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Midterm Flashcards

1
Q

Who was Horatio Barber? What did he do?

A
  • Played an important role in the development of US aviation insurance
  • An underwriter for Lloyd’s who came to the US
  • Worked for Hartford, USAIG, and with Independence through his own company, Barber and Baldwin
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2
Q

Who was Brooks Parker?

A
  • Played an important role in the development of US aviation insurance
  • Organized Parker and Co. which has been recognized as the worlds 1st brokerage firm specializing in aviation insurance
  • Worked for Chubb and Son
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3
Q

On what 3 grounds was the Group Approach to Underwriting based?

A
  1. Promotes Patriotism (American Aviation deserves to have be funded)
  2. It’s the most economical way
  3. Purposed the formation of a new group of specialists
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4
Q

Who originated the idea of group aviation underwriting?

A

David Beebe, who partnered with Major Reed Chambers!

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5
Q

What was the 1st aviation insurance pool in the US?

A

USAIG

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6
Q

What was one of the earliest aviation insurance agencies?

A

Barber and Baldwin!

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7
Q

How did the passage of the General Aviation Revitalization Act of 1994 impact the industry?

A
  1. Cessna resumed production on single-engine a/c
  2. The New Piper A/c Org. was formed
  3. GA a/c shipments increased
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8
Q

What did the General Aviation Revitalization Act of 1994 impose?

A

An 18-year statue of repose

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9
Q

Who was the 1st aviation insurer in the US?

A

Travelers Insurance Company!

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10
Q

True or False: The Group Approach to underwriting aviation risks is generally more advantageous to INSURERS than AGENTS/BROKERS

A

FALSE

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11
Q

True or False: The General Aviation Revitalization Act of 1994 limited products liability suits and provided subsidies to light a/c manufacturers

A

FALSE

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12
Q

The principal aviation insurance coverage purchased by the a/c and component parts manufacturer is:

A

Products Liability!

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13
Q

Who is the Personal Non-Owned Aircraft Policy primarily designed for?

A

Private Pilots, and those who rent, borrow, or lease a/c!

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14
Q

An FBO may be held liable for:

A
  1. Negligence of student/renter pilots
  2. Charter/Rental services
  3. A/c Sales
  4. Line Services
  5. Maintenance/Repair Sevices
  6. Premises Liability (fuel, product sales)
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15
Q

What would be considered a negligent act by a pilot?

A

Flight into known hazards such as adverse weather

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16
Q

Negligence on the part of the FAA can arise when ATC gives the PIC inaccurate info regarding:

A
  • Weather
  • A/c separation standards
  • Aeronautical charts
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17
Q

When could an aircraft manufacturer be held liable?

A
  1. Design-induced errors
  2. Inadequate instructions
  3. Defective parts
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18
Q

Describe airport liability. Who uses it?

A
  • Where the airport takes full possession/control of an a/c, a bailment is created which imposes a duty to use ordinary care in safeguarding the plane
  • FBOs!
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19
Q

Are a/c in the Special Use category considered a favorable risk by insurers? Give examples of Special Use a/c

A

YES - bc usually these pilots are highly trained for that specific use of the a/c

  • Police traffic control
  • Mosquito control
  • Powerline/pipeline patrol
  • Aerial photography/sightseeing
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20
Q

The General Aviation Revitalization Act of 1994 limited whose liability?

A

Limited a MANUFACTURER’S liability

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21
Q

Non-owened a/c physical damage coverage is frequently purchased by:

A

FBOs!

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22
Q

What kind of coverage is frequently purchased by airport owners and operators?

A

Contractual Liability/Independent Contractors Liability

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23
Q

True or False: Grounding coverage is frequently purchased by major air carriers

A

FALSE

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24
Q

True or False: The majority of civil a/c in the US are used for commercial purposes

A

FALSE, majority of GA is business and pleasure

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25
Q

True or False: Liability arising out of an FBO is basically limited to their owned a/c and line services

A

FALSE (list of things)

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26
Q

True or False: When a pilot is operating an a/c on behalf of his or her employer on company business, the pilot’s liability can be imputed to the pilot’s employer

A

TRUE

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27
Q

True or False: Pilot liability can sometimes be established on a theory other than negligence

A

TRUE

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28
Q

True or False: The payment of punitive damages does not apply in the case of a pilot flying under the influence

A

False…

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29
Q

True or False: The General Aviation Revitalization Act of 1994 restricted the issuance of ADs by the FAA

A

FALSE

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30
Q

True or False: Failure to issue a NOTAM advising pilots of dangerous conditions at an airport could result in a liability claim under the FAAs responsibility in publishing aeronautical charts

A

FALSE

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31
Q

In what areas can the FAA incur liability?

