Risk And Insurance Test 2

Front 1

real property

Back 1

land, all structures permanently attached to the land, and whatever is growing on the land

Front 2

personal property

Back 2

all property other than real property, Ex: cars, money, clothes

Front 3

Direct loss

Back 3

occurs when there is damage to the property

Front 4

Indirect loss

Back 4

Occurs when a direct loss causes expenses to increase or revenues to decline.

Front 5

Property Values Subject to loss

Back 5

Property Damaged, Destroyed or wrongfully taken, Debris removal, Demolition expenses, removal of undamaged property, increased cost of construction, part of a pair or set, loss of the "going concern value", net income.

Front 6

Negligence

Back 6

Duty, Failure to Perform, Injury or damage, proximate causes

Front 7

Defenses against of Negligent Claims

Back 7

Contributory Negligence, Assumed Risk, Guest host Statues

Front 8

Contributory Negligence

Back 8

If both parties are to blame in an accident, they cannot collect against eachother even if one was 90% and the other was 10%

Front 9

Assumed Risk

Back 9

defendant may raise defense that the plaintiff has no cause for action bc the plaintiff assumed the risk of harm from: conduct of defendent, condition of the premises, defendants product

Front 10

Guest host statutes

Back 10

relates to the standard of care by an automobile driver to a passenger

Front 11

factors leading to a higher standard of care

Back 11

Expanding application of liability, weakening of defenses against a liability, Res Ipsa Loquitor, Expansion of Imputed Liability, Changing Concept of Damages, Increased Damage Awards, Joint and Several Liability

Front 12

Weakening of defenses against a liability,

Back 12

contributory negligence v. comparative negligence, last clear chance rule

Front 13

Res Ipsa Loquitor

Back 13

the thing speaks for itself, may collect without proving negligence.

Front 14

Sources of Liability

Back 14

operational liability, premises Liability, products, completed operations, professional acts, principle/agent liability, automobile

Front 15

Operational Liability

Back 15

tort liability as part of your day to day operations, contractual liability, employer/employee liability

Front 16

Premises Liability

Back 16

Property Owner/Tenant liability, Attractive Nuisance Doctrine- take reasonable steps to protect your property

Front 17

Products Liability

Back 17

Breach of warranty, Strict tort, negligence

Front 18

Completed Operations Liability

Back 18

must occur after contractor has completed work

Front 19

professional acts

Back 19

seller of services is required to use reasonable care not to injure others in the performance of those services

Front 20

Principle-Agent Liability

Back 20

respondeat superior, determining if someone is an agent or independent contractor.

Front 21

Non Insurance Methods of Risk Management

Back 21

1. Risk Avoidance, 2. Loss Control 3. Risk Retention and Financing 4. Risk Transfer 5. Segregation of Exposure Units

Front 22

Risk Avoidance

Back 22

conscious decision not to expose oneself to a particular risk, reduces risk to 0, no risk = no reward, give up potential benefits

Front 23

Loss Control, whats the focus?

Back 23

loss prevention and loss reduction, focus of loss control is frequency reduction

Front 24

loss prevention

Back 24

reduce the frequency of our losses

Front 25

loss reduction

Back 25

reduce the severity of our losses

Front 26

Domino Theory, list em

Back 26

1. Heredity and Social Environment, 2. Personal Fault 3. Unsafe act or physical Hazard 4. Accident 5. Injury

Front 27

Types of Loss Control

Back 27

Separation and Duplication

Front 28

Immediate v. Basic Causes

Back 28

immediate- employee fell down, basic- what caused the employee to fall down

Front 29

Other theories of Accident Causation

Back 29

General Methods of Control Approach, Energy Release Theory, Techniques of Operations Review, System Safety Approach, Crisis Management approach.

Front 30

General Methods of Control Approach

Back 30

focuses on conditions instead of actions

Front 31

Energy Release Theory

Back 31

Looks at energy as its released and how it affects surrounding objects

Front 32

Technique of Operations Review

Back 32

Accidents are a result of Managerial shortcomings

Front 33

Timing of Loss Control

Back 33

Preloss activities- implemented before any loss occurs (frequency reduction), Concurrent Loss Control- concurrent to the loss occurring (firefighters cut electricity), Post Loss Activities- severity reduction activities

Front 34

Potential Benefits of Loss Control

Back 34

reduce/eliminate expenses associated with repair/replacement, reduce income losses, Reduce extra costs after a loss over time, reduce/eli adverse liability judgements against us, reduce medical cost to fix injury, reduce income loss due to death or disability

Front 35

Potential Costs of Loss Control

Back 35

1. Installation 2. Maintenance

Front 36

Risk Retention and Financing

Back 36

Retention-funding and preplanning, assumption of the risk and a conscious decision to retain this risk

Front 37

planned v. unplanned retention

Back 37

planned- a conscious decision to retain risk, unplanned- a firm doesnt recognize a loss exists and doesnt believe a loss will occur

Front 38

funded v. unfunded retention

Back 38

funded- setting up preloss arrangements to help pay losses when they occur, unfunded- intended to pay them as they occur

