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112 Cards in this Set
- Front
- Back
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Fixture |
any personal property affixed to real property in such a way as to become part of the real property. |
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money |
currency, coins, bank notes, and sometimes traveler's checks, credit card slips, and money orders held for sale to the public |
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securities |
written instruments represent either money or other property such as stocks or bonds |
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Auto |
As defined in commercial general liability and auto forms, a land motor vehicle, trailer, or semitrailer designed for travel on public roads, including attached machinery or equipment, or any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged. page 8.5 |
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mobile equipment |
various types of vehicles for use principally off public roads, such a bulldozers and cranes |
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Recreational Vehicle |
A vehicle used for sports and recreational activities, such as a dune buggy, all-terrain vehicle, or dirt bike page 8.5 |
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peril |
the cause of loss |
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Hazard |
anything that increases the frequency or severity of a loss |
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parties affected by property losses |
-property owners -secured lenders of money to the property owner -property holders |
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Bailee |
a person or organization to which possession of the property of others has been entrusted, usually for storage, repair, or servicing. |
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Property Loss Exposure |
3 important elements: - Assets exposed to property loss -cause of loss -financial consequences page 8.3 |
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Assets Exposed to Property Loss |
-money and securities -vehicles and watercraft -property in transit (the property categories can overlap) page 8.3 |
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Asset |
is property, which is any item with value. property can decline in value- or become worthless- if it is lost, damaged, destroyed. page 8.3 |
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Buildings |
A structure, including plumbing, wiring, heating and air conditioning equipment. -the parts of a building can lead to hazards Fixtures are attached to buildings permanently |
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Fixture |
Examples: Steam Boiler Unfired Pressure Vessels (Airtanks) Refrigerating / Air Conditioning Mechanical Equipment Production Equipment Electrical Equipment Boilers & Machinery share 2 characteristics: -susceptible to explosion/breakdown that can result in serious losses. - periodical inspection & proper maintenance can lessen likelihood of explosion/breakdown |
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Personal Property contained in Buildings |
contents: - Furniture - Machinery/equipment - Stock (contents/goods) |
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Money & Securities |
this is separate from other types of contents because the characteristics present special problems. -high susceptibility of loss by Theft - |
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Legal Basis of a Liability Claim |
A legal right of recovery can be based on:
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Vehicles & Watercraft |
primary purpose: move people/property, and this movement exposes vehicles/watercraft to several causes of loss types: -Autos/highway vehicles -mobile equipment -recreational vehicles Watercraft are exposed to special perils not encountered in other means of transit. page 8.5 |
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Property in Transit
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This coverage protects your customers' property on their own vehicles, as well as when aboard motor, rail, or air carriers for hire. Important coverage details include: Automatic coverage for loading and unloading. Goods covered while temporarily in storage.
page 8.6 |
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Causes of Property Loss |
Perils include fire, lightning, windstorm, hail, theft. Most causes of loss adversely affect property and leave it in an altered state. |
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Hazard |
anything that increases the frequency or severity of a loss -frequency: leaving door unlocked increases thief ability to get inside - more likely to happen -severity: instead of putting money in bank, putting $100,000 in your living room, for a thief to steal - The amount lost is high. page 8.6 |
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Peril |
cause of loss (NOT HAZARD) page 8.6 |
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Financial Consequences of Property Losses |
When property loss occurs, the property is reduced in value.
