Contracts Midterm 2 Topics 5-8 Cpcu 557 Notes

Front 1

Explain the difference between a loss discovery form and a loss sustained form.

Back 1

The discovery form covers losses discovered during the policy period even though they may have occurred before the policy period (LOOK BACK). The loss sustained form covers losses actually sustained during the policy period and discovered no later than one year after the policy expiration. (LOOK FORWARD)

Front 2

What organization developed financial institution bonds?

Back 2

The Surety & Fidelity Association of America (SFAA)

Front 3

Why are financial institution bonds called "bonds"?

Back 3

Because one of the key coverages they provide is employee dishonesty insurance, which was traditionally called a "fidelity bond".

Front 4

What are different types of financial institutions?

Back 4

Banks, savings and loan associations, credit unions, stockbrokers, finance companies, and insurance companies.

Front 5

T or F: Entities eligible for financial institution bonds are also eligible for the ISO commercial crime program.

Back 5

F.

Front 6

What is the most widely used financial institution bond?

Back 6

Standard Form No. 24, which is used to insure banks and savings & loans associations.

Front 7

What was another name for Standard Form No. 24?

Back 7

"Bankers blanket bond"

Front 8

How many insuring agreements does the ISO Commercial Crime Coverage Form offer?

Back 8

Seven [7].

Front 9

What are the insuring agreements included in the ISO Commercial Crime Coverage Form? (try to name them in numerical order as listed on the form)

Back 9

1. Employee Theft

2. Forgery or Alteration

3. Inside the Premises - Theft of Money and Securities

4. Inside the Premises - Robbery or Safe Burglary of Other Property

5. Outside the Premises

6. Computer and Funds Transfer Fraud

7. Money Orders and Counterfeit Money

Front 10

T or F: A police report or criminal conviction is required for coverage to apply.

Back 10

F.

Front 11

T or F: Forgery committed by an employee is covered under the Forgery or Alteration insuring agreement.

Back 11

F. Forgery by an employee qualifies as theft as defined by the Employee Theft insuring agreement and is therefore covered under the Employee Theft insuring agreement, NOT the Forgery or Alteration insuring agreement.

Front 12

What is the regular coverage territory of the Employee Theft insuring agreement?

Back 12

The USA, including territories and possessions, Puerto Rico, and Canada

Front 13

What territory extension does the Employee Theft insuring agreement offer?

Back 13

It extends territory to include loss caused by any employee while temporarily outside the regular policy territory for up to 90 consecutive days.

Front 14

What is Insuring Agreement 2?

Back 14

Forgery or Alteration

Front 15

F&A does not cover losses resulting from _______, or ________.

Back 15

1. Insured's knowing acceptance of instruments that have been forged or altered2. Dishonest acts of the insured or insured's employees/associates (covered under EE Theft)

Front 16

Where does F&A coverage apply?

Back 16

Worldwide.

Front 17

What must occur for the Inside the Premises - Theft of Money and Securities (IP:TMS) coverage or apply?

Back 17

The thief must be present inside the premises or the banking premises; theft committed through remote computers is not covered.

Front 18

What is Insuring Agreement 3?

Back 18

Inside the Premises - Theft of Money and Securities.

Front 19

What does the IP:TMS insuring agreement extend coverage to?

Back 19

It extends coverage to apply to loss or damage to the premises if the insured is the owner or liable for the damage and to containers that hold covered property if damage is caused by safe burglary/attempted safe burglary.

Front 20

T or F: Disappearance or destruction includes losses REGARDLESS of whether they are caused by unlawful acts.

Back 20

T.

Front 21

What is Insuring Agreement 4?

Back 21

Inside the Premises - Robbery or Safe Burglary of Other Property

Front 22

What qualifies as a "custodian" of property under IP:RSB)

Back 22

Salesperson, cashier, janitor

Front 23

What must be present for the "safe burglary" peril to be covered?

Back 23

Marks of forcible entry into the safe or vault.

Front 24

What is Insuring Agreement 5?

