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67 Cards in this Set
- Front
- Back
real property
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land, all structures permanently attached to the land, and whatever is growing on the land
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personal property
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all property other than real property, Ex: cars, money, clothes
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Direct loss
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occurs when there is damage to the property
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Indirect loss
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Occurs when a direct loss causes expenses to increase or revenues to decline.
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Property Values Subject to loss
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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.
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Negligence
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Duty, Failure to Perform, Injury or damage, proximate causes
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Defenses against of Negligent Claims
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Contributory Negligence, Assumed Risk, Guest host Statues
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Contributory Negligence
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If both parties are to blame in an accident, they cannot collect against eachother even if one was 90% and the other was 10%
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Assumed Risk
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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
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Guest host statutes
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relates to the standard of care by an automobile driver to a passenger
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factors leading to a higher standard of care
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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
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Weakening of defenses against a liability,
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contributory negligence v. comparative negligence, last clear chance rule
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Res Ipsa Loquitor
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the thing speaks for itself, may collect without proving negligence.
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Sources of Liability
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operational liability, premises Liability, products, completed operations, professional acts, principle/agent liability, automobile
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Operational Liability
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tort liability as part of your day to day operations, contractual liability, employer/employee liability
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Premises Liability
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Property Owner/Tenant liability, Attractive Nuisance Doctrine- take reasonable steps to protect your property
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Products Liability
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Breach of warranty, Strict tort, negligence
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Completed Operations Liability
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must occur after contractor has completed work
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professional acts
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seller of services is required to use reasonable care not to injure others in the performance of those services
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Principle-Agent Liability
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respondeat superior, determining if someone is an agent or independent contractor.
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Non Insurance Methods of Risk Management
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1. Risk Avoidance, 2. Loss Control 3. Risk Retention and Financing 4. Risk Transfer 5. Segregation of Exposure Units
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Risk Avoidance
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conscious decision not to expose oneself to a particular risk, reduces risk to 0, no risk = no reward, give up potential benefits
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Loss Control, whats the focus?
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loss prevention and loss reduction, focus of loss control is frequency reduction
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loss prevention
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reduce the frequency of our losses
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loss reduction
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reduce the severity of our losses
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Domino Theory, list em
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1. Heredity and Social Environment, 2. Personal Fault 3. Unsafe act or physical Hazard 4. Accident 5. Injury
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Types of Loss Control
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Separation and Duplication
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Immediate v. Basic Causes
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immediate- employee fell down, basic- what caused the employee to fall down
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Other theories of Accident Causation
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General Methods of Control Approach, Energy Release Theory, Techniques of Operations Review, System Safety Approach, Crisis Management approach.
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General Methods of Control Approach
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focuses on conditions instead of actions
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Energy Release Theory
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Looks at energy as its released and how it affects surrounding objects
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Technique of Operations Review
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Accidents are a result of Managerial shortcomings
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Timing of Loss Control
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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
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Potential Benefits of Loss Control
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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
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Potential Costs of Loss Control
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1. Installation 2. Maintenance
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Risk Retention and Financing
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Retention-funding and preplanning, assumption of the risk and a conscious decision to retain this risk
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planned v. unplanned retention
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planned- a conscious decision to retain risk, unplanned- a firm doesnt recognize a loss exists and doesnt believe a loss will occur
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funded v. unfunded retention
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funded- setting up preloss arrangements to help pay losses when they occur, unfunded- intended to pay them as they occur
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Hold Harmless Agreements (3 types)
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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
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Segregation of Exposure Units
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1. Diversification 2. Hedging- speculative risk: opposing bets on same asset.
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Major Insurance Principles
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Indemnify, Insurable Interest, Principle of Subrogation, Principle of utmost good faith
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Indemnify
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restore the insureds to the situation that existed prior to a loss
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What constitutes Insurable Interest
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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.
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Principle of Subrogation
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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
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Principle of Utmost Good Faith
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Higher standard of honesty imposed on parties to an insurance agreement than ordinary commercial contracts
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representations
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imbedded in the application, voiding the contract does not follow the mistake unless it is material to the risk
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concealments
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silence when obligated to speak, same legal affect as misrepresentation
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Concealments test questions
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did the insured know of a certain fact? was this fact material? was the insurer ignorant of the fact?
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Ideally Insurable Exposures
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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
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Requirements of all Valid Contracts
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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
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Distinguishing Characteristics of Insurance Contracts
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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)
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Social and Economic Values
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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
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Social Costs of Insurance
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1. Operation of the insurance business 2. losses that are caused intentionally 3. losses that are exaggerated.
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Major parts of an Insurance Policy
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1. Declarations 2. Insuring agreement 3. Exclusions 4. Conditions 5. Other important aspects
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Named v additional insured
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Named- person that is to recieve the benefit of the coverage provided. Additional- Normally receive coverage that is somewhat less
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Named v. Open Perils
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Named- list what they cover, not on list, NOT COVERED. Open- everything is covered unless we exclude it.
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Why we have exclusions
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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
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Typical Exclusions
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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)
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Common Policy Conditions
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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
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Actual Cash Value v. Replacement cost
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ACV is replacement cost minus actual depreciation. Replacement is recovery with no depreciation- most houses done this way
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deductibles
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1. Straight 2. Aggregate 3. Calendar year 4. Disappearing 5. Franchise
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Straight Deductible
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applies to each loss and is subtracted before any loss payment is made
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Aggregate Deductible
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insure absorbs all losses until the deductible is reached in any given policy period
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Calendar Year deductible
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aggregate deductibles in the health insurance industry: meeting a deductible until the insurance pays
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Disappearing Deductible
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Size of deductible decreases as the size of the loss increases, at a given level the deductible disappears
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franchise deductible
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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
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Dollar Limits
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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
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