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175 Cards in this Set
- Front
- Back
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Which of the following is the best general definition of actual cash value? Select one: a. Repair cost less deprecation b. Repair cost less damage c. Replacement cost less a service charge d. Replacement cost less depreciation |
d. Replacement cost less depreciation |
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Which of the following would be considered civil authority under the Prohibited Access coverage of Coverage D? Select one: a. Janitor b. Police officer c. Security guard d. Bus driver |
b. Police officer |
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Earthquake shocks are considered a single event if they occur within a Select one: a. 138-hour period. b. 148-hour period. c. 158-hour period. d. 168-hour period. |
d. 168-hour period |
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After recieving notice of loss from the insured, the insurer must provide the insured with proof of loss forms within ___________ days. |
60 days |
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What is the limit under the IBC Homeowners Basic Form for the extension of coverage for Fire Department Charges? Select one: a. $150 b. $250 c. $500 d. $1,000
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d. $1,000 |
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A warranty is: |
A warranty is a statement or stipulation in a contract the breach of which nullifies the contract. |
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Which of the following is NOT generally among the basic concerns when determining premium for insurance against theft? Select one: a. Construction of building b. Potential extent or size of loss c. Dollar values of likely claims d. Susceptibility of insured property to loss |
a. Construction of building |
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A theft rate is developed on a: Select one: a. first-loss basis. b. flat-rate basis. c. multi-loss basis. d. multi-rate basis.
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a. first-loss basis. |
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Which of the following is considered a cash card as defined in the Commercial Property Named Perils Form? Select one: a. Gift card b. Debit card c. Credit card d. Business card |
a. Gift card |
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Which of the following is a benefit of written insurance applications? a. Reducing misunderstanding b. Building customer rapport c. Lessening the chance of identity theft d. Reducing premiums
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a. Reducing misunderstanding |
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The proximate cause of a loss is best defined as the Select one: a. indirect actions of a third party that result in a direct loss. b. event that initiates the continuous chain of events leading to the loss. c. the remote cause of a loss, which is usually an excluded peril.
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b. event that initiates the continuous chain of events leading to the loss |
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The principle of indemnity provides that the insured: Select one: a. shall receive more than the actual loss suffered. b. shall not receive more than the amount he or she has paid in premiums. c. be returned as nearly as possible to the financial position he or she enjoyed immediately prior to loss. d. be returned to a financial status set by the insurer prior to loss.
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c. be returned as nearly as possible to the financial position he or she enjoyed immediately prior to loss. |
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Motorized vehicles or their equipment are one of three types of property excluded under Coverage C — Personal Property of the Homeowners Basic Form, One of the exceptions to that exclusion applies to scooters. Which is under that exception? Select one: a. Mobility scooters b. Golf carts c. Skate boards |
a. Mobility scooters |
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Under the peril of Glass Breakage, there is no coverage if the building has been vacant for more than ________ days. |
30 days |
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Quotation marks allow the drafter of the form to distinguish between the intended meanings of the same word when it is used in ___________. |
different contexts. |
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Which type of construction would result in the most favourable rating for Earthquake insurance? Select one: a. Low-rise wood frame b. Hollow concrete block c. Buildings of precast concrete d. Solid brick |
a. Low-rise wood frame |
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An exception is made to the Dishonest Acts Exclusion under the Commercial Property Broad Form where a Select one: a. theft was committed by a family member. b. theft was committed by the insured. c. theft was committed by an employee. d. theft was committed by a friend of the insured. |
c. theft was committed by an employee |
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Under the Basis of Valuation clause, the value of unsold stock is ______________. |
Under the Basis of Valuation clause, the value of unsold stock is its actual cash value at the time and place of loss |
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The package policy approach allows the insurer to reduce premium in two ways, of which one is by reducing the risk of adverse selection. What is the second way? |
By issuing uniform contracts, which simplifies policy-issuing and claims adjustment. |
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What is an exception to the Animals Exclusion under the Homeowners Broad Form? |
Loss or damage to building glass |
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When two insurance contracts cover the same interest at the time of loss, which of the following applies? a. Both deductibles apply to the loss. b. The highest deductible applies to the loss. c. Each Insurer pays its rateable contribution unless they agree otherwise in writing |
c. Each Insurer pays its rateable contribution unless they agree otherwise in writing |
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If property is lost, the insured has a duty to take all reasonable steps to recover it. Which condition provides that any reasonable and proper expenses related to the recovery attempt are shared by the insured and insurer according to their respective interests?
