UNIT ONE:
Qualifications Required for a General Lines Test
WHAT are the required
qualifications?
Section 1.4 (p. 19)
18 years of age
A resident of the
state of Florida
Place of business
A U.S. citizen or legal
located in Florida
alien who possess work
authorization from the
United States Immigration
Naturalization Services
Not licensed for purpose
of writing or handling
controlled business
Controlled Business—is insurance
DUTIES AND FUNCTION OF
THE DEPARTMENT OF THE
FINANCIAL SERVICES AND
THE OFFICE OF
INSURANCE REGULATION
Section 1.7 (p. 22)
Department of Financial
Services
1) Approve issuance of
licenses to agents, CR,
and adjusters
2) Supervision of claims
3) Investigate charges of
unethical conduct and
take judicial action
Office of Insurance
Regulation
1) Examine the
qualifications of
insurance companies
doing business in
Florida
2) Examine the financial
conditions of
companies
(more than 50%) written on his or her
own interests or those of his or her
family or of any firm, corporation, or
association with which he or she is
associated with directly or indirectly
or has an interest other than the
insurance
UNIT TWO:
Property and Liability Concepts
RISK
BINDERS
Section 2.1
(p. 23)
Section 2.3
(p. 23)
WHAT is an insurance policy?
Section 2.2 (p. 23)
Risk—the chance
Binders—temporary
of financial loss
Both definitions are from the
Florida Statues
Policy—a written
PROPERTY AND
LIABILITY
INSURANCE
Section 2.4 (p. 24)
contract for effecting
insurance and
includes, clauses,
riders, endorsements,
and papers which are
part of the contract
Insurance—a
contract where one
undertakes to
indemnify another or
pay a specified
amount determined on
contingencies
Property Insurance—
where payment is made
directly to the insured or
other named interests Liability Insurance—
where payment is made
on behalf of the insured
to another
insurance policies,
which can be made
orally or written INSURANCE
CONTRACT
CHARACTERISTICS
Section 2.5 (p. 24)
The insurer shall
give 5 days prior
notice of cancelling
a binder unless the
binder is replaced by
a policy. No notice is
required unless the
binder exceeds 60
days.
WHAT are the four components of a
property or liability contract?
Personal Contract: Covers persons, not
property or operations
Conditional Contract:
Obligations of insurer to
perform, may depend on the
insured satisfying certain
conditions
Contract of Adhesion: Parties
have unequal bargaining power,
such as the insured cannot
negotiate the terms of the insurer.
Ambiguities found in the policy
are usually found in favor of the
insurer
Indemnity Contract: One
party should be put back in
the same financial condition
they were in before the
loss. (Never profit from a loss)
Departures from the principal of indemnity:
1)
terest
Insurable In
t the
must exist a
and the
time of loss
ld
insured wou
mic loss.
suffer econo
(p. 26)
Replacement Cost: Given new for old
2) Agreed Value: Specific amount agreed upon in
advance
3) Florida Value Policy Law: Policy limits are
paid for total loss
4) Liability: Pays amount that exceeds insured’s
resources
(Refer to page 25)
PROPERTY INSURANCE CONCEPTS
Section 2.6 (p. 27)
Peril—a contingency
that cause a loss
Proximate Clause—a
doctrine that states
when there is an
unbroken connection
between an occurrence
and damage that
grows out of the
occurrence, then the
resultant damage is all
part of the occurrence
Hazard—a condition that
WHAT are the three classifications
of hazards?
increases the likelihood of
a loss from a covered peril
Dir ect vs. Indir ect Loss
Direct Loss—physical
harm to tangible property
Morale: Physical: Moral: Intentional Accident-­‐prone Physical loss or carelessness characteristics that increase the probability and severity of loss Lender Interest
Indirect Loss—economic
loss that flows as a
consequence of the direct
loss
Real Property: Lender’s interest
is named in the Mortgage Clause,
Mortgagee Clause, or Mortgage
Holders
Personal Property: Usually
named in Loss Payable Clause
Many property policies
are issued subject to
Replacement Cost. This is
common on buildings.
Lender interest varies from
policy to policy. Virtually all
property insurance covering
real property provides for
naming mortgagees and gives
them special protection such
as:
1) Advanced notice of
cancellation
2) Protected even if insured
is prevented from recovery
3) Allows mortgagee to
continue payments in
order to continue the
policy even if insured fails
to do so
Loss Settlement Valuation (p. 28)
property
Most basic
te that
policies sta
e
losses will b
d on
settled base
Value
Actual Cash
Blanket—a single amount
Actual Cash Value (AVC)—the current
of coverage that applies to
two or more coverage items
cost to replace the item minus depreciation
Coinsurance (p. 29)
Coinsurance clauses encourage an insured to
insure their property to its replacement cost
If the coverage
amount is equal to or
more than the agreed
percentage of the
property value, the
coinsurance clause
does not have an
impact on the claim
payment to the
insured.
Specific vs. Blanket Insurance
(p. 30)
value. Coinsurance clauses limit the insurer’s
responsibility in a loss to the proportion of a
loss which the limit of insurance bears to the
value of the property at the time of loss times
the coinsurance percentage. Formula for Coinsurance:
Loss ×
𝑳𝒊𝒎𝒊𝒕 𝒐𝒇 𝑰𝒏𝒔𝒖𝒓𝒂𝒏𝒄𝒆
𝑽𝒂𝒍𝒖𝒆 𝒐𝒇 𝑷𝒓𝒐𝒑𝒆𝒓𝒕𝒚 × 𝑪𝒐𝒊𝒏𝒔𝒖𝒓𝒂𝒏𝒄𝒆 = Loss Settlement
Specific Insurance—property
insurance policies are issued with
separate limits for each individual
building, the contents of each
building, and the indirect loss
exposure at each building
Coinsurance Example:
Coverage limit is $30,000, with an 80% coinsurance clause, a loss of
$20,000 occurs.
If the value of the covered property is $50,000 at the time of loss, the
insurer’s loss payment responsibility is calculated as follows:
Blanket Insurance—an alternate
method of insuring, blanket insurance
is to apply a single amount to two or
more coverage items, with any part of
the full amount available to apply to
any item and/or all items
$20,000 ×
$"#,!!!
$"#,!!! × !"%
= $15,000
The insured would collect $15,000 of the $20,000 loss, as the $30,000
of coverage did not meet the 80% value of the dwelling.
Deductibles (p. 30)
STRAIGHT
PERCENTAGE
Deduction of a flat
amount
Percentage of loss of
the value of the
property or percentage
of the policy limits
Example: An insured has $500 collision
deductible on his/her auto. The
insured lightly backed into a
wall scratching the rear bumper
cover resulting in $300 in
damages. The insurance policy
would not make a payment to
the insured until the damages
exceeded the $500 collision
deductible. FRANCHISE
No payment is made
until the loss equals or
exceeds a prescribed
amount, then the loss
is paid in full Example:
A homeowner owns a home valued at $300,000, and has an insurance
policy with $300,000 of Homeowners coverage. The policy has a 2%
windstorm deductible. If a loss occurs, the insured is responsible for the
first 2% of the damages.
The percentage deductible can be expressed in dollars by multiplying the
percentage by the coverage amount:
2% × $300,000 = $6,000
In this example, the insured would be responsible for the first $6,000.
LIABILITY
INSURANCE
CONCEPTS
Legal Liability—means our
rules of law dictate that one must
provide reparations to another
based on negligence
Section 2.7 (p. 31)
nder
Insureds U
olicy—
Liability P
is the
“Insured”
legally
one who is
liable
Liability Policy Insuring Agreement
Liability insurance
policies contain an
insuring agreement
that essentially states
that the insurer agrees
“to pay on behalf of
the insured all sums
the insured becomes
legally obligated to
pay as damages…”
Liability Policy Limits
Expressed three ways:
1) Single: Maximum amount
paid to any one accident or
occurrence
2) Split Limits: Expressed in
two figures
Example:
A private passenger automobile
policy has split limits of
$100,000 per person and
$300,000 per occurrence
(written as 100/300 on many
declaration pages). The policy
will pay out no more than
$100,000 for any one person
and no more than $300,000 for
any one occurrence.
Example:
A private passenger
automobile policy has a single
bodily liability limit of
$300,000 which is the most the
insurer will pay for any one
injured party’s claim and also
the total the insurer will pay for
all injured party’s claims. 3) Aggregate: A limit is applied
which represents the total
insurance coverage that will be
paid for the policy term
INSURANCE POLICY CONDITIONS
Section 2.8 (p. 32)
WHAT are the insured’s duties
following loss?
GENERAL DUTIES:
1) Prompt notice
2) Cooperate with
insurer
3) Preserve insurer’s
rights
Subrogation (p. 33)
Subrogation—the right an insurance
company has when an insured has a right
to collect damages from another party, but
instead elects to claim the damages under
his/her own insurance policy, those rights
against the other party are transferred to
the insurer
PROPERTY POLICIES:
1) Inventory damaged
property
2) Protect against
further loss
3) Show damaged
property
4) Provide records and
documents
5) Submit to questions
6)
LIABILITY POLICIES:
1) Notify insurer of
name and address of
claimants and
witnesses
2) Forward all legal
papers received
3) Aid the insurer in
settlements
4) Avoid voluntary
payments or
assumption of
obligations
Example of Subrogation:
Jill’s automobile incurs $1,000 of
physical damage in an accident caused
by Michelle. Jill receives a claims
payment of $800 from her own insurer,
because of a $200 deductible clause.
The insurance company is now
subrogated to Jill’s right to collect from
Michelle. Jill’s insurance company will
file a claim with Michelle’s insurance
company to recover the $800 paid.
Assignment (p. 34)
Assignment Clause—specifies that
transferring the policy to another will
not be valid unless the insurer consents
in writing
All changes to the policy
must be made by the
insurer, in writing.
Coverage applies only to
losses or occurrences
that take place during the
policy period.
Other Insurance (p. 34)
In cases were the insured has other policies, the policy may
call for paying its share in the following four ways:
Some policies cover
world-wide, but most
have a condition limiting
coverage.
1) Pro Rata: The company will pay its
proportionate part
2) Equal Shares: Contributions based on the
number of policies without regard to limits
Example:
A $300,000 loss has occurred and two liability
policies are determined to apply to the same
$300,000 loss. The first policy is responsible
for: $500,000/$1,500,000 (1/3 of the loss) of
the loss and the second policy is responsible
for $1,000,000/%1,500,000 (2/3 of the loss).
Example:
A $300,000 loss has occurred and two liability
policies are determined to apply to the same
$300,000 loss. The first policy has a $500,000
limit and the second a $1,000,000 limit. The first
policy is responsible for ½ of the loss and the
second policy is responsible for ½ of the loss.
Thus, the first policy pays $100,000 (1/3 of the
loss) and the second policy pays $200,000 (2/3
of the loss).
Thus, the first policy pays $150,000 (1/2 of the
loss) and the second policy pays $150,000 (1/2
of the loss).
3) Primary: Policy applies first up to the limit
before others apply
4) Excess: All other insurance must be
exhausted before the policy applies
Example:
A $300,000 loss has occurred and two liability
policies are determined to apply to the same
$300,000 loss. The first policy is primary and
has a $500,000 limit and the second policy is
excess with a $1,000,000 limit. The first
policy pays $300,000 for the loss and the
second policy pays zero, as the loss did not
exceed the first policy’s limit.
Example:
A $300,000 loss has occurred and two liability
policies are determined to apply to the same
$300,000 loss. The first policy is primary and
has a $500,000 limit and the second policy is
excess with a $1,000,000 limit. The second
policy pays zero, as the loss did not exceed the
first policy’s limit with the first policy paying
the entire $300,000 loss.
Appraisal (p. 35)
Liberalization—states that
when the insurer adopts a
revision that would broaden
coverage in other similar policies,
then the insured receives the
benefit of such broadened
coverage without additional
premium
When there is a dispute over the payment of
a claim, this condition provides for the
insured and insurer each to select an
appraiser and those
two then select a third
(or a court can appoint a third) and the
agreement of two of the three will be
binding.
Abandonment (p. 35)
cannot
Insured
d
damage
”
p
m
u
d
“
on the
property
nd
insurer a
its full
demand
value.
Severability (p. 36)
BASIS FOR INSURER
AVOIDANCE PERFORMANCE
Section 2.9 (p. 36)
Warranty—a policy
The insurance
applies separately
to each insured as
if other insureds
do not exist.
condition that is either
based on information in
the insured’s application or
inserted by the insurer
Misrepresentation—an
untrue statement in the
application made by the
insured
Concealment—when the
insured fails to reveal facts
to the insurer
UNIT THREE:
Personal Auto
FINANCIAL RESPONSIBILITY
Section 3.1 (p. 40)
All drivers in Florida must
be financially responsible
when operating a motor
vehicle. This includes
resident and non-resident
drivers.
