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176 Cards in this Set
- Front
- Back
Absolute Liability
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When one part is held liable for the injury or damage to a third party in the absence of fault or negligence.
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Accident
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A sudden, unforeseen event
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Additional (Supplementary) Payments
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Payments automatically included in a liability policy to cover defence costs, court related expenses, attorney fees, etc.
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Assumption of Risk
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Defence against negligence that asserts the injured party was aware of the danger before engaging in the activity; i.e., accepting a ride with a person who is intoxicated.
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Bodily Injury
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Type of liability arising from the physical injury or death to another person
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Civil Law
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Laws that are concerned with disputes between individuals as opposed to criminal law.
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Common Law
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Apart of our legal system that is based on previous and similar situations that have been previously heard in other courts.
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Comparative Negligence
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Defence against negligence apportioning blame for the loss based on both parties' contribution to the injury.
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Compensatory Damage
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Damages designed to compensate a third party for injury or property damage caused by a first party.
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Contributory Negligence
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Defence against negligence that would bar an injured party from recovering anything from the defendant if the injured party contributed in any degree to their own injury.
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Damages
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In a civil suit, the money awarded to the injured party.
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Defamation
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A false communication that damages a reputation or good name.
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General Damages
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A type of compensatory damage for which amounts are usually in excess of special damages and compensate for pain and suffering or psychological trauma.
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Intervening Cause
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Defence against negligence that asserts something broke the chain of events leading from the breach of duty to the injury.
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Libel
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Written defamation
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Negligence
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Failure to do what a reasonable and prudent person would have done under the same or similar circumstances.
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No Fault Law
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Limits the right of an individual to sue a third party for damages for injuries involving an auto accident
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Occurrence
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Damage caused by continuous and repeated exposure to the same conditions to include accidents (unforeseen events)
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Personal Injury
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injury other than bodily injury or property damage caused by false arrest, defamation, invasion of privacy.
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Proximate Cause
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Required element to prove negligence. Proximate cause is an unbroken chain of events leading from the breach of duty to injury.
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Property Damage
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Liability arising out of damage to real or personal property of another. Property damage includes any damages due to the real or personal property being rendered unusable by the damage, i.e., rental reimbursement for an auto injury.
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Punitive Damages
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Damages awarded in excess of compensatory damages. Punitive damages are to punish the party causing the injury or damage. Awarding punitive damages usually requires proof of special circumstances that may show a particular degree of carelessness or intent.
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Slander
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Spoken defamation
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Special Damages
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A type of compensatory damage for which a specific amount of money can be proven.
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Statute of Limitations
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Defence against negligence claiming the injured party waited too long to institute the lawsuit. Statutes of limitations are established individually by each state and also vary based on the situation and age of the injured party
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Statutory Law
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Law that is based on bills passed by Federal or State government
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Strict Liability
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Proof of negligence is not required. You must only prove that a dangerous situation was created or, in the case of a manufacturer, a dangerous product was produced
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Third Party
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The party claiming injury or harm in a liability situation.
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Tort
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A wrong against an individual other than criminal or breach of contract.
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Vicarious Liability
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Being held liable for actions of another because of your relationship to that party; i.e., a parent being held responsible for their child.
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Actual Cash Value (ACV)
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A method to establish value at the time of loss. ACV is the actual cost to repair or replace missing or damaged property minus depreciation.
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Abandonment
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Provision in property policies forbidding insured from abandoning property and demanding a total loss.
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Basic Cause of Loss
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Covers only the perils listed in the perils listed in the Insuring Agreement.
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Blanket Limit
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A single limit of insurance that applies to multiple locations or types of property on one policy.
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Broad Cause of Loss
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Covers only the perils listed in the Insuring Agreement. The number of perils listed is greater than a basic cause of loss
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Burglary
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theft of property inside a premises by someone unlawfully entering the building leaving visible signs of forcible entry or exit.
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Coinsurance
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A condition in a property policy that encourages an insured to purchase adequate insurance to value, normally set at 80% of Replacement Cost value
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Friendly Fire
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A fire intentionally set that remains within its intended boundaries. the damage caused by a friendly fire is not covered under the peril of fire.
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Hostile Fire
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Afire that has escaped its intended boundaries and my be covered
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Indirect Loss
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Financial Loss incurred when the insured cannot use their insured property because of direct damage rendering the building unfit or unsafe for use. Loss not directly caused by the peril but as a result of the loss to covered property.
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Lightning
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Natural bolts of electricity
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Market Value
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The price a seller of real property can expect to receive from a buyer based on an appraisal.
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Mysterious Disappearance
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An unexplained loss
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Named Perils
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A property policy that covers only perils listed in the policy
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Open Perils
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A property policy that covers risk of loss subject to exclusions; in other words, if there is damage to covered property it is covered unless excluded.