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Sue and Labour |
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In commercial wordings such as the Commercial Property Named Perils Form, the definition of Premises is extended to vehicles within _______ meters of the insured premises. |
100 metres of the insured premises |
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Property is often used as a security for a loan. Where the security is personal property, the loan arrangement may be a: Select one: a. mortgage. b. binding article. c. chattel mortgage. d. secured personal loan |
c. chattel mortgage. |
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Under Extensions of Coverage in the Broad form the insurer will pay for lock replacement, rekeying, or repair on the dwelling building if the insured’s keys are: a. lost. b. stolen. c. damaged. d. lent out but not returned |
b. stolen |
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Subrogation is the substitution of one party for another Select one: a. as creditor. b. as debtor. c. insured. d. arbitrator. |
a. as creditor. |
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The main benefit of a Mortgage clause is: |
it protects the mortgagee in the event of loss even if the insured breaches a policy condition. |
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Deductibles used in commercial risks are usually applied per: a. policy. b. occurrence. c. endorsement. d. additional peril.
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b. occurrence |
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There are TWO exceptions that apply to the first part of the Pollution Exclusion of the Commercial Property Broad Form. One exception applies if the spill or escape of a pollutant is directly caused by an insured peril. What is the other exception? |
The second exception applies to secondary loss or damage |
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The Statutory Conditions under the Insurance Acts of the common law provinces apply to which of the following? Select one: a. All insurance contracts b. Both the insurer and insured c. Written fire insurance contracts only d. All Fire and Extended Coverage contracts |
b. Both the insurer and insured. |
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What is a declaration form? (3 marks) |
Declaration Form
- If the insurer is satisfied that the distributor’s business records and systems are well organized and accurate, the solution to our distributor’s problems is a policy with a declaration form. |
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Outline the features of a declaration form. (7 marks) |
Features of a Declaration Form
- The form incorporates a schedule with an address and a provisional amount, |
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Identify what perils are included in a fire insurance contract |
Fire Lightening Explosion Contamination
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FOUR (4) requirements of the insured arising under Statutory Condition 6, Requirements After Loss. (4 marks) |
- prompt written notice of loss - proof of loss as soon as practicable - an inventory, if required, of undamaged property - certain records, if required, including book of accounts, warehouse reciepts and invoices
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Identify and distinguish between the TWO (2) parts of a Homeowners form |
Section I of a Homeowners form concerns property insurance
Section II of a Homeowners form concerns personal liability insurance |
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State what FOUR (4) parts compose Section I of a Homeowners form |
- Coverage A —Dwelling Building |
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State what FOUR (4) parts compose Section II of a Homeowners form |
- Coverage E — Personal Liability |
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What is a Deferred Payment clause? (3 Marks) |
- Under a Deferred Payment clause, the insured is indemnified for only a portion of the total loss to a building at the time of loss. |
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Why a Deferred Payment Clause is Used? (5 marks) |
Such a clause addresses the moral hazard arising from the possibility of a total constructive loss to an insured building — that is, where the building, though not destroyed, is damaged so severely that the cost of repair would equal or exceed its value before the loss or the amount of insurance. |
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Identify the most common example of a Deferred Payment clause (2 marks) |
The most common example of a Deferred Payment clause is the Rebuilding clause often found in farm policies.
It is usually applied to farm buildings that are vacant or no longer used. |
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Sub-clause B of the Insured Property clause in the Commercial Property Broad Form provides coverage in some circumstances where the Named Perils Form does not. Identify five such coverages under Sub-clause B |
Temporary Locations Building at Newly Acquired Location Contents at Newly Aquired Location Property in Transit Sales Representative |
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Define and describe the THREE (3) different kinds of equipment under the Commercial Property Named Perils Form. |
Contents any business is likely to have (furnishings, fixtures, fittings, machinery, tools, utensils, appliances)
The second type of equipment includes property like the first type but belonging to others and which the insured is obligated to insure or for which the insured is legally liable.
The third type of equipment comprises tenant’s improvements which could include property that, except for the ownership, is similar to property defined under building or equipment.
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What type of insurance will we need if we are purchasing a house? (3 marks) |
- Your client will need habitational insurance. |
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Will we be able to understand the habitational policy when we read it? (3 marks) |
- Your client should not have difficulty reading the policy. This is because, other than the occupancy of the risks they insure, habitational policies have one other distinguishing feature: they are written in clear language. |
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If we purchase a house and buy insurance to protect our investment, what will be the basis of settlement in the event of a loss, and why? (5 Marks) |
- In the event of a loss, replacement would be based on replacement cost.