WHAT triggers the Financial
Responsibility law?
(p. 40)
Accident involving
bodily injury
Accident involving
property damage
that results in an
inoperable vehicle
Accident involving
traffic violations such
as DUI and committing
a felony
WHAT limits satisfy the
Financial Responsibility Law?
WHAT are the penalties for not
providing financial responsibility?
(p. 41)
10/20/10 liability limits are required.
(p. 41)
If 10/20/10 limits are not carried, the owner
and operator must (to avoid penalties):
Drivers license and
registration of all
vehicles suspended
Owner or operator
responsible for up
to 10/20/10
File SR-22 that
certifies coverage is
in effect (filed for
three years)
1) Pay legally valid claims up to
10/20/10
2) Provide certification of financial
responsibility
DUI offenders: $100/$300/$50 or
$350,000 limits are required of anyone
found guilty of DUI. If after three (3)
years without being guilty of another DUI
or felony traffic offense, the person is
allowed to go back to standard coverage
limits.
WHO administers the
Financial Responsibility Law?
(p. 41)
A “Named Non-owner
Policy” is required if
the operator of a
vehicle does not own
a vehicle and is
required to carry an
SR-22. This coverage
is only when they are
operating a vehicle
owned by others.
The Department of Highway
Safety and Motor Vehicle
NO-FAULT
Section 3.2 (p. 42)
Personal Injury Protection (PIP)
ho is
t matter w
It does no
the
f you carry
at fault. I
um
ired minim
u
q
e
r
te
a
st
t
you canno
,
)
0
/1
0
/2
0
(1
e
cause of th
be sued be
in
nless certa
accident u
or verbal
monetary
are met.
thresholds
Personal Injury Protection (PIP), the
coverage under the No-Fault Law, is
mandatory for all owners of a registered
motor vehicle.
PIP only applies to Bodily Injury Claims.
Motor Vehicles—includes all self-propelled
vehicles with four or more wheels that are of a
type both designed and required to be licensed for
use on Florida highways, and trailers and semitrailers designed for use with such vehicles
Exceptions: 1) Taxicabs 2) Mobile homes 3) Government-­‐owned vehicles used to transport more than 5 passengers 4) School busses WHO or WHAT constitutes an
“owner” under the PIP law?
(p. 42)
Legal title is held
Option to purchase lease
Enforcement of this
requirement: Evidence of
insurance must be provided
at the time of registration
annually
WHAT is the responsibility of
nonresident?
(p. 43)
Nonresidents are not required to register their
vehicle in Florida, but are still subject to the
law if the vehicle has been physically present
in Florida for more than 90 of the preceding
365 days.
WHAT are the PIP benefits?
(p. 43)
Agreement to lease
six months or more
Debtor in possession
WHAT are the penalties for not
complying with the No-Fault law?
(p. 43)
Denied
immunities
from legal
liability
Personally liable
for payment of
PIP benefits
Driver’s license and
registration are
subject to suspension
The TOTAL benefit of PIP is $10,000 ($2,500 limit
if individual is not diagnosed with emergency
conditions)
Death benefit
of $5,000 in
addition to
$10,000
Replacement
Services, 100%
Income from
work, 60%
Medical, 80%
d PIP
An Extende
t can
endorsemen
d for
be purchase
med
only the na
d
insured an
bers
family mem
WHAT does the Extended
PIP endorsement cover?
WHAT does the Additional
PIP endorsement cover?
(p. 43)
(p. 44)
Additional PIP increases the PIP limit by
the following additional amounts:
MEDICAL
WORK LOSS
(raises medical
coverage from 80%
to 100%)
(raises work loss
coverage from 60%
to 80%)
$10,000
$20,000
$25,000
$40,000
$90,000
These increases do not
affect the $5,000
death
benefit.
Primary vs. Excess
When is PIP primary and when is PIP
excess?
(p. 44)
PIP is primary against all
other medical and
disability coverage except
Worker’s Compensation
PIP is excess over
Worker’s Compensation
WHO is covered?
(p. 44-45)
Named Insured
In Florida: The named
insured is covered while
occupying any defined motor
vehicle or if struck by a
defined motor vehicle as a
pedestrian
b) Outside Florida: The named
insured is covered while
occupying his/her own
insured motor vehicle or a
motor vehicle owned by a
resident relative (must be
insured for PIP)
a)
Relative who resides with
Named Insured
a) In Florida: Same as
insured
b) Outside Florida: Only
while occupying the
named insured’s PIPcovered motor vehicle
Other Named Insured or
Resident Relative
If not an owner or entitled to
benefits from another owner’s
insurer, then covered if:
a)
Occupying named
insured’s motor vehicle in
Florida
b) Struck by insured’s motor
vehicle while a pedestrian
if a Florida resident
WHAT are the PIP exclusions?
(p. 45)
Vehicles owned and
not covered by
insured’s policy
Operating insured’s
vehicle without
consent
Self-injury
intentionally inflicted
Injured while
committing a felony
Tort Exemption
(Under the Florida No-Fault Law)
(p. 45)
Tort exemption is tied to the vehicle
not to the person
Tort exemption is up to the PIP limits
only
The threshold
(FS627.737) is:
1) Loss of major bodily
function
2) Permanent injury
within a reasonable
degree of medical
probability
3) Significant scarring
or disfigurement
4) Death
Tort exemption is based upon PIP
paid or payable
Personal Auto Policy (PAP)
Section 3.3 (p.46)
ave
Unless you h
ove,
one of the ab
e
you cannot su
pain,
som eone for
suffering, or
ish. mental angu
WHO is covered?
(p. 46)
Individuals
Related
Persons
Unrelated
persons who
reside together
WHAT types of vehicles
are eligible?
(p. 46)
The following are not eligible to
be insured under the PAP:
1) Corporations
2) Partnerships
Private passenger automobiles
and pickup truck or van that has
a Gross Vehicle Weight (GVW)
of less than 10,000 pounds
Ownership
Intended for private family exposure, issued
only to an individual or related persons, or
Vehicles cannot be used to
deliver or transport good or
materials, except for those that
are incidental to the insured’s
business or furniture or
equipment installations,
maintenance, or repair, or for
farming or ranching
unrelated persons who reside together
If a non-owner of an auto, then they must
obtain a Named Non-Owner Policy
WHAT are the sections of
Personal Auto Policy?
(p. 47)
Declarations
Agreement
And
Definitions
Part A:
Liability
Coverage
Part B:
Medical
Payments
Part C:
Uninsured
Motorists
Part D:
Damage to
Your Auto
Part E: Duties
after an Accident
or Loss
Part F:
General
Provision
s
PIP is
added by
endorsemen
t
PAP DECLARATIONS
Section 3.4 (p. 47)
Loss Payee—one who has an interest in a
vehicle, such as a bank or finance company
PAP Declarations
identify and state:
1) Named Insured
2) Mailing address
3) Policy period
4) Coverage that
applies
5) Limits
6) Premiums
7) Loss payees
ments
Claims pay
made
are jointly
red
to the insu
yee
and loss pa
PAP DEFINITIONS
Section 3.5 (p. 47)
Named Insured—referred to as “you” and
Owned—defines as any auto leased for six
“your” and includes resident spouse
months or more
Bodily Injury—bodily harm, sickness, or
Property Damage—physical injury to or
disease resulting in death
loss of use of tangible property
Family Member—defined to include
Business—trade, profession, or occupation
relatives, wards, and foster children in the
named insured’s house
Occupying—means in, upon getting in, on,
out, or off
Your Covered Auto—defined as follows:
1) Any vehicle in the Declarations
2) Newly acquired autos (14 days to
declare if additional vehicle)
3) Any trailer you own
4) Any auto or trailer you do not own
while used as a temporary
substitute
Newly Acquired Auto—defined to include
any of the following types of vehicles you
become the owner of during the policy
period:
1) A private passenger auto
2) A pickup or van, for which no other
insurance policy provides coverage, that
a. Has a GVW of 10,000 pounds
b. Is not used for delivery or
transportation of goods and materials
unless it is:
i. Incidental to your “business” of
installing, maintaining, or repairing
furnishings, or equipment
ii. Farming or Ranching
Trailer—a vehicle designed to be pilled by
private passenger, pickup, or van, or a farm
wagon or farm implement while towed by
any such vehicle
Only Part A, Part B, and UM will
follow the insured in temporary
substitute while the vehicle is out if
its normal use because of:
1) Breakdown
2) Repair
3) Servicing
4) Loss
5) Destruction
The coverage for Newly Acquired Auto:
For Liability, Medical Payments, Uninsured Motorists, or
any other coverage, except for coverage for damage to
your auto (Part D), the newly
acquired auto automatically
receives coverage that is equal to the broadest
coverage that the insured has for any vehicle
on the Declaration page.
If the newly acquired auto is an additional auto, the vehicle has coverage for 14 days. After 14 days, the
insured must request coverage.
If the newly acquired auto is a replacement vehicle, then the vehicle is covered until the policy expires,
even if the insured did not request coverage.
For Part D, Coverage for Damage to Your Auto, a newly acquired vehicle is covered:
If the insured has Collision coverage or Other Than Collision coverage on at least one vehicle, then
1) 14 days of automatic coverage applies
2) Coverage is equal to the broadest coverage on any vehicle on the policy
3) After 14 days, the insured needs to request the vehicle be added to the policy
If the insured dose not carry Collision coverage on at least one of the vehicles on the insured’s policy then:
1) The insured receives physical damage on a newly acquired auto for 4 days with a $500 deductible
2) After 4 days, the insured must request that the vehicle be added to the policy for coverage to continue
PART A: LIABILITY
Section 3.6 (p. 49)
Coverage
WHAT are the
Supplementary Payments?
(p. 49)
Part A pays on behalf of the
insured for Bodily Injury (BI)
and Property Damages (PD).
As a part of BI and PD, Part A
Liability provides/pays for a
legal defense against claims
brought by third parties (the
party suing the insured).
Loss of
earnings of
$200 per day
Interest
on
judgments
Appeal
Bonds
Bail Bonds
up to $250
Legal
Expenses
WHO is insured?
(p. 50)
Costs associated with defense
are called Supplementary
Payments; these payments are
in addition to the policy limits.
Named Insured and
family members for the
ownership, maintenance,
or se of any auto or trailer
Any person using
your covered auto
with permission
(permissive user)
Anyone legally
responsible for
your covered
auto (vicarious
liability)
Exclusions that apply to Coverage A—Liability
Insured not covered for: 1) Intentional injury 2) Damaged property that is owned or transported by insured 3) Damage to property rented to, used by, or in the care of the insured, except damage to residence or private garage 4) Injury to employee in the course of employment; does not apply to domestic workers not covered by WC 5) Using vehicle as public livery, except car pools 6) Selling, repairing, servicing, storing, or parking vehicles, except named insured, family member, or a partner, agent, or employee of the named insured or a family member 7) Business use, except for farming or ranching, or use of non-­‐owned pickup or van 8) Use of vehicle without permission (i.e. theft or conversion) 9) Nuclear Energy liability policy in effect WHAT vehicles are not
covered?
(p. 51)
Vehicles with fewer
than four wheels or
designed for off
road use
Vehicles regularly
furnished to an
insured and not a
“your covered auto”
Vehicles owned by or
furnished or available for
the regular use of a family
member, other than “your
covered auto”; however,
this does not apply to the
named or residing spouse
while maintaining or
occupying such a vehicle
Vehicles garaged or
located in a facility
designed for racing or
speed contests
WHICH types of limits apply
to Coverage A—Liability
(p. 51)
PART B: MEDICAL PAYMENTS
Section 3.7 (p. 52)
Single Limits: Only one limit
applies per person and per
occurrence
The minimum single limit is
$30,000
Split Limits: Limits are split into three
WHAT is covered in
Part B—Medical
Payments?
(p. 52)
The minimum split limit is 10/20/10
The first ten (10) represents: $10,000
per person for bodily injury
The twenty (20) represents: $20,000 per
accident for all bodily injuries
The last ten (10) represents: $10,000
per accident for property damage
Necessary medical and
funeral expenses for up
to three (3) years from
the date of the accident
Part B pays without
regard to fault
Liability Limits apply as primary
coverage for vehicles owned by
the insured
Liability limits are excess for
vehicles not owned by the insured
Part B is a firstparty coverage—
applies to the insured
and occupants of the
insured vehicle
Exclusions that apply to Coverage B—Medical Payments
WHO is insured under
Part B?
1)
2)
3)
4)
(p. 52)
The named insured and family
members while occupying any
car or as a pedestrian while
struck by any motor vehicle
designed for road use or by any
type of trailer
Others are insured while
occupying “your covered auto”
How Losses Ar e Paid
Part B is primary when occupying an owned auto.
