Insurance Coverage Types: Real and Personal Property, Perils, Limits, and Exclusions, Exams of Property Law

Download Insurance Coverage Types: Real and Personal Property, Perils, Limits, and Exclusions and more Exams Property Law in PDF only on Docsity! Wisconsin Property and Casualty exam answers FAIR - ANS; Fair Access to Insurance Requirements Elements of a Legal Contract. L. O. A. C. - ANS; • Consideration • Legal Purpose • Offer • Acceptance • Competent Parties Consideration - ANS; Money and statements made on application Legal Purpose - ANS; Risk transfer doesn't violate the law Offer - ANS; Insured submits application and first month premium to insurer Insurer accepts or insurer declines the risk Counteroffer - ANS; Agrees to issue policy but with higher premium or restrictions/ exclusions Insured either accepts the conditions or withdraws their application Competent Parties - ANS; Competent• Legal age (usually 18) • Mentally sane• Sober Adhesion - ANS; Policy written by the insurance company Adhesion = glue Insured has no input If ambiguous, court will take the side of the insured Aleatory Contract - ANS; • Unequal value • Pay small premium and have a large claim, or pay premiums for many years without a claim representation - ANS; believed to be true misrepresentation - ANS; representation that is actually false. Material misrepresentation - ANS; information given that is not true and DOES affect the insurer's decision warranty - ANS; statement that is guaranteed to be true, and it may be relied on by the other party. If a warranty is not kept, there is a breach of warranty that voids the contract. Concealment - ANS; failure to disclose known facts Property insurance policies - ANS; Covers"mystuff" "Mystuff"=buildings(real property) and personal belongings First Part Loss Casualty Insurance - ANS; Casualty = Liability Always pays the other guy, never me Third party losses D. I. C. E. E. - ANS; ■ Declarations■ Insuring agreements■ Conditions■ Endorsements and additional supplementary coverages ■ Exclusions Declarations - ANS; who, what, when, where, and how much Insuring agreement(s) - ANS; promise to pay and perils covered Conditions - ANS; rules for the policy Endorsements - ANS; changes to the original policy Exclusions - ANS; items not covered Named insured - ANS; listed on the declarations First-named insured - ANS; first on the declarations policy territory - ANS; typically includes the United States, Canada, Puerto Rico, and other U.S. territories and possessions. Most insurance policies do not extend coverage into Mexico flat cancellation. - ANS; policy is canceled on the effective date, by either the insurer or insured Cancellation - ANS; occurs before the policy's expiration date Insurer cancellation requires advance notice Insured cancellation—no advance notice Nonrenewal - ANS; occurs at the expiration date Insurer must give advance notice No advance notice required by the insured Nonconcurrency - ANS; result of two or more policies covering the same property but providing different or non-identical coverage. Pro Rata - ANS; Each insurer's liable for a portion of the loss Blanket - ANS; all of a certain type of property - Single limit of coverage - No detailed list Limits of insurance - ANS; maximum coverage limits ■ Listed on declarations page Insured Perils - ANS; ■ Named peril—only perils on the list are covered ■ Open (special) perils—covers all perils except those specifically excluded Basic Perils - ANS; ■ Fire, lightning, and internal explosion ■ Extended coverage - WCSHAVVER- Vandalism and malicious mischief (V&MM) Broad Perils - ANS; All of basic (fire, lightning, and internal explosion) plus extended perils (WCSHAVVER and V&MM) Plus BIG AFFECT:- BI AFFET - ANS; BURGLARY, ICE AND SNOW WEIGHT, ACCIDENTAL DISCHARGE OF WATER, FALLING, FREEZING, ELECTRICAL, TEARING APART Broad Peril Exclusions - ANS; Weight of ice, snow, or falling objects on awnings, fences, patios, swimming pools, docks, and retaining walls Accidental discharge over water from continuous leaking Flooding from river or lake Burglary if property vacant more than 60 consecutive days Special/Open Peril Coverage - ANS; all risks of direct physical loss, except those specifically excluded Special/Open exclusions: - ANS; Flooding- Earthquake- Intentional damage caused by an insured- Losses due to enforcement of building codes- Damage caused by a power interruption occurring off premises - Governmental seizure Types of Loss - ANS; ■ Direct—the immediate damage caused by the peril ■ Indirect —loss over time as a result of the direct loss - Loss of income a business suffers when the building burns- Cost of a rental car because someone ran into your car- Additional living expenses while the home is being repaired Classes of Construction - ANS; Class 1 - Frame Class 2 - Joisted Masonry Class 3 - Noncombustible Class 4 - Masonry Noncombustible Class 5 - Modified Fire Resistive Class 6 - Fire Resistive Loss Valuation - ANS; how the insurance company determines appropriate amount of loss to be paid Coinsurance - ANS; The coinsurance requirement is normally 80% of the replacement cost. If the minimum required amount is carried, then claims are paid in full up to policy limits. If the minimum is not carried, partial losses are not paid in full. Replacement Cost Value (RCV) - ANS; (Better than ACV)The cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose Actual Cash Value - ANS; replacement cost - depreciation Standard Mortgage or Loss Payable Clause - ANS; -allows lender to pay premium -lender entitled to receive notice if policy is to be canceled -lender can file claim -lender protected from negligent or dishonest acts of the insured -lender only entitled to receive payment up to the amount of the debt No Benefit to Bailee - ANS; Bailee is a person or business that has temporary control of the insured's property ■ Bailee cannot benefit from the property owner's policy Dwelling Policy - ANS; Property coverage only. Not required to be owner occupied • Covers Lake House, rental property, older homes, and hunting cabins Dwelling Policy Eligibility - ANS; 1-4 unit dwelling with boarders Vacation dwellings Rental dwellings Dwellings under construction (endorsement) Mobile homes (endorsement) Farm dwellings NOT eligible Dwelling Coverages - ANS; Coverage A - Dwelling, Coverage B - Other structures, Coverage C - Personal property, Coverage D - Fair rental value, and Coverage E - Additional living expenses Dwelling Coverage A - ANS; covers the dwelling, structures attached to the dwelling Dwelling Coverage B - ANS; Other (detached) structures insures buildings on the premises that are separated from the dwelling by a clear space or connected only by a fence, utility line, or similar connection. The building may not be used for commercial, manufacturing, or farming purposes. Dwelling Coverage C - ANS; personal property covers the insured's personal property that is at the described location and is usual to the dwelling occupancy. Dwelling Coverage D - ANS; Fair rental value covers the insured in the event a covered loss makes the rental portion of a property unfit for normal use. 20% of the insurance on the dwelling is available for this coverage Dwelling Coverage E - ANS; additional living expense is included in DP-2 and DP-3 and pays for additional living expenses the insured incurs after a covered loss, including reasonable motel, dining, laundry, and transportation expenses. The limit is 10% of Coverage A DP 1 Basic Form provides certain other coverages that are automatically included for no additional premium. - ANS; Debris removal Property removed—5 days Reasonable repairs Tenant's improvements (10% of Coverage C) Fire department service charge—$500 (no deductible) Worldwide personal property (10% of Coverage C) DP-2 and DP-3 Other Coverages - ANS; All basic other coverages Trees, shrubs, and plants • Maximum of $500 each • Total—5% of Coverage A Collapse—caused by a covered peril Glass Ordinance or law (10% of Coverage A) Property removed—30 days (5 days DP-1) Dp-1 Pays Losses - ANS; All losses paid Actual Cash Value Basis Dp-2 and Dp-3 pays losses - ANS; dwelling and other structures on a replacement cost basis must cover 80% or more of the full replacement cost DP1-1 Basic Covered perils - ANS; Only insures fire, lightning, and internal explosion automatically ■ EC—WCSHAVVER (additional premium)■ V&MM—if has EC (additional premium) DP-2: Broad - ANS; All of DP-1 available perils (fire, lightning, internal explosion, WCSHAVVER, and V&MM) ■ Plus (BIAFFECT) - Burglar damage- Ice and snow weight- Accidental discharge or overflow of water - Falling objects- Freezing pipes- Electrical damage- Collapse- Tearing asunder DP-2: Broad Exclusions - ANS; -Weight of ice, snow , or falling objects on awnings , fences, patios, swimming pools, docks, and retaining walls -Accidental discharge over water from continuous leaking -Flood -Burglary if property vacant (60 consecutive