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What is the best way to estimate the replacement cost of our house? (4 marks) |
You would advise your client that a professional appraisal is the best way to determine a building’s replacement cost. Most insureds would find this too expensive to have done regularly. Instead, most insurers require completion of an estimator or calculator devised by professional appraisers, that estimates replacement cost based on features such as the size and location of the dwelling |
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We were looking at buying a larger house and renting the extra space to two other families who would share the house with our family. Why is the premium so high? (5 Marks) |
Premium calculation for Homeowners forms can be complicated for dwellings housing more than one or two families. |
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Describe the exclusions of the Fire coverage under a fire insurance contract. |
The description in the Insurance Act of loss against fire excludes: - goods undergoing any process involving the application of heat - riot, civil commotion, war, invasion, act of foreign enemy, hostilities, civil war, rebellion, revolution insurrection or military power. |
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Describ the exclusions of the Lightening coverage under a fire insurance contract. |
It does not cover destruction or loss to electrical devices, or appliances caused by lightening, or other electrical currents unliss fire originates outside the article itself, and then only for loss or damage that occurs from the fire. |
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Explain a modular policy |
This is a policy that is constructed in several parts or modules. It can have the normal declarations page but the insuring agreements and other sections are added to complete the policy |
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Define Moral Hazard |
Relates to the character of the insured. How likely someone is to intentionally cause a loss. |
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Define Morale Hazard |
Relates to the attitude of the insured towards security and loss prevention. Is there a security system? Are they maintaning the building properly? |
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Define Mysterious Disappearance |
Unexplained disappearance. It's not stolen, it is just gone. |
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Define Pro Rata Cancellation |
This is the actual amount of time left on the policy period. If the premium was paid for a one year period and the policy cancelled after six months, the refund would be the unused premium for a six month period of time. |
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Define relief from forfeiture |
This occurs when the insured is in breach of the insurance contract and the insurer could deny coverage. The courts will look at the situation and if they deem it inequitable that coverage be denied will grant the insured relief from forfeiting his/her rights under the policy. |
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Define Replacement cost |
Rather than the present day value of the item, the insured receives new for old if this coverage is included |
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Define Short Rate Cancellation |
This is less than the pro rata premium and is usually determined by a table in the policy. For instance in the example given for pro rata (above) on a short rate basis, the insured would receive around 35% of the premium back rather than 50%. |
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These conditions are set out in the respective Insurance Acts and are a set of rules that govern both the insurer and the insured. |
Statutory Conditions |
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Define Susceptibility |
Sometimes the chance of loss to certain types of buildings is higher due to their construction (frame) or some other feature. This makes them more susceptible to loss occurring |
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A Homeowner’s Broad Form provides coverage based on: Select one: a. all risks for building and contents b. all risks for buildings and named perils for contents c. named perils for buildings and all risks for contents d. names perils for building and contents |
b. all risks for buildings and named perils for contents |
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On the IBC Comprehensive Homeowners Form, garden type tractors have a limit of: Select one: a. $2500 b. $5000 c. $1000 d. $10,000 |
b. $5000 |
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The extension of coverage on the Comprehensive Homeowner’s for freezer food covers: Select one: a. the freezer only b. the food only c. both the freezer and food d. only damage in excess of $2000 |
c. both the freezer and food |
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An insured, with a Comprehensive Homeowners Form, has $10,000 worth of jewellery stolen. He has a $1000 deductible. What amount would be payable under his policy? a. $1000 b. $2000 c. $10000 d. $9000 |
b. $2000 |
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When a client was away for one week, a fire occured. The neighbour watching their property had not visited the premisis since day four of their absense. Could this claim be denied? |
The claim would be paid. This is not a freezing loss and there is no indication this occured during the normal heating season. They are allowed to be away from their home for a period of 30 days before unoccupancy would be a factor. The neighbour visiting regularly or not, is not a factor in this loss. |
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The insured had two hamsters that were killed in a fire that was covered under a comprehensive homeowners form. Could he be reimbursed for the loss of the pets? |
As the loss is from a specified peril, the insurer would pay for the loss of the hamsters. |
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Define insurable interest |
Anyone who has a financial interest in the property such as a mortgage holder or lien holder would stand to benefit from the continued existence of the property or be prejudiced by its loss. There can be others besides the named insured that can have an insurable interest in the property insured. |
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Define subrogation |
