P & C Insurance Basics Flashcards
Negligence:
Failure to do what a normal prudent person would have done under the same or similar circumstances.
E.g. knowing that it snowed and not shoveling the sidewalk causing a pedestrian an accident.
Negligence
Negligence:
Says that each party pays for guilt or fault.
E.g. McDonald’s Case where the woman was 20% at fault and McDonald’s was 80% at fault.
Comparative Negligence
Negligence:
Written or printed untrue statements.
E.g. think of LIBrary = ________
Libel
Negligence:
A purposeful act that harms someone in some way.
Tort
Negligence:
Oral or verbal untrue statements.
Slander
Negligence:
Says that the person suing must be completely free of fault.
Contributory Negligence
Elements of Negligence:
Must be an actual loss or damage/injury.
Loss or Damage
Elements of Negligence:
An unbroken chain of events.
E.g. a direct loss (fire happening to a home - water from a firetruck gets on the TV)
Proximate Cause of Loss
Elements of Negligence:
E.g. failing to observe traffic signals breaches the duty to drive safely and prudently.
Breach of Duty
Elements of Negligence:
The obligation to provide another party with a certain standard of conduct.
E.g. homeowner has a duty to their guests but not trespassers.
Legal Duty of Care
Damages:
A policy that covers a certain thing or its own amount of coverage.
E.g. a diamond ring
Specific Insurance
Damages:
Old English law that states that the master is responsible for the acts of the servant.
Vicarious Liability
Damages:
- Undoubtedly guilty
- NO NEED to prove fault because it is obvious
E.g. swimming pool, tiger, explosives
Absolute Liability
Damages:
A single policy that covers multiple classes.
E.g a bunch of pieces of jewelry
Blanket Insurance
Damages:
A policy that will only cover perils that are named/listed on the policy.
“If it ain’t named, it ain’t covered”
Named Peril
Damages:
The law will allow damages to be awarded in addition to compensatory damages in order to punish and discourage a wrongdoer.
Punitive
Compensatory Damages:
- Are awarded to an injured party for tangible and known expenses.
- Specific amounts unique to the claimant
E.g. bills, loss of earnings, costs of repairing or replacing damaged property.
Special Damages
Compensatory Damages:
To compensate for non-economic losses that are difficult to calculate.
E.g. payments for pain and suffering, mental anguish, disfigurement, etc.
General Damages
Damages:
- Are the cause of loss, the reason you file a claim
- Insurance doesn’t cover all possible ______
E.g. fire, lightening, wind, hail
Perils
Damages:
Only about a product regardless of faults or negligence.
Strict Liability
Damages:
- The losses as a consequence of the direct loss
- The aftermath
E.g. the house burned down - having to stay at a hotel or a loss of profit from your business
Excludes flood
Indirect Loss
Damages:
- A policy that will cover only perils, except what’s included
- Lists out what is not covered
Open Peril
Damages:
- The direct physical damage to property (e.g. raging fire)
- which includes proximate cause of loss (e.g. during a fire the furniture gets damaged)
Direct Loss
Damages:
A building that is made out of wood which is flammable.
Frame
Damages:
A house that is built with material that can resist burning down for up to 2 hours
BEST RATING
Fire Resistive
Loss Valuation:
A policy that sets a limit an insurer will pay based on fair valuation.
E.g. YOU agreed + I agreed = Fair Valuation
Agreed Value
Loss Valuation:
Less commonly used, the price the willing buyer would pay for property purchased from a willing selling under fair market conditions.
Market Value
Loss Valuation:
An endorsement that guarantees the insurer will rebuild the house to the full value after a loss.
- Often in homeowners
E.g. shortage of eggs or toilet paper during the pandemic (guaranteed it will be replaced)
Guaranteed Replacement Cost
Loss Valuation:
- The brand new price to replace things at today’s prices
- The original price paid is irrelevant
Replacement Cost
Loss Valuation:
- The USED value of replacing things
- Calculated by knowing the replacement value and then subtracting wear and tear
RC = replacement value (-) depreciation
Actual Cash Value
Loss Valuation:
Using modern, less expensive construction material
E.g. in an HO-8 policy OR Plaster v.s. Drywall
Functional Replacement Cost
Loss Valuation:
A policy that determines the MAXIMUM value the insurer will pay
Stated Value
Loss Valuation:
“EVALUATING the Loss”
- A factor in determining the premium
Loss Valuation
Other Insurance:
Coverage for certain perils or causes of loss that is provided only after the limits of a primary insurance policy are exhuasted.
Excess Insurance
Other Insurance:
Any type of coverage that responds to loss first, before all other coverage responds.
Primary Insurance
Other Insurance:
A provision in the policy that expires if there is more than one policy covering a loss.
Other Insurance
Limits of Liability:
The most the policy will pay for loss to any one person injured in any one loss.
Per Person Limit
Limits of Liability:
Separately stated limits for each person for Bodily Injury (BI) and Property Damage (PD).
Higher limits are better that way you’re not underinsured
Split Limit
Limits of Liability:
25/50/10
25 - Bodily Injury (per person)
50 - Bodily Injury (in total)
10 - Property Damage (max)
Minimum Limits of Liability in NY
Limits of Liability:
The most the policy will pay for all losses arising out of any one occurrence.
Per Occurrence Limit
Limits of Liability:
- A house that has stuff, but no people, however, the people do intend to come back; like going on vacation.
- Applies to those with a second residence with the intent to return
Unoccupancy
Limits of Liability:
Part of, rather than in addition to, the limit that would otherwise apply to the loss.
E.g. a home and contents policy includes $100,000 of contents cover but the ___________ for jewelry is $2,500.
Sublimit
Limits of Liability:
“MAXIMUM” available amount of money for all claims in a policy period
Aggregate
Limits of Liability:
Thr most the policy will pay for all losses of all types resulting from any one occurrence, regardless of other limits. (Usually more expensive)
E.g. 300k
Combined Single Limit
Limits of Liability:
- no people, no stuff
- at 61 days of being _____a house will begin to lose coverage
Vacancy
Insurer Provisions:
- The insurer’s legal right to recover damages from the responsible third party
E.g. insurer (State Farm) goes after at-fault driver = _______________
- Insured cannot collect twice and can’t sue
Subrogation
Insurer Provisions:
The right of the insurer to take possession of the damaged property after paying for its loss. The __________ belongs to the insurer.
Salvage
Insurer Provisions:
Specifies that if the insurer broadens coverage with no increase in premium, that broadening of coverage will apply to existing policies without the need for an endorsement.
Liberalization
Insurer Provisions:
- The rule says an insured needs to carry at least 80% of the replacement cost of the home to have a full claim covered.
- If an insured carries less than 80%, then they use the __________ co-insurance equation to reduce the amount they pay for a claim.
Co-insurance`
This condition specifies which loss valuation method will apply to the property insured under the policy.
Loss Settlement
Third-Party Provision:
An important provision in a property insurance policy that ensures that the insurance company will pay the mortgagee if the loss or damage occurs to a mortgagor’s property.
Mortgage Clause
Third-Party Provision:
Loss Payee = a party that is paid first in the event of a loss to property in which it has insurance interest.
_______ __________ ________ designates a loss payee as a beneficiary of the policy.
Loss Payable Clause
Third-Party Provision:
A bailee is someone who holds (but does not own) another party’s personal property. Coverage does not apply if loss payment benefits a bailee.
No Benefit to Bailee
