Lightning Facts Chapter 2&3

Question 1

Proximate Cause

Answer 1

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.

Question 2

Concurrent

Causation

Answer 2

A principle holding that when two perils simultaneously cause a loss (i.e., they are both
considered the proximate cause of loss), the insurer must pay the loss even if one of the
perils is excluded by the policy.

Question 3

occurrence

Answer 3

an accident and includes continuous or repeated exposure to the same general
harmful conditions.

Question 4

pro rata

Answer 4

If an insurer cancels an insurance policy before its expiration date

Question 5

endorsement

Answer 5

a policy form that alters or adds to the provisions of a property and casualty
insurance contract.

Question 6

direct loss

Answer 6

causes damage without an intervening cause

Question 7

indirect loss

Answer 7

occurs as the consequence of a direct loss

Question 8

named perils policy

Answer 8

specifically lists the covered perils

Question 9

open perils policy

Answer 9

covers all perils except those specifically excluded

Question 10

replacement value

Answer 10

cost to replace with property of like kind and quality,

at current pricing, without a deduction for depreciation.

Question 11

Actual cash value

Answer 11

replacement value of property minus depreciation.

Question 12

valued policy

Answer 12

requires the insurance company pay the total scheduled limit of insurance for a
total loss.

Question 13

specific limit

Answer 13

insures a single item on a single policy for a single

limit of insurance.

Question 14

scheduled limit

Answer 14

insures one or more items on a single policy and

each item is insured at a scheduled limit of insurance.

Question 15

blanket limit

Answer 15

insures multiple items of property on a single policy

with one limit of insurance applying to all insured property.

Question 16

declarations page

Answer 16

describes basic information about the policy; i.e., the who, what, where,
when, and how much.

Question 17

Insuring Agreement

Answer 17

insurer’s promise to pay the insured.

Question 18

conditions section

Answer 18

states the obligations of the insurer and the insured, as well as any other
conditions of coverage.

Question 19

subrogation provision

Answer 19

states the insured’s obligation to transfer to the insurance company its
right of recovery against any party causing a loss after it accepts payment from the insurer for a
loss.

Question 20

exclusions section

Answer 20

Perils that are NOT covered by the policy

Question 21

Additional coverages

Answer 21

automatically included in property policies without an additional
premium and include items such as debris removal, collapse, and fire department service
charges.

Question 22

Coinsurance

Answer 22

property policy provision that requires the insured maintain a certain
limit of insurance coverage in order to avoid a penalty in the event of a partial loss.

Question 23

tort

Answer 23

a wrongful act, other than a breach of contract or a crime that violates a duty or the
rights of another and for which compensation may be sought from the responsible party.

Question 24

intentional tort

Answer 24

a deliberate act that harms another and for which the injured party is
permitted by law to sue the wrongdoer.

Question 25

Liability insurance

Answer 25

provides coverage for most unintentional torts and excludes intentional torts.

Question 26

Vicarious liability

Answer 26

assigned to one party for the conduct of another, based solely on a
relationship between the two.

Question 27

Compensatory damages

Answer 27

awarded to an injured party for actual loss sustained.

Question 28

Special damages

Answer 28

compensatory damages for tangible expenses such as bills, loss of earnings,
and the costs to repair or replace damaged property.

Question 29

General damages

Answer 29

compensatory damages for pain, suffering, mental anguish, disfigurement,
and similar types of losses that cannot be objectively calculated.

Question 30

Bodily injury liability

Answer 30

the legal liability arising from physical injury, including sickness, disease,
and death caused by the acts or omissions of an insured. Bodily injury liability expenses include
medical bills, lost wages, mental anguish, disfigurement, pain and suffering, etc.

Question 31

Property damage liability

Answer 31

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. Property
damage liability expenses include the actual cost of repair or replacement of the damaged
property as well as the inability to use damaged property (loss of use).

Question 32

Medical payments coverage

Answer 32

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.

Question 33

Personal injury liability

Answer 33

is 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.

Question 34

accident

Answer 34

sudden, unforeseen, unintended, and unplanned event from which loss or
damage results.

Question 35

Negligence

Answer 35

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.

Question 36

Contributory negligence

Answer 36

a defense for negligence in which the claimant was also negligent to
any degree.

Question 37

Comparative negligence

Answer 37

involves fault on the part of all parties and the damages are reduced in
proportion to the degree of negligence.

Question 38

absolute liability

Answer 38

claimant does not have to prove fault in order to collect damages.

Question 39

Strict liability

Answer 39

applies when a manufacturer is held liable whether or not its product was
defective in causing injuries.

Question 40

excess policy

Answer 40

pays a covered claim after the primary policies exhaust their limits or deny
coverage.

Question 41

pro rata loss payment provision

Answer 41

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.

Question 42

limit of liability

Answer 42

the dollar amount of coverage specified for a liability loss.

Question 43

aggregate limit

Answer 43

maximum amount payable for loss per location or per person from all
occurrences within a policy period regardless of the number of separate accidents.

Question 44

split limit of liability

Answer 44

the amount of coverage divided between bodily injury and property
damage

Question 45

combined single limit

Answer 45

the policy limit applied to either bodily injury or property damage as
needed or in any combination.