A
  1. Certification of a/c
  2. Certification of airmen
  3. Air weather information
  4. Aeronautical charts
  5. Airport hazards
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32
Q

What are the 6 major US insurance companies?

A
  1. USAIG
  2. Global Aerospace
  3. AIG
  4. ACE USA
  5. XL Aerospace
  6. HCC Aviation
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33
Q

What company is an example of a directing-writing company?

A

Avemco

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34
Q

What aviation insurer specialized in underwriting FBOs until they were bought by Avemco?

A

National Aviation Underwriters

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35
Q

One of the two largest aviation insurance pools, this underwriter was formed by the merger of Associated Aviation Underwrtiers and the British Aviation Insurance Group:

A

Global Aerospace

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36
Q

The only people who may present business to underwriters at Lloyd’s are:

A

Lloyd’s brokers

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37
Q

Large, multi-line companies such as Liberty Mutual and Hartford Fire Insurance Co. are members of:

A

USAIG

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38
Q

In addition to business and pleasure risks, this insurer specializes in agriculture a/c:

A

Phoenix Aviation Managers

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39
Q

The actual underwriting market at Lloyd’s is called:

A

Syndicate - not all syndicates write aviation insurance

40
Q

What is the oldest and largest of all the aviation insurance groups?

41
Q

True or False: There are approximately 300 insurance companies in the US which write aviation coverages, and majority are member of some pool or association

42
Q

True or False: Underwriting members of Lloyd’s of London are formed into syndicates

43
Q

True or False: All American agents and brokers doing business with Lloyd’s must work through an approved Lloyd’s broker

44
Q

True or False: A broker is generally looker upon as the agent of the insurED, and not of the insurER

45
Q

True or False: The 2 largest aviation insurers (USAIG and Global Aerospace) only accept business through brokers, and independent agencies that represent their member companies

46
Q

What does ACE USA specialize in?

A

Airport and Satellite risks!

47
Q

True of False: Aviation Syndicates through Lloyd’s can only accept business through brokers approved by the committee of Lloyd’s

48
Q

What does the Special Risk Department of HCC Aviation specialize in?

A

Warbirds, antique, float and homebuilt a/c

49
Q

What are the 4 levels of security in the insurance market?

A
  1. Premiums trust fund
  2. Individual/corporate member’s trust funds
  3. Personal resource of individual members
  4. Central Fund
50
Q

What is the only direct writing company?

51
Q

Headquartered in Atlanta, this company was created from the former SEAU:

A

AIG Aviation Inc.

52
Q

What company is a major aviation insurer of airline risks?

53
Q

What company provides a market for antique and homebuilt aircraft?

A

HCC Aviation

54
Q

What company established an agricultural division in 1998?

A

Phoenix Aviation Managers

55
Q

What company specializes in airport and satellite risks?

A

ACE USA International and Specialty Aerospace

56
Q

List 5 factors which an insured should consider in selecting an agent or broker to handle aviation insurance

A
  1. Knowledge of the INSURANCE business
  2. Knowledge of AVIATION industry
  3. Number of insurers represented
  4. Type of aviation insurance written
  5. Experience handling aviation claims
57
Q

In what 4 ways can Insurance be defined?

A
  • The transfer of risk
    1. Legal: A contract(s) between the insurance company and an insured customer
    2. Social: Combine a large enough group to make the loss predictable, and the coverage affordable
    3. Accounting: Substituting a small certain loss for a large uncertain loss (pay a little now so you don’t have to pay more later)
58
Q

What are the requirements for an Insurable Risk?

A
  1. Large number of homogeneous risks
  2. Number of losses must be reasonably predictable
  3. The object must be of sufficient value
  4. Loss must be accidental
  5. Must be unlikely to occur simultaneously
  6. Loss must be definite
59
Q

What is Reinsurance?

A
  • Insurance for the insurance companies
  • Spreads losses to protect an insurance company against catastrophic losses
  • Relieves the strain on the resources and capital of an insurance company
60
Q

How is risk best described?

A
  • Uncertainty

- Chance of loss**

61
Q

What is the major function of insurance?

A

Substitute certainty for uncertainty…

62
Q

What classification of risk is NOT the responsibility of the risk manager?

A

Dynamic Risks

63
Q

A speculative risk differs from a pure risk because:

A

A speculative risk MIGHT result in a financial gain, where a pure risk has NO chance of a gain.