page 8.6, 8.7 |
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Parties Affected by Property Loss |
Property owners -the most affected -the owner incurs a financial loss to repair/replace the property Secured Lenders -conditional rights to property -repossession of property gives the lender security. -secured lender/creditor will repossess property that is not paid for. -mortgagee, mortgagor Property Holders -Bailee -must safekeep property they do not own. -during losses, they must consider their own property and the property held for others. page 8.8 |
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Mortgagee |
A lender in a mortgage arrangement, such as a bank or another financing institution. page 8.8 |
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Mortgagor |
The person or organization that borrows money from a mortgagee to finance the purchase of real property page 8.8 |
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Legal Liability |
the legally enforceable obligation of a person or an organization to pay a sum of money (called damages) to another person or organization page 8.9 |
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Sources of Law |
Constitutional Law - derived from the constitution and is the supreme law in the US. Has legislation, executive branch, & judicial branch. Statutes - derived from National, State, or Local legislatures regulatory powers- derived from federal, state, local government agencies common law- judges overview case & determine outcome |
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constitutional law |
the constitution itself and all the decision of the supreme court that involve the constitution page 8.10 |
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statute |
written law passed by a legislative body at either the federal or state lever |
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statutory law |
the formal laws, or statutes, enacted by federal, state or local legislative bodies |
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common law (case law) |
laws that develop out of court decisions in particular cases and establish precedents for future cases |
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Criminal Law & Civil Law |
Legal cases related to insurance usually involve civil law. -civil law deals with rights and responsibilities of citizens with respect to one another. -criminal law applies to wrongful acts that society deems so harmful to the public welfare that the government takes the responsibility for prosecuting and punishing the wrongdoers. page 8.11 |
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criminal law |
the branch of the law that imposes penalties for wrongs against society. |
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Civil law |
a classification of law that applies to legal matters not governed by criminal law and that protects rights and provides remedies for breaches of duties owed to others. page 8.11 |
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Damages |
a person must sustain actual harm for a liability loss to result in a valid claim. two main categories of damage: -compensatory damages -punitive damages |
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compensatory damages |
are intended to compensate the victim for the harm actually suffered. an award of compensatory damages is the amount of money that has been judged to equal the victim's loss, and it is the amount the party responsible for the loss will have to pay. |
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punitive damages |
exemplary damages |
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Tort |
a wrongful act or an omission, other than a crime or a breach of contract, that invades a legally protected right. -negligence, intentional torts, strict liability |
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Tort law |
the branch of civil laws that deals with civil wrongs other than breaches of contract page 8.12 |
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Negligence |
the failure to exercise the degree of care that a reasonable person in a similar situation would exercise to avoid harming others page 8.13 |
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Negligence proof requirements |
the four elements:
person/organization whose conduct is negligent is generally responsible for the consequences. |
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Proximate Cause |
a cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would not have happened page 8.13 |
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Tortfeasor |
A person or an organization that has committed a tort. |
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Vicarious Liability |
A legal responsibility that occurs when one party is held liable for the actions of a subordinate or an associate because of the relationship between two parties |
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Intentional Tort |
A tort committed by a person who foresees (or should be able to foresee) that his or her act will harm another person |
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Assult |
the threat of force against another person that creates a well-founded fear of imminent harmful or offensive contact |
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battery |
intentional harmful or offensive physical contact with another person without legal justification |
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Defamation |
a false written or oral statement that harms another's reputation |
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slander |
a defamatory statement expressed by speech |
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libel |
a defamatory statement expressed in writing |
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false arrest |
the seizure or forcible restraint of a person without legal authority |
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Invasion of Privacy |
An encroachment on another person's right to be left alone |
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Strict Liability (Absolute Liability) |
Liability imposed by a court or by a statute in the absence of fault when harm results from activities or conditions that are extremely dangerous, unnatural, ultrahazardous, extraordinary, abnormal, or inappropriate |
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Liability |
the state of being responsible for something, especially by law. |
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Strict Liability |
In inherently dangerous situations, tort law can give an injured person a right of recovery without having to prove negligence or intent. Such inherently dangerous activities can give rise to strict liability for any injury regardless of the intent or carefulness of the person held liable. page 8.14 |