This is an important aspect of property insurance. If someone causes a loss to a property insured and the insurer of the property must pay a loss amount, they have the right to pursue the negligent party for recovery of their claims payout. An example would be someone driving their vehicle along an icy road and they lose control and hit the insured dwelling causing damage. The insurer of this damaged dwelling would be responsible for repairs and would pay the amount that the repairs totaled. They would then be able to pursue the negligent motorist to recover whatever amount they paid. This is what is known as the subrogation process. |
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Define Basis of Indemnity |
The insured will receive the LEAST of the actual cash value of the property damaged or destroyed, the interest of the insured in the property or the amount of insurance. Indeminity could also be on a replacemnt cost basis. |
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Actual Cash Value |
This is one of the areas of the basis of indemnity and is quite important and sometimes very difficult to arrive at. The actual cash value is sometimes described as "what a willing buyer would pay a willing seller" or "replacement cost less depreciation." It is the present day value of the item and consideration must be given to the condition of the item at the time of loss. In handling claims, the adjuster has a difficult task in arriving at the actual cash value with individual claimants as most people feel the value of their items is much higher than it realistically might be. For instance, upholstered living room furniture in a house with an older couple of residents would be worth more than the same items in a house with a number of children crawling all over it. Many considerations must be made in arriving at the actual cash value of items and it is a give and take process for the insured and insurer. |
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Explain exclusions |
In determining coverage on a Basic Fire Policy, the insurer must determine if the proximate cause of loss was an insured peril and then determine if an exclusion exists that would negate payment of the claim. The exclusions or the Basic Fire policy are broken down into two groups with the first group reflecting the content of the various Insurance Acts and the second group reflecting underwriting and premium considerations. |
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Application of Heat Exclusion |
If some one where applying heat to an item and caused damage to it during this process, the damage would be excluded. For example, someone might be welding a break in a metal patio set and cause damage in the welding process. The damage caused would not be covered. If the fire spread to another area and caused damage, that would be considered covered under the peril of fire. |
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War Risk Exclusion |
The basic war risk exclusion is easy to understand. However, if a riot were taking place the rioters caused a fire, riot would be the proximate cause of the fire and would be excluded |
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Alterations and Additions Exclusion |
This presents additional risks to the insurer and is only covered if the insured has requested and received written permission from the insurer to proceed with the alterations and additions. Vacancy, Unoccupancy, Disuse Exclusion |
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Vacancy |
Property is unoccupied with no intent to return |
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Unoccpancy |
Property is unoccupied for a period of 30 days or greater, however the client has the intent to return. The property remains furnished. |
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By-Laws Exclusion |
Municipalities have by-laws that state how a property can be rebuilt or repair. If a frame dwelling was destroyed and the municipality had a by law that only brick dwellings could be built, this would mean considerable additional expense for the insurer. This extra cost would be excluded |
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Explain Removal of Insured Property - Extension of Coverage |
If property is removed to prevent further loss, the balance of coverage is applicable for a period of seven days or until the policy expires. Within the seven day period the insured and insurer can agree on continuing coverage beyond this time period but that must be negotiated. |
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Explain the extension of coverage for Debris Removal |
If a loss occurs the cost involved in cleaning up and removing the debris can be considerable.
This is covered by the Basic Fire Policy but the amount must come out of the total amount insured.
It does not increase the building coverage amount |
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Define Modular Policy |
This is a policy that is constructed in several parts or modules. It can have the normal declarations page but the insuring agreements and other sections are added to complete the policy. |
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Define Blanket Coverage |
This covers all the property of the insured but can be at various locations |
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Relief from Forfeiture |
If the insured is considered to be in breach of a policy condition, they can negate their right to recover under the policy. It is stated that they have FORFEITED their right to be indemnified for a loss. However, the courts will look at the situation and make a determination that the coverage denial was unfair and grant the insured Relief from Forfeiture, meaning the insurer must live up to their policy obligations. It could be a situation where the insurer is stating that a material change has occurred to the property but the courts determine that the change was not substantial and not continuing and does not pass the materiality tests. They would order that the claim be paid. |
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Proof of Loss Forms |
Proof of loss is the insured’s statutory declaration of what he is claiming. The insured is required swear to the truth of the statements on this form in front of a Notary Public or someone else authorized to complete oaths. If the insured makes a false statement, has the form notarized and submits it to the insurer, an act of fraud has been committed. |
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Removal of Insured Property |
