Caib 1 - Key Terms & Chapter 1 Questions

Front 1

Risk

Back 1

chance of financial loss to which an object of insurance is exposed

Front 2

Speculative Risk

Back 2

the chance of a financial loss or gain

Front 3

Pure Risk

Back 3

the chance of financial loss but no chance of financial gain.

Front 4

Insurance

Back 4

the undertaking by one person to indemnify another person against loss or liability for loss in respect of a certain risk or peril to which the object of the insurance may be exposed... or to pay a sum of money or other thing of value upon the happening of a certain event

Front 5

Contract

Back 5

an agreement between two or more persons which creates an obligation to do or not to do a particular thing

Front 6

Consideration

Back 6

an exchange or something of value between parties

Front 7

Insurable Interest

Back 7

one has an insurable interest in the subject matter of the insurance when they will suffer financially by a loss

Front 8

Utmost Good Faith

Back 8

the law requires insurance contracts to maintain a higher standard of honesty than is needed of other contracts. This applies to the insured, insurer & broker.

Front 9

Indemnity

Back 9

application of this principle ensures people receive the actual amount of their loss, no more and no less

Front 10

Insurance Binder

Back 10

a temporary agreement in which the insurer agrees to provide certain coverages pending the issuance of the policy

Front 11

Agency Agreement

Back 11

a written agreement or contract between the insurer and the brokerage which acknowledges their relationship.

Front 12

Void Contract

Back 12

one which is unable in law to support the purpose of which it was intended. Such contracts are deemed never to existed

Front 13

Voidable Contract

Back 13

a contract that may be voided at the option of the wronged party only and not the wrongdoer

Front 14

Peril

Back 14

the cause of loss

Front 15

Direct Loss

Back 15

occurs when the peril insured actually attacks the object of insurance

Front 16

Indirect Loss

Back 16

losses which arise as a consequence of a direct loss

Front 17

Actual Cash Value

Back 17

new or replacement cost of the property at the time of the loss, less depreciation

Front 18

Replacement Cost

Back 18

the cost to repair or replace the lost or damaged property with new property of like kind and quality, without deduction for depreciation

Front 19

Valued Policy

Back 19

both the insured and insurer agree at the time the policy is issued as the the cash value of the property. In the event of a loss, the agreed amount would be paid

Front 20

Blanket Coverage

Back 20

policy which provides a single limit of insurance for all property falling within a specific class

Front 21

Scheduled Coverage

Back 21

Covered property is itemized on the policy

Front 22

Fiduciary

Back 22

one who occupies a special position of trust or confidence in the handling or supervising of the affairs or funds of another

Front 23

Unearned Premiums

Back 23

premiums not yet earned by the insurer. Such premiums are deemed to be held in trust in order to refund the insureds in the event the policy is cancelled prior to expiry date

Front 24

Fire

Back 24

involves the presence of a visible flame or glow, actual ignition or burning is required

Front 25

Friendly Fire

Back 25

a fire that is contained in its proper receptacle

Front 26

Hostile Fire

Back 26

a fire that passes outside of the limits assigned to it.

Front 27

Proximate Result

Back 27

damage which arises from a natural or continuous sequence of the peril causing the loss

Front 28

Material Change

Back 28

is any change within the control and knowledge of the insured and which arises after the policy has been issued and serves to increase the chance of loss

Front 29

Pro Rata

Back 29

the basis of return premium calculation when the insurer cancels a policy. The amount of the return premium is arrived at by dividing the amount of premium paid by the number of days in the policy period. The number so obtained is the multiplied by the number of days remaining in the policy period

Front 30

Short Rate

Back 30

the basis of return premium calculation when the insured cancels the policy. The amount of the return premium is equivalent to that provided on a pro-rata basis, less any administrative charge or cancellation penalty

Front 31

Notice of Loss

Back 31

immediate report of loss to insurer by the insured or his representative in writing

Front 32

Proof of Loss

Back 32

a formal verification, under oath, of the details and amounts being claimed under the policy