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Pair and Set Clause
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Indemnifies insured based on value of grouped items where the estimate of undamaged items is subtracted from the value of the group.
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Peril
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The cause of loss such as fire, wind, hail, etc.
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Proximate Clause
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The original peril causing loss or damage; if the proximate cause of loss is covered, then all subsequent losses are covered as well.
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Replacement Cost
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Replacement cost is the actual cost to repair or replace missing or damaged property with no deduction for depreciation.
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Robbery
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The act of taking property by the use of violence or the threat of violence
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Salvage value
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The estimated value of property at the end of its useful life which can offset the insurer's claims expense
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Special Cause of Loss
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Open Peril coverage subject to exclusions
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Stated Value
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A stated amount used to determine premium cost on unique items
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Theft
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any act of stealing
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Unoccupied
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A condition where there are no people present at the time of loss
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Vacant
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A condition where there is not enough personal property in the building to conduct normal operations.
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Claim
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A demand for payment from the insurer following a covered loss
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Exposure
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Any condition or situation that could lead to a financial loss
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Hazard
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A condition that increases the chance of loss
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Indemnify
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To restore someone to the same financial position that existed before the loss
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Insurable Interest
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The potential for financial loss - existing at the time of loss
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Insurance
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Transferring risk from an individual or business to an insurer
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Insurance Policy
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A legal contract used to transfer risk
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Insured
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The party transferring risk to an insurer (policy holder)
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Insurer
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The party accepting a transfer of risk from another (company)
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Law of Large Numbers
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The mathematical principle that states as the number of similar but independent exposure units increase, the greater the predictability about the future losses based on these exposure units increases
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Legal Liability
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Responsibility for injury to another person or their property
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Loss
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Any reduction in the quantity, quality, or value of something.
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Loss of Use
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When there is damage to real or personal property that causes a financial loss because the real or personal property cannot be used.
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Moral Hazard
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When the chance of loss is increased because of the insured's attempt to gain from insurance.
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Morale Hazard
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Chance of loss is increased by the insured's attitude toward safety
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Personal Property
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All property other than real property, i.e., household furnishings, business inventory, boat, water-craft.
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Peril
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A cause of loss, i.e., fire, wind, hail
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Physical Asset
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Real or personal property
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Physical Hazard
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When the chance of loss is increased by the construction, use, or location of the property
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Pure Risk
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Risk that only involves the possibility of loss or no loss (breaking even)
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Real Property
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Buildings or other structures, i.e., house, garage, fence
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Risk
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Financial uncertainty of loss
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Speculative risk
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Risk that involves the possibility of gain, loss, or no loss (breaking even); i.e., gambling or purchasing stocks
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Terrorism Risk Insurance Act (TRIA)
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Law passed to create a federal backstop for commercial property and casualty insurance claims related to acts of terrorism
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Agreement
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An element of a contract requiring an offer an acceptance be completed in order to issue a policy
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Aleatory Contract
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Describes a contract where the consideration is not always even
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Ambiguity
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Describes an unclear word or term in a contract
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Binder
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A temporary insurance contract
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Concealment
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An intention to withhold information from another party that is entitled to know that information.
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Conditional Contract
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Describes a contract with provisions both parties must adhere to for the contract to be binding
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Consideration
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An element of a contract where somethig of value must be exchanged between both parties
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Contract
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A legal document between two parties enforceable in a court of law
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Contract of Adhesion
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Describes a contract prepared by one party and submitted to the other party on a "take-it-or-leave-it" basis
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Estoppel
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A legal doctrine that may be used to prevent one party from asserting a legal right when past actions were inconsistent with that right.
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Legal Purpose
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An element of a contract that states the reason for the contract must be legal for the contract to be binding
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Legally Competent Parties
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An element of a contract where both parties must meet legal competency requirements in order to enter into a contract
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Material Fact
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Information that would alter the insurer's decision to offer coverage
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Misrepresentation
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An untrue statement of fact
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Parol or Oral Evidence Rule
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A rule of evidence used in disagreements over written documents. If the two parties to the contract intend the written document as the final agreement, they may not enter evidence of previous written documents or oral discussion or statements.
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Personal Contract
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A characteristic of a contract between two parties where one party (the insured) may not transfer any rights, responsibilities or other privileges to another party without the prior permission of the other party (the insurer)
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Reasonable expectation
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if a reasonable person believes coverage exists based on the circumstances of the claim and the insurer's marketing efforts, coverage may exist where it would otherwise be excluded.