Part B is excess when occupying a non-owned auto.
Fewer than four wheels Public/Livery Worker’s Compensation is payable Auto which is furnished or available for regular use 5) Used without permission 6) Business use of non-­‐private passenger auto 7) Racing facility Any amount payable under Part
B is reduced by any amounts
payable under Part A—Liability,
Part C—Uninsured Motorist
Bodily Injury, or PIP
Medical Payments Coordination with Personal Injury Protection
(PIP) Coverage
Medical Payments will pay some or all of the 20% medical not
paid by PIP
Medical Payments will not pay for any of the PIP deductible
PART C: UNINSURED MOTORIST
Section 3.8 (p. 53)
WHAT is covered in Part
C—Uninsured Motorist?
WHO is insured?
(p. 54)
(p. 53)
Part C protects the insured for Bodily
Injury caused by an uninsured or
underinsured motor vehicle. The
Florida Statute that governs the UM
law is FS 627.727
Named Insured and
Family Members
a) In any auto
b) As a pedestrian
Others are insured
while occupying
“your covered auto”
WHAT constitutes an
“uninsured”
motorist/vehicle?
(p. 54)
Responsible party’s
Bodily Injury limits are
lower than amount of
injury
Responsible party has
no insurance
Limits
(p. 54)
Single or
Split Limits
are available
Responsible party’s
insurance company is
“insolvent”
Hit and Run vehicle
Stacked vs. Non-stacked
(p. 54)
The UM law (FS 627.727)
requires that every policy that
provides Part A Liability
coverage must include
“stacked” UM at the same
limits as apply for Liability
coverage, unless the insures,
in writing:
1) Rejects UM coverage
2) Elects UM coverage at
limits lower than those
for Liability
3) Elects non-stacked UM
coverage
tion of
Determina
r UMBI
damages fo
ieved
can be ach
through:
nt
1) Agreeme
on
2) Arbitrati
3) Suit
Stacked UMBI coverage adds together
two or more vehicle’s UMBI coverage to
determine the limit of coverage available
to an injured person in any one accident
Non-stacked equals the limit shown on the
declarations page, but differs from stacked in the
following ways:
1) Coverage available to an injured person while
occupying a motor vehicle is only the limit
applicable to that motor vehicle
2) When the insured is occupying a non-owned
vehicle, any UM on that vehicle is primary. The
maximum UM paid under the insured’s policy is
the highest limit on any vehicle for which they
are the named insured or family member
3) UMBI does not apply to the insured while
occupying any vehicle owned by insureds for
which UM was not purchased
4) A person who is injured in an accident while
not occupying a motor vehicle may select limits
of UMBI applicable to any vehicle afforded
UMBI for which they are a named insured or
family member
5) Non-stacked coverage must be offered at
reduced rates
PART D: DAMAGE TO YOUR AUTO
Section 3.9 (p. 55)
The UM law (FS 627.727) requires that
insurers annually send a notification to all
insureds of their options under the UM law
WHAT vehicles are
covered?
(p. 55)
Non-owned auto—a private passenger auto,
Your covered auto
pickup, van, or trailer that is not owned by
or furnished for regular use while being
operates or in the care of the named insured
or family member
Non-owned auto,
including their equipment
WHAT is covered in Part D—Coverage
for Damage to Your Auto?
(p. 55)
Collision: The upset or impact
with another vehicle or object
Other Than Collision: All direct and accidental
loss not covered by Collision and not excluded in
the policy, such as:
1) Missiles 2) Falling Objects 3) Fire 4) Theft
5) Larceny 6) Explosion
7) Flood 8) Hail
9) Water 10) Earthquake
11) Windstorm
12) Vandalism
13) Breakage of glass
14) Animal Impact
Part D includes Transportation Expenses
to Your Covered Auto
or Loss of Use to a
Non-Owned Auto
Transportation Expenses
1)
2)
3)
4)
$20 per day/$600 maximum
24 or 48 hour waiting period if a Theft Loss
No Deductible applies
Benefit begins 24 hours after loss and ends when
vehicle is returned or company pays for loss
Exclusions that apply to Coverage D—Damage to You Auto
(p. 56)
1)
2)
3)
4)
5)
6)
Mechanical Breakdown Tires, road damage, racing, and transportation for hire Wear and tear, war and nuclear Tapes, records, ect. Freezing, fancy fixtures, fuzz buster Sound reproducing equipment: permanently installed ($1,000 limit for non-­‐factory installed items) 7) Seizure by the government 8) Camper body/trailer not on the declaration page 9) Custom furnishings on pickup/van and awnings and cabanas 10) Non-­‐owned auto in the auto business How losses are paid
1) Lesser of ACV or cost to repair or replace 2) $1,500 for any non-­‐owned trailer PART E & F: OTHER PROVISIONS
Section 3.10 (p. 57)
WHAT are the insured’s duties after loss?
(p. 57)
Prompt notice
Forwarding legal papers
Cooperation
Submit to physical
exam
Proof of loss
General Provisions
Policy territory includes:
1) U.S.
2) Canada
3) Puerto Rico
4) U.S. territories and possessions
Uninsured Motorist
losses require the filing
of a police report
ENDORSEMENTS
Section 3.11 (p. 57)
Extended Non-owned Coverage—
for a non-owned auto which is
furnished or available for the regular
use of the insured (Liability and
optional Medical can be added by
endorsement)
Towing and Labor—covers for
towing and costs of labor performed
at the place if disablement for up to
$25, $50, $75, and $100 per
disablement
Coverage for Excluded
Equipment—covers tapes, records,
and discs up to $200. Other
customized equipment for pickup
and vans for specified amounts
Joint Ownership Coverage—
Named Non-owner Coverage—
provides Liability, Medical Payments,
and Uninsured Motorist Bodily Injury
for those who do not own an auto
Miscellaneous—covers motorhomes,
motorcycles, golf carts, and allterrain vehicles
required when the PAP covers two
or more relatives (whether or not
residing together) or individuals
residing together
Additional PIP—only available
Increased Limits of
Transportation Express Coverage—
increases the $20/$600 to any limit
selected by the insured
Extended PIP—increase medical to
100% and Work Loss to 80%. The
maximum amount of coverage
remains $10,000
to the named insured and family
members only, and only if the
Extended PIP is purchased. PIP
coverage can be increased by either
$10,000, $25,000, $40,000, or
$90,00 of additional coverage.
RATING
Section 3.12 (p. 58)
WHAT are the discounts
available?
WHAT is the standard
rating plan used by
insurance companies
(p. 58)
(p. 58)
Territory
Age
Sex
Marital
Status
Use of
Vehicle
Driving
record
Multicars
Good
Grades
Defense
Driving
Course
Anti-lock
brakes
Antitheft
Safe
Driver
MISCELLANEOUS FLORIDA
AUTOMOBILE LAWS
Section 3.13 (p. 59)
Cancellation/Nonrenewal
(There is always a cancel/nonrenewal
question on the exam)
(p. 59)
First 60 days when PAP provides mandatory PIP and PD:
1) Insurance company: Any reason except discrimination
2) Insurer cannot cancel for non-payment of premium unless
NFS or insured failed to pay any “Additional Premium” due
3) Insured has limited reasons for cancelling, such as total
destruction, purchasing replacement coverage with another
insurer, or selling the vehicle
After 60 days the insurer may cancel only for non-payment of
premium, material misrepresentation or fraud, or
suspension/revocation of the driver’s license or registration of an
operator during the policy term or within 180 days
When cancellation is permitted or nonrenewal, there is a 45-day
notice except 10 days for non-payment
If insured cancels policy, the insurer must return the unearned premium within 30 days. Unfair Trade Practices and
Information Disclosure to Claimants
(p. 60)
Florida law requires the insurer to disclose full policy information to a claimant within 30 days upon a written request Glass Breakage—Deductibles
(p.60)
No deductible for windshield glass breakage
per F.S. 627.7288
MECHANICAL BREAKDOWN
INSURANCE
Section 3.14 (p.60)
WHAT is covered?
(p. 60)
The coverage is for failure by a part,
notably: engine, transmission, drive axle,
steering assembly, air conditioning, and
front suspension.
Coverage is similar to extended warranty
coverage. Some policies cover rentals for
up to $15 a day with a maximum of $75
Exclusions under
Mechanical Breakdown Insurance
(p. 61)
1)
2)
3)
4)
5)
6)
7)
8)
9)
Lack of maintenance Fire, theft, or collision Odometer tampering Towing Tune-­‐ups Seals or gaskets Racing Towing Trailer Public Livery Policy Term
(p. 61)
New Car: 36 months,
36,000 miles
Used Car: 12 months,
12,000 miles UNIT FOUR:
Homeowners and Dwelling
HOMEOWNERS INSURANCE
Section 4.1 (p. 63)
Not eligible:
WHAT are the eligibility
requirements?
1)
2)
3)
4)
Corporation
Partnership
Estate
Individual who does not occupy the
premises (exception: if a condo unit
owner who rents the unit to others
is eligible)
5) Farms, except incidental farming is
eligible
(p. 63)
Owner-occupants of
1-4 family dwellings
Renters
residing in
any building
Dwelling
under
construction
Condo and
coop apartment
occupants
Allows up to two
roomers or boards per
family, owner must
reside in unit
WHO is covered?
(p. 63)
Person
Named
Residing
Spouse
Residing
Relatives of
either
Trust (with
endorsement)
Life estate
arrangement
Person under
the age of 21 in
care of named
insured
For Section II Liability Only: A
named insured can be persons
animals or
legally liable for
watercraft owned by the insured
A student away at
school, if related to the
name insured, under the
age of 24, and a full
time student (Full time
is defined by the
school)
A Homeowners Policy consists of:
1)
Declarations
2) One of the forms (2, 3, 4, 5, 6, 8)
3) Endorsements
WHAT Homeowners forms are
available?
(p. 64)
H0-2 Broad Form
(1-4 family)
H0-3 Special Form
(1-4 family)
For owner-occupants
of 1-4 family
dwellings only forms
H0-2, 3, 5, or 8
apply
H0-4
Contents
(Renters)
H0-5
Comprehensive
(1-4 family)
H0-6 Unit Owners
Form
(Condos/Cooperatives)
If the insured is a
condominium unitowner or cooperative
apartment dweller,
than an H0-6 would
apply even if the
insured rents the unit
If the insured
rents, then the
H0-4 applies
SECTION I—PROPERTY COVERAGE
Section 4.2 (p. 64)
WHAT are the types of property
coverage?
(p. 64)
Coverage A:
Dwelling
Coverage B:
Other Structure
Coverage C:
Personal Property
H0-8
Modified
Form (1-4
family)
Coverage D:
Loss of Use
COVERAGE A: DWELLING
COVERAGE B: OTHER STRUCTURES
Coverage A:
1) Covers the dwelling and structures that are
attached and construction materials onsite.