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Contracts |
contract law enables an injured party to seek recovery because another party has breached a duty voluntarily accepted in a contract. a contract is legally enforceable agreement between two or more parties. two areas of liability: -bodily injury/property damage -breach of warranty page 8.15 |
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Hold-harmless agreement (indemnity) |
a contractual provision that obligates one of the parties to assume the legal liability of another party |
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Warranty |
a written or an oral statement in a contract that certain facts are true |
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Statutory Liability |
Legal liability imposed by a specific statute or law. |
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No-fault Laws |
-exist to reduce lawsuits from auto accidents
-recognize inevitably of auto accidents -restrict/eliminate right to sue the other party -can sue in serious cases defined by state's law. page 8.16 |
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Liability Loss Exzposures |
3 elements: -Assets exposed to the liability loss -causes of liability loss -financial consequences of liability loss |
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Assets exposed to the liability loss |
-asset can be anything of value to individual/ organization -money can pay for damages, payments, costs, & fees page 8.17 |
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Causes of Liability Loss |
cause is the initiation of a claim or lawsuit an individual/organization by another party seeking damages or some other legal remedy. examples: -Autos, Watercraft, Other Vehicles -Premises -Personal Activities -Business Operations -Completed Operations -Products -Advertising -Pollution -Liquor -Professional Activities page 8.18 |
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Autos, Watercraft, Other Vehicles |
significant liability loss exposure for most persons/businesses comes from ownership, maintenance, & use of automobiles. Liability loss exposures are also created by owning/operating other conveyances, such as watercraft, aircraft, and recreational vehicles. page 8.18 |
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Premise |
anyone who owns/occupies a premise has premises liability loss exposure. |
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Personal Activities |
non-business/personal activities can cause liability between individuals and others |
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Business Operations |
priorities are the condition of the premises they run their business, and their business operations. Any activity a business performs has the potential to cause harm to someone else. page 8.19 |
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Completed Operations |
Plumber, Electrician, Painter, or other contract work maintains liability loss exposures after it is completed and when the contractor leaves the work site. page 8.19 |
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Products |
liability resulting form products that cause bodily injury or property damage is a significant exposure for manufacturers. Exposure begins with design and may not end until the consumer properly disposes of the product. page 8.19 |
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Advertising |
without proper permission of images, likeness, slogan, and other copyrighted materials, a company could face a liability claim |
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Pollution |
Contaminants, Pollutants, hard to dispose materials can affect the environment. Clean up costs, expenses to relocate contaminated areas, and other fines could be given to the company and they would be held liable. page 8.20 |
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Liquor |
the consumption, serving, sale of alcohol present liability loss exposures. - intoxicated persons are a threat to themselves/others --providers of alcohol can be held responsible of intoxicated parties -drunk driver & alcohol server can be held liable in a car accident |
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Professional Activites |
negligence involves a failure to exercise the degree of care that is reasonable under given circumstances. Professionals are expected to be specially competent in a specific field/occupation & they will exercise higher standard of care in performing their duties than someone without special competence. |
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Financial consequences of liability loss |
In practice, financial consequences are limited to the wealth of the person/organization -- although in theory, the financial consequences are limitless --some jurisdictions limit the amount that can be taken in a claim -- liability claims can result in the loss of most/all of a person's/organizations assets. |
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Financial Consequences |
-Damages -Damage to Reputation |
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Damages |
-can be more difficult to determine than those involved with other losses. -money whose payment a court orders as compensation to an injured plaintiff. |
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Defense Costs |
if liable, may include costs to defend the alleged wrongdoer in court. These defense costs include not only the fees paid to lawyers but also all the other expenses associated with defending a liability claim.
included expenses: -investigation costs, -expert witness fees -premiums for necessary bonds -other expenses to prepare/conduct trial page 8.21 |
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Damage to Reputation |
-hard to quantify, but exists -money to compensate for defendant's loss of reputation |
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Personnel Loss Exposures |
3 elements: -assets exposed to a personnel Loss -causes of personnel loss -financial consequences of a personnel loss |
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Personnel Loss Exposures |
A condition that presents the possibility of loss caused by a person's death, disability, retirement, or resignation that deprives an organization of the person's special skill or knowledge that the organization can not readily replace. |
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key employee |
an employee whose loss to a firm through death/disability before retirement would have economic effects on the company |
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Assets exposed to personnel loss |
Valuable employees (key employees) present a critical loss exposure to an organization -groups of employees who perform crucial functions, if lost at once, can cause crisis for an organization.
