Study 3 - Perils and Hazards Flashcards
Define peril.
The event that caused a loss covered by the policy; for example, fire, windstorm. May be a natural or man made event. Must be fotuitous.
What is the difference between Named Perils policies and All Risks policies?
Named perils: coverage against direct physical loss or damage caused by only the listed perils.
All-risk: coverage 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.
What is an exlusion?
Risks, perils, or properties defined in the policy as not covered; types of property that are not insured, and perils that are never or sometimes not insured.
What are the named perils listed in the IBC habitational forms?
- Fire
- Lightning
- Explosion
- Smoke
- Falling Object
- Impact by Aircraft or Land Vehicle
- Riot
- Vandalism or Malicious Acts
- Water Damage
- Windstorm or Hail
- Glass Breakage
- Transportation
- Theft, including Damage Caused by Attempted Theft
- Electricity
Which other common perils are covered within the IBC Habitational Forms due to falling within the definitions of perils that are named in the policy?
- Wildfire
- Hurricane
- Tornado
- Collapse
- Accidental Breakage of Property
- Earth Movement
- Flood
- Sewer Backup
- Sump Pump Filure
- Ice Damming
- Water seepage
- Mould and Wood Rot
Define hazard.
An attribute of the property to be insured or its physical surroundings that can lead to a peril or
cause the loss or damage due to that peril to be more severe.
What are the two types of hazards?
Physical hazard: A hazard arising from the physical condition or characteristics of the object that is insured; for example, using and storing volatile materials and substances on the premises.
Moral hazard: A hazard arising from the character, interest, habits, and lack of integrity of the insured or person concerned.
What is a fortuitous event?
Insurable perils are accidental events. The property insurance policy is not intended to be a maintenance policy. Intentional acts (for example, arson by the owner) and expected events (for example, wear and tear on the property) are excluded.
What are specified perils?
In the all-risks habitational forms, some of the exclusions that limit coverage are qualified by exceptions to those exclusions in the form of specified perils. Thus, the exclusion applies to all losses except a loss that is caused by one of the specified perils.
Explain the Fire peril.
Fire included any uncontrolled or unintended ignition, howsoever caused. By provincial statute, a fire insurance policy may only exclude fire if it results from:
- property undergoing a heat process (but resulting damage to other property is covered.)
- riot, civil commotion, war, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, or military power (a collection of perils often called war risks)
- radioactive contamination
Fire as a result of any other event may not be excluded (such as resultant from an earthquake, although damage directly cause by the earthquake would be excluded)
Explain the Lightning peril.
- Usually shown together with fire.
- A fire insurance policy must cover loss due to lightning, but loss to electrical devices or appliances cause by lightning or other electrical currents is not covered unless fire originates outside the article itself.
- Natural phenomenon produces by electrical discharge between clouds or between clouds and the ground.
- Resulting power surge can destroy electronics.
- Shockwaves (thunder) may shatter windows.
Explain the Explosion peril.
- Explosion of natural , coal, or manufactured gas in a building not forming part of a gas works, whether fire ensues or not.
- Explosion excludes water hammer (the shock wave created by closing a faucet or tap)
- In commercial policies, explosion usually excluded loss cause by the explosion, rupture, or bursting of more boilers and pressure vessels (equipment breakdown insurance)
Explain the Smoke peril.
- Smoke due to sudden, unusual, and faulty operation of any heating or cooking unit in or on the premises, but not smoke from fireplaces.
- In all-risks forms, smoke however caused is covered, except for smoke from agricultural smudging and industrial operations.
Explain the Falling Object peril.
- Any falling object that strikes the exterior of the building, for example, a tree blown down during a storm and striking the building, causing damage to the building and property inside.
- Also covers strike by meteorite or by an object ejected from an aircraft, or from part of a decayed satellite.
Explain the Impact by Aircraft of Land Vehicle peril.
- Loss of or damage to insured property caused by being struck by an aircraft or a land vehicle.
- Animals, considered personal property, are not covered.
- Excludes loss cause by any vehicle owned or operated by the insured or any of the insured’s employees.
Explain the Riot peril.
- An act or threat of violence by one or more persons who are part of an assembly of three or more persons, that might give rise to damage to property or injury to persons.