An example might help in understanding this additional coverage granted by the basic fire insurance contract. The insured has $50,000 coverage on his contents and fire results destroying or damaging contents in the amount of $35,000. The basic policy allows the remaining coverage of $15,000 to apply to the undamaged contents that must be moved to another location. Coverage is applicable for a period of seven days and the insured must contact the insurer for coverage for a longer period of time at another location. The total amount of insurance would be the amount remaining after the loss is paid. |
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Rateable Contribution |
sometimes there is an overlap in coverage and the insured finds him/herself with two policies covering the same property at the same time. Even if policies contain an Other Insurance clause the rateable contribution is still effective. Policies containing Other Insurance clauses would be excess coverage only. However, the Insurance Acts generally limit these clauses or else the insured would end up with two policies and no coverage. It becomes a pro rating exercise between the two policies |
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What is a Statutory Condition? |
These conditions are set out in the respective Insurance Acts and while they can vary from province to province, there is not a lot of differences. They are actually a set of rules that govern both the insurer and insured with respect to the policy issued. While the Statutory Conditions can be varied, it is not often done and requires negotiation and agreement between the insurer and insured and good documentation of the same. |
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What is Statutory Condition 1? |
Misrepresentation
This is an untruth or an omission about the property being insured. It would occur on the application. It has to be something of some relevance and would have caused the insurer to charge additional premium or refuse the risk entirely. It cannot be some obscure fact about the property that does not affect the risk |
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What is Statutory Condition 4? |
Material Change
This condition applies while the policy is in effect. It involves changes to the property or its use during the policy term that are material. It could be something like the addition of a business in a residence or the fact that the sprinkler system was no longer operating. |
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What is Statutory Condition 5? |
Termination
A very important condition as it sets out the way the policy can be concluded or terminated by both the insurer and insured. Be sure to know what pro rata and short rate refunds are and the periods of notice required in all circumstances |
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What is Statutory Condition 7? |
Fraud
This condition includes important information regarding the proof of loss form. If the insured commits an act of fraud in one area of a particular claim, it negates the right to recover for any of the claim. If an insured had a number of contents stolen and claims for them, completing a proof of loss form. On the form he states that a 55 inch, high definition T.V. was stolen when in fact it was only a 27 inch, regular TV. If the insurer can prove this act of fraud, they could deny the entire claim for all the contents. The onus is always on the insurer to prove fraud and it is not an easy thing to accomplish |
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What is Statutory Condition 13? |
Contrary to what the insuring public think, it is the insurer’s option as what format will be followed in the settlement of a claim. The insurer can settle a claim by repairing, rebuilding or replacing damaged or destroyed property. The can also settle on a cash basis if they so desire. Although this condition does give the insurer the election, on a day to day basis the method of settlement is generally worked out between insurer and insured. |
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What is Statutory Condition 15? |
Notice
This is the formal way that notice must be given between the insurer and insured. On a day to day basis, the insured simply calls their Broker or Agent to advise of changes and the Broker or Agent reciprocates accordingly |
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Define Distribution |
This can happen when the insured has (for example) stock in a number of different locations. The single amount of insurance is distributed to each location to be insured . |
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Explain Limit of Liability Clause |
This is any clause that limits recovery by the insured. It could be deductibles or a coinsurance clauses. |
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Explain Materiality |
If the insurer is alleging a material change in risk after the policy has been issued, the change must be substantial and continuing. This is the test of materiality and would not include slight changes or matters that did not affect the over all risk.
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Define Pro Rata Cancellation |
This is the actual amount of time left on the policy period. If the premium was paid for a one year period and the policy cancelled after six months, the refund would be the unused premium for a six month period of time. |
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Define Short Rate Cancellation |
This is less than the pro rata premium and is usually determined by a table in the policy. It charges a fee for a mid-term cancellation. |
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What is Statutory Condition #6? |
Waiver of Inventory
Requirements After Loss can require the insured to give a complete inventory of undamaged goods after a loss. It can waive this right if it is expedient to do so. |
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Name the 5 factors for premium calculation: |
1) public fire protection 2) private fire protection 3) occupancy 4) construction 5) susceptibility |
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Explain the Deductible clause |
The stated deductible on a policy is the insured’s responsibility. The deductible always comes off the amount of the loss first and then determination is made as to what the policy will pay. |
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Explain Coinsurance |
As insurers, agents and brokers do a much better job of ensuring that clients have the proper amount of insurance coverage, coinsurance is not as prominent as it was a number of years ago. It was a tool the insurer had to encourage the insured to insure to value thus paying the proper amount of premium for the risk involved. If the coinsurance clause was not complied with, the insured became a "coinsurer" with the insured and had to pay or bear a portion of the loss.