-INDIVIDUAL EMPLOYEES -OWNERS, OFFICERS, & MANAGERS - GROUPS OF EMPLOYEES page 8.23 |
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Individual Employees |
employees with unique talents, creativity, or special skills vital to the organizations' ability to meet it's goals these employees: -do not own/manage/oversee the organization -BUT they add value to it |
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Owners, Officers, Managers |
Responsible for making decisions essential to the organization, as well as managing/motivating others. If the owner is a key person, their wellbeing/competence will influence the organization's value page 8.23 |
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Groups of Employees |
Individuals may be less important- but if an entire group leaves, the organization may not be able to function without their contributions. |
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expendable |
of little significance when compared to an overall purpose, and therefore able to be abandoned. |
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Causes of Personnel Loss |
-death -disability -resignation, layoff, firing -retirement -kidnapping |
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disability |
the inability (because of impairment) of a person to meet his or her personal, social, or occupational demands ; other activities of daily living; or statutory or other legal requirements |
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Workplace injuries |
are often related to companies' failing to take adequate safety measures: -failing to apply ergonomics to prevent injuries, such as carpal tunnel syndrome, from repetitive motions -not allowing workers performing physical labor to take periodic breaks -operating an assembly process too quickly, thereby encouraging workers to take chances assembling products and increasing their exposure to potential injury page 8.25 |
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Involuntary Employee Separations |
generally are not considered a personnel loss because the organization has determined that it is better off without the employees |
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Financial Consequences of Personnel Loss |
the loss is similar to the effect of property & liability losses, in that they reduce the value of the organization. difference, is that personnel loss typically manifest themselves as net income losses. Financial consequence examples: -loss of the value the employee contributed to the organization -replacement costs (recruit, interview, training) -losses to the organization's value by negative publicity -losses caused by low morale, such as reduced productivity and increased illness page 8.26 |
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Net Income Loss Exposure |
a condition that presents the possibility of loss caused by a reduction in net income. 3 elements: -assets exposed to net income loss -causes of net income loss -financial consequences of net income loss |
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Assets exposed to net income loss |
the asset exposed is the future stream of net income of the individual or organization. it includes revenues minus expenses and income taxes in a given time period. -usually associated with property losses in the insurance industry, but there are many other causes. |
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Indirect Loss |
is a loss that results from, but is not directly caused by, a particular cause of loss. |
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Causes of Net Income Loss |
it can often be difficult to discern when the direct property loss, liability loss, personnel loss, or business risk loss ends and the indirect net income loss begins. Various circumstances lead to net income loss. |
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Property Loss |
a loss sustained by a person/organization resulting from damage to property in which that person/organization has financial interest. Damage can reduce property's value (down to zero) |
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Liability Loss |
caused by a claim of legal liability from someone who is usually seeking monetary damages against a person/ organization page 8.29 |
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Personnel Loss |
often caused by a key person's death, disability, retirement, or resignation. This loss deprives those dependent on that person of a special skill/ knowledge that can not be readily replaced |
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Business Risks |
refers to risk that is inherent in the operation of a particular organization. examples of potential net income losses: -loss of goodwill -failure to perform -missed opportunities |
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Loss of goodwill |
goodwill can be lost by: poor service, offering obsolete products, mismanaging operations. for not-for-profit organizations, goodwill = reputation |
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Failure to perform |
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Missed Opportunities |
missing opportunities for profit by delays, hesitations, etc. |
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Ideally insurable Loss exposures |
to be insurable, a loss exposure should have certain characteristics/ Most insured loss exposures do not completely embody all of the characteristics of an ideally insurable loss exposure. |
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Pure Risk |
only a loss, no chance of gain. Not speculative risk. |
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Fortuitous Losses |
it should be occurring "completely by chance" from the insured's standpoint. example of NOT fortuitous: -theft, vandalism (both intentional acts against the victim) for a loss to be fortuitous, the insured cannot have control over whether or when a loss will occur. |
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Definite and Measurable |
Definite required components: time, cause, location insurance policies have a policy period that specifies the precise dates and times of coverage. page 8.33 |
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Independent & Not Catastrophic |
independent- loss suffered by one insured does not affect any other insured/group of insureds. gotta maintain that solvency baby |
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solvency |
Solvency essentially is the ability to pay what you owe. In the case of insurers, it's the ability to pay for claims. |
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affordable |
the insurer should be able to charge an economically feasible premium - one that the insured can afford to pay. page 8.35 |
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The summary on page 8.36 is super helpful. |
It may be worth reading. |