Front 33

Fraud

Back 33

is a deliberate attempt to deceive, with a view to securing some profit

Front 34

Deductible

Back 34

represents the amount the insured is required to absorb for each loss for which insurance coverage is provided before receiving any payment from the insurer

Front 35

Subrogation

Back 35

when the insurer has paid a claim for loss caused by a third party, the Insurance Act allows the insurer to place itself "in the insureds shoes" in respect of their right to recover the amount of the loss from the responsible party

Front 36

Proprietary Insurers

Back 36

insurance companies which exists to make a profit or return on their investment

Front 37

Non-proprietary Insurers

Back 37

insurance companies which are organized for reasons other than profit. They are owned and controlled by their policyholders and their mandate is to secure insurance at as low a cost as possible

Front 38

Personal Property

Back 38

contents of the insured's dwelling and other personal property owned, worn or used by the insured while on the premises, which is usual to the ownership or maintenance of a dwelling

Front 39

Additional Living Expenses

Back 39

coverage that provides for additional cost of living elsewhere when the dwelling is damaged by an insured peril and the damage is sufficient to make the dwelling unfit for occupancy, or requires that the insured move out while repairs are being made. Also provides for loss of fair rental value if part of the dwelling was rented or being held for rental at the time of the loss

Front 40

Vandalism

Back 40

the wilful or ignorant destruction of property

Front 41

Malicious Act

Back 41

wrongful act done without legal justification or excuse

Front 42

Vacant

Back 42

regardless of the presence of furnishings, all occupants have moved out with no intention of returning and no new occupant has taken up residence; or in the case of a newly contracted house, no occupant has yet taken up residence

Front 43

Theft

Back 43

includes all means of taking property without the owner's consent

Front 44

Mobile Home

Back 44

a home that is factory built on its own chassis and which can be easily moved

Front 45

Condominium

Back 45

a system of separate ownership of individual units in a multiple unit building

Front 46

Endorsement

Back 46

an extra sheet or slip of paper attached to the policy indicating in writing that the insured and the insurer have agreed to a change in the terms of the insurance contract

Front 47

Fine Arts

Back 47

traditionally includes painting, pictures, etchings, tapestries and other bona fide works of art of rarity, historical value or artistic merit

Front 48

Criminal Law

Back 48

deals with wrongs against society

Front 49

Civil Law

Back 49

concerns itself with settling disputes between individuals or other legal entities in matters not involving a criminal act

Front 50

Plaintiff

Back 50

the party making the complaint

Front 51

Defendant

Back 51

the party who allegedly committed the wrong

Front 52

Tort

Back 52

a wrong done to another in breach of a duty laid down by law

Front 53

Strict Liability

Back 53

Doctrine in law in which " a person is guilty until proven innocent"

Front 54

Negligence

Back 54

the omission to do what a reasonable man, guided by those ordinary considerations which ordinarily regulate human affairs, would do, or the doing of something which a reasonable and prudent man would not do

Front 55

Special Damages

Back 55

damages which can be accurately measured and which are intended to reimburse the plaintiff for out-of-pocket expenses

Front 56

General Damages

Back 56

damages which cannot be exactly determined but which reflect an amount the court believes necessary to compensate the aggrieved party fairly

Front 57

Trespasser

Back 57

is one who is on another's premises for his/her own purpose without the express or implied permission of the occupier. Their presence is of no value to the occupier and such persons are viewed as having temporarily appropriated the property for their own use

Front 58

Licensee

Back 58

a licensee is someone who comes onto the premises for his own purpose but with the occupier's consent

Front 59

Invitee

Back 59

someone who enters by invitation be it express or implied. His entry is connected with the owner's business or with an activity the owner conducts or permits to be conducted on his land and there is a mutual benefit or benefit to the owner

Front 60

Visitor

Back 60

classification given to a licensee or invitee under provincial Occupier's Liability Acts

Front 61

Farming

Back 61

ownership, maintenance or use of premises for the production of crops or the raising or care of livestock, including all necessary operations

Front 62

Custom Farming

Back 62

use of insured's farm machined or equipment for others away from insured's farm premises for compensation. It does not include work done for others in return for work done by them