Coverage B:
1) Covers private structures on the residence
premises that are not attached to the main
dwelling
2) Does not include structures used for
certain business purposes or rented to
anyone who is not a tenant of the main
dwelling, unless a rental is for private
garage purposes
3) Automatically 10% of Coverage A
4) Is NOT in the H0-4 or H0-6
H0-6 Coverage A:
1) Covers certain interior building items
2) A basic limit of $5,000 applies, or higher
limits if approved
3) The unit-owner will usually need an
increased amount over the H0-6 basic
Coverage A
H0-4 Coverage A: Not included
COVERAGE C: PERSONAL PROPERTY
COVERAGE D: LOSS OF USE
(Automatically 50% of Coverage A: Dwelling)
Coverage C:
Covers personal property owned or used by the
insured anywhere in the world. Optionally, the
insured can give the coverage to property
owned by others while the property is located at
any residence occupied by insured
Coverage D:
Covers increases over normal living expenses if
damage from a covered peril makes the
residence unfit for occupancy
Limits
(p. 65)
Exclusions for Coverage C
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
Specifically insured articles
Animals, Birds, or Fish
Motorized vehicles, except vehicles for the handicapped or maintenance
Portable electronic equipment that reproduces, receives, or transmits
audio, visual, or data signals, and is designed to be operated by the power
from the electronic system of a motorized vehicle
Aircraft and parts, except model or hobby aircraft
Hovercraft and parts
Property of roomers or tenants, unless related to the insured
Property in an apartment that is regularly rented or available for rentals to
others
Property that is rented or held for rental to others away from the
residence premises
Business in data books, paper records, or electronic software media,
except blanks
Water or Steam
•
•
•
•
30% of Coverage A
under H0-2, H0-3,
or H0-5
30% of Coverage C
under H0-4
50% of Coverage
under H0-6
10% of Coverage A
under H0-8
Special Property Coverage Limits
Special Coverage Limits
Coverage Amount
Property Off Premises
Money or related property
Securities, similar property
Watercraft, trailers, and accessories
Jewelry, watches, furs, stones by theft
Firearms and equipment by theft
Silverware, goldware, pewter by theft
10% Coverage C*
$200
$1,500
$1,500
$1,500
$2,500
$2,500
Business property on the residence premises
$2,500
Business property away from the residence premises
$1,500
Portable electronic equipment
$1,500
Tapes, wires, records, disks, or other media
$250
*Property located at another residence is 10% Coverage C or $1,000, whichever is
greater. The 10% is also applied to personal property located in a self-storage
unit. This 10% does not apply if personal property is being moved from residence
if:
1) It is being repaired
2) The residence is not for to live or store property in
The property is usually located at insured’s residence other than insured’s premises
Additional Coverages
(p. 66)
Additional Coverages
Debris removal after a loss
Trees, shrubs, and plants
Fire Department service charges
Property removal to protect from further loss
Credit card, fund transfer forgery, counterfeit
Loss assement ($2,000 for H0-6 Condo)
Landlord furnishings for insured who rents to other
Breakage of building glass if not vacant
Building ordinance
Additions, alterations, & additions by tenant H0-4 only
Coverage Amount
5% of Coverage A
5% of Coverage A
$500
30 days
$500
$1,500
$2,500
60 days
10% of Coverage A
10% of Coverage C
Perils Insured Against
1) Catastrophic Ground Cover Collapse 2) Fire 3) Lightning 4) Windstorm 5) Hail 6) Explosion 7) Weight of ice, snow, and/or sleet 8) Freezing of plumbing, heating, or A/C 9) Accidental discharge or overflow or appliances 10) Sudden and accidental tearing apart of steam, heating, or A/C system 11) Sudden and accidental damage from electrical current 12) Aircraft 13) Vehicles 14) Riot or civil commotion 15) Smoke 16) Volcanic eruptions 17) Vandalism or malicious mischief 18) Theft 19) Falling objects The H0-2, H0-4, and H0-6 all have
named perils (policy names the perils
insured against)
H0-3:
Coverage A and B: Open Perils (All
Risks)
Coverage C: Named perils 1-19 as listed
H0-5: All Risks for Coverage A, B, and C
H0-8: Named perils, 1-6 and 12-17 as
listed
All Risk or Open Peril—is protection for the
insured from loss arising from any peril other than
those perils specifically excluded in the policy
Conditions
Loss Settlement for Section I is mainly
Actual Cash Value, EXCEPT for,
replacement cost on Coverage A and B
if limit at the time of loss equals to
80% or more of the replacement cost.
If the 80% threshold is not met, then
the coinsurance formula applies
The method that identifies the covered causes of loss has
traditionally been called “all risks”. Many insurance
professionals still use the term, but it is no longer used in
when they hear the word “all”,
policies because the insured,
believes everything is covered. Because of this, some
insurance professionals have begun using the term “open
perils” instead of “all risks”
Some exceptions to replacement cost adjustments:
1)
ACV applies to awnings, carpeting,
appliances, outdoor antennas, and outdoor
equipment
2) To receive replacement cost, the insured must
notify the company of intent within 180 days
3) Can take ACV and later claim the difference
to meet 180 days
SECTION II: LIABILITY COVERAGE
Section 4.3 (p. 68)
WHAT are the types of liability
coverage?
(p. 68)
Personal (non-business)
activities are covered
anywhere
Section II Liability
applies to liability
arising from insured
locations
Coverage E: Liability
Coverage F: Medical
Payments to others
Coverage E: LIABILITY
Coverage F: MEDICAL PAYMENTS TO
OTHERS
Coverage E: protects insured from legal
liability for bodily injury (BI) or property
damage (PD) to others
Coverage F: pays for medical and other related
expenses for members of the public injured by
the personal activities of the insured without
regard to insured’s legal liability
WHAT are the insured locations?
(p. 68)
Premises
described in the
declarations
Newly acquired
residences
during policy
period
Locations
where insured
is temporarily
residing or
rented for nonbusiness use
Vacant land can
be rented by
insured that does
not include
farmland
Land where a
new family
dwelling is being
constructed as the
new residence
Cemetery plots
and burial vaults
Exclusions
(p. 69)
While most business pursuits are excluded,
the policy does not exclude the following:
While most motorized land vehicles are excluded,
the policy does not exclude the following:
1) Activities to non-business pursuits
2) Occasional or partial rental to others
3) Using part of residence as office, studio,
school, or private garage,
4) Activities receiving less than $2,000 a
year
5) Childcare for no compensation
6) Insured under 21 engaged in part time,
self-employed business with no
employees
1) Vehicle in dead storage at insured location
2) Used solely to service residence premises
3) Owned golf cars on insured location or used to
play golf in residential community where carts
are authorized for road use
4) Owned off road recreational vehicles on insured
location (can be elsewhere if not owned by
insured)
5) Vehicles designed for handicapped anywhere if
at the time of loss being used to assist
handicapped
Other exclusions of principal interest: 1) Aircraft 2) Hovercraft 3) Property damaged that is owned by insured or rented to or in the care of the insured (except others’ property damaged by smoke, fire, or explosion) 4) Injury to any insured 5) Workers’ Compensation The exclusion of coverage for watercraft
eliminates coverage for:
1) Inboard-outboard owned by insured or more
than 50 HP rented to insured
2) Watercraft powered by water jet pump owned
or rented to insured
3) Sailboats owned or rented to insured at
beginning of policy
4) Boats powered by outboard motors of over 25
horsepower owned by insured at the beginning
of the policy
Additional Coverages
(p. 69)
WHAT are the additional coverages?
(p. 69)
Claim Expenses
First Aid
Expenses
Damage to Property of
Others: Up to $1,000
max, if not covered
under Section I
Loss Assessment: Up to
$1,000, and applies to
assessments against the
insured by an association
of property owners
Limits of Liability
(p. 70)
Claim Expenses Include:
1) Cost of defense
2) Premium on appeal
bonds
3) Interest on judgments
4) Prejudgment interest
5) Reimbursement to the
insured for expenses for
defense
6) $250 per day for loss
earnings
Basic limits of $100,000 apply per
occurrence of Coverage E and $1,000 per
person for Coverage F. (Limits can be
increased)
Florida Law imposes $10,000 cap on
statutorily imposed vicarious parental liability
GENERAL CONDITIONS
Section 4.4 (p. 70)
WHAT are the conditions for
deductibles?
(p. 70)
$500 is the
standard
deductible for
all perils
except
hurricanes
When
multiple
deductibles
apply, only
the highest
will apply
$500 is the
minimum
hurricane
deductible
Options to
purchase
deductibles are
2%, 5%, or 10%
of the building
limit if $500,00
or less
Hurricane
deductible
amount applies
on an annual
basis
Windstorm
coverage can be
rejected, not
hurricane-only,
with a handwritten
statement by the
insured
The
deductible
must be stated
on the
Declarations
page
Cancellation Requirements: 1) Required 100 days written notice for cancellation/non-­‐renewal 2) During the first 90 days, 20-­‐days written notice for cancellation 3) A 10-­‐day notice for nonpayment of premium 4) A 45-­‐days notice for renewal 5) Cancellation/non-­‐renewal between June 1 and November, 100-­‐days notice written notice or notice by June 1, whichever is earlier 6) If the insured has been with the company for five years or more, then 120-­‐days notice of cancellation/non-­‐renewal ENDORSEMENTS
Section 4.5 (p. 71)
Endorsement
Coverage Amount
Money To
Securities To
Jewelry, Furs to
Silverware, etc to
Firearms to
Business Property
Credit Card, Forgery, counterfeit…
Property away from premises
Loss Assessment
Building Ordinance Law
$2,000
$2,000
$5,000
$10,000
$6,500
$10,000
$10,000
Varies
Varies
50%
WHAT are the options for Section I to
broaden coverage?
(p. 71)
Personal
property from
ACY to RC
Theft coverage for
residence occasionally
rented to others
Certain scheduled
property to open perils
with no deductible
(jewelry, furs, cameras,
silverware, golf
equipment, fine arts, ect.)
H0-4 to provide
for open perils for
personal property
Physical damage for
certain owned golf carts,
will pay all loss payable
that exceeds $500, loss
settlement is ACV
Structures not covered
under Coverage B may
be included
H0-8 to include
off-premise theft
up to $1,000
Coverage for relative of
an “insured” in an
assisted living facility
A residence in
name of trust is
eligible for
coverage
Condo Unit Owner
open perils for both
building and personal
property
A student away at school
who does not fit the
description of “an
insured” may be covered
by endorsement
WHAT are the options for Section II to
broaden coverage?
(p. 72)
Coverage for
excluded watercraft
Home-based business
exposures: Permitted
Incidental Occupancies
and Home Business
Insurance Coverage
Structures and 1-4
family dwellings
rented to others
Incidental farming
at residence and
other locations
Personal Injury Liability
for false arrest, detention,
imprisonment, libel,
slander, wrongful
eviction, ect.
RATING
Section 4.6 (p. 72)
Rating is based on three elements: Construction of Dwelling Fire Protection
Available
Location in State DWELLING PROGRAM
Section 4.7 (p. 72)
Examples of Dwelling Program Usage:
1)
Three or four family dwellings
The Dwelling Program is personal
insurance for insuring buildings having not
more than four apartments or family units,
mobile homes not having more than one
apartment, and personal property used as
living quarters or rented to others.
2) Dwelling rented to others by insured
3) Dwellings owned by corporation or other
business entities
4) Owner-occupied dwellings, lower values than
minimum required for homeowners insurance
WHAT are the
coverage forms?
(p. 72)
DP-1 Basic
Form
DP-2 Broad
Form
DP-3
Special Form
WHAT are the available
coverages?
(p. 73)
A—Dwelling
B—Other
Structures
C—Personal
Property
WHAT are the limits?
(p. 73)
DP-2 may not be
less than $12,000
for Coverage A
DP-3 may not be
less than $15,000
for Coverage A
DP-2 and DP3
Coverage C limit is
$4,000 if Coverage
A is not included
D—Fair
Rental Value
E—Additional
Living Expenses
Standard deductible is $500 for ALL perils other than hurricanes. For hurricanes: • $500 minimum applies • Insurer must offer deductible options of 2, 5, and 10% of building • The amount of the deductible must be stated on the Declaration page • Deductible applies on an annual basis, not per occurrence basis COVERAGE A: DWELLING
Covers:
1) The described dwelling and includes
additions in contact with dwelling
2) Building equipment and outdoor used to
service and is located on premises
3) Building materials on or adjacent to
premises for se in alteration or repair to
dwelling
COVERAGE C: PERSONAL PROPERTY
Covers:
1) Household and personal property in the
dwelling or on the premises belonging to
the insured, family members, or guests
Excluded property includes:
1) Money
2) Tickets
3) Stamps
4) Valuable papers
5) Precious metals
6) Animals, birds, fish
7) Aircraft and parts
8) Motor vehicles (except equipment for
premises maintenance)
9) Boats (except rowboats and canoes)
10) Books of accounts
11) Electronic Data Processing Software
(except blank software or prerecorded
computer programs)
12) Water, Steam
13) Grave markers
14) Credit and fund transfer cards
COVERAGE B: OTHER STRUCTURES
Covers:
1) Detached structures on the dwelling
premises which are not used in whole or
in part for commercial, manufacturing or
farming purposes or rented to others
Exceptions:
1) Detached structure rented to a tenant of main
dwelling or rented for private garage
2) For storing of commercial or farming equipment, if
solely owned by insured as long as property does
not contain gaseous or liquid fuel other than
contained in a permanently installed fuel tank on
the vehicle/craft stored/parked in the structure
COVERAGE D: FAIR RENTAL VALUES
Reimburses the insured for the fair rental
value of covered property if the property
becomes uninhabitable from damage from a
covered peril. It only applies to the portion of
the premises rented to others or held for rental
COVERAGE E: ADDITIONAL LIVING
EXPENSES
Covers:
1) Additional living expenses to maintain
insured’s normal living standards when
property is uninhabitable by covered peril
for necessary period of restoration
Coverage E is not included in form DP-1
General Exclusions
(p. 74)
Basic Form—Other Coverages
(p. 74)
General Exclusions: 1) Enforcement of any law regulating use, construction, demolition, or repair of property 2) Earth movement 3) Water damage from flood, rising waters, backing up of sewer or drains, overflow from sump or subsurface water 4) Power interruption if damaged sours is at other premises 5) Neglect to protect property from damage 6) War 7) Nuclear hazards 8) Intentional loss 9) Governmental actions Perils Insured Against
(p. 75)
WHAT perils are insured
against?