days) dwelling property policy (DP-3) Coverage E is - ANS; Coverage E is 20% of Coverage A How is lost or damaged property valued under the BAP - ANS; Lesser of the ACV or the cost to repair or replace The Proximate Cause - ANS; primary cause of loss in a sequence of events resulting in a claim. An insurer may not use odometer reading data collected in the course of an inspection to set rates or premiums for a motor vehicle policy or as a factor in altering rates or premiums during - ANS; the term of the policy or at the time of renewal. Medical Payments under the Personal Auto Policy - ANS; is a per person limit that applies to each accident. Section II Coverage E provides - ANS; personal liability coverage for property damage to others due to actions of the insured. PAP part B Medical expenses - ANS; must be incurred within 3 years of the accident. constitutes the acceptance of an offer? - ANS; When an insurer issues a binder Personal Effects and Property of Others - ANS; Provides limited coverage for the personal effects owned by an individual insured, partner, employee, etc. Excludes Theft. $2,500 limit per location. Contribution by equal shares - ANS; all insurers contribute equally up to the limit of the policy of the smallest coverage. The HO-2 - ANS; (broad form): covers the dwelling, other structures, and personal property on a named perils basis Damage to Property of Others - ANS; pays up to $1000 per occurrence for property damage caused by an insured Damage to Property of Others exclusions - ANS; Coverage does not apply to property damage: Covered under Section I of the policy. Caused intentionally by an insured who is 13 years of age or older. To any property owned by an insured. To property owned by or rented to a tenant of an insured or a resident of the named insured's household. Arising out of a business engaged in by an insured; acts or omissions in connection with premises owned, rented, or controlled by an insured that is not the insured location; the ownership, maintenance, occupancy, operation, use, loading or unloading of aircraft, hovercraft, watercraft, or motor adhesion - ANS; An insurance contract is prepared by oneparty (the insurance company) with little or no opportunity for the other party (the insured) to bargain Homeowners Policy - ANS; a package-type insurance policy designed to insure homes and property Homeowners Eligibility - ANS; ■ Owner occupied (special version for a renter)■ No more than 4-family dwelling■ Primary purpose as a residence■ Dwellings under construction are eligible (for owner-occupant) ■ Mobile homes (require mobile home endorsement) ■ Farm dwellings NOT eligible Insureds - ANS; ■ Named insured including a resident spouse■ Resident relatives■ Anyone under the age of 21 and in the care of an insured (foster child and exchange student) ■ Full-time student under age 24, relative, and prior resident■ Representative of the named insured in the event of death HO Cancellation - ANS; Cancellation by the insurance company- During the first 60 days for any reason—minimum 10 days' notice - Other reasons after 60 days— minimum 30 days' notice ■■ Material misrepresentation ■■ Substantial change in the risk- Nonpayment of premium—10 days' advance notice Nonrenewal by Insurer - ANS; Nonrenewal by insurance company - 30 days advanced notice Standard Mortgagee Clause - ANS; ■ Can pay the premium■ File a claim up to insurable interest■ Receive advance notice of cancellation■ Dishonesty of insured doesn't prevent mortgagee from collecting Homeowner Policies - ANS; HO 2: broad form: owner occupant HO 3: special form: owner occupant HO 4: tenants or renters HO 5: comprehensive form: owner occupant HO 6: condominium owners HO 8: modified form HO Property Coverages Dwelling - ANS; - Including property attached- Materials on the premises used in construction - No coverage for a renter HO Property Coverages Other Structures - ANS; - Not attached to dwelling- Not used for business purposes HO Property Coverages Personal Property - ANS; - Not attached to the dwelling- Anywhere in the world- Guest's property (if requested) HO Special limits for theft - ANS; ■■ $1,500—jewelry, watches, and furs■■ $2,500— firearms and related items■■ $2,500—silverware, goldware, and pewterware HO Special limits for ALL losses - ANS; ■■ $200—money and securities■■ $1,500— watercraft and related items■■ $1,500—trailers■■ $2,500—business personal property on premises■■ $1,500—business personal property away from premises■■ $1,500— portable electronic apparatus away from the premises HO Loss of Use - ANS; Indirect losses due to loss of use of home caused by a covered peril ■■ Additional living expenses ■■ Rental income Additional Coverages in ho 2, 3, and 5 - ANS; Collapse- Caused by a covered peril - Not earthquake Landlord's furnishings—$2,500 Grave markers—$5,000 Ordinance or law—increased cost up to 10% × dwelling limi Perils - basic form - ANS; Fire, lightning, explosion, wind, hail, smoke, aircraft, vehicles, volcanic eruption, vandalism and malicious mischief, riot/civil commotion, and theft (all homeowners covers theft; not automatically covered in dwelling property policies) Perils Exclusions - ANS; - Theft by the insured- Theft from dwelling under construction - Theft from rental portion of premises- Theft of watercraft off of the premises- Mysterious disappearance Perils - Broad form - ANS; All basic perils plus: ■■ Falling objects■■ Accidental discharge of water (not flood)■■ Weight of ice, sleet, or snow■■ Freezing of plumbing (if care used)■■ Artificially generated current■■ Sudden tearing and breaking of heating and cooling system Perils Special - ANS; - Open peril ■■ All direct causes of loss (to the dwelling and other structures) unless specifically excluded Excluded Perils in All Homeowners Policies - ANS; Enforcement of law or ordinance regulating construction, repair, or demolition Earth movement, including earthquake and mine subsidence Flooding and overflow from a sump pump■ Power interruption that takes place off the residence premises ■ War■ Nuclear hazard■ The insured's failure to save and preserve property after a loss, or to protect it from loss■ Losses caused intentionally by the insured or by CPP Cancellation - ANS; Notices to first-named insured■ Premium refund to first- named insured ■ Request from first-named insured CPP Changes and Premiums - ANS; Change request from first-named insured ■ First-named insured responsible for payment of premium The CPP cannot include - ANS; Workers' compensation- Life insurance- Health and disability insurance - Certain types of professional liability CPP property coverage forms - ANS; Building and personal property - Builder's risk- Condominium association - Condominium commercial unit owners - Business income- Extra expense CPP casualty coverage forms - ANS; Commercial auto - General liability - Crime- Farm liability CPP Examination of Books and Records - ANS; Right of insurance company- Only for calculation of correct premium - Up to 3 years after expiration ■ Right to inspect premises- Purposes of insurability - Not safety inspections Assignment Clause / Transfer of rights - ANS; Insurance company has to agree Automatic if named insured dies Legal action against us - ANS; gives the insured two years to bring an action against the insurer. Commercial Property Conditions Form - ANS; Control of property■ Legal action against the insurer■ Other insurance■ Policy period and coverage territory■ Transfer of recovery rights against others (subrogation) ■ Concealment, misrepresentation, and fraud■ No benefit to bailee■ Insurance under two or more coverages■ Liberalization Commercial Property Insurance Cause of loss Forms - ANS; Basic■ Broad■ Special (open) NOT a component of the commercial package policy - ANS; Common exclusions covered under the builders risk coverage from - ANS; The foundation builders risk reporting form requires a report of value that must be reported to the insurer every - ANS; Month extended business income - ANS; Addresses possibility of income loss which continue after the period of restoration ends. Ends when the insured's business returns to normal, subject to maximum of 60 days. CPP Basic Peril Coverage CP1 - ANS; Fire■ Lightning■ Explosion■ Wind or hail■ Smoke■ Aircraft or vehicles■ Riot or civil commotion■ Vandalism■ Sprinkler leakage■ Sinkhole collapse■ Volcanic action (does not cover land movement)■ Fungus, wet rot, dry rot, and bacteria—$15,000 maximum CPP Broad - ANS; all of basic plus: ■ falling objects (does not cover damage to interior property unless the exterior of the building is damaged first); ■ weight of snow, ice, or sleet;■ water damage (accidental discharge or leakage of water or steam as a result of the cracking or breaking of a water or steam system or appliance); and ■ collapse caused by any broad peril plus - hidden decay, - hidden insect or vermin damage, - weight of people or personal property, - weight of rain that collects on