Front 63

Residence Employee

Back 63

those whose duties are exclusively in connection or maintenance and use of the residence premises

Front 64

Farm Employee

Back 64

those paid for their work and who are hired on a part time, seasonal or full time basis to perform duties principally connected with farming activities outside the insured's dwelling. Or persons engaged in farm related work on behalf of the insured in a neighbourly exchange of assistance for which the insured is not obliged to pay any money

Front 65

Pink Card

Back 65

in provinces where automobile insurance is provided by private insurers, a PINK CARD is used to provide proof of financial responsibility or in provinces having compulsory government insurance plans, the PINK COPY of the certificate of registration serves as a proof financial responsibility

Front 66

Facility Association

Back 66

an insurance pool in which all licensed automobile insures participate and which provides insurance to those who may be refused insurance by private insurers

Front 67

Driver's Abstract

Back 67

a record of the driver history of the applicant and other drivers which can be obtained from provincial licensing authorities

Front 68

Uninsured Automobile

Back 68

one in which neither the driver nor the owner has collectible bodily injury liability insurance

Front 69

Unidentified Automobile

Back 69

one in which the identity of either the owner or driver cannot be ascertained and which causes bodily injury or death to an insured person arising out of actual contact of that automobile with the automobile in which the insured is an occupant

Front 70

General Average

Back 70

designed to provide payment for ocean marine losses voluntarily incurred for the safety of the entire venture. The insurers of the parties whose property was saved shall contribute to the losses of the parties whose property was sacrificed

Front 71

Temporary Substitute Automobile

Back 71

one which is temporarily being used as a substitute for the automobile described on the policy. It qualifies only if the described automobile cannot be used because of its breakdown, repair, servicing, loss destruction or sale

Front 72

Occupant (auto)

Back 72

any person who drives the automobile or is being carried on or upon or is in addition to others owned by the insured which are all insured by the same insurer

Front 73

Step Licensing

Back 73

a system which requires a higher degree of knowledge for each increasing step

Front 74

Ethics

Back 74

the principles of conduct governing an individual or group

Front 75

Professional

Back 75

one who possesses special skills or knowledge

Front 76

Self Regulation

Back 76

the right of an industry to govern it own affairs

Front 77

List the three categories of risk.

Back 77

Personal - injury to one's health or life
Property - damage to one's property
Liability - lawsuits

Front 78

Four possible options to deal with risk.

Back 78

1. Avoid the risk - not practical - all chance of financial loss has been eliminated. e.g. rent rather than buy
2. Control the risk - loss control measures. Reduces frequency & severity of loss
3. Retain the risk - self -insurance or share risk though deductibles
4. Transfer the risk - purchase insurance

Front 79

Two examples of loss control measures:

Back 79

Intrusion detection system
Fire detection alarms

Front 80

Two reasons why loss control measures are not a total solution in eliminating financial loss:

Back 80

1. Equipment may not work 100% of the time
2. Certain types of losses such as wind, hail & lightning cannot be effectively controlled

Front 81

What type of risk will the insurers not provided an insurance policy:

Back 81

Speculative Risk

Front 82

List the five elements in a contract:

Back 82

Agreement
Consideration
Legality of object
Legal capacity of the parties to contract
Genuine intention

Front 83

Agreement - meeting of the mind as to the subject matter and terms of condition. Two items that are required:

Back 83

1. an OFFER made;
2. An unequivocal and unconditional ACCEPTANCE of the terms of that offer.

Front 84

Legal capacity of the parties to contract.
Persons who do not have the legal capacity of the parties to contract are called incompetents. Such persons include:

Back 84

1. Minors (unless age of majority in their province, or right to contract for necessities of life such as food, clothing and lodging.
2. Mental incompetents
3. Persons under the influence of alcohol or drugs
4. Trade names

Front 85

To prove genuine intent, it is necessary to show that the agreement between the parties was not affected by:

Back 85

1. Fraud, trickery to cheat another
2. Duress, use of force or illegal imprisonment
3. Concealment, misrepresent the past or present fact
4. Mistake, when legal documents are sign by error or mistake

Front 86

Three additional elements unique to insurance contracts:

Back 86

Insurable interest
Utmost good faith
Indemnity

Front 87

At what point in time is the true measure of indemnity determined?