(p. 75)
Fire
Lighting
Internal
explosion
DP-­‐1 Basic Form Other Coverage: 1) Up to 10% of Coverage A limit applied to Coverage B—Other Structures 2) Debris removal 3) Up to 10% of Coverage C limit for damage to improvements, alterations, and additions to property of others 4) Up to 10% of Coverage C limit to property anywhere in the world 5) Up to 20% of Coverage A limit for fair rental value of property, described in Coverage D, limited to one-­‐twelfth (1/12) of the 20% per month 6) Reasonable costs for necessary repairs to prevent further loss 7) Coverage up to five days at temporary locations when property is removed from a premises endangered by covered peril 8) Additional $500 for fire department service charge For DP-­‐1 only, the fire department service charge can be paid as additional amount above policy limits Catastrophic
Ground Cover
Collapse
WHAT are the Extended
Coverages?
(p. 75)
Windstorm
Hail
Explosion
Riot or Civil
Commotion
Aircraft
Vehicles
Smoke
Volcanic
Eruption
Extended coverages are not available without the basic four coverages, and may not be purchased for separate amount WHAT are the Extended
Coverage Limitations?
(p. 75)
Signs
Outside
antenna
equipment
Awnings
Damage to
building interior
Boats
Contents, unless
exterior damage
to roofs or walls
Conditions for Form DP-­‐1: 1) Loss Settlement: ACV 2) Other Insurance: Policy pays pro rata if other insurance applies 3) Cancellation/Nonrenewal i.
100-­‐day written notice for cancellation or nonrenewal ii.
first 90 days, 20-­‐days During written notice of cancellation iii.
10-­‐days notice for nonpayment iv.
45-­‐days notice of renewal premium v.
Between June 1 and November 30, 100-­‐days written notice by June 1, whichever is earlier vi.
If insurance has been with same company for five years or more, then 120-­‐days notice of cancellation/nonrenewal When EC and “FIRE” have been included under
DP-1, the additional peril of vandalism and
malicious mischief may be added.
Vandalism includes: 1) Damage to building glass
2) Crime loss (except damage by burglar)
3) Vacant building for 60 or more days
preceding loss
Broad Form
(p. 76)
WHAT does DP-2 Broad Form Cover?
Includes “FIRE”, EC, and VMM perils of DP-1 and add the
following:
(p. 76)
Damage by
burglars
Falling
objects
Weight of
ice, snow,
or sleet
Accidental
discharge
Overflow of
water or
steam from
within
plumbing
Steam or hot
water heating;
AC; and, hot
water system
tearing apart,
burning, cracking,
or bulging
Freezing of
plumbing,
heating, or
AC
Artificially
generated
electrical
current
Volcanic
eruption
Other Coverages
Includes coverages in DP-1 with variations and
broadened features:
1) 10% of Coverage A can be applied to other structures and 10% of Coverage C can be applied to tenants’ improvements 2) 20% of Coverage A applied to the combination of rental value and additional living expenses. No monthly limit and applies as an additional amount of insurance 3) 5% of Coverage A may be applied as an additional amount of insurance to trees, shrubs, or plants with a limit of $500 for any one item 4) Collapse of a building or part of a building 5) Breakage of glass. Does not apply if the building is vacant for more than 60 consecutive days 6) Building Ordinance or Law covered in DP-­‐2 and DP-­‐3. 10% of Coverage A if the building owner; 10% of Coverage B if not owner; 10% of improvements, alterations, and additions if tenant Loss Settlement:
1) Building-replacement cost
(excludes antennas,
carpeting, awnings,
outdoor equipment, etc.)
2) Full replacement cost if
insurance is not less than
80% of replacement cost. If
less than 80%, the insurer
will pay a portion of loss
3) Must notify the insurer of
intent to replace property
within 180 days, but can
take ACY until property is
replaced
Special Form
(p. 77)
Summary of Differences
(p. 77)
DP-3 is the same as DP-2, except building
WHAT are the differences among the
Dwelling Program coverage forms?
structures are covered on an “open perils”
(p. 77)
basis.
DP-3 covers interior damage to the dwelling
from windstorm when there is no exterior
Basic DP-1
covers limited
perils and ACY
loss settlements
building damage, and theft of property that is an
integral part of the dwelling.
Options to alter coverage:
1) “Automatic Increase Insurance” specifies annual percentage increase for
Coverage A and B
2) Windstorm and hail may be included for property not covered
3) “Building Ordinance Law” to cover loss of building ordinance enforcement
4) Condo Unit Owners covered for loss to building additions, alterations, and
assessments
5) Personal property associated with business conducted in dwelling
6) Theft, including attempted theft, vandalism, and malicious mischief that results
from theft or attempted theft
7) Personal liability
Broad DP-2 covers
additional named perils
and has broadened
“Other Coverages”,
which may provide
replacement cost on
buildings
Special DP-3
includes DP-2
features and
buildings for
“all-risk”
FLOOD
Section 4.8 (p. 78)
Definition of Flood: • A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or two or more properties (at least one of which is yours) from any of the following three: 1) Overflow of inland or tidal waters 2) Unusual rapid accumulation of runoff or surface waters from any source 3) Mudflow • Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above WHO are the major providers
of flood insurance?
(p. 78)
Write Your Own
programs: Private
insurers backed 100%
by the NFIP
National Flood
Insurance Program
(NFIP)
Eligibility Community
(p. 79)
Not every community is eligible for
the NFIP. Once the community applies
for admittance and is accepted, then
the community is in the Emergency
Program.
WHAT is an eligible building?
(p. 79)
Two or more
outside rigid walls
and secured roof
Affixed to
permanent site
located in an
eligible community
50% or more
above ground
Once a detailed study is undertaken,
resulting in a Flood Insurance Rate
Map (FIRM), higher limits of coverage
will be available if the community
passes ordinances. Once requirements
are met, then the community is in the
Regular Program.
WHAT are eligible contents?
(p. 80)
Located in fully
enclosed building
Secured to prevent
flotation out of the
building
Certain specific property in
basements and under
elevated floors is excluded
WHAT are the insurance forms
available from the NFIP
(p. 80)
Dwelling
Form
Preferred
Risk Policy
General
Property Form
Dwelling Form
1) 1-4 Family dwelling
2) up to 10% of the dwelling limit
for detached garages
3) Other separate structures which
service a dwelling (such as
garage apartments, utility
buildings, and storage sheds)
require a separate policy
Preferred Risk Policy
1) Zones B, C, and X only
2) All risks
3) Not available in the Emergency
Program
Residential
Condominium
Association
Policy Form
Residential Condominium
Building Association Policy Form
1) Applies to any condo
association with one or more
residential unit if:
i. At least 75% of the total
floor area is residential
ii. The building is located in a
Regular Program
Community
Valuation of Losses
(p. 80)
Replacement Cost:
Single family building for individuals, and is the
insured’s principal residence (insured lives there
80% of the time and dwelling insured for 80% of
replacement cost). RCBAP is subject to coinsurance.
All other losses are ACV. LIABILITY—PERSONAL
Section 4.9 (p. 81)
Similar to section II of the Homeowners policy, but can
be written separately. It provides coverage for liabilities
arising from private residence and personal activities. It
include Med Pay to Others
WHAT does Personal
Liability cover?
(p. 81)
Liabilities arising from private
residence and activities
WHO is Personal Liability
coverage available to?
WHO are the insureds under
Personal Liability coverage?
(p. 81)
(p. 81)
Named
insured
Owner-occupants and non-owner
occupants of a dwelling, condo unit,
mobile home, co-op, or apartment
WHAT are the Basic
Limits?
Residing
spouse
Residing
relatives of
either
Anyone under
the age of 21
in the care of
either
Persons who are
legally responsible
for animals or
watercraft owned
by insured
WHAT are the endorsements?
(p. 81)
(p. 81)
$100,000 for
Liability
$1,000 for
Medical
Payments
$1,000 to Damage
Property of Others
INLAND MARINE
INSURANCE UNIT
Certain
watercraft
Permitted incidental
business pursuits
PERSONAL INLAND MARINE POLICIES
Section 4.11 (p. 81)
Section 4.10 (p. 81)
Two Forms:
Extension of Ocean Marine
coverage for cargo traveling
Controlled-standard
over land instead of sea
Uncontrolled-nonstandard
Exclusions to Open Perils: 1) Water 2) Tear 3) Deteriorations 4) Inherent vice 5) Government action 6) Insects 7) Vermin WHAT are the Personal
Articles Floater Provisions?
(p. 82)
Worldwide
coverage
Open perils
WHAT is the coverage?
(p. 82)
ACV
Cost to repair
or replace or
limit specified
Agreed value
option
No deductible
Pairs or set: Insurer may
elect to repair or replace,
to restore to original
value, or pay the
difference between ACV
before and after the loss
Parts: Responsibility
is only for the value
of the part damaged
or lost
WHAT are the classes of
property?
(p. 82)
Jewelry
Furs
Cameras
Musical
Instruments
Automatic Coverage for newly acquired
property:
1) 30 days after acquisition
2) 25% of coverage limit up to $10,000
Fine Arts Automatic Coverage:
1) 90 days after acquisition
2) 25% of total limit
3) ACV
Silverware
Golfer’s
equipment
Fine arts
Stamps and
coin collections
Exclusions:
1) Fading, creasing, denting, scratching, tearing, or
thinning
2) Transfer of colors, inherent defect, dampness,
extremes of temperature, or depreciations
3) Damage from being handles or worked on
4) Disappearance of individual items
5) Property in custody of transportation companies
or mail
6) Property not part of collection
EXCESS LIABILITY/UMBRELLAS
Section 4.12 (p. 84)
When the policy limits are insufficient for an insured’s needs there
are two coverage forms used to provide additional amounts:
Excess Liability
Policies
Umbrella Policies
Excess Liability
Follow Form: Provides exact
same coverage, provisions, and
exclusions, to insureds as the
underlying policy
Umbrellas
Operates like a stand-alone
policy except it will provide
coverage not included in the
underlying policies
Stand-alone: Same coverage as
underlying, but each policy has
its own terms
When umbrella is primary, it is
subject to a deductible known as
the self-insured retention (SIR)
UNIT FIVE:
Commercial Auto
BUSINESS AUTO POLICY
Section 5.1 (p. 88)
WHAT types of autos owned are
covered under a BAP?
(p. 88)
Private Passenger Autos:
includes station wagons,
jeeps, pickups, panel trucks,
vans, and utility trailers
designed to be pulled
behind a private passenger
auto
Commercial Autos:
includes trucks (other
than listed under private
passenger auto), truck
tractors, semitrailers,
commercial trailers, and
service trailers
Public Autos: buses,
taxicabs, and private
passenger-type autos
rented to others
without a driver
Special Autos: self-propelled
with permanently attached
equipment such as snow
removal, road maintenance,
street cleaning, cherry picker,
and air compressors
WHAT are the coverage forms?
(p. 88)
Business Auto: all
business other than
garage or truckers
Garage: businesses
engaged in selling,
servicing, repairing,
parking, or storing
autos
Truckers: businesses
hired to transport goods
for someone else
BUSINESS AUTO COVERAGE FORM
Separate
ents:
En dorsem
1) PIP
2) U M
al
3) Medic
nts
e
m
y
Pa
Section 5.2 (p. 88)
WHAT are the policy formats?
(p. 88)
Section I:
Covered Autos
Section II:
Liability
Section III: Physical
Damage Coverage
Section IV:
Business Auto
Coverage
Section V:
Definitions
Section I: COVERED AUTOS
Covered Auto Symbols:
Symbol 1: Any auto for liability only
Symbol 2: Owned auto only, automatic coverage (no requirement to report replacement), may be applied to Liability, Medical
Payments, UM, and Physical Damage
Symbol 3: Owned private passenger autos only, automatic coverage, all coverages except PIP
Symbol 4: Owned autos other than private passenger autos only, all coverages except PIP, automatic coverage
Symbol 5: Owned autos subject to No-Fault/PIP only, automatic coverage
Symbol 6: Owned autos subject to compulsory UM law, not used in Florida
Symbol 7: Specifically described autos, any coverage, acquired auto during the policy period if:
1) The insured already insures on this policy all autos they own
2) The auto replaces a covered auto (for both 1 & 2, the insured must notify the insurer within 30 days of acquisition)
Symbol 8: Hired autos only, Liability and PD only, covers autos only the named insured hires, rents, leases, or borrows,
excludes auto of employees and members of their family
Symbol 9: Non-owned autos only, Liability only, covers autos the named insured does not own, lease, hire, rent, or borrow,
except from an employee or family member
Symbol 19: Mobile equipment subject to compulsory or financial responsibility or other motor vehicle insurance law, used
only to trigger coverage for over the road use of mobile equipment that falls under the definition of auto
Auto—is defined as a land motor vehicle, trailer
Mobile Equipment—is defined as off-road and
(load capacity of 2,000 pounds or less if designed
for use on public road), semi-trailers, and any
other land vehicle that is subject to a compulsory
of financial responsibility law
unlicensed vehicles (bulldozers, forklifts, vehicles
on crawler treads) used solely on the insured’s or
adjacent premises, and those that provide mobility
to permanently attached specialized equipment
Section II: Liability
(p. 91)
WHO are the insureds?