Front 39

Hold Harmless Agreements (3 types)

Back 39

definition- transfer responsibility for some types of losses, specifies who is responsible to paying. Limited- each party will pay their own losses 2. Intermediate- transferree will only pay losses if both parties are liable. 3.Broad- not common, blank check, transferee pays all losses

Front 40

Segregation of Exposure Units

Back 40

1. Diversification 2. Hedging- speculative risk: opposing bets on same asset.

Front 41

Major Insurance Principles

Back 41

Indemnify, Insurable Interest, Principle of Subrogation, Principle of utmost good faith

Front 42

Indemnify

Back 42

restore the insureds to the situation that existed prior to a loss

Front 43

What constitutes Insurable Interest

Back 43

1.the holder of a contract to receive royalties, legal liability resulting from contracts, secured creditors, building contractors, always presumed to exist in life insurance for people who voluntairly insure their own lives.

Front 44

Principle of Subrogation

Back 44

one who has indemnified another is entitled to recovery from reliable third parties who are responsible. reinforces the principle of indemnity, keeps insurance premiums below what they might be, burden of loss more nearly placed on shoulders of those responsible

Front 45

Principle of Utmost Good Faith

Back 45

Higher standard of honesty imposed on parties to an insurance agreement than ordinary commercial contracts

Front 46

representations

Back 46

imbedded in the application, voiding the contract does not follow the mistake unless it is material to the risk

Front 47

concealments

Back 47

silence when obligated to speak, same legal affect as misrepresentation

Front 48

Concealments test questions

Back 48

did the insured know of a certain fact? was this fact material? was the insurer ignorant of the fact?

Front 49

Ideally Insurable Exposures

Back 49

1. Large number of similar objects 2. accidental or unintentional losses 3. Determinable and measurable 4. losses not subject to catastrophic hazard 5. Large losses 6. Probability of a loss must not be too high

Front 50

Requirements of all Valid Contracts

Back 50

1. agreement must be for legal purpose 2. parties must have legal capacity to contract 3. there must be a valid offer and acceptance 4. Promises must be supported by the exchange of consideration

Front 51

Distinguishing Characteristics of Insurance Contracts

Back 51

1. Aleatory Contract (values exchanged by the contracting parties is not necessarily equal) 2.conditional contract (insureds must perform certain acts before recovery is to be made) 3. contract of adhesion (unclear parts of agreement will be held against insurer) 4. unilateral (only one party makes promises that are legally enforceable)

Front 52

Social and Economic Values

Back 52

1. Reduced reserve requirement 2. capital freed for investment 3. reduced cost of capital 4. reduced credit risk 5. Loss Control activities 6. Business and Social Stability

Front 53

Social Costs of Insurance

Back 53

1. Operation of the insurance business 2. losses that are caused intentionally 3. losses that are exaggerated.

Front 54

Major parts of an Insurance Policy

Back 54

1. Declarations 2. Insuring agreement 3. Exclusions 4. Conditions 5. Other important aspects

Front 55

Named v additional insured

Back 55

Named- person that is to recieve the benefit of the coverage provided. Additional- Normally receive coverage that is somewhat less

Front 56

Named v. Open Perils

Back 56

Named- list what they cover, not on list, NOT COVERED. Open- everything is covered unless we exclude it.

Front 57

Why we have exclusions

Back 57

help define and limit the coverage provided by an insurer, without these policies would be so expensive no one would be able to afford them

Front 58

Typical Exclusions

Back 58

1. Perils(war, vermin) 2. Losses (Unbroken chain of events, pay for burnt walmart but not lost business) 3. Property (money, deeds, manuscript) 4. Locations (only covered in specified locations)

Front 59

Common Policy Conditions

Back 59

breach of these is grounds for refusal to pay 1.Fraud 2. Notice of loss 3. Proof of loss 4. appraisal 5. preservation of the property 6. Cancellation 7. Assignment

Front 60

Actual Cash Value v. Replacement cost

Back 60

ACV is replacement cost minus actual depreciation. Replacement is recovery with no depreciation- most houses done this way

Front 61

deductibles

Back 61

1. Straight 2. Aggregate 3. Calendar year 4. Disappearing 5. Franchise

Front 62

Straight Deductible

Back 62

applies to each loss and is subtracted before any loss payment is made

Front 63

Aggregate Deductible

Back 63

insure absorbs all losses until the deductible is reached in any given policy period

Front 64

Calendar Year deductible

Back 64

aggregate deductibles in the health insurance industry: meeting a deductible until the insurance pays

Front 65

Disappearing Deductible

Back 65

Size of deductible decreases as the size of the loss increases, at a given level the deductible disappears

Front 66

franchise deductible

Back 66

either a percentage of a value or dollar amount, no liability for insurer unless loss exceeds amount stated, once it does the insurer pays the entire claim

Front 67

Dollar Limits

Back 67

1. Specific Dollar Limits- restrict payments to a maximum amount on any one type of loss 2. Aggregate Dollar Limits- restrict payments on any one group of property items or group of losses from the same peril to some overall max