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What is the coinsurance formula? |
Insurance carried ----------------------- x Loss $ = amount recoverable Insurance required |
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Explain Waiver of Coinsurance |
Some policies include a waiver of coinsurance. A common waiver is if the loss is neither 2% of the amount of insurance nor $5,000, the application of the coinsurance clause would be waived. |
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Define Deferred Payment Clause |
This clause is sometimes referred to as the rebuilding clause. Until repairs or replacement happens, only a portion of the loss would be paid. This clause effectively deals with situations where the insured would rather not replace the building. It might be applicable to farm structures and is fairly common on farm related property policies. However, it can also apply to commercial buildings as well. |
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Explain how the Deferred Payment Clause is applied |
A An insured has a farm type of barn that is valued at $100,000. If it suffers damage equal to two-thirds or more of its value, 50% of the amount of loss would be paid at that time. If repairs or replacement takes place within 9 months, the balance of the loss payment would be made. If repair or replacement does not take place within the prescribed time frame, the initial 50% would be the total loss settlement. |
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What is a Loss Payee? |
These are parties listed on the policy who have an insurable interest as the lenders of funds to the insured in which the insured property is put up as collateral to the loan. If claims occur, both the insured and the loss payee will be listed as payees on the settlement cheque. A loss payee can be denied indemnity under the policy if there is a policy breach by the insured or the premium has not been paid. |
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Does the mortgage clause give the mortgage holder greater or lesser protection than a loss payee? Why? |
A mortgage clause does give the mortgage holder greater protection than a loss payee enjoys. Even if the insured is unable to recover for the loss due to a breach or some other reason, the mortgage clause allows the mortgage holder to recover. The insurer would have subrogation rights against the insured in situations where claims are denied to the insured and paid to the mortgage holder. The mortgage holder has other rights under the policy and may give notice and proof of loss to the insurer. If the policy is cancelled, by either insurer or insured, the appropriate period of notice must be given to the mortgage holder. Mortgage clauses are usually only granted to policies covering buildings and not to chattel mortgages on contents. |
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Define Susceptibility |
Sometimes the chance of loss to certain types of buildings is higher due to their construction (frame) or some other feature. This makes them more susceptible to loss occurring. |
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Define Mortgagor |
The borrower of funds |
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Define Mortgagee |
The lender of funds |
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How does replacement cost contravine the principal of indemnity? |
Replacment cost means that the insured recieves the value of replacement rather than the depreciated value, which would put him into a better position than he was prior to the loss. Indemnity means he is put into the same position he was in 5 minutes before the loss. |
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Explain Automatic Reinstatement |
Previously, if an insured had a policy on his/her house for $100,000 and a loss occurred totaling $50,000, the coverage on the policy became the balance remaining of $50,000. This was not satisfactory and created problems. The policies that we have in more recent times allow the coverage to remain constant as far as the amount of coverage. Therefore, using the above example the coverage would remain at $100,000 despite the loss of $50,000. |
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Name the additional coverages offered on a Named Perils form that are not included under a Basic Fire policy. |
Explosion Impact by Aircraft, Spacecraft of Land Vehicle Riot, Vandalism or Malicious Acts Smoke Leakage from Fire Protective Equipment Windstorm or Hail
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Explain the Smoke Peril |
Smoke from a hostile fire is covered under the peril of fire. The peril of smoke covers only smoke damage from sudden, unusual and faulty operation of a furnace i.e. furnace blow back. Cumulative damage is not covered . Must be sudden, unusual and faulty. |
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Explain Hostile Fire |
Fire of an unintentional nature. Out of control, oncontained, sudden and accdental or fire that has escaped the intended circumstance. |
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Explain Friendly Fire |
Fire that is intended, contained and controlled. |
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Explain the coverage for Windstorm or Hail
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Either or both are covered as additional perils. Does not have to be simultaneous. Windstorm must be of sufficient velocity. Interior building damage is not covered unless an opening was created. If a portion of the roof was blown off and the elements entered, the interior damage would be covered. |
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Define stock |
Goods and merchandise that the insured manufactures or handles usual to his business |
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Define Riot |
An act or threat of violence by a group of persons that could result in injury to property damage |
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Define Vandalism |
Willful or malicious destruction or damage to property |
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Explain Conversion and how it is covered, or not covered by the policy. |
One of the first areas is that of conversion which can occur in bailment situations where property is entrusted to some for repairs or safekeeping and that person keeps the property for their own use. This is defined theft but is specifically excluded. |
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Define Mysterious Disappearance Is it covered? |
Mysterious disappearance is really an unexplained disappearance and could result from theft or possibly accidentally destroyed. It is generally excluded, although in recent times it is an insured peril on some comprehensive policies. |
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Explain Theft by Trick Is it covered? |
Theft by trick, which actually amounts to theft, such as paying for something with an dishonoured cheque is excluded as it easily lends itself to collusion |
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Explain the key difference between named perils and all risks coverage |
Named perils is a coverage defined by its inclusions. If it isnt' on the list, it isn't covered.