(p. 91)
Named insured for
any covered auto
Permissive
users
Those liable for
conduct of insured
WHO are not the insureds?
(p. 91)
The owner of an auto hired
or borrowed from an
employee or family member
Person working
in an auto-type
business
Person, other than an
employee or leasee, who
is moving property to or
from a covered auto
Exclusions for Section II: Liability
1)
2)
3)
4)
Assumed liability, except under insured contract Employee injuries Damage to property in the CCC of the insured Handling of the property before being moved to the place where it is accepted by the insured 5) Movement of property by mechanical device other than a hand truck 6) Pollution, except fluids, from the vehicle 7) Operation of certain mobile equipment 8) Expected or intended injury 9) Completed operations 10) Injuries from organized racing, stunting, or demolition contests 11)War Section III: Physical Damage
(p. 92)
WHAT are the types of coverage?
(p. 92)
Comprehensive:
basically same as
PAP “Other Than
Collision”
Specified Cause of Loss: fire,
lightning, explosion, theft, windstorm,
hail, earthquake, flood, mischief,
vandalism, sinking, burning, collision,
or derailment of a conveying transport
Collision: Collision
with another object or
overturn
Exclusions for Section III: Physical Damage
1)
2)
3)
4)
5)
6)
Private Passenger
autos include:
1) Transportation:
$20 per day;
$600 maximum
2)
Towing and
Labor: $25 limit
Wear and tear Freezing Mechanical or electrical breakdown Road damage to tires War and nuclear events Sound reproducing and receiving equipment and tapes and records WHAT are the conditions?
(p. 92)
Duties after loss
Subrogation
Changes
Transfer
Cancellation
Other Insurance
Endorsements
(p. 92)
Principal additional Business Auto endorsements include:
1) Named Individual-Broadened PIP: Treats non-owners
for PIP as if they were owners
2) Individual Named Insured: Broadens coverage on autos
similar to PAP
3) Drive other Car: Covers insured and spouse for auto
they do not own
The Business Auto form does not
build into the policy PIP, UM, and
Medical Payments; those coverages
have to be added by endorsement.
Rating
(p. 93)
WHAT is rating based on?
(p. 93)
Territory where
garaged
Radius of operation
1) Local: 50 miles
2) Intermediate: Over 50 to 200
miles
3) Long Distance: Over 200 miles
Size or type
Business Use
1) Retail: Deliver goods
2) Service: go from job site to job site
3) Commercial: Used other than retail
or service
Truckers Coverage Form
•
ase
Rates incre
as trucks
size
increase in
and weight
•
•
Truckers coverage is a variation on the BAP to recognize hazards unique to business that haul goods Insured Liability: Anyone from whom a vehicle is hired or borrowed used exclusively for the named insured’s business. If a trailer, then only while connected to a covered power unit Trailer Interexchange Coverage: Legal liability coverage for damage to trailers owned by others. Excludes same causes as the BAP Physical Damage and does not cover loss of use GARAGE INSURANCE
Section 5.3 (p. 93)
Those in the businesses of WHAT is
Garage Insurance designed for?
(p. 93)
Servicing
Selling
Repairing
Section I: COVERED AUTOS
Covered Auto Symbols:
Parking
Section II: Liability
(p. 94)
Symbol 21: Any auto
Symbol 22: Owned auto only
WHAT is covered?
(p. 94)
Symbol 23: Owned private passenger autos only
Symbol 24: Owned autos other than private passenger autos only
Symbol 25: Owned autos subject to No-Fault
Garage Operations
Symbol 26: Owned autos subject to compulsory UM law, not used in Florida
Symbol 27: Specifically described autos
Symbol 28: Hired autos only
Symbol 29: Non-owned autos used in a garage business
Symbol 30: Autoes left with you for service, repair, storage, and safekeeping
Symbol 31: Dealers’ autos and autos held for sale by non-dealers or trailer
dealers (PD coverage)
Garage Operations—the ownership, maintenance
or use of locations for garage business and the
ways adjoining, and all operations necessary or
incidental to the business, plus those autos as
indicated by the covered auto symbols in the
Declarations
Exclusions for Section II: Liability
Insureds under Section II: Liability are the
1) Watercraft or aircraft except watercraft on
premises
2) Property damage to insured’s own work or
products (Defects)
3) Loss of use of property if caused by
insured’s delay or failure to perform an
agreement of contract
4) Claims for product retail
same as BAP except:
1)
For Dealers Risk, customers are not
covered if they have 10/20/10
2) If they have less than 10/20/10, then
they are covered
A deductible of $100 applies in each
accident resulting from property damage
as a result of work performed by or on
behalf of the insured
Section III: Garagekeepers
(p. 95)
Damage for which the insured is liable to customers’ cars, which the insured has for servicing, repairing, parking, or storing Exclusions for Section III: Physical Damage
WHAT are the causes of loss
that may be covered?
(p. 95)
Comprehensive:
all losses except
collision overturn
Specified Cause of Loss:
Fire, explosion, theft,
mischief, or vandalism
Collision
1) Sound reproducing and receiving
equipment, tapes, and records
2) Agreement in which insured accepts
responsibility for loss
3) Theft or conversion by the insured,
employees, or shareholders
4) Defective parts or materials or faulty
work performed by or on behalf of
the insured
Section IV: Physical Damage
(p. 96)
WHAT coverages are offered?
(p. 96)
Comprehensive or
Specified Perils
and Collision
Dealers Risk
Usually issued on a blanket coverage basis for symbols 21 and
31. Can be either:
1) Reporting basis: Monthly or quarterly
2) Non-reporting basis: Subject to limit stated on policy
(Both are 100% coinsurance)
Exclusions for Section IV: Physical Damage
Same as BAP, but, in addition, there is no coverage for auto leased or rented to others
(except to customer who has left their auto for repair or service) for:
1) Organized racing
2) Voluntarily parting with auto by a trick or scheme or under false pretenses
For Dealers Blanket Coverage, the following are excluded:
1) Expected profits
2) Loss at newly acquired, unreported location, if loss occurs more than 45 days after
acquisition of property
3) Autos being transported more than 50 miles apart
4) Collision or upset of the transporting vehicle
WHAT are the endorsements?
(p. 97)
PIP, UM, and
Medical Payment
must be added by
endorsement
Broad Form Products: Delete
liability exclusion for damage
to the insured’s own products.
Subject to $250 deductible
Dealers Drive-Away
Collision: Physical damage
exclusion for auto driven or
transported over 50 miles is
eliminated
False Pretense: PD
coverage for los from trick
or scheme or acquiring auto
from someone who does not
have a title
UNIT SIX:
Commercial Property
COMMERCIAL PROPERTY INSURANCE
Section 6.1 (p. 98)
Commercial Property—covers direct and
Commercial Property is FIRST party
coverage against economic loss from
damage to tangible property
indirect losses to properties other than 1-4
family dwellings and farm properties
THE COMMERCIAL PROPERTY
CONTRACT
Section 6.2 (p. 98)
WHAT does the policy consist of?
(p. 98)
Declarations:
1) Identifies insured and property
covered
2) States limits
3) Deductible
4) Inception and expiration dates
5) Forms and endorsements
6) Other relevant information such
as mortgage holders
Common Policy
conditions
Commercial
Property conditions
Coverage
Form
Describes the subject
of the insurance and
provides for added
conditions relating to
the subject
WHAT are the condition forms
conditions?
(p. 98)
Company and
policyholder
rights and
duties
Changes
Pursuit of rights
against others
Transfer of
policy
Suit against
the company
Cause-of-loss
Form
Lists perils and
exclusions
Cancellation/Nonrenewal
CONTRACT CONIDTIONS
•
•
•
First 90 days: 20 days written notice
After 90 days: 45 days written notice
Nonpayment of premiums: 10 days written notice
•
•
•
Commercial Residential:
Nonrenewal: 100 days notice
Premium renewal: 45 days notice
Same company: 120 days cancellation/nonrenewal if the insured has ben with the company for at least 5 years
Changes
•
Only changes by endorsement with company and insured agreement
Transfer
•
Insured cannot transfer any rights except with written consent of the company. If insured dies, then transfer to legal
representative
Concealment, Misrepresentation, Fraud
•
Coverage is void if insured engages in any of these acts
Control of Property
•
Protection for insured is not impaired by acts of others beyond insured’s control
Liberalization
•
Insured gets benefits without premium increase if company, within 45 days of inception, adopts a revision that broadens
coverage
Other Insurance
•
•
If other insurance is SAME, prorate
If other insurance is NOT THE SAME, excess
Policy Period and Territory
•
Only covers losses during policy period in US, Puerto Rico, and Canada
Subrogation
•
Receiving payment under the policy transfers rights to company. Insured can waive rights under certain conditions but has
to be in writing prior to loss
Deductible
(p. 99)
Commercial Property Coverage Forms—General
(p. 100)
WHAT are the major coverage
forms?
(p. 100)
The standard deductible
is $500 for all loss or
damage in any one
occurrence for all perils
except hurricanes, which
is usually a percentage.
Builders
Risk
For commercial
residential has the
option of either a per
event or annual basis.
Building and
Personal
Property
Extra
Expense
Business
Income
Legal
Liability
Condominium
Association
Leasehold
Interest
Condominium
Commercial
Unit-Owner
BUILDING AND PERSONAL
PROPERTY COVERAGE FORM
Section 6.3 (p. 100)
WHAT properties are covered?
(p. 100)
Buildings
Completed additions, fixtures including
outdoor, permanently installed machinery
and equipment, personal property to service
the premises, floor coverings, appliances,
additions under construction, alteration, or
repair and the supplied within 100 feet of
the premises
Your Business Personal Property
All fixtures, equipment, and furniture
used in the business, if tenant, then
improvements and betterments, and all
property covered in building within 100
feet of premises
Property not covered includes:
1) Money, currency, accounts, bills, etc.
2) Animals, unless held for sale
3) Autos for sale
4) Land
5) Pilings, piers, wharves, or docks
6) Retaining wall not part of the building
7) Self-propelled machines, other than stock
8) Fences, outdoor antennas,
9) Outdoor trees, shrubs, and plants
Personal Property of Others
Property owned by others but in
your care, custody, or control
Additional Coverages
(p. 101)
Signs: $2,500 for any one occurrence, whether attached or not
Debris Removal: 25% of amount paid for loss. If limit has been exhausted then, or exceeds 25%, then
an additional $10,000 for each occurrence at each location is provided
Preservation of Property: When covered property is taken elsewhere for protection, covered while
moving, and at temporary location for 30 days
Fire Department Service Charge: Covers up to $1,000
Pollution Clean Up and Removal: Pays for extracting pollution from ground or water if created by a
covered cause of loss. Has to be reported within 180 days of loss and will pay a maximum of $10,000
during any 12 month period
Increased Cost of Construction: This coverage is activated when the cost to repair is increased due to
a building ordinance or law. The replacement cost option must be selected to trigger this coverage and
the ordinance must be in effect at the time of loss. Limit is 5% or $10,000, whichever is less.
