Cpcu 510 - Assignment 12

Front 1

An an insurance professional reads the Dec, he or she must verify what?

Back 1

Memory Aid: I PILL
1. Insured party
2. Insurable interest
3. Paid Premiums
4. Loss occurred during policy period
5. Loss occurred in covered territory.

Front 2

Insured party

Back 2

A person, corporation, or other entity contractually entitled to a loss payment or other benefits according to a policy's terms.

Front 3

Named insured

Back 3

A person, corp., partnersip, or other entity identified as an insured party in a policy's Dec page.

Front 4

Insurable interest

Back 4

An interest in the subject of an insurance policy that would cause the interested party to suffer financial loss if an insured event occurred.

Front 5

Under the CGL Coverage form, who can be considered insureds even though their names don't appear on the Dec page?

Back 5

Employees.

Front 6

Loss Payee

Back 6

A secured creditor to whom the debtor has pledged specific personal property as collateral for a loan.

Front 7

Loss payable clause

Back 7

A policy provision that protects the creditor's interest in personal property pledged as collateral for a loan.

Front 8

As first named insured, what duties and rights do you have?

Back 8

*Responsible for premium pmt
*Only insured who can cancel
*Only one to receive cancellation notice
*Can make policy changes
*Can receive returned premiums

Front 9

Loss payees may be entitled to _______, but they are not considered _______.

Back 9

Some payment under the policy
They are not insureds or NI, even if their name appears on Dec page.

Front 10

What are some rights a loss payable clause might extend to the loss payee?

Back 10

*Entitled to receive advance notice of policy cancellation
*Rights might be protected even when loss results from NI's fraudulent acts or omissions.

Front 11

Mortgagee

Back 11

A lender in a mortgage arrangement, such as a bank or other financing institution.

Front 12

Mortgage Clause

Back 12

A policy provision that protects the creditor's (mortgagee's) insurable interest in real property pledged as collateral for a mortgage loan.

Front 13

Unlike a typical loss payable clause, the standard mortgage clause is viewed as...

Back 13

A separate policy between the insurer and the mortgagee.

Front 14

In addition to spouses, what other parties may qualify for status as an insured?

Back 14

*Family members
*HH residents
*Employees
*Officers and Directors.

Front 15

Separation of Interests Provision

Back 15

A policy provision that clarifies the extent to which coverage may apply separately to more than one insured party.

Front 16

An insurance policy may contain policy provisions addressing parties that may not be insured. What are the 2 most common examples of these provisions?

Back 16

1. No benefits to bailee provisions
2. Assignment provision.

Front 17

Bailee

Back 17

A party having possession fo another's personal property and a duty either to return it to the owner or to deliver or dispose of it as agreed.

Front 18

When compensation is involved, the bailee is a ________.

Back 18

Bailee for hire.

Front 19

When no compensation is involved, the bailment is a _______.

Back 19

Gratuitous bailment.

Front 20

No benefit to bailee provision

Back 20

A property insurance policy provision that states that it is the insured, and not the bailee, who is protected when covered property is in a bailee's custody.

Front 21

The No benefit to bailee provision relates specifically to _______, such as _______.

Back 21

Bailees for hire.
Auto mechanic.

Front 22

The no benefit to bailee provision does not preclude coverage for a _______, such as _______.

Back 22

Gratuitous bailee
Another driver to whom an insured lends his or her auto.

Front 23

What is the typical effect of any no benefit to bailee provision?

Back 23

1. The bailee cannot benefit from the property owner's coverage (insurer retains sub rights)
2. An insured has protection for loss to property in the custody of a bailee for hire.

Front 24

Many policies exclude coverage for parties to whom the policyholder has _______ covered property.

Back 24

Transferred.

Front 25

Assignment

Back 25

The transfer of property from one party (assignor) to another party (assignee).

Front 26

Assignment Provision

Back 26

A policy provision that prohibits an insured from transferring ownership of an insurance policy to another party without the insurer's written consent.

Front 27

What is one exception to the prohibition of assignment?

Back 27

Insuranc eon oceangoing cargo is usually assignable. Ownership of the cargo can change while at sea, and policy can be assigned to new owners as they gain ownership.

Front 28

For life insurance policies, insurable interest must be present at the time_______.

Back 28

the policy is purchased.

Front 29

For P&C insurance policies, insurable interest must be present at the time _______.

Back 29

of the loss.

Front 30

Why do insurance policies have an insurable interest requirement?

Back 30

1. Support principle of indemnity
2. Prevents use of insurance to wager
3. Reduces moral hazard incentive insurance may create for insured.

Front 31

What are the legal bases for insurable interest?

Back 31

*Ownership interest in property
*Contractual obligations
*Exposure to legal liab (tenants for rented premises, hotelkeeper for guest property)
*Factual expectancy
*Representation of another party (Agent, Trustee, Bailee)

Front 32

Contractual rights and insurable interests fall into what 2 major categories?

Back 32

1. Contracutal rights re: persons - contract can give the party the right to bring a claim against another without entitling them to make a claim against property belonging to the other person (unsecured creditors such as credit card companies)
2. Contractual rights re: property - Allow one party to bring claim against property held by another (ex: auto subject to a secured loan).

Front 33

Factual Expectancy

Back 33

A situation in which a party experiences an economic advantage if an insured event does not occur, or, conversely, economic harm if the event does occur.

Front 34

Property may be jointly owned under the following interests:

Back 34

1. Joint tenancy
2. Tenancy by the entirety
3. Tenancy in common
4. Tenancy in partnership.

Front 35

Joint Tenancy

Back 35

A concurrently owned and undivided interest that transfers to the surviving joint tenant upon the death of the other...each has an insurable interest up to the extent of the property's full value, but the insurance policy will only pay out the full value to the NI.