In the commercial forms, the meaning of riot is extended to include open assemblies:
- of strikers inside of outside the premises who have quitted work
- of locked-out employees
Explain the Vandalism or Malicious Acts peril.
- Vandalism is willful or malicious destruction of or damage to property.
- Malicious Damage originally identified a peril in property insurance but was later broadened to malicious act to better describe the intended scope of protection.
- Examples of vandalism include creating graffiti, breaking windows, cutting off power, and deliberately plugging a sink and turning the water on.
The IBC forms specifically excludes vandalism or malicious acts:
- occurring while the building is under construction, even if a Builders Risk endorsement has been issued.
- occurring while the building is vacant, even if a Vacancy Permit has been issued.\
- perpetrated by any insured
- caused by theft or attempted theft (named perils only)
Explain the Water Damage peril.
Loss of or damage to insured property cause ONLY by the following four scenarios:
- Sudden and accidental escape of water from a water main
- Sudden and accidental escape of water from within a plumping, heating (water or steam), sprinkler, or air conditioning system or domestic water container (such as a toilet, washing machine, hot-water heater, or dishwasher) located within the dwelling. This scenario excludes such loss within any unheated portion of the dwelling if the insured has been away for more than four days unless the insured has either shut off oand drained all the pipes and domestic water containers or arranged for a competent person to daily inspect the dwelling to ensure the heat is still on.
- Sudden an accidental escape of water from a domestic water container located outside of the dwelling (for example, a hot tub). Freezing is specifically excluded.
- Entrance of water through an aperture created concurrently with another insured peril (for examples, a hurricane blows part of the roof off, allowing the storm’s rainwater to enter the interior of the dwelling.)
What is excluded from the Water Damage peril.
- inadvertently leaving a window open and thus allowing rainwater to enter the dwelling is not covered in the named-perils form.
- damage to the actual system or domestic water container from which the water or steam escaped, only resultant damage to other property is covered.
- continuous seepage or leakage
- sewer back-up
- flood
- hydrostatic pressure
Explain the Windstorm or Hail peril.
- Windstorm includes tornadoes and hurricanes, but the Windstorm or Hail peril does not include loss or damage caused by waves, floods, or the weight, pressure, or melting of ice or snow.
- Also, outdoor antennae and satellite receivers are not insured property with respect to the peril of Windstorm or Hail.
- Personal property is not insured for loss or damage caused by Windstorm or Hail unless the storm fire creates an opening that allows the storm access to the interior of the dwelling.
Explain the Glass Breakage peril.
- Accidental breakage of the building glass or doors howsoever causes (for examples, by vandalism, windstorm, or an errant baseball), unless the breakage results from an excluded perils (such as war risks.)
The IBC named-perils forms specifically exclude glass breakage:
- occurring while the building is under construction, even if a Builder’s risk endorsement has been issued (there is no similar exclusion in the all-risks form).
- occurring while the building is vacant, even if a Vacancy Permit has been issued (there is no similar exclusion in the all-risks form).
Explain the Transportation peril.
- Encompasses loss of or damage to insured personal property cause during the transportation of the property by collision of the automobile transporting the property.
- Other perils that may occur to the automobile or trailer conveying the property include upset, overturn derailment, or sinking.
- Also extends to personal property that is temporarily removed from the premises, as well as to building fixtures and fittings that are temporarily removed from the premises for seasonal storage.
- The named-perils forms specifically exclude watercraft, as well as property in an owned vacation or home trailer.
Explain the Theft, Including Damage Caused by Attempted Theft peril.
- The meaning of theft is very broad and policies that provide theft coverage inevitably rely on exclusions to limit the scope of the coverage.
- Extended to include damage to real and personal property sustained during the actual or attempted theft, whether directly or incidentally.
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 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 theft of property or building materials from any dwelling under construction until the dwelling is completed and ready for occupancy.
- to animals
- caused by voluntary parting of property via false pretense.
Explain the Electricity peril.
- Electricity means sudden and accidental damage from artificially generated electrical current. For example, power surge of artificially generated electricity (as opposed to a lightning strike or solar storm)
- Damage must be sudden and accidental rather than, for example, a burnout due to wear and tear during normal use of an electrical appliance.
