters and technical experts analyze before underwriting a pollution legal liability policy?
the quantity of hazardous material being stored, the quality of the management of environmental exposures, the quality of the physical measures being taken to control the pollutant
164
What type of insurance policies are written on an occurrence basis
lead abatement liability, asbestos abatement, and asbestos-in-place insurance
165
If, in the course of landscaping a piece of property, a developer discovers several drums labeled as hazardous waste, will the pollution legal liability insurances cover this occurrence
yes, it will be covered because it was an unknown condition
166
what twelve types of situations can be covered by Pollution Legal Liability Inusrance
claims for onsite cleanup of unknown preexisting conditions, new conditions, personal property damage, bodily injury, clean up costs from pre existing and new conditions,
167
Which type of insurance can be purchased to cover potential liability for the asbestos operations and maintenance program?
asbestos-in-place insurance
168
Which type of insurance can be purchased to cover potential liability for the removal of asbestos containing materials?
asbestos abatement liability insurance.
169
How can property owners maintain control over large-scale abatement projects and ensure adequate liability limits for contractors?
by opting for an owner-controlled insurance program
170
What is overrun insurance?
A type of supplemental insurance that would help limit exposure on remediation projects that sometime exceed the initial projected costs.
171
In what areas may the government compete with private insurers?
for workers compensation insurances
172
What is the role of the insurances agency in the direct writing method of insurances marketing?
the insurance company employees sales persons to make direct personal contact with the prospective policy holders.
173
What are five factors to consider when assessing a potential insurerer?
financial strength; market presence and reputation, ability to handle claims, loss control and other services; stability and long term market history for your type of business; cost
174
Where can you find the financial strength of an insurance compnay?
Best's Guide
175
When deciding on an insurer, what is a good indication that a firm may be appropriate?
the firm customarily handles accounts whose size and scope are the same as yours.
176
What is one indication of a good insurance agent?
the appropriateness of his or her proposed risk managements program as measured by a thorough investigation of your operations and review of current programs.
177
What are key indicators that of an insurance agents appropriateness for your company?
how thoroughly they investigate your loss exposures; how appropriate their proposed risk management and insurance programs are for your business.
178
What are the three most commonly used methods for deciding an appropriate insurance agent or broker?
comparing service capability proposals; comparing competitive quotes; hiring a consultant to manage the process for you.
179
What should specifications include
exact coverages to be quoted with the premiums basis; ratings of each insurer of at least A from Best's Guide; payment plans from each insurer that show details such as whether a finance charge is involved, details of all services to be provided and an itemization of the special abilities of the competitor; data about payrolls, sales, vehicles, loss runs, and property lists and values.
180
What is the best assessment method for a large company with complex insurance needs?
Hire a consultant
181
What is the function of an underwriter
determining which applications are to be accepted
182
What type of underwriter specializes in auto, general liability, and other liability insurance?
casualty underwriters
183
What is a moral hazard?
a hazard involving the questionable character or integrity of an insured, which could lead to dubious or intentionally caused claims.
184
What are four ongoing underwriter responsibilities?
adding or deleting coverage for the policy holder; pricing desired changes in coverage; providing payment terms for policies; adding other entities to the policy holders policy as additional insureds, such as landlord on the the tenants policies
185
In an insurance policy, what are conditions?
conditions are the section of an insurance policy that lays out the general ground rules of the policy; the conditions describe the rights and obligations of both the insured and the insurer, specifying with considerable detail what each party to the policy must do in the event of a loss and how the loss will be evaluated; the conditions describe such issues as policy cancellation, subrogation, amendment procedures, and the right of the insurer to audit the policy after expiration.
186
In an insurance policy, what are the exclusions?
They are the limitations of the coverage provided by the policy and specific items not covered under the policy.
187
What is the primary reason for caution in adding additional insureds to a general liability policy?
They gain access to the liability limits.
188
What is meant by the term class rated?
class rating is a system of rating risks in a standardized manner based on general characteristics the risks have in common.
189
What is a specific rate?
an insurance rate that applies to a single, particular risk
190
What is a schedule rating?
is means by which the underwriter can apply debits or credits to class rates to calculate the premium appropriate to a certain risk more accurately.
191
What is experience rating?
a system of rating in which the actual past experience of the risk is instrumental in determining its future rates.
192
Higher deductibles usually mean:
lower premiums
193
What is the difference between a package policy and a monoline policy?
a package policy contains at least two types of coverage, typically property and liability; monoline, or single line policy, provides only one type of coverage.
