Cpcu 551 Ch 1-3

Front 1

Exposure avoidance

Back 1

"abandons or avoids the loss situation, thus eliminating all possibility of loss."

Front 2

Proactive avoidance

Back 2

"occurs when a firm avoids ever incurring a particular loss exposure."

Front 3

Abandonment

Back 3

"occurs when a firm eliminates an existing loss exposure."

Front 4

Loss prevention

Back 4

"reduces loss frequency."

Front 5

Loss reduction

Back 5

"reduces loss severity."

Front 6

Separation

Back 6

"disperses resources over two or more locations."

Front 7

Duplication

Back 7

"creates copies or spares of important items and stores them at separate locations."

Front 8

Diversification

Back 8

"spreads loss exposures over several projects, products, markets, and/or regions."

Front 9

Retention

Back 9

"generates funds from within the firm to pay for losses; compare transfer."

Front 10

Transfer

Back 10

"generates funds from outside the firm to pay for losses, through either insurance or noninsurance transfer; compare retention."

Front 11

Burglary

Back 11

"is theft with forcible entry."

Front 12

Robbery

Back 12

"is theft by threat or use of bodily violence."

Front 13

Employee theft

Back 13

"is theft committed by an employee against his employer."

Front 14

Commercial property insurance

Back 14

"covers property loss exposures for businesses and nonprofit organizations."

Front 15

Multiline policy

Back 15

"covers two or more lines of business."

Front 16

Package policy

Back 16

"is another term for multiline policy."

Front 17

Monoline policy

Back 17

"covers one line of business."

Front 18

Standard form

Back 18

"is developed by the Insurance Services Office, Inc., the American Association of Insurance Services, or another insurance advisory organization."

Front 19

Nonstandard form

Back 19

"is developed independently by insurers or brokers."

Front 20

Commercial package policy (CPP)

Back 20

"is a multiline policy with two or more ISO commercial lines coverage parts."

Front 21

CPP

Back 21

"abbreviates commercial package policy."

Front 22

Output policy

Back 22

"combines several commercial property coverages into one policy form with associated endorsements."

Front 23

MOP

Back 23

"abbreviates Manufacturers’ Output Policy."

Front 24

Businessowners’ policy (BOP)

Back 24

"is a freestanding package policy that provides property and liability coverages for small to medium–sized businesses."

Front 25

BOP

Back 25

"abbreviates businessowners’ policy."

Front 26

Commercial property conditions

Back 26

"are applicable to all commercial property coverage forms under a CPP."

Front 27

Policy condition

Back 27

"is any provision that qualifies an otherwise enforceable promise in an insurance policy."

Front 28

Concealment, Misrepresentation, or Fraud

Back 28

"is a commercial property condition that voids coverage if you commit related fraud or intentionally conceal or misrepresent any material fact related to any coverage, claim, or your insurable interest."

Front 29

Control of Property

Back 29

"is a commercial property condition that states that any act by anyone you don’t control won’t affect coverage."

Front 30

Insurance Under Two or More Coverages

Back 30

"is a commercial property condition that states that we will not pay more than the actual amount of your loss, no matter how many coverages apply."

Front 31

Legal Action Against Us

Back 31

"is a commercial property condition that states that you can’t sue us unless you’ve complied with all the coverage part conditions and you bring suit within two years of the date of loss."

Front 32

Liberalization

Back 32

"is a commercial property condition that states that if we broaden coverage without additional premium within 45 days before policy inception or during the policy period, you have the broadened coverage."

Front 33

No Benefit To Bailee

Back 33

"is a commercial property condition that states that no one else having custody of covered property benefits from this insurance."

Front 34

Subrogation

Back 34

"seeks recovery from any negligent third party."

Front 35

Other Insurance

Back 35

"is a commercial property condition that states that if the other policy has the same terms, conditions, and provisions as the BPP, the other insurer shares losses with us on a pro rata basis."

Front 36

Transfer of Rights of Recovery Against Others to Us

Back 36

"is a commercial property condition that states that after we’ve paid, we reserve the right to subrogation."

Front 37

Actual cash value (ACV)

Back 37

"equals replacement cost minus depreciation."

Front 38

ACV

Back 38

"abbreviates actual cash value."

Front 39

Replacement cost (RC)

Back 39

"is the cost to replace the property with new property, determined at the time and place of loss."

Front 40

RC

Back 40

"abbreviates replacement cost."

Front 41

Selling price

Back 41

"is the way in which stock that you’ve sold but not yet delivered is valued, minus discounts and un–incurred expenses."

Front 42

Coinsurance

Back 42

"encourages insurance–to–value by penalizing insureds who do not buy coverage equal to (typically) 80 – 100% of the property’s full val ue."