Back 24

Outside the Premises

Front 25

What does Outside the Premises cover?

Back 25

Property in the care of a "messenger" or armored vehicle company.

Front 26

What is Insuring Agreement 6?

Back 26

Computer and Funds Transfer Fraud

Front 27

What does the first part of the Computer Funds and Transfer Fraud insuring agreement cover?

Back 27

Loss resulting directly from fraudulent entry of electronic data or computer program into a computer system owned/leased/operated by the named insured, entry or change which causes money to be transferred paid or delivered or the named insured's account to be debited or deleted.

Front 28

What does the second part of the CFTF insuring agreement cover?

Back 28

Loss resulting directly from a fraudulent instruction causing a financial institution to debit the named insured's transfer account and do something with stuff from that account.

Front 29

Where does coverage under Insuring Agreement 6 (CFTF) apply?

Back 29

Loss resulting directly from an occurrence taking place anywhere in the world.

Front 30

What is Insuring Agreement 7?

Back 30

Money Orders and Counterfeit Money

Front 31

What does Money Orders and Counterfeit Money cover?

Back 31

Loss from money orders that are not paid when presented and "counterfeit money" that the insured has accepted in good faith in exchange for merchandise, money, or services.

Front 32

What is the special limit of IP:RSB?

Back 32

$5000 per occurrence

Front 33

What are the special limits for Outside the Premises and CFTF?

Back 33

$5000 per occurrence

Front 34

What are the 11 general exclusions applicable to any of the crime insuring agreements?

Back 34

1. Acts Committed By You, Your Partners or Your Members

2. Acts Committed by Your Employees Learned of by You Prior to the Policy Period

3. Acts Committed by Your EE's, Managers, Directors, etc.

4. Confidential or Personal Information

5. Data Security Breach

6. Governmental Action

7. Indirect Loss

8. Legal Fees, Costs and Expenses

9. Nuclear Hazard

10. Pollution

11. War and Military Action

Front 35

What exclusions apply only to the Employee Theft insuring agreement?

Back 35

1. Inventory Shortages

2. Trading

3. Warehouse Receipts

Front 36

What eight exclusions apply specifically to Inside the Premises -- Theft of Money and Securities, Inside the Premises -- RSBOP, and Outside the Premises?

Back 36

1. Errors or Omissions

2. Exchanges or Purchases

3. Fire

4. Money Operated Devices

5. Motor Vehicle or Equipment and Accessories

6. Transfer or Surrender of Property

7. Vandalism

8. Voluntary Parting With Property

Front 37

What five exclusions only apply to the Computer and Funds Transfer Fraud insuring agreement?

Back 37

1. Authorized Access

2. Credit Card Transactions

3. Exchanges or Purchases

4. Fraudulent Instructions

5. Inventory Shortages

Front 38

What were the three types of insurance that US insurers were restricted to in the early 1900's?

Back 38

Fire insurance, casualty insurance, and marine insurance

Front 39

T or F: Commercial inland and ocean marine insurance is subject to more rate and form regulation than other lines of insurance.

Back 39

F. Subject to less rate and form regulation.

Front 40

What are the filed classes of inland marine business?

Back 40

Classes for which the policy forms and/or rates must be filed with the state insurance department.

Front 41

What characterizes filed classes?

Back 41

Large number of potential insureds and reasonably homogeneous loss exposures.

Front 42

What is an example of a filed class?

Back 42

Policy that covers musical instruments or photography equipment.

Front 43

What are nonfiled classes of inland marine business?

Back 43

Classes for which neither policy forms nor rates must be filed with the state insurance department. These vary by state.

Front 44

What characterizes nonfiled classes?

Back 44

Relatively small numbers of potential insureds; diverse loss exposures; or both.

Front 45

What is judgment rating?

Back 45

A rating method used by underwriters to rate one-of-a-kind risks. Judgment rating requires a thorough knowledge of the class of business for which coverage is being written.

Front 46

How is the size of the largest classes of inland marine business, aka traditionally nonfiled classes, measured?