All Risks coverage is defined by exclusions. If it isn't specifically excluded, it would be covered. |
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What are the six criteria that must be met under a named perils or all risks coverage, in order for the loss to be paid? |
1. The cause of loss must be fortuitous so far as the insured is concerned. 2. It must not be caused or contributed to by any connivance by the insured. 3. It must be extraneous to the article involved. 4. The property damaged or destroyed must fall within the subject matter of the insurance. 5. The property, was, at the time of loss, at a location described in the policy. 6. The loss occurred during the policy period. |
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Provisions Governing All Insurance Contracts
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ActionWaiverRelief from ForfeitureApplicationProof of LossImperfect ComplianceNon-PaymentConsistancy With The Insurance ActAppraisalMade in ProviceMortgagee Collateral SecurityPolicy Contents
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Action
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Action may be brought 60 days after the insured has returned a completed Proof
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Waiver of Contract Terms
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-Must be in writing-Must be signed by the Insurer-Can not relate to the investigation, adjustment or appraisal of a claim, or in regards to the delivery or completion of Proofs
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Relief From Forfeiture
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-Insured is in breach of contract-Insurer could deny coverage-Court determines the denial inequitable
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Application
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A true copy must be provided to the Insured upon request
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Proof of Loss
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Insurer must provide to insured- when requested- within 60 days of FNOL- does not imply liability or contract in force
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Imperfect Compliance by the Insurer
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Any act or omission by the Insurer does not render contract invalid as against the Insured
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Non-Payment
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-Contract is binding if delivered even if premium is unpaid-When a payment is not honored the contract can be cancelled per Termination Statutory Condition
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Consistency With The Insurance Act
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No Insurer shall make a contract which is inconsistent with the Insurance Act
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Appraisal
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-Both appraisers appoint ump within 15 days-Each party assigns appraiser within 7 days-For value only, not coverage-Requested in writing
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Made in Province
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-Subject matter in province-Insurable interest of resident in the provinceConstrued according to the laws of the province if....-signed, countersigned, issued or delivered-committed to the post office or carrier, messenger or agent-to be delivered or handed to the insured or insured's agent within the province-All money payable under the contract must be paid at the office of the Insurer's chief officer or agent in the province
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Mortgagee Collateral Security |
No commission can be paid to a mortgagee or agent or employee of a mortgagee for arranging insurance under which a loss would be payable to the mortgagee
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Policy Contents
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PremiumPersons payableInsuredInsurerIndemnity for which the insurer may become liableExpiryEffectiveEvent on the happening of which liability is to accrueSubject matter of insurance
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Insurance Principals and Doctrines
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-Subrogation-Elements of a contract-Principal of Indemnity-Insurable Interest-Proximate Cause
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Subrogation
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-The substitution of one party for another as creditor on a claim-The insurer assumes the right of subrogation
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Elements of a Contract
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-Offer and Acceptance-Consideration-Capacity to contract-Genuine Intent-Legality of ObjectThis establishes that the policy is...-an agreement -between legally capable parties -for a consideration-demonstrating intent-to do something legal
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Insurable Interest |
-Is required to recover from a loss-Must stand to benefit from the continued existence of the property or be prejudiced by it's loss-The claimant is responsible to demonstrate their insurable interest
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Principle of Indemnity
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-The insured shall not receive more than the loss-The loss must be fortuitous to the insuredFortuitous: A chance event or accidental
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Proximate Cause |
The active efficient cause that sets in motiona train of events which bring about a resultwithout the intervention of any other forcestarting and working actively from a new and independent source
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How is the rate of premium calculated for fire insurance policies?
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Rates vary between properties & Insureds according to several characteristics.-Public/Private fire protection-Occupancy-Construction & - Susceptibility.
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How has public fire protection changed premiums charged to Insureds?
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A fire is more likely to be extinguished before it destroys property completely, than it would in a small community.
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How does the construction of a building affect the premium charged to Insureds?
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Buildings constructed of combustible material (frame) attract higher rates than a buildings constructed mainly/completely of non combustible material (concrete block)
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Describe the 4 different ways a deductible may be applied.
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1. Separate Items - applied separately to the amount recoverable under each item. 2. Occurance Basis - subtracted from the total amount of loss/damage arising from single event.3. Loss above threshold - no loss paid below specific amount, anything over that amount paid in full. 4. Specific amount beyond which no deductible applies.
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What is the purpose of Co-Insurance?
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Obliges the Insured to maintain a specified minimum amount of Insurance in relation to the value of the property Insured.
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Describe the Co-Insurance formula.
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amount of Insurance carried divided by the minimum amount of Insurance required times the amount of the loss = Amount recoverable by Insured.
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Why is it important for Insureds to consider the effect of inflation on property values when deciding how much insurance to buy?
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they may discover they are under insured at the time of a partial loss and incur a coinsurance penalty.
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Why do property policies often include a waiver of coinsurance for small losses?