Extensions of Coverage
(p. 102)
(If policy is subject to 80% or more coinsurance or Value Reporting form being used)
Automatic Coverage: 30 days automatic coverage for:
1) New buildings under construction or acquired at the insured’s premises, up to $250,000
2) Newly acquired business, personal property, up to $100,000
Personal Effects and Property of Others: $2,500 (excludes theft) limit for named insured, partners, and
employees for personal property in the CCC of the insured
Valuable Papers and Records: up to $2,500 to research and restore lost information from paper and
records
Property-Off Premises: up to $10,000 for business personal property while it is temporarily at a
location not owned by insured. Property in or on vehicle or in custody of salespersons is not included
Outdoor Property: up to $1,000 for fences, antennas, trees, shrubs, and plants. ($250 limit for any one
tree, shrub, or plant). Only for perils of fire, lightning, explosion, riot, civil commotion, or aircraft
Non-Owned Detached Trailers: detached non-owned trailers up to $5,000 used in insured’s business
and located on premises
Conditions
(p. 102)
Abandonment: prohibits abandonment of property to company
Appraisal: provides for appraisal if company and insured disagree on loss
Duties after loss
Rights of recovery
Coinsurance
Vacancy: building vacant more than 60 consecutive days prior to loss coverage suspended for:
1) Vandalism
2) Sprinkler leakage (unless steps against freezing taken)
3) Building glass breakage
4) Water damage
5) Theft or attempted theft
6) Any other cause of loss payable reduced 15%
7) Limitations can be eliminated by attachment of a Vacancy Permit endorsement
Valuation: basically ACV, if a building is valued at $2,500 or less and in compliance with coinsurance
clause, then full replacement cost is paid
Replacement cost does not apply to:
1) Awnings
2) Floor Coverings 3) Appliances 4) Outdoor equipment or furniture
Stock that has been sold but not delivered is covered for net selling price
Glass replacement includes cost of safety glazing material
Valuable papers and records are covered for cost of blank materials to reproduce
Tenants improvements: coverage based on formula:
Original cost ×
!"#$ !"#$ !"#$ !" !"## !"#$% !"#$%&'$() !" !"#$" !"#$ !"#$ !"#$ !" !"#$%&&%$!'" !" !"#$!"#$%& !" !"#$"
Mortgage Holders: losses are paid to any such interest stated in declarations, protection is not impaired by
acts or omissions of the insured, and mortgage holder is guaranteed advanced notice of cancellation or
nonrenewal of policy
Optional Coverages
(p. 103)
Agreed Value: Waives coinsurance condition, statements signed that insuring for 80% or more, an
expiration date for the Agreed Value option which may be earlier than the expiration date. If option date
passes without renewal, the coinsurance condition is reinstated
Inflation Guard: The policy states a percentage y the policy limits automatically increase. The policy will
increase pro rata throughout the term.
Replacement Cost: An option to replace the ACV basis with replacement cost without deducting
depreciation. This coverage is available for buildings and personal property, but not property of others.
Requires 80% coinsurance and must repair or replace within a reasonable time. If the option is granted to
take ACV, then claim difference for replacement cost if company notified within 180 days
The following are available by endorsement:
1) Value Reporting: Used when personal property values fluctuate, limit of coverage set higher than
expected peak values, separate limit is stated for each location, total of these limits is called the
provisional amount, reports of values are reported within 30 days after the end of each month
For losses: If report of values has not been made and overdue, the company is liable for only 75%
of the loss. If reports have been filed but report is overdue, the company is liable for maximum
value. If the last report of values was understated, the loss payment is based on formula to measure
deficiency:
Loss ×
!"#$% !"#$!%"&
!"# !" !!! !"#$!%&'( !"#$
2) Peak Season: An alternate to Value Reporting that provides for stating additional amounts which apply
during specific periods of the policy
3) Building Ordinance Coverage: covers insured for enforcement of laws that require demolition of
undamaged portions of the building, higher costs of repair or reconstruction based on building, zoning,
or land use laws, and prerequisites of 80% or higher coinsurance and replacement cost coverage.
BUILDERS RISK COVERAGE FORM
Section 6.4 (p. 104)
Covered Property—structures being build
including foundations, fixtures and
machinery, equipment to service the
building, owned materials and supplies used
for construction, and temporary structures
built to assemble on site
Builders Risk covers the building in
the course of being constructed.
WHAT is the coverage extension?
(p. 105)
Gives $5,000 coverage for
building materials owned by the
others in the insured’s CCC
(Care, Custody, and Control)
als are
The ma teri
or on the
located in
0
r within 10
building, o
remises and
feet of the p
b e co m e a
intended to
part of the
permanent
building.
Need for Adequate Insurance Clause
This clause takes the place of the coinsurance
clause. The clause provides that the company is
responsible only for the portion of any loss that the
limit bears to the value at completion by using the
formula:
Loss × !"#"$
!"#$%
WHAT causes the coverage to terminate?
(p. 105)
Policy cancels
or expires
Property is accepted
by purchaser
Interest in
property ceases
Abandoned
Building
complete 90 days
after construction
Building is put to
intended use for
60 days
BUSINESS INCOME COVERAGE FORMS
Section 6.5 (p. 105)
Business Income—net profit of loss
before taxes that would have resulted
through a period of restoration
WHAT do the forms cover?
(p. 105)
Period of Restoration—begins 72 hours after
direct damage. 72 hours is considered a
deductible. Coverage ends when either:
1) The damaged property could be repaired,
rebuilt, or replaced with reasonable speed
2) The business resumes operations at a new
permanent location
Protects against loss of business
income that results from damage to
covered property from a covered
cause of loss
WHAT are the two Coverage Forms?
(p. 105)
Business Income with Extra Expense:
Pays extra expenses to avoid the
suspension of business regardless if it
results in a loss of business income
Business Income without Extra Expense:
Pays extra expenses only if they reduce the
loss
WHAT are the additional coverages?
(p. 105)
Extra Expenses:
Covers up to 3 weeks (after the 72 hour
deductible) when access to the insured’s
premises is prohibited by a civil authority
because of the damage elsewhere from a
covered case of loss
Extended Period of Indemnity:
Coverage up to 30 days after the period
of restoration if the insured continues to
suffer loss of income
Limits apply to business caused by:
1) Damage to electronic media records
2) Period of indemnity is the longer of 60 days
from date of damage or the restoration period
Coverage Extension
provides $100,000
automatic coverage
for up to 30 days at
each newly acquired
location
Coinsurance Condition:
1) None, 50%, 60%, 70%, 80%, 90%, 100%, or 125%
2) Amount of insurance must be equal to the coinsurance percentage
times the total net pre-tax profit or loss and all operation expenses
for the past 12 months following the anniversary date
3) If at the time of loss the coverage amount is less, then the
company is only responsible for the portion of loss which the limit
carried bears to the required amount
Coverage Options
(p. 106)
WHAT are the coverage options?
(p. 106)
Maximum Period of Indemnity:
Replaces the coinsurance condition
but limits the period of indemnity to
120 days following the 72-hour
deductible. Applies to both business
income and extra expense
Monthly Limit of Indemnity:
Provides another way to avoid the
coinsurance condition. Limits the
amount of recovery to fraction
coverage during each consecutive
30 days during the restoration
period. Fractions available are
1/3, 1/4, and 1/6
Agreed Value:
The way to avoid the
coinsurance penalty by
having the insured agree
to percentages of the total
of profit and expenses
Extended Period
of Indemnity:
Increases from 30
up to 730 days
EXTRA EXPENSE
COVERAGE FORM
Variation of coverage is available for business
income from dependent properties instead of
damage to the insured’s own premises. This is for
those being relied upon to deliver materials or
services to the insured or to accept the insured’s
products or services.
Section 6.6 (p. 107)
Extra Expense Coverage Form—covers business
that cannot have any prolonged interruption due to
irreparable harm to the business
1) There is no 72-hour deductible that
applies to this coverage
2) Limit on Loss Payment condition
applies to recoveries based on 30-day
periods
LEASEHOLD INTEREST COVERAGE FORM
Section 6.7 (p. 107)
Remaining Values—the unauthorized
WHAT does it cover tenants for?
portion of values that remain from the
date of loss to the end of the lease
period
(p. 107)
Loss of
favorable lease
Loss of
favorable
sublesase
Loss of bonus
to acquire lease
Loss of value to
improvements
and betterments
Loss of
remaining value
of prepaid rents
LEGAL LIABILITY COVERAGE FORM
Section 6.8 (p. 107)
Legal Liability Coverage Form—covers the
WHAT does the form cover?
insured for negligently damaging property
owned by others but in the insured’s CCC
(p. 107)
Occupancy of a building
owned by others
Damage to personal property such
as customer’s goods or leased
equipment and also includes legal
costs to defend the insured
No deductible
or coinsurance
CONDOMINIUM COVERAGE FORMS
Section 6.9 (p. 108)
WHAT does the Condominium
Association form insure against?
(p. 108)
Direct physical
loss or damage
to the building
Business
personal
property
Personal property in the CCC
of the association and located
at the premises (perils are
listed in the Cause of Loss
form in Section 6.10
Building is defined to cover: 1) Outdoor fixtures 2) Permanently installed fixtures and equipment 3) Fixtures, improvements, and alterations that are part of the building Does not cover: 1) Personal property owned, used, or controlled by unit-­‐owner When both association and unit-owner
policies cover a risk, the association is
primary. The unit-owner policy is
excess over amounts recoverable by
the associations policy
Business Personal Property includes:
1) Property owned by association
2) Property owned individually by all unit-owners
WHAT does the Condominium
Unit-Owners form insure against?
ium UnitCondomin
rm covers
Owners Fo
of the
th e owner
is used
condo and
mmercial,
only for co
ntial,
not reside
iums
condomin
(p. 108)
Business
personal
property
Personal property in the CCC of
the insured; the form does not
cover the building
CAUSES OF LOSS FORMS—GENERAL
Section 6.10 (p. 108)
All of the forms we have covered require a
Cause of Loss Form to specify the perils
covered
The 3 Causes of Loss Forms are:
Basic
Broad
The perils under the 3 forms are:
1) Fire
2) Windstorm
3) Hail
4) Vandalism
5) Sprinkler leakage
Special
(only form that
includes Theft)
All forms exclude:
1) Enforcement of building ordinance
2) Earth movement, other than catastrophic ground collapse, except loss from fire or explosion resulting
from earth movement
3) Seizure during destruction by government authority, except to prevent fire
4) Nuclear reaction, radiation, or contamination, except damage by spread of fire
5) Utility service failure anywhere outside the building
6) War
7) Flood, except resulting fire, explosion, or sprinkler leakage
8) Fungus, wet dry rot, an bacteria
9) Wire damage from artificially-generated electrical current, except resulting fire damage
10) Steam boilers, pipes, engines, or turbine explosion, except fire resulting from explosion or combustion
Business Income and Extra Expenses also excludes:
1) Antenna equipment
2) Delays in property restoration caused by strikers or other persons
3) Loss of license, lease, or contract
Legal Liability
excludes
assumption under
a contract unless
the insured would
have been liable
without the
contract existing.
Business Income excludes:
1) Damage to stock manufactured by insured
2) Time required to reproduce the stock
CAUSES OF LOSS-BASIC FORM
Section 6.11 (p. 109)
WHAT perils are covered?
(p. 109)
Fire and
removal
Lightning
Explosion
and
Volcanic
action
Windstorm
or hail
Smoke
Aircraft
or vehicle
Additional Coverages:
Riot or civil
commotion
Vandalism
Sprinkler
leakage
Catastrophic
ground cover
collapse
Exclusions:
Fungus, wet dry rot, and bacteria
1) Rupture or bursting of water pipes
2) Leakage of water or steam from breaking or
cracking of a system or appliance
3) Mechanical breakdown, except resulting
damage from a covered cause of loss
This is what is called a “give-back” to the exclusion.
This additional coverage gives an annual aggregate of
$15,000 for all claims as a result of a cause of loss
other than fire or lightning.
CAUSES OF LOSS—BROAD FORM
Section 6.12 (p. 110)
Includes the Basic perils plus:
1) Falling objects
2) Weight of ice, snow, or sleet
3) Water damage from accidental discharge or leakage of water or steam from a system
4) Collapse if caused by one of the above perils, hidden decay, insects or vermin,
weight of people, personal property or rain that collects on roof, or defective
materials during remodeling or renovation. Outdoor and exterior property is excluded
CAUSE OF LOSS—SPECIAL FORM
Section 6.13 (p. 111)
Open Perils (ALL RISK) except those excluded, such as
the following:
1) Wear and tear
2) Rust and decay
3) Deterioration
4) Smog
5) Release of contaminants or pollutions
6) Settling and cracking
7) Insects, birds, or other animals
8) Breakdown
9) Temperature changes
10) Marring or scratching
11) Prolonged leakage or seepage of water
12) Dishonesty of employees
13) Voluntary parting with property through trick or device
14) Loss of property in open rain, snow, sleet, or ice
15) Acts of governmental bodies
16) Errors in planning or zoning workmanship
Additional Coverage Extensions:
1) Property in transit for certain perils up to $5,000
2) Cost to tear and replace part of a building to repair
system that caused water damage
Cover age Limitations:
1) Boilers
2) Interior of building caused by rain, sand,
etc. unless there is exterior damage
3) Detached building materials and supplies
by theft
4) Mysterious disappearance of property
unless caused by one of the broad form
causes of loss (valuable papers and
records, animals, fragile articles, and
builder’s machinery, tools, and
equipment)
Dollar limitations apply: • $2,500 for theft of furs and fur garments • $2,5000 for theft of jewelry and similar property • $2,500 for theft of patterns, dies, molds, and forms • $250 for stamps, tickets, and letters of credit FARM COVERAGE
Section 6.14 (p. 111)
WHAT forms apply?
(p. 111)
Farm Property
Coverage Form
Farm Liability
Coverage Form
***Both forms are packaged for farmers and
cover both personal and business exposures.