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Representation
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An applicant's response to a question to the best of their knowledge and belief
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Subrogation
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The insurer's right to get their money back from the person causing the insured's loss after the insurer has indemnified the insured
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Unilateral Contract
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A characteristic of a contract where on party (the insured) exchanges an act (paying a premium) for a promise from the other party (the insurer)
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Utmost Good Faith
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The business of insurance requires that all parties to the insurance contract be able to rely on the honesty of the other parties
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Waiver
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Voluntarily giving up known right
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Warranty
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A statement of fact
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Additional Insured
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Someone covered by the policy other than the named insured
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Adverse Selection
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When an insured that presents a risk greater than that anticipated by the company in establishing the rate attempts to obtain coverage in a preferred company
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Aggregate Limit
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Maximum the insurer will pay for all claims during a specific policy period
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Assignment Clause
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Prohibits the insured from transferring any rights or duties under an insurance policy without the insurer's written permission
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Bailee
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A business having possession of another's personal property for mutual benefit (dry cleaner, auto shop)
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Cancellation
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Terminating a policy prior to the normal expiration date
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Combined Single Limit
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A single limit of Liability applying to all loss in any one occurrence
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Conditions
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The policy provisions (rules) that the insured and insurer must follow
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Declarations Page
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A necessary component of every insurance policy that shows all of the variables that identify the specific risk
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Deductible
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Part of a claim the insured pays before the insurer pays
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Deposit Premium/Audit
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Estimated premium paid as a deposit subject to an audit at the end of the policy period to assess premium accurately represents risk
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Endorsement
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Something that changes an insurance policy. An endorsement may add coverage, delete coverage, change limits, etc.. An endorsement must be in writing and may only be issued by the insurer.
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Equal share
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A condition that establishes the insurers' contribution to the loss settlement when there are multiple insurers' contribution to the loss settlement when there are multiple insurers' with coverage applying to the same loss. Each insurer pays an equal share of the loss based on the total number of policies involved. For example: IF three insurers cover the same risk, then each would pay 1/3 of any loss.
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Exclusions
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Part of the policy that details perils, situations, or people not intended to be covered by the policy
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Field Underwriting
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Underwriting done at the point of sale by the agent
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First Named Insured
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A concept in commercial insurance policy where the person or business listed first on the decelerations page is responsible for making premium payments, receiving refunds, and cancelling or changing the policy
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Flat Rate
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the policy is terminated as of the effective date and all premiums are returned as if the policy never existed.
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Insuring Agreement
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The section of the insurance policy that describes the insurance company's promise to pay
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Short Rate
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Method of calculating return premium when a policy is cancelled by the insured before the expiration date. The insurer charges a penalty for early termination.
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Split Limits
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A method used for expressing liability limits. On an auto-mobile policy, for example, there is one limit for bodily injury per person, another limit for all bodily injury from one occurrence and a separate limit for property damage liability.
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_________ is the financial uncertainty about loss.
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Risk
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There are two types of risk. The type that deals with a potential for loss only is ____________. The type that could result in loss or gain ____________.
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Pure; Speculative
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Tina Scott, your insured and owner of a fast food restaurant, has purchased proterty coverage on her building and contents. Tina has a serious gambling problen and business has been really lousy. If a fire was started intentionally by Tina to collect on her insurance, we could say that _________ hazard was responsible for the loss.
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Moral
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You own a home and there is potential for fire damage. The home presents a(n) _______________ to loss.
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Exposure
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If there were a fire at your home caused by careless smoking, fire would be the hazard of loss. True or False
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False, fire would be the peril, smoking would be the hazard.
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John owns an 80 Chevrolet truck and decides to not buy coverage in case the truck is stolen or damaged. Paying for damage to your vechicle out of your own pocket in case of loss is which risk management technique?
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Retain
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Insurers use what mathematical principle to make predictions about loss?
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Law of Large Numbers
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In property/casualty insurance, insurable interest must exist _________________.
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At time of Loss
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A legal contract used to transfer risk to an inusrer is the definition of_________________.
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Insurance Policy.
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Al Bore, your insured, has a home that was damaged by fire due to careless use of smoking materials. The peril causing loss was ____________ and the type of hazard that made the loss more likely was ___________. In addition to risk transfer to an insurer, what other risk management techniue could or should have been used?
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Fire; Smoking; Reduce
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Write a brief definition of indemnify.
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To bring insured back to financial status prior to loss.
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Terrorism Risk Insurance Act (TRIA) provides a federal "backstop" for insurance claims covering what types of commercial insurance?
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Property & Casualty
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Identify the four required elements of a contract.
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Consideration; Legal Purpose; Agreement; Legally Competent Parties
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In an aleatory contrcat, consideration is not always equal. In an insurance contract, what is the consideration on the part of the client? On the part of the insurer?