Front 43

Vacant

Back 43

"describes property that doesn’t contain enough contents to conduct customary operations."

Front 44

Vacancy Permit Endorsement

Back 44

"brings back full coverage for vacant buildings for additional premium."

Front 45

Mortgage Holders’ Provision

Back 45

"states that we’ll pay for covered loss to each mortgagee in the order in which they appear."

Front 46

Loss Payable Provisions Endorsement

Back 46

"contains four options: loss payable, lender’s loss payable, contract of sale, and building owner loss payable."

Front 47

Loss Payable

Back 47

"is the loss payable provisions endorsement that states that the loss payee is entitled only to joint loss payment with the insured."

Front 48

Lender’s Loss Payable

Back 48

"is the loss payable provisions endorsement that states that a loss payee whose interest in the insured property is established through written agreements (receipts, bills of lading) is entitled to joint loss payment."

Front 49

Contract Of Sale

Back 49

"is the loss payable provisions endorsement that states that the buyer or seller in a contract of sale is entitled to joint loss payment as their (both parties’) interests may appear."

Front 50

Building Owner Loss Payable

Back 50

"is the loss payable provisions endorsement that states that the owner of a building in which the insured is tenant is entitled to payment for losses to the described building."

Front 51

Fixture

Back 51

"is a personal property item permanently affixed to the building."

Front 52

Stock

Back 52

"is covered under the BPP when it is sold but not delivered."

Front 53

Building

Back 53

"includes the building described in the declarations plus completed additions, fixtures, machinery and equipment, and personal property used to maintain or service the building."

Front 54

Trade fixture

Back 54

"is removable by a tenant."

Front 55

Improvements and betterments

Back 55

"include fixtures to real property that change the property and enhance its value."

Front 56

Commercial bailment

Back 56

"exists when one party (the bailee) holds the property of another (the bailor) for some purpose beneficial to both parties."

Front 57

Bailee

Back 57

"is the holder of bailed property."

Front 58

Bailor

Back 58

"is the owner of bailed property."

Front 59

Debris removal additional coverage

Back 59

"pays for debris removal of covered property damaged by a covered loss if the insured reports the expenses to the insurer within 180 days of the date of the physical loss to be covered."

Front 60

Pollutant cleanup and removal additional coverage

Back 60

"pays for extraction of pollutants from land or water at the described premises if their release was caused by a covered cause of loss and if reported within 180 days of the incident."

Front 61

Preservation of property additional coverage

Back 61

"covers any direct loss to property moved to save it from a covered loss, while it is being moved or temporarily stored but only for 30 days from when it was first moved."

Front 62

Fire department service charge additional coverage

Back 62

"pays up to $1,000 of required fire department service charges, no deductible."

Front 63

Electronic data additional coverage

Back 63

"pays up to $2,500 per year (not per occurrence or per location) to replace or restore electronic data destroyed or corrupted by a covered cause of loss."

Front 64

Newly acquired or constructed property extension

Back 64

"covers newly acquired or constructed property for up to 30 days."

Front 65

Personal effects and property of others extension

Back 65

"applies contents coverage to personal effects of the insured, its officers, and employees and personal property of others up to $2,500."

Front 66

Valuable papers and records (other than electronic data) extension

Back 66

"applies contents coverage, up to $1,000, for the cost of research to replace information other than electronic data."

Front 67

Outdoor property extension

Back 67

"applies up to $1,000 to outdoor property if damaged by fire, lightning, explosion, riot, or aircraft."

Front 68

Multiple deductible form endorsement

Back 68

"allows insureds to apply different deductibles to different buildings under the same policy."

Front 69

Non–owned detachable trailers extension

Back 69

"allows the insured to apply up to $5,000 to trailers used in his business; in his care, custody, or control; and for which he has a contractual responsibility to pay for loss or damage."

Front 70

Outside signs endorsement

Back 70

"provides higher limits and/or broader perils than conventional BPP coverage for outdoor signs attached to a building."

Front 71

Windstorm Or Hail Percentage Deductible Clauses Endorsement

Back 71

"applies a deductible to windstorm or hail losses equal to 1%, 2%, or 5% of the applicable amount of insurance or, for blanket coverages, 1%, 2%, or 5% of the value of the damaged property."

Front 72

Agreed Value Optional Coverage

Back 72

"waives the coinsurance clause until the statement of values expires."

Front 73

Inflation Guard Optional Coverage

Back 73

"increases theinsurance limit, pro–rata, by the annual percentageshown in the declarations."

Front 74

Replacement cost coverage

Back 74

"is made available whenthe insurer is willing to assume the increased moral hazard inherent in RC coverage."

Front 75

Extension of replacement cost coverage to property of others

Back 75

"covers personal property of others for which the insured is legally liable for loss or damage."