Farm Property Coverage form provides coverage for:
Coverage
Coverage
Coverage
Coverage
A—Dwelling
B—Other private structures appurtenant to the dwelling
C—Household and private dwelling
D—Loss of Use, which includes:
1) Additional living expenses
2) Fair rental value
Coverage E—Scheduled farm personal property, which includes:
1) Grain 2) Farm Produce 3) Poultry
4) Livestock 5) Machinery
6) Vehicles and equipment for farming (growing crops are excluded)
Coverage F—Unscheduled Farm Personal Property, which covers:
1) Farm personal property on blanket basis on and off the insured’s
premises
Coverage G—Other Farm Structures, which includes:
1) Barns 2) Silos 3) Fences
5) Other farm structures
4) Outdoor radio equipment
UNIT SEVEN:
General Liability
Liability may be: 1) Direct: being injured by allegedly unsafe conditions in premises owned or occupied by the insured 2) Indirect: being held liable for actions of an independent contractor to whom the insured has subcontracted a part of general contract work 3) Assumed: the liability may ordinarily belong to another, but the insured agreed by contract to indemnify or “harm harmless” one whose direct actions produced the claim WHAT does the General
Liability Policy cover?
(p. 113)
Liability arising from premises,
general operations (ongoing and
after completion), and products
manufactured or sold
WHAT are the CGL coverage forms?
(p. 113)
Occurrence
The only difference in
the two versions relates
to the coverage “trigger”
Claims-made
THE CGL CONTRACT
Section 7.1 (p. 113)
WHAT forms does the CGL contract contain?
(p. 113)
Declarations:
Declarations
Various
Endorsements
Common
Policy
Conditions
Occurrence or
Claims Made
Form
Nuclear Energy
Liability Exclusion
endorsement
1) Identifies the
named insured
and address
2) States policy
period and
premium
3) Specifies limits
of coverage
that applies
Common Policy Condition
(p. 113)
Cancellation:
1) 90 days or sooner: 20 day notice except for misrepresentation or misstatement
2) After 90 days: 45 days written notice of cancellation or nonrenewal is required
3) 10 day notice of cancellation for nonpayment of premium regardless of how long policy has
been in force
Changes: Policy can be changed only by endorsement, agreed to between the company and named
insured
Examination of Books, Records: Company may audit an insured’s books and records during the
policy period and for 3 years thereafter
Inspection and Surveys: The company can make inspections, give reports, and make
recommendations, but disclaims any liability for doing so
Premiums: The first named insured must pay premiums and will receive the return premiums
Transfer: The insured cannot transfer any rights or duties under the policy unless the insured has
the written consent of the company. If the insured dies, the rights can be transferred.
COVERAGE A: BODILY INJURY AND
PROPERTY DAMAGE INSURING AGREEMENT
Nuclear Endorsement:
Excludes all hazards relating
to nuclear energy
Section 7.2 (p. 114)
Bodily Injury—physical harm,
and includes sickness or disease
or resulting death. BU does not
include harm to reputation
Coverage A pays those sums
that the insured becomes legally
obligated to pay for BI and PD
Property Damage—means physical injury to tangible
property, including loss of use of property not physically
injured. This does not include copyrights and patents
Liability Exposures Covered
(p. 115)
Premises and Operations Exposure—
liability arising out of the business
location or its activities at any location
Products and Completed Operations Exposure —
includes BI and PD occurring away from premises the
insured owns or rents and arising out of the insured’s
products or work except still in the insured’s possession
or work not completed or abandoned
Product—means any goods or products
Work—work or operations
manufactured, sold, distributed, etc., by:
1) Insured
2) Others trading under the
insured’s name
3) Persons or organizations whose
business or assets the insured
has acquired
performed by the insured or
on the insured’s behalf and
materials or equipment
furnished in connection with
the work.
Vicarious Liability—when
Contract Liability —when a business
assumes the liability exposure of
another through a contract
a business is held liable for
the actions of employees,
agents, or subcontractors
Work is deemed completed at the earliest of the following times: 1) Work completed 2) Work completed at one site if contract calls for more than one site 3) Work done and put at intended use Coverage Limitations
(p. 116)
Occurrence—an accident,
Coverage Territory—includes the U.S.
including continuous or repeated
exposure to substantially the
same harmful conditions. It also
includes faulty products that over
time cause injuries
and its territories or possessions, Puerto
Rico, and Canada. It also includes
international waters and airspace
between these spaces. This definition
expands to the entire world when BI
and PD is caused by products made or
sold by the insured and activities while
away for a short time on business
Accident —is sudden
and unexpected
be
BI or PD must
caused by an
in the
“occurrence”
itory”
“coverage terr
The “Coverage Trigger”
(p. 116)
Recall the two different CGL forms: Occurrence and Claims-Made
Occurrence applies to Bodily Injury
and Physical Damage that occur
during the policy period regardless of
when a claim is made
Claims-Made applies to BI and PD
that occurs on or after the retroactive
date and the claim is received or
recorded by insured or the company
during the policy period
A policy can be issued without a
retroactive date, but the insurer would be
covering claims prior to the assumption of
risk. If a policy has a retroactive date later
than the effective date, then a coverage
gap would exist
Retroactive Date—is stated on the
declarations page and is normally the same
date as the effective date of the insurer’s
first claims-made policy for the insured
Basic Extended Reporting Period (BERP)
coverage
In case of
e Claim sgaps in th
, there a re
Made Form
for
provisions
repo rti ng
extended
perio ds
1) Claim received within 60 days after policy
expiration OR
2) Occurrence reported within 60 days and
claim within 5 years
BERP is automatic and free of charge when:
1) Policy is canceled
2) Renewed with retro date later than the date
stated in the Declarations page
3) Renewed by policy on Occurrence Policy
Supplemental Extended Reporting Period (SERP)
Once the BERP takes effect, the insured is guaranteed the option to purchase
SERP:
1) Must be requested in writing within 60 days after policy expiration
2) Provides 2 new separate aggregate limits which are equal to the expiring
policy’s aggregate
3) These limits apply only to claims first received and recorded during the
SERP
4) SERP begins after the 60 days for reporting
5) SERP begins after the 5 years for claims
A Modified Insuring Agreement
(p. 117)
Known Loss Rule—stipulates that if the
A modified
insuring agreement
is a mandatory
endorsement that
revolves around
the principle called
the Known Loss
Rule
insured knew that BI and PD as occurred
before the effective date, then any
continuation (known or unknown) of the BI
and PD would be considered a known loss
Bodily Injury and Physical Damage Exclusions:
1) Intentional injury
2) Contractual: 2 exceptions
a. Insured would have been liable without contract
b. Certain contracts not subject to contract such as
i)
Leases
ii)
Sidetrack agreements
iii)
Easement agreements
3) Liquor liability
4) Employee injuries
5) Pollution
6) Aircraft, Autos, Watercraft-exceptions
a. On insured’s premises OR less than 26 feet away and not owned or carrying people for a fee
b. Parking of other autos on or next to premises
c. Liability assumed under contract for watercraft and aircraft
7) Mobile Equipment: if doing intended work, CGL; if being transported, BAP
8) Miscellaneous Property Damage, includes:
a. In insured’s CCC
b. Premises is sold, given away, or abandoned
c. Real property where the insured or someone on the insured’s behalf are performing
operations
d. Property that must be restored, repaired, or replaced because the work of the insured or on
insured’s behalf was incorrectly performed
9) Insured’s products
10) Insured’s work, exception is work of subcontractor
11) Defects, delays
12) Recall
13) Electronic data
CGL exclusions do not apply to fire damage to premises rented to the insured
COVERAGE B: PERSONAL AND ADVERTISING INJURY
Section 7. 3 (p. 120)
WHAT does Coverage B cover?
(p. 120)
False
Arrest
Detention or
imprisonment
Malicious
prosecution
Wrongful entry
or eviction
Libel, slander,
or rights of
privacy
Infringement of
copyright, title,
or slogan
Excludes:
1) Oral or written publications made with knowledge of falsity or occurring before the policy
period
2) Willful violation of the law with consent of insured
3) Liability assumed under contract
4) Offense made by an insured in business of advertising, broadcasting, publishing, or
telecasting
5) Pollution
COVERAGE C: MEDICAL PAYMENTS
Section 7.4 (p. 120)
Coverage C: Medical Payments is
voluntary or non-legal liability coverage
WHAT does Coverage C cover?
(p. 120)
Medical
Dental
Hospital
Excludes:
1) Injuries to insured
2) Tenant on the part of the premises the
tenant normally occupies
3) Employee of insured or tenant
4) Covered by WC athletics
5) Injured away from insured’s premises
by the insured’s work after completion
6) Injured by insured’s product
Funeral
Services
SUPPLEMENTARY
PAYMENTS
Section 7.5 (p. 121)
WHAT are the supplementary payments?
(p. 121)
Litigation, including
court costs
Prejudgement
interest
Interest on
judgments
Cost of
bonds
Bail
bonds,
$250
Expense at
company
request
Loss of
earnings, $250
WHO IS INSURED
Section 7.6 (p. 121)
WHO is insured?
(The Named Insured depends upon the
named insured’s form of legal entity)
(p. 121)
Individual
includes spouse
and legal
successors if the
insured dies
Partnership or
joint venture
includes partners,
members, and
their spouses as to
the conduct of
business
LLC includes
members and
managers
Also included are:
1) Employees for their acts as employees
2) Real estate manager for the named insured
3) If the insured acquires or forms another business
during policy terms they will become the named
insured for 90 days as to events which occur after
formation of the new business
Organization
includes executive
officers, directors,
and stockholders
LIMITS OF INSURANCE
Section 7.7 (p. 122)
WHAT are the basic limits?
(p. 120)
$200,000 general
aggregate, maximum
per policy year
$100,000 per
occurrence, BI/PD
$100,000 per
occurrence,
Personal and
Advertising
Injury
$5,000 per person,
Medical Payments
Products and Completed Operations: $200,000 aggregate $100,000 per fire, Fire
Damage and Liability
CONDITIONS
Section 7.8 (p. 122)
The CGL policy is ALWAYS PRIMARY
The Claims-Made is EXCESS over any other policy
If permitted by other policies, each
insurer will contribute equal shares
until its limits are reached. If equal
Both policies are
excess over
policies that apply
to completed work
or to premises
rented to the
insured
shares are not permitted, then the
policy will pay pro-rata.
Separation of Insureds—is a condition
that states each insured is covered
separately as if they were the only
insured
MISCELLANEOUS FORMS OF GENERAL
LIABILITY INSURANCE
Section 7.9 (p. 123)
Owners and Contractors Protective
Liability:
Covers the insured from the operations of a
specific independent contractor and the
specific location of operations stated in the
Declarations. Exclusions and other
provisions are similar to those for CGL.
This is an occurrence form of coverage.
Liquor Liability Coverage Form:
This is a buyback of the liquor
exclusions in the CGL and is an
occurrence or claims-made form.
Pollution Liability Coverage and
Pollution Liability, Limited Form:
Two forms issued, Limited and Broad.
Both cover for pollution incident, such as
emission of pollutants into or on land, the
atmosphere, or water. Both forms are
claims-made.
Products/Completed Operations
Liability Coverage Form:
Sold separately from the CGL policy
on either occurrence or claims-made
form.
EXCESS LIABILITY/UMBRELLAS
Section 7.10 (p. 123)
Covers only what is in the
underlying policy, and the underlying
policy is the policy that will respond
to the loss before the excess policy
WHAT are the two types of Excess
Liability?
(p. 124)
Follow Form:
Covers exactly what
is in underlying
Stand Alone:
May not cover all
in the underlying
Self Insured Retention (SIR)— Insured
must pay when the umbrella is primary; it is
similar to a deductible
WHAT does Umbrella Policy cover?
(p. 124)
Covers underlying plus some additional
coverages such as:
Non-owned
aircraft or
watercraft
Property in
CCC
Personal
Injury
Worldwide
premises
liability
Limited
Pollution
Product Recall
PROFESSIONAL LIABILITY INSURANCE
Section 7.11 (p. 125)
WHAT are the standard coverage
forms?
WHAT is available for coverage
under the standard forms?
(p. 125)
(p. 125)
Occurrence
Claims-made
Physicians, surgeons,
and dentists
Hospitals
Lawyers
WHAT can also be covered with endorsement?
(p. 125)
Blood Banks
Medical and X-ray labs
Nurses
Optometrists
Veterinarians
WHAT do Independent Non-standard forms cover?
(p. 125)
Architects
Engineers
Accountants
Insurance
Agents
Real Estate
Brokers
Stock
Brokers
Financial
Planners
Surveyors
Physicians, Surgeons and Dentists (PS&D)
(p. 125)
Covers: Legal liability form medical incidents
(p. 