Cpcu 510 - Assignment 15

Front 1

What affects how liability losses are valued?

Back 1

*Relevant Policy Provisions
*Extent of BI and/or PD.

Front 2

Although policy limits restrict the insurer's liab, neither the judge nor jury is bound to...

Back 2

confine an award to policy limits.

Front 3

When the insured is liable for damages, the key issue affecting the valuation of a liab claim is...

Back 3

the amount it will take to reasonably indemnify the party who incurred the loss.

Front 4

The US Common-law system requires the amount of damages awarded to compensate the clmt for loss incurred as of...

Back 4

the trial date.

Front 5

Who has the burden of proof regarding BI and PD amounts?

Back 5

The claimant.

Front 6

When BI results in a clmt's death, the claim is usually categorized as either a _______ or a _______.

Back 6

Survival Action (how much would have been recovered if the clmt had lived)
Wrongful Death Action ($ loss to survivors).

Front 7

In liab insurance, policy limits are usually expressed in what different ways?

Back 7

1. Single limits
2. Split limits
3. Aggregate limits.

Front 8

Single limit

Back 8

A limit that applies to all BI and PD for a single occurrence, a single person incurring a loss, or a single claim.

Front 9

Split limits

Back 9

Separate limits for BI and PD liab claims.

Front 10

Policies containing split limits, like PAPs, usually contain what different types of limits?

Back 10

1. BI per person (sublimit)
2. BI total
3. PD limit.

Front 11

Aggregate Limit

Back 11

A specific lmit on the max amount an insurer will pay for total damages from all covered occurrences during the covered period (usually a policy year).

Front 12

Aggregate limits are common in what types of policies?

Back 12

Commercial liab policies.

Front 13

What are examples of other types of policy limits (besides single, split and aggregate) that may appear in liab insurance?

Back 13

*Limits on defense costs
*Limits on nonfault-based coverages (MPC, state-mandated WC).

Front 14

Under most liab insurance policies, defense costs are payable...

Back 14

in addition to the max amount payable for damages.

Front 15

Deductibles aren't usually included in what types of policies?

Back 15

*Commercial general liab
*Personal liab
*Auto liab.

Front 16

Large deductibles are common with what specialty liab policies?

Back 16

*Professional liab
*Directors and officers liab.
*Bailee legal liab (for warehouses and garagekeepers).

Front 17

What is the difference between a deductible and a self-inisured retention (SIR)?

Back 17

1. With a liab insurance deductible, insurer defends then bills the insured later.
2. With SIR, insurer only pays losses that exceed SIR amount. Insurer does not defend claims below SIR amount.

Front 18

Liability insurance policies contain provisions designed to help resolve disputed claims. These are referred to as _______ provisions.

Back 18

Arbitration.

Front 19

Arbitration resolves what types of disagreements?

Back 19

1. Disagreements about whether the insured is legally entitled to recover damages
2. Disagreements about the amount of damages.

Front 20

A multiple-recovery rule applies only to other sources against which the insured has a legally enforceable right, including the following sources:

Back 20

1. Noninsurable agreements (hold-harmless agreements, service agreements, credit card protection plans, warranties) - insurance becomes excess.
2. Negligent 3rd parties (recovery under tort law)
3. Other insurance in same policy
4. Other insurance in a similar policy
5. Ohter insurance in a dissimilar policy.

Front 21

Other-insurance provisions are usually found in what section of the insurance policy?

Back 21

Conditions section.

Front 22

What are the broad types of other-insurance provisions found in property and liability insurance policies?

Back 22

1. Primary/excess provisions
2. Proportional provisions
3. Escape clauses.

Front 23

Primary coverage provision

Back 23

An other-insurance provision that specifies that the policy pays the loss amount before other applicable policies until its own limits have been exhausted.

Front 24

Excess coverage provision

Back 24

An other-insurance provision that specifies that the policy pays any remaining loss amount, up to its policy limits, after the prinary policy's coverage limits have been exhausted.

Front 25

Proportional other-insurance provision

Back 25

A policy provision that limits the insurer's obligations to a portion of the overall loss.

Front 26

How does it work when 2 policies both state they are primary, when both state they are excess, or when no statement of primary/excess coverage is indicated?

Back 26

Insurers typically share the loss amount proportionally...this is an equitable way to share in the loss.

Front 27

Losses are typically proportioned between insurers by what methods?

Back 27

1. Equal shares
2. Pro Rata sharing.

Front 28

Contribution by equal shares

Back 28

A method of paying losses in which both policies pay the loss equally until the limits under one policy have been exhausted, thereafter the other policy alone pays.

Front 29

Pro Rata sharing formula

Back 29

Policy A's maximum amount payable =
A's Policy limit/ Total limits of all policies
x loss amount

Front 30

What type of proportioning is typically found in property insurance polices?

Back 30

Pro rata sharing.

Front 31

What type of proportioning is typically found in liability insurance polices?

Back 31

Contributions by equal shares.

Front 32

Escape clause

Back 32

An other-insurance provision that relieves the insurer of ANY obligation to pay a claim for which other insurance applies.

Front 33

What are the different ways an Escape clause can function?

Back 33

1. Prohibitions - forbids other insurance
2. Exclusions - excludes property/activities covered by other insurance.
3. Disclaimers - denies responsibility if other insurance applies (typically with firnge coverages).
4. Offsets - reduces the coverage limit by the amount of the other insurance.

Front 34

What are some of the ways other-insurance provision disagreements can be resolved?

Back 34

1. Agreement/compromise
2. Arbitration
3. Application of the Guiding Principles
4. Resolution in court.

Front 35

When do the Guiding Principles apply?

Back 35

When other-insurance provisions are contradictory or when other-insurance clauses don't exist.

Front 36

The Guiding Principles indicate when...
And provide a method of...

Back 36

policies are primary or excess over one another
Proration for policies that are neither primary nor excess to one another.

Front 37

The Guiding Principles make what types of polices primary over what other types of policies?

Back 37

Policies that cover more specifically described property at more specifically described locations are primary over more general policies.

Front 38

Why are insurers usually reluctant to allow amounts payable decisions to be determined by the courts?

Back 38

Because of the inability to predict court decisions.