Front 76

Direct loss

Back 76

"is actual, perceptible, physical damageto or disappearance of property."

Front 77

Proximate cause of loss

Back 77

"produces physical damage through an unbroken chain of events."

Front 78

Causes of loss/basic form

Back 78

"covers loss by fire, explosion, lightning, windstorm, hail, smoke, aircraft, vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action."

Front 79

Causes of loss/broad form

Back 79

"covers the basic form covered causes of loss plus glass breakage; falling objects; weight of snow, ice, or sleet; water damage; and additional coverage–collapse."

Front 80

Causes of loss/special form

Back 80

"provides ‘all–risks’ coverage."

Front 81

Fire

Back 81

"is rapid oxidation that produces visible light."

Front 82

Hostile fire

Back 82

"is a fire outside its intended place."

Front 83

Friendly fire

Back 83

"is a fire within its intended place."

Front 84

Lightning

Back 84

"is electricity of atmospheric origin."

Front 85

Explosion

Back 85

"includes gas explosion within a furnace system, but excludes rupture of pressure vessels."

Front 86

Combustion explosion (furnace explosion)

Back 86

"is explosion of fuel or gases."

Front 87

Furnace explosion

Back 87

"is another term for combustion explosion."

Front 88

Windstorm

Back 88

"is wind of unusual strength producing general damage in an area at a particular time."

Front 89

Hail

Back 89

"is precipitation of ice particles."

Front 90

Smoke

Back 90

"includes only sudden and accidental damage from nonagricultural and nonindustrial operations."

Front 91

Vehicle

Back 91

"is any device for conveying persons or objects."

Front 92

Riot

Back 92

"is three or more people, assembled for any reason, who disturb the public peace."

Front 93

Civil commotion

Back 93

"is an uprising of citizens."

Front 94

Vandalism

Back 94

"is willful and malicious damage to property."

Front 95

Sprinkler leakage

Back 95

"is leakage or discharge from an automatic sprinkler system, including collapse of a system tank."

Front 96

Protective safeguards endorsement

Back 96

"suspends coverage if the insured knows the sprinkler system isn’t working and doesn’t tell the insurer."

Front 97

Sinkhole collapse

Back 97

"includes loss caused by the sudden sinking or collapse of land into empty underground spaces created by water (not dug mines)."

Front 98

Volcanic action

Back 98

"includes direct loss or damage caused by the eruption of a volcano including airborne shock waves, ash, and lava flow."

Front 99

Doctrine of concurrent causation

Back 99

"states that if a loss can be attributed to two causes and only one of them is covered, the policy covers the loss."

Front 100

Falling object

Back 100

"excludes damage to personal property in the open or to the interior of a building or its contents unless the roof or an outside wall is first damaged by a falling object."

Front 101

Additional coverage

Back 101

"Breakage of glass–includes glass, except neon tubing, that is part of the building."

Front 102

Weight of snow, ice, or sleet

Back 102

"doesn’t include damage to gutters and downspouts or personal property outside the building."

Front 103

Additional coverage

Back 103

"collapse–covers direct loss or damage caused by partial or total building collapse from named perils."

Front 104

Ordinance or law exclusion

Back 104

"eliminates coverage for the enforcement of any law regulating the construction, repair, or use of any property or requiring the tearing down of property or the removal of that debris."

Front 105

Earth movement exclusion

Back 105

"eliminates coverage for any movement except sinkhole collapse, but resulting fire or explosion is covered."

Front 106

Governmental action exclusion

Back 106

"eliminates coverage for governmental seizure or destruction of insured property."

Front 107

Nuclear hazard exclusion

Back 107

"allows coverage for loss by resulting fire."

Front 108

Utility services exclusion

Back 108

"eliminates coverage if power failure occurs away from the insured premises."

Front 109

War and military action exclusion

Back 109

"eliminates coverage for war, war–like action, insurrection, rebellion, or revolution."

Front 110

Water exclusion

Back 110

"eliminates coverages for flood, surface water, waves, tides, overflow, spray, mudslide, water that backs up from a sewer or drain, and pressure from or seepage of water at or below ground level."

Front 111

Maintenance exclusion

Back 111

"eliminates coverage for losses that can be prevented through ordinary maintenance or that are inevitable over time."

Front 112

Employee dishonesty exclusion

Back 112

"eliminates coverage for dishonest or criminal acts by the insured or anyone to whom he entrusted property."

Front 113

Voluntary parting exclusion

Back 113

"eliminates coverage for voluntary parting with any property by an insured that was induced to do so by a fraudulent scheme or false pretense."

Front 114

Unauthorized instructions exclusion

Back 114

"eliminates coverage for property transferred to another person or placed outside the premises because of unauthorized instructions."