Back 46

Measured by premiums written

Front 47

What is the largest class of commercial inland marine business?

Back 47

Contractors equipment

Front 48

What is covered under Builders Risk?

Back 48

Structure under construction, temporary structures at the building site, and building materials that have not yet become part of the building. Building materials ARE covered onsite, in transit, or in storage at another location. BIC may also be provided.

Front 49

What perils basis is Builders Risk typically covered under?

Back 49

An open perils basis, typically excluding flood, earthquake, and theft of business materials that have not been installed

Front 50

Why is the nonfiled approach to insuring Builders Risk preferred over being a component of a commercial property coverage part?

Back 50

The nonfiled approach allows more coverage and rating flexibility.

Front 51

What are soft costs?

Back 51

Various incidental expenses that results from a physical loss to a building project i.e. additional interest, advertising expenses, or real estate taxes.

Front 52

What are the two basic types of transit insurance and what are their meanings?

Back 52

Trip transit policy: covers a particular shipment of goods specified in the policy

Annual transit policy: covers all shipments made or received by the insured throughout a one-year policy period

Front 53

T or F: Flood and earthquake are not excluded by annual transit policies.

Back 53

True! Annual transit policies are mostly covered on an open perils basis and don't exclude those two common exclusions.. what?

Front 54

What is the coverage territory of a transit policy?

Back 54

Continental US, Alaska , and Canada. NOTE: NOT Hawaii, Puerto Rico, or any overseas possessions.

Front 55

T or F: DIC policies are a nonfiled class of inland marine insurance in most states.

Back 55

True. Insurers have great flexibility in arranging the insurance to the specific needs or exposures of their insureds.

Front 56

What coverages can be added by endorsement to the Physicians and Surgeons Equipment filed class?

Back 56

- Office equipment while off premises for no more than thirty consecutive days

- Extra expenses following a covered loss

- Money and stamps on premises

- Personal effects of the insured or others while on premises

- Valuable records

Front 57

Why is the Signs Coverage Form used by many businesses?

Back 57

Commercial property coverage forms severely limit coverage for signs.

Front 58

Why might an insured include an Accounts Receivable Coverage Form in their package if they don't really need it?

Back 58

To raise the coverage limit to higher than it would be without LOL.

Front 59

What are the three most common types of ocean marine insurance policies?

Back 59

Cargo, hull, and protection & indemnity

Front 60

Who is included under the term cargo owner?

Back 60

"Shippers" include manufacturers, importers, and exporters

Front 61

What advisory organization computes ocean marine loss costs?

Back 61

Trick question- no one! Ju-ju-judgment ratinnnnnng.

Front 62

What is the formula for the typical valuation of an ocean shipment?

Back 62

Amount of invoice + Freight + 10%

Front 63

What are the components of a general liability coverage part?

Back 63

1+ general liability declarations forms

1+ general liability coverage forms

Any applicable endorsements

Front 64

What does the condition on most GL declarations forms read?

Back 64

"In return for payment of the premium, and subject to all the terms of this policy, we agree with you to provide the insurance as stated in the policy."

Front 65

What is included on the declarations page of a typical GL declarations page?

Back 65

- insurer and producer name

- named insured's name and mailing address

- policy inception and expiration dates

- condition stating agreement

- limits of insurance

- description of the named insured's business

- rating an premium auditing info

- list of endorsements attached to policy

Front 66

What purpose does the conditions section of a GL coverage form serve?

Back 66

It contains the various conditions/rules that the insurer and insured must abide by.

Front 67

What are the seven conditions imposed on the insurer's duty to pay damages under occurrence version of the CGL coverage A?

Back 67

1. Insured must be legally obligated/liable to pay damages.

2. The damages must result from bodily injury or property damage as defined in the policy

3. The policy must apply to the bodily injury or property damage.

4. The occurrence must take place in the coverage territory.

5. The bodily injury or property damage must occur during the policy period.

6. The bodily injury or property damage must be caused by an occurrence.

7. The bodily injury or property damage must not be known to the named insured or certain other persons before the policy period.