Back 87

it is measured by the value of the insured property as it existed immediately prior to the loss

Front 88

How is binding authority provided to brokers?

Back 88

Agency Agreement

Front 89

What should occur after oral binders have been provided by brokers?

Back 89

should be confirmed immediately in writing.

This practice avoids the potential for disagreement as to coverages and amounts of insured in the event of a loss occurring before the policy has been issued.

Front 90

What do brokers face when they exceed their binding authorities?

Back 90

May find itself facing an errors and omissions claim.

The broker will be responsible for the amount of the loss.

Front 91

What are three elements found in Indemnity Agreements?

Back 91

The insurer agrees to indemnify the insured against the direct loss so caused to an amount not exceeding, whichever is least of:
a. ACV of the property at the time of loss, destruction or damage;
b. the interest of the insured in the property;
c. the limit of insurance provided by this policy in respect of the property lost, destroyed or damaged

Front 92

What considerations are used to determine depreciation?

Back 92

Condition of the object
Resale value
Normal life expectancy

Front 93

Identify four persons who might have an insurable interest in a contract of insurance.

Back 93

1. Owners of property including their business partners.
2. Mortgagee.
3. Bailees to whom property is entrusted for repair, service or safekeeping.
4. Any person who may be held legally responsible to a third party for bodily injury, or property damage.

Front 94

Why do governments pay a role in the insurance industry?

Back 94

Insurance companies will be financially competent to discharge their obligations.
Forms of contracts are drafted fairly.
Business is being conducted to the general benefit of the public.

Front 95

What duties are owed by brokers to insurers?

Back 95

1. Collection of premiums.
2. Passing on of relevant information, obtained from the client.

Front 96

What duties do brokers owe to the insureds?

Back 96

Careful & prompt attention to instructions
Expert advice
Competitive pricing of products

Front 97

Identify three ways in which brokers might exceed the binding authority given to them by an insurer.

Back 97

Dwelling & contents.
Commercial building & contents.
Liability insurance.

Front 98

What is the role of the Federal government?

Back 98

Licensing companies & monitoring the insurers solvency & financial stability.

Front 99

What is the role of the Provincial government?

Back 99

Administering the Insurance Act.
Supervising the terms & conditions of insurance contracts.
Licensing insurers, agents, brokers, and adjusters.
Monitoring solvency of provincially licensed insurers.

Front 100

What is PACICC?

Back 100

Property and Casualty Insurance Compensation Corporation.

Front 101

What does PACICC provide?

Back 101

When a bankruptcy occurs and claims cannot be paid, the corp pays all valid claims. All participating insurance companies are then charged an assessment to cover the total amount of the claims. The amount of each insurer's contribution is based on total direct premiums written by it.

Front 102

Basic Coverage Legislated contains the following three coverages.

Back 102

1. Fire.
2. Lightning.
3. Explosion of natural, coal or manufactured gas.

Front 103

Standard Exclusions Legislated. List the losses excluded under fire policies.

Back 103

1. Loss or damage due to direct application of heat.
2. Lightning damage to electrical devices or appliances.
3. Other electrical currents.
4. Contamination by radioactive material.

Front 104

What are three forms of misrepresentation?

Back 104

1. A false description of the property to the prejudice of the insurer.
2. Misrepresentation of a material fact.
3. Fraudulent omission of a material fact.

Front 105

Property of Others

Back 105

Unless otherwise specifically stated in the contract, the insurer is not liable for the loss or damage to property of others.

Front 106

Change of Interest.