Front 115

Inventory shortage exclusion

Back 115

"eliminates coveragefor loss if the only evidence of loss is inventory shortage."

Front 116

Unexplained disappearance exclusion

Back 116

"eliminates coverage for loss if there is no physical evidence of loss."

Front 117

Concurrent causation exclusion

Back 117

"eliminates coverage for certain causes of loss unless the uncovered cause of loss results in a covered cause of loss."

Front 118

Specified Causes of Loss

Back 118

"include fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot; leakage from fire equipment; sinkhole collapse; volcanic action; falling objects; weight of snow or ice; and water damage."

Front 119

Additional coverage extensions for the causes of loss

Back 119

"special form–include property in transit and water damage."

Front 120

Firms must manage four categories of loss exposure:

Back 120

"1. Property Loss Exposure 2. Liability Loss exposure 3. Personnel Loss exposure 4. Net Income Loss exposure"

Front 121

There are six risk control techniques:

Back 121

"1. Exposure avoidance 2. Loss prevention 3. Loss reduction 4. Separation 5. Duplication 6. Diversification"

Front 122

There are two risk financing techniques:

Back 122

"1. Retention 2. Transfer"

Front 123

Commercial Insurance Policy Formats (7)

Back 123

"1. Multiline (package) Policy 2. Monoline policy 3. Standard form 4. Nonstandard form 5. Commercial Package policy 6. Businessowners policy (BOP) 7. Output policy"

Front 124

Common Policy Conditions (6)

Back 124

"1. Cancellation 2. Changes 3. Examination of books and records 4. inspections and surveys 5. premiums 6. transfer of rights"

Front 125

Other Commercial Property Insurance Conditions

Back 125

"1. Valueation 2. Coinsurance 3. Duties in the event of loss or damage 4. appraisal 5. Loss Payment 6. Recovered property 7. Vacancy 8. Mortgage Holders Provision 9. Loss Payable Provisions Endorsement"

Front 126

Property covered by the BPP – three types

Back 126

"Building, Your Business Personal Property, Personal property of others"

Front 127

Property Specifically not covered by the BPP (three types)

Back 127

"1. Buildings and other real property, 2. Plants and utdoor property 3. Other personal property (DEMCABS) deeds, Evidence of debt, money Currency, accounts bills securities and notes)"

Front 128

Six additional coverages

Back 128

"Debris removal, Pollutant Cleanup and Removal, Preservation of Property, Fire Department Services, Increased Cos of Construction, Electronic Data"

Front 129

Six BPP Coverage Extensions

Back 129

"New Acquired or Constructed Property, Personal effects and Property of Others, Valuable Papers and records/ cot of research, Property off premises, Outdoor Property, Non–Owned detachable trailers."

Front 130

BPP Provisions that determine recovery amounts (three)

Back 130

"1. Limits of Insurance 2. Deductible 3. Valuation"

Front 131

BPP Optional Coverages (four)

Back 131

"1. Agreed Value Optional Coverage

2. Inflation Guard Optional Coverage

3. Replacement cost (RC) Coverage

4. Extension of replacement cost coverage to property of others."

Front 132

Basic Form (12) Covered Causes of Loss

Back 132

"Fire , Lightning, Fungus (limited) WARVVESSS Wind/hail Aircraft Riot/civil Vandalism Vehicles smoke sinkhole sprinkler"

Front 133

Basic Form Exclusions (8)

Back 133

"ordinance or Law, Earth movement, Government Action, Nuclear Hazard, Utility Services, War and military action, Water, Fungus/wet rot/dry rot/bacteria

UWNEWFOG"

Front 134

Broad Form – Causes of Loss 1+5

Back 134

"Basic form covered casues of loss plus falling objects, weight of snow, ice or sleet, Water damage collapse"

Front 135

Special Form – Causes of Loss

Back 135

"Risks of direct physical loss unless excluded in section B or limited in section C."

Front 136

Additional Coverage Extensions

Back 136

"1. Property in Transit 2. 'Tearing out' coverage"

Front 137

Places Where the BPP Covers:

Back 137

The BPP covera property Located at the described locations or within 100 feet of the nearest Boundary of the land considered part of the insured premises.

Front 138

Six-step risk management process:

Back 138

1. Identify loss exposures, 2. Analyze Loss Exposures, 3. Examine availible risk management techniques, 4. choose the best techniques, 5. Implement the technique, 6. Monitor the results.

Front 139

Commercial Property Conditions

Back 139

1. Concealment, Misrepresntation, or Fraud, 2. Cortrol of Property, 3. Insurance Under Two or More Coverages, 4. Legal Action Against Us. 5. Liberalization, 6. No Benefit to Bailee, 7. Other Insurance, 8. Policy Period, Coverage Territory, 9. Transfer of Rights of Recovery Against Others to Us.