64
Q

If an a/c is damaged in a windstorm, the direct loss would be ___, and the indirect losses could include ___ .

A
  • Direct Loss = Actual cost of repairs

- Indirect Loss = Rental of a replacement a/c, loss of a days revenue, time and effort to arrange for repairs, etc.

65
Q

What are the 2 categories of hazards?

A
  1. Physical

2. Moral/Morale

66
Q

True or False: From an insurance standpoint, risk is only involved with finacial losses

67
Q

True or False: Risks can be divided into FUNDAMENTAL and PARTICULAR risks

68
Q

True or False: Dynamic risks are group risks, like floods

A

FALSE - Static risks are normal perils of nature, such as floods

69
Q

True or False: Moral hazards involve an attitude or carelessness

70
Q

True or False: A peril is the actual cause of the loss

71
Q

What are the 6 classifications of risk?

A
  • Static vs. Dynamic
  • Fundamental vs. Particular
  • Pure vs. Speculative
72
Q

True or False: Transferring the risk to an insurance company is only feasible when the loss will cause some hardship

73
Q

True or False: For the insurance mechanism to work, a large number of homogeneous units must be present

74
Q

True or False: The basic purpose of reinsurance is to spread the losses to protect an insurance company against catastrophic loss

75
Q

In what 2 ways can The PROCESS of Risk Management be viewed?

A
  1. As a Decision-Making Process

2. As a Management Process

76
Q

What steps are involved in Risk Management that is viewed as a DECISION-MAKING Process?

A
  1. Define the problem
  2. Search of alternatives
  3. Evaluate the alternatives
  4. Select, implement and monitor the alternatives
77
Q

What steps are involved in Risk Management that is viewed as a MANAGEMENT Process?

A
  1. Planning
  2. Organizing
  3. Implementing
  4. Controlling
78
Q

In what 2 ways can The OBJECTIVES of Risk Management be viewed?

A
  1. Pre-Loss Objectives

2. Post-Loss Objectives

79
Q

Define Risk Identification

A

The process of identifying ALL the resources that a corporation is responsible for and the loss exposure to those resources

80
Q

What are the 5 major types of Risks (Losses) that can be Identified (Risk Identification)

A
  1. Property loss
  2. Loss of use of Property
  3. Liability losses
  4. Criminal and fraud losses
  5. Key Person losses
81
Q

What is Risk Measurement?

A

The probability of a loss

82
Q

What are the 4 factors used to Measure Risk?

A
  1. Frequency
  2. Severity
  3. Variations
  4. Impact
83
Q

What is the definition of an insurable interest?

A
  • A person or company who would be financially injured by an occurance against the insured
84
Q

Explain Subrogation

A
  • The right of the insurance company, after payout to the insured, to take over the insured’s legal rights against negligent 3rd partied
  • Only when someone else caused the damage, and the policyholder does not admit ANY liability
85
Q

Explain the concept of Indemnity

A

The insurer agrees to pay for NO MORE than the actual loss suffered by the insured (to make him whole; no better no worse)

86
Q

What 2 legal principles support the concept of Indemnity?

A
  1. Insurable Interest

2. Subrogation

87
Q

What are the 4 Prerequisites to an Enforceable Contract?

A
  1. Offer and Acceptance
  2. Consideration
  3. Competent Parties
  4. Legal Purpose
88
Q

What are the 6 parts of a Policy Layout?

A
  1. Declarations/Coverage Summary
  2. Insuring Agreements
  3. Definitions
  4. Exclusions
  5. Conditions
  6. Endorsements
89
Q

For a valid contract there must be an exchange of values by the parties. This prerequisite is called:

A

CONSIDERATION

90
Q

The prerequisite for a valid contract, legal purpose, is primarily concerned with:

A

The presence of an INSURABLE INTEREST

91
Q

Agents are primarily responsible to:

A

The insurance companies they represent!

92
Q

What are the 3 AUTHORITIES generally assumed by Agents and Brokers?

A
  1. Contractual
  2. Implied
  3. Apparent
93
Q

True or False: The CONSIDERATION of the insurance company is the promise to pay for losses caused by covered perils

94
Q

True or False: EXCLUSIONS reduce the broad coverage provided in the insuring agreement

95
Q

What do the CONDITIONS in a Policy Layout do?

A

Outline the duties of the parties to the contract

96
Q

True or False: The relationship between AGENTS and Insurance Companies is based upon the law of agency

97
Q

What is fraud?

A

The deliberate attempt to mislead a third party

Aviation Insurance (2 decks)

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