194
What is an insurance binder?
a temporary insurance policy that provides coverage until the actual policy can be issued by the insurance company
195
Which property insurance form covers all causes of loss except those specifically excluded?
the special form
196
What ten types of losses are typically excluded from the special form?
enforcement of laws relating to construction/repair; utility failure; earth movement other than sinkholes; most pollutants; water such as flood and overflow; nuclear reaction; governmental action; war or military action; equipment breakdown; losses due to employee dishonesty.
197
What is the replacement cost value of a building?
the actual cost to replace the building with a new building of a similar kind
198
what provision do most property forms and loss of income forms have that ensures that buildings are insured to their proper value?
coinsurance provision
199
What kind of insurance policy covers several buildings under the same policy?
blanket policy
200
What insurance covers damage to furniture, machinery, stock, equipment, and movable fixtures?
business personal property insurance.
201
What is the main policy that forms the basis for property coverage?
building and personal property insurance
202
What is generally true of equipment breakdown insurance?
it will pay for damage to computer operated heating, cooling and security systems that results from a power outage or surge it will pay for replacement of equipment if that is cheaper than repairing the equipment;' it can pay for the loss of income that results from an equipment breakdown
203
What type of insurance protects a building owner from vandalism during construction?
Builders risk insurance
204
What is business income insurance?
insurance that enables a firm to protect itself against loss of income suffered as a result of physical damage to the insured property.
205
What are two types of coverage provided by computer fraud and funds transfer fraud insurance?
covers situations where a computer is used to cause loss or damage to money/securities by fraudulently causing the transfer of that property from inside the business to outside; funds transfer fraud insurance pays for the loss of money from a fraudulent instruction directing a financials institution to transfer or pay funds from a transfer account.
206
What are thirteen most common deficiencies in risk management and insurance?
property and income insurance is not provided on a blanket; not all named insureds are named on policy; the firm fails to obtain umbrella liability; fails to obtain various types of professional liability; fails to obtain crime insurance; fails to require contractors and tenants have adequate insurance, contracts have performance bonds for larger jobs; insurances are placed with companies that are not A-rated; the firm has insurance against small loss but not adequate against sever loss; fails to heed insurance company loss control recommendations; the loss exposures of the firm have been misclassified; the firm gives the attorney care blanche to draft insurance provisions in leases; the firm fails to report claims on a timely basis; real estate firms tend to view insurance as just another overhead, will go based solely on cost
207
What does hold harmless agreement with a contractor protect the property manager against?
Harm to building clients during construction; property damage during construction; losses caused to tenants by the contractor
208
What is draft authority?
given to an agent to make payment on small claims
209
What are independent claims adjusters?
Independent contractors who adjust claims for different insurance companies
210
Who are public claim adjusters?
claims adjusters hired by the insured to assist with large complex claims
211
What are duties of the insured during the claims process?
in a first party claim, the insured must provide notice of the loss, submit a proof of loss form, and do everything in its power to prevent further loss from occurring one the loss is discovered; the insured must also give the inusrance company its cooperation and assistance in settling the claim; in a third party claim, the insured must notify the insurer, provide needed documentation, and cooperate with the insurere in the investigation.L
212
List some factors that must be reviewed when determining whether a claim is covered
Did the loss occur within the covered Policy period? Is the type of loss covered by this policy? are the parties that suffered this loss covered? Has the insured breached the policy provisions in any manner or prejudiced the right of the insurer to investigate?
213
What is an other insurance clause?
a clause that prohibits collecting more than the amount of the loss if an insured has two or more policies that cover a property loss.
214
What is subrogation?
the process of an insurer issing a claim against a responsible third party after having paid the insured for damages.
215
What is most likely that an insurance company will pay a claim to an insured and not subrogate against the responsible third party?
if the cost of subrogation would be excessive relative to the amount to be collected
216
What is considered a nuisance claim?
in liability claims adjustment, a claim that has no merit, yet is cheaper to settle than to fight
217
What are four options an insurer has in making payment for a property loss?
to pay the insured the value of the lost or damaged property; pay the cost of repairing or replacing the lost or damaged property; to take any and all parts of the property at an agreed or appraised value; to repair, or replace the property with other property of like kind and quality
218
Why should reserves set up for the claims be as accurate as possible?
If a reserve is too low, the insurance company will falsely assume that it has adequate loss reserves to pay its claim; if the reserve is too high, the losses of the insured will appear to be much higher than they really are, and the insurer may believe that it needs to raise premiums to compensate.