a roof, - use of defective material or methods in construction, remodeling, or renovation if the collapse occurs while the construction, remodeling, or renovation is in progress CPP Special Form - ANS; covers all direct causes of loss CPP Special Form Exclusions - ANS; Smog- Pollutants (unless the release, discharge, or dispersal is caused by a specified cause of loss) - Settling, cracking, shrinking, or expansion- Damage caused by insects, birds, rodents, or other animals- Mechanical breakdown- Explosion of steam boilers, pipes, and engines- Dishonest or criminal acts of the insured or the insured's employees- Voluntary parting with property if induced to do so by fraud or a trick- Rain, snow, ice, or sleet damage to personal property that is not in a building- Loss resulting from acts or decisions, or the failure to act or decide- Collapse (other than that specifically included under the collapse additional coverage)- Faulty planning, development, design, specifications, workmanship, or repair CPP Endorsements - ANS; Value reporting—allows insured to report values (usually on a monthly basis) to establish limits of coverage - No loss paid greater than the last report Ordinance or law—pays for additional costs of repair or replacement due to building ordinances or laws Spoilage—covers perishable stock (refrigerated) Earthquake and volcanic eruption—land movement CPP Volcanic eruption - ANS; All earthquake shocks or volcanic eruptions that occur within any 168-hour period constitute a single earthquake or volcanic eruption Inland Marine Insurance - ANS; Floater, Covers goods that are moved by land carriers such as trains, trucks, and airplanes. commercial articles coverage form, additional acquired property is automatically covered if it is a type of property already covered by the form for up to - ANS; 30days annual transit policy - ANS; protects the shipper or receiver of goods against loss to goods in transit. Coverage is available on a named-peril basis, protecting against such losses as fire, windstorm, collision, and theft, or on an open-peril basis trip transit policy - ANS; Covers a single shipment—one time, one way Motor truck cargo - ANS; Trucker's form covers the insured's bailee responsibility Owner's form covers insured's own goods in own trucks Combo form - ANS; Covers bailee responsibility and own goods Bailee Liability - ANS; Covers damage to customer's property • Pays customer Contractor's Equipment Floater - ANS; Tools, machinery, and heavy equipment Installation Floater - ANS; Covers property in transit• Awaiting installation• Coverage ends when installed Electronic Data Processing - ANS; Software Hardware Data Includes extra expense coverage and lost income Domestic shipments inland marine transportation forms do not cover shipments traveling by - ANS; Mail Inland Marine Insurance Nationwide Definition—6 categories - ANS; Imports - Exports - Personal property floaters Domestic shipments - Instrumentalities of transportation or communication - Commercial property floater risks farm property coverage forms - ANS; Coverage A—dwellings■ Coverage B—other private structures appurtenant to dwellings ■ Coverage C—household personal property■ Coverage D—loss of use Farm Personal Property Coverage Form - ANS; Coverage E- scheduled farm personal property covers property for the limit in the dec (grain, farm products, poultry, etc); Coverage F- unscheduled farm personal property on a blanket premises both on and off premises; Coverage G- the barns, outbuildings, and other farm structures form BOP Collapse caused by: - ANS; building glass breakage; hidden decay; hidden insect or vermin damage; weight of people or personal property; or weight of rain or snow BOP Increased Cost of Construction - ANS; Due to covered peril• If replacement cost coverage BOP Action of Civil Authority - ANS; For business loss when insured cannot access premise • Beginning 72 hours after the action BOP Forgery or Alteration - ANS; Maximum of $2,500• Includes defense costs BOP Business Income From Dependent Properties - ANS; • Limit of $5,000 BOP Fungi, Wet Rot, Dry Rot, and Bacteria - ANS; Limited to $15,000 per policy period • Must occur during the policy period BOP Electronic Data - ANS; oftware and hardware• $10,000 per policy period • Caused by a covered peril BOP - standard deductible - ANS; $500 homeowners policy Standard deductible - ANS; 250 BOP Coverage Extensions - ANS; Newly acquired Buildings—30 days, $250,000 Personal property—30 