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to nullify the coinsurance clause for losses exceeding neither 2% of the amount of insurance nor $5K.Applies separately to each item.
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What is the difference between the Stated amount Coinsurance clause and the standard co Insurance Clause?
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The difference is that the coinsurance requirements on a Stated Amount coinsurance are specified in dollars rather then as a percentage of the ACV found in the standard co insurance clause.
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When does the Stated Amount clause usually expire, relative to the policy, why?
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The Stated amount clause expires independently of the policy, usually three months later. This gives the Insured 3 months after renewing to confirm values for the renewal terms.
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Describe the circumstances in which an average distribution clause might replace a Coinsurance clause.
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In such operations as manufacturing or processing when goods move from one building to another and the total value remains fairly constant.
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How Does a deferred payment clause affect an insured in the case of loss of a building?
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The Insured is indemnified for only a portion of the total loss to a building at the time of loss. The remainder of the loss payment is deferred until the insured repairs or replaces the building.
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Creating Policy Wordings: Freedom within requirements and constraints
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-After an Insurer satisfies the requirements of the Insurance Acts with respect to...1. Perils2. Exclusions3. Extensions4. Stat Conditions-There is considerable freedom for insurers to include terms and conditions that do not comply with the Insurance Acts-Forms and Riders are used to add coverage for specific needs
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Creating Policy Wordings: Types of Policies
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Specific Policy: builds on a standard policy and includes...-Standard Insuring agreements-Exclusions-Limitations-Stat conditions-A schedule describing the property insuredModular Policy: is the sum of several parts...-A combo of multiple parts to create a whole policy-Declaration Page (names and addys of insured / insurer, the policy period, and the premium)-Pages are added to complete the contract
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Creating Policy Wordings: Types of Losses
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Direct Loss: Damage to the insured property directly from the insured perilExample: An apartment building has a fire. The property damaged is the direct lossIndirect Loss: Damage to insured property caused indirectly from the insured peril. It ios a consequential lossExample: Insured house suffers a major fire and need to be at an alternate location as a result
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Creating Policy Wordings: Description and Location of the Subject Matter
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-Clear description is important-Location description is critical (moveable property, blanket coverage, -PO Box addresses are not sufficient-An "item" may encompass more than on object (office furniture)
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Creating Policy Wordings: Occupancy
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-How the premise is used-May be part of the description of the property (ie: Joe's Garage)-Either insured's or Neighbors occupancy may be considered in the risk assessment-Essential for assessing the risk
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Creating Policy Wordings: Subject Matter of Insurance
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The property for which the insured will be indemnified if it is damaged or destoyed
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Creating Policy Wordings: No 2 policies are the same
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Every policy is unique
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Provisions Governing All Insurance Contracts
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ActionWaiverRelief from ForfeitureApplicationProof of LossImperfect ComplianceNon-PaymentConsistancy With The Insurance ActAppraisalMade in ProviceMortgagee Collateral SecurityPolicy Contents
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Action
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Action may be brought 60 days after the insured has returned a completed Proof
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Waiver of Contract Terms
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-Must be in writing-Must be signed by the Insurer-Can not relate to the investigation, adjustment or appraisal of a claim, or in regards to the delivery or completion of Proofs
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Relief From Forfeiture
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-Insured is in breach of contract-Insurer could deny coverage-Court determines the denial inequitable
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Application
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A true copy must be provided to the Insured upon request
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Proof of Loss
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Insurer must provide to insured- when requested- within 60 days of FNOL- does not imply liability or contract in force
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Imperfect Compliance by the Insurer
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Any act or omission by the Insurer does not render contract invalid as against the Insured
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Non-Payment
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-Contract is binding if delivered even if premium is unpaid-When a payment is not honored the contract can be cancelled per Termination Statutory Condition
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Consistency With The Insurance Act
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No Insurer shall make a contract which is inconsistent with the Insurance Act
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Appraisal
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-Both appraisers appoint ump within 15 days-Each party assigns appraiser within 7 days-For value only, not coverage-Requested in writing
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Made in Province
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-Subject matter in province-Insurable interest of resident in the provinceConstrued according to the laws of the province if....-signed, countersigned, issued or delivered-committed to the post office or carrier, messenger or agent-to be delivered or handed to the insured or insured's agent within the province-All money payable under the contract must be paid at the office of the Insurer's chief officer or agent in the province
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Mortgagee Collateral Security
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No commission can be paid to a mortgagee or agent or employee of a mortgagee for arranging insurance under which a loss would be payable to the mortgagee
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Policy Contents
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PremiumPersons payableInsuredInsurerIndemnity for which the insurer may become liableExpiryEffectiveEvent on the happening of which liability is to accrueSubject matter of insurance
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