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Transfer of risk; Representation
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What is another word to describe an unclear provision in an insurance policy?
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Ambiguity
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What is the difference between "concealment" and misrepresentation?
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Concealment knowingly leaves out information; Misrepresentation gives inaccurate or false information.
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Ethel applied for insurance with Klugman Insurance Agency. When asked about other drivers in the household, she indicated there were none. Two months later, her husband of 5 years and a resident of the household had an accident and a claim was submitted. This would be an example of intentional misrepresentation of an __________ _________.
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Material Fact
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Describe an insured's rights concerning assigning an insurance policy to another person.
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Must have insurers permission.
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Parol or Oral Evidence Rule is best defined as:
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Verbal
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Subrogation extends the right to recover damages from an at-fault party to whom?
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Insurer
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True or False A written binder should not include premium
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True
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Who is contractually obligated in a unilateral contract?
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Insurer
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One of the primary purposes of the Underwriting Department is to avoid _________________ _____________.
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Adverse Selection.
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List three types of information you could find on a typical Declarations page.
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Name; Vehicle; Effective Date
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The Insuring Agreement is where you would look for information concerning the cancellation provisions, true or false
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False
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When there is more than one insurance plicy applying to the same loss the other insurance provision determines the method for deciding how much each policy pays. Describe the method for determining each company's share of the loss when the policies are written on a primary/excess basis.
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One policy is considered the primary policy. Once that company has paid up to its limit and if the claim is still not satisfied then the excess policy will pay up to its limit or until the claim is satisfied.
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Split limits of liability are used on personal auto policies. What does each of the following numbers mean: $25/50/20
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25k per person injury; 50K per occurrence injury; 20k per occurrence property damage
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What is the alternative to split limits for expressing liability limits on a Personal Auto Policy?
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Combined Limit
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If an insured terminates their homeowners' policy prior to the expiration date, the return premium will be calculated using which method of calculating return premium?
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Pro Rata
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In a Liability Claim situation, who is the third party?
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The injured
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Negligence is designed as the failure to do what a _________ and ___________ person would have done under the same circumstances.
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Reasonable; Prudent
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List the four elements that must be present for negligence to exist.
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Duty to act; Breach of duty; injury or damage; unbroken chain of events
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Strict liability means that you do not have to prove ________ for the injured party to collect.
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Negligence
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There are five primary defences against negligence. List and define them.
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Intervening Cause- Something breaks the chain of events; Assumption of risk- being aware of the danger involved (skydiving); Contributory Negligence- acting in a manner as to increase the risk; Comparative Negligence- both the negligent and third party are responsible for portion of the loss determined by involvement in the loss; Statute of Limitations- a predetermined amount of time one can wait prior to pursuing action.
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An accident is defined as a(n) __________ event.
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Unforeseen
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Compensatory damages that pay for measurable losses are called _____________.
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Special
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The automatic coverage under liability that pays court related expenses is known as _____________ (___________) __________
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Additional (supplementary) Coverage
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An insurer has a duty to ___________ an insured even in a groundless lawsuit.
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Defend
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Workers compensation is a form of what liability?
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Absolute
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Peril is defined as the __________ of _________.
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Cause; Loss
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True or False; An open perils policy covers all perils listed in the insuring agreement.
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False
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Actual Cash Value is defined as the cost to repair or replace with material of like kind and quality at __________ prices minus ____________.
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Market; Depreciation
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What is the difference in ACV and Replacement Value?
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Actual Cash Value is like material and kind at market value MINUS depreciation Replacement does not recognize depreciation.
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A binding decision in an appraisal clause is when an agreement has been reached between the __________ and the ___________.
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Insurer; Insured
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Coinsurance is to encourage an insured to adequately insure their property to __% of value
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80
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What does it mean when a building is vacant?
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Not enough personal property to conduct daily business.
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Explain the difference between specific and blanket limit.
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Specific sets a predetermined limit for policy coverage on certain losses and loss types, Blanket limit covers multiple separate properties.
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What type of theft would you report to an insurer when someone broke into your home and stole your property?
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Burglary
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If an insured chooses to waive subrogation, when must this waiver be completed?
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before the loss
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What is the name of the value that estimates property value at the end of its useful life?
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Salvage
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_____ ___ ____ ______ Determines the settlement value based on items grouped together where an estimate of the value of remaining undamaged items will be subtracted from the value of the group and the insurer will pay the difference
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Pairs and set Clause
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Adverse Selection occurs when:
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Someone with a poor driving record maintains insurance in a preferred program.
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Insurance Companies have several major departments. One of them is the actuary department that analyses data and sets rates. Another is the underwriting department and their function is to:
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Analyse loss history for rate setting
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