days, $100,000 Trees and detached signs• Maximum total of $2,500• Maximum per tree—$1,000 Personal property of others (not customers) such as employee property on the premises • $2,500 Valuable papers and records • $10,000 BOP Medical Payments - ANS; Not employees or insureds• 1 year from the date of accident PAP (Personal Auto Policy) - ANS; Casualty- Part A—liability coverage- Part B— medical payments coverage- Part C—uninsured motorists coverage PAP Property Coverages - ANS; Part D—coverage for damage to your auto (physical damage) PAP Occupying means: - ANS; in a vehicle;■ upon a vehicle; or■ getting into, onto, out of, or off of a vehicle. Assigned risk plans - ANS; A plan through which people can buy insurance if they are unable to purchase insurance in the regular or voluntary market, because of their high risk or other factors. PAP Part A Who is an insured - ANS; Named insured and resident spouse Resident family members Any person who borrows a covered auto with the permission of any insured What is the amount of reimbursement that the insured can receive for loss of earnings due to the time spent in court? - ANS; 250 PAP PART B—MEDICAL PAYMENTS COVERAGE - ANS; Covers medical and funeral expense • Within 3 years No fault • Insured, family, and guest passengers while occupying any vehicle (owned or nonowned) Occupying• In, on, or getting in, out, or off Also covers insured and family as a pedestrian PAP Part B: Medical Payments Exclusions - ANS; sustained while occupying a motor vehicle with fewer than four wheels; sustained while using a covered auto as a public or livery conveyance; that would be covered under workers' compensation; sustained while occupying an uninsured auto owned by a family member or furnished for the family member's regular use (does not apply to the named insured); sustainedwhiletheinsuredisoccupyingavehiclewithoutthereasonablebeliefthatheisentitled to do so (does not apply to family members using covered autos owned by the insured); Motor Carrier Act - ANS; The deregulation of the trucking industry was accomplished through which 1980 regulation Common carrier - ANS; A business individual that carries people and property belonging to the general public for a fee from one place to another Intervening Cause - ANS; an event that comes between the initial act in a sequence and the end result On a commercial property coverage form signs attached to the building are covered up to - ANS; $2,500 Proximate Cause - ANS; primary cause of loss in an unbroken sequence of events resulting in a claim. Indirect Cause - ANS; a cause that produces an effect, which in turn, produces a third effect Assumption of risk - ANS; A defense against negligence that can be used when the plaintiff was aware of a danger and voluntarily assumed the risk of injury from that danger. Per Person Limit - ANS; The maximum amount the coverage will pay for loss to any 1 person, regardless of the overall policy limits. Combined Single Limit - ANS; auto insurance liability coverage that combines both bodily injury and property damage liability Split limits (auto insurance) - ANS; $100,000 (per person) / $300,000 (per accident) / $50,000 (property damage) Concurrent causation - ANS; A principle holding that when two perils simultaneously cause a loss (i.e., they are both considered the proximate cause of loss), the insurer must pay the loss even if one of the perils is excluded by the policy. The Earthquake endorsement to the BOP provides that coverage continues for how long after a policy expires - ANS; 168 hours Which of the following clauses protects the interests of the loss payee? - ANS; Loss payable clause Under which of the following circumstances would the Limited Theft Coverage endorsement be used - ANS; The insured dwelling is tenant-occupied An HO-3 policy provides coverage on which basis - ANS; Open perils coverage on the dwelling and broad form coverage on the personal property Which of these statements is not true about Uninsured Motorist coverage - ANS; Coverage is automatically provided for the damage to the insured vehicle Which of the following is true regarding the Earthquake Cause of Loss Form - ANS; It can be used only with another Causes of Loss Form Which of the following is the best description of the Voluntary Compensation Endorsement under Workers' Compensation Insurance? - ANS; It provides coverage to employees that are not otherwise covered not eligible for coverage under the FAIR plan - ANS; Farm property