Front 36

Tenancy by the entirety

Back 36

A joint tenancy between a husband and wife.

Front 37

Tenancy in Common

Back 37

A concurrent ownership of property, in equal or unequal parts, by 2 or more joint tentants who lack survivorship rights (shares pass to heirs).

Front 38

Tenancy in Partnership

Back 38

A concurrent ownership by a partnership and its individual partners of personal property used by the partnership. Similar to joint tenancy. All partners have rights of survivorship.

Front 39

Many policies have a payment of premium provision, which states...

Back 39

coverage is granted in consideration of the premium.

Front 40

Policy period

Back 40

The timeframe beginning with the inception date, during which insurance coverage applies.

Front 41

A builders risk policy expires when?

Back 41

Before the stated expiration date if construction is completed prior to that date.

Front 42

Coverage under a crop-hail insuance policy ends when?

Back 42

When the crop is actually harvested, provided the harvest comes before the expiration date.

Front 43

Many property, liab, and other policies begin and expire at what time?

Back 43

12:01 a.m. (1 minute after midnight).

Front 44

Property insurance typically applies to losses that _______ during the policy period.

Back 44

Start.

Front 45

Wher may the coverage territory appear in a policy?

Back 45

On the Dec page, in the definitions, or other policy sections.

Front 46

The insurer's obligations are triggered when what happens?

Back 46

An insured event.

Front 47

An event is insured only if it meets what elements of an insured event (for property insurance)?

Back 47

PPCCL
1. Covered Property
2. Covered COL
3. Covered Consequences
4. Covered Location
5. Covered Period

Front 48

An event is insured only if it meets what elements of an insured event (for liability insurance)?

Back 48

A CLAP
1. Covered Activity
2. Alleged legal responsibility
3. Covered Consequences
4. Covered Location
5. Covered Period

Front 49

A property insurance policy may provide coverage for:

Back 49

*Real/personal property lost or damaged by a covered COL
*Consequential financial loss resulting from property damage.

Front 50

What is the format for most property insurance policies (commercial building, personal property, HO forms)?

Back 50

1. Insuring agreement, with or without a policy schedule
2. An exclusionary section
3. Other provisions that may add or exclude property.

Front 51

Policy Schedule

Back 51

A list that identifies specific items, usually with values attached, that are covered by a property insurance policy.

Front 52

Coverage for a loss is provided under a property insurance policy only if a covered cause of loss is the _______, and only if the _______ is unbroken.

Back 52

Proximate cause
chain of events.

Front 53

With basic and broad forms, what approach is followed? Who has the burden of proof?

Back 53

*Specified-perils or named-perils.
*Insured must prove covered peril was the COL.

Front 54

With special-form coverage, what approach is followed? Who has the burden of proof?

Back 54

*Very broad coerage
*Names excluded hazards and COL.
*The insurer must prove the loss resulted from an excluded hazard or peril.

Front 55

In additon to the covered COL, most property policies contain coverage for _______.

Back 55

Ensuing loss.

Front 56

What are the covered consequences of property losses?

Back 56

1. Reduction in value (direct loss)
2. Increased cost to replace/repair (direct loss)
3. Loss of revenue (indirect loss)
4. Extra expense (indirect loss).

Front 57

A HO policy's coverage extends...

Back 57

worldwide.

Front 58

Most commercail property forms cover business personal property only in or within _______ of the premises described on the Dec page.

Back 58

100 miles

Front 59

The _______ period may not always be the same as the _______ period.

Back 59

Covered period
Policy period (written on Dec page)

Front 60

What are some reasons the policy period from Dec page may vary from the Covered period?

Back 60

*Policy period may begin right before a written policy is issued (binder(
*Coverage may be terminated due to non-payment.
*A policy could be due for renewal, but for many years an endorsement ony would be issued.

Front 61

The legal obligation to which various liab policies refer can stem from the following bases of legal liab:

Back 61

1. Negligency/other tort liab.
2. Contractual liab
3. Statuatory liab.

Front 62

The covered consequences of a liab insurance policy typically cover both...

Back 62

*Damges for which insured is legally liable to a 3rd party
*Defense costs incurred to defend a case (usually in addition to the max amount payable for damages.)

Front 63

In liab claims where damages exceed limits, where the claimant is not willing to settle for the limits, the insurer must do what?

Back 63

continue defending the insured until a final court judgment hs been rendered.

Front 64

What are the benefits of insurers' legal defense team defending claims?

Back 64

1. Results in judgment in favor of the insured.
2. May establish case law discouraing similar claims.
3. Signals we will vigorously defend claims.
4. The amount of damages payable an be much lower because of evidence introduced.

Front 65

With liab insurance, what 2 distinct locataions can be relevant?

Back 65

1. Location of accident
2. the location of the lawsuit brough by a claimant.

Front 66

Nearly all property claims have a short/long "tail."

Back 66

Short.

Front 67

most liab insurance is written on what kind of basis?

Back 67

Occurrence-basis.

Front 68

Occurence-Basis coverage

Back 68

Coverage that is triggered by the actual happening of bodily injury or property damage during the polciy period.

Front 69

Claims-made coverage

Back 69

Coverage that is triggered by a claim alleging BI or PD that is made during the policy period, even if the claim arises from an event that happened before policy inception.

Front 70

Retroactive Date

Back 70

The date on or after which injury, damage, or another insured event must occur in order to be covered under a claims-made policy.

Front 71

Most liab insurance is written on what type of basis?

Back 71

occurrence-basis.

Front 72

Most claims-made liab policies are subject to a _______.

Back 72

Retroactive date.