Back 106

The insurer is liable for loss or damage occurring after an authorized assignment under the Bankruptcy Act or change of title by succession, by operation of law, or by death

Front 107

Termination

Back 107

By Insurer: 15 days notice by registered mail or 5 days written notice of termination personally delivered.
Premium returned Pro Rata.
By insured: anytime on request. Premium returned Short Rate

Front 108

Requirements After Loss

Back 108

Forthwith give notice in writing.
Proof of loss (complete details of the loss, inventory, when and how loss occurred, no negligence, showing interest of the insured & any changes)

Front 109

Who May Give Notice and Proof.

Back 109

Agent of the Insured named in the contract in case of absence or inability of the insured.
Person to whom any part of the insurance money is payable (loss payee)
Insured.

Front 110

Salvage

Back 110

In the event of any loss or damage to any property insured under the contract, shall take all reasonable steps to prevent further damage or damage to such property insured, including necessary removal of property to prevent damage or further damage.

Front 111

Entry, Control, Abandonment

Back 111

Immediate right of access and entry; and
A further right of access and entry after the insured has secured the property.

Front 112

Appraisal

Back 112

In the event of a disagreement as to the value of the property insured, property saved or the amount of loss, it shall be determined by appraisal as provided under the Insurance Act before any recovery under the contract & independently of all other questions. No right to appraisal until a specific demand is made in writing and after proof of loss has been delivered.

Front 113

When Loss is Payable

Back 113

With in 60 days after completion of the proof of loss, unless the contract provides for a shorter period.

Front 114

Replacement

Back 114

Instead of making payment, may repair, rebuild, or replace the property damaged or lost, giving written notice of its intention so to do within 30 days after receipt of the proofs of loss.
Within 45 days the insurer must proceed with all due diligence to the completion.

Front 115

Action

Back 115

Any action or preceding must be commenced within one year next after the loss or damage occurs.
Two years for MB, SK and Yukon.

Prohibit until 60 days or short period fixed on contract after filing of proof of loss.

Front 116

NOTICE by insured to insurer

Back 116

Notice of termination of the policy.
Request for appraisal
Notice of legal action against the insurer

Front 117

NOTICE by insurer to insured

Back 117

Notice of termination of the policy
Notice of option to exercise "replacement" option
Cheque for settlement of a claim when payment is not provided through the brokerage.

Front 118

When policies insure against a wide range of perils, insurers generally incorporate " Additional Conditions" List these five additional conditions.

Back 118

1. Notice to Authorities
2. Sue & Labour
3. No Benefit to Bailee
4. Pair & Set
5. Parts

Front 119

Notice to Authorities

Back 119

Where there is a loss due to certain criminal acts, or is suspected, the insured shall give immediate notice to policy or other authorities having jurisdiction. This gives authorities greater chance of recovering items.

Front 120

Sue & Labour

Back 120

Insurer takes all reasonable steps to recover lost property.

Front 121

No Benefit to Bailee

Back 121

This insurance shall not protect the insurable interest of a carrier or bailee having custody of the insured property.

Front 122

Pair & Set

Back 122

When there is a loss or damage to only one item of a pair or set, the loss is not a total loss. The item not lost continues to have value which will be considered in the amount of settlement.

Front 123

Parts

Back 123

When there is a loss or damage to a part of insured property which consists of several parts or components, the insurer will pay for the replacement of the lost or damaged part only, including the cost of installation.

Front 124

List the Contents of Insurance Policy

Back 124

1. Parties to the contract
2. Policy period
3. Loss payable or payee, if any
4. Types of insurance coverages & amounts for which the insurer may be liable.
5. Rate & premium charged
6. Subject matter of interest

Front 125

List three examples of direct loss.

Back 125

1. Fire damage
2. Theft
3. Lightning

Front 126

List three examples of indirect loss.

Back 126

1. Business interruption
2. Stock
3. Profits

Front 127

List the fourteen standard exclusions that are legislated to be in fire insurance policies. Abbrev. ALEC RIC RIC WHAM

Back 127

1. Application of heat
2. Lightning to electrical devices
3. Electrical current
4. Contamination of radioactive materials
5. Riot
6. Insurrection
7. Civil commotion
8. Rebellion
9. Invasion
10. Civil war
11. War
12. Hostilities
13. Act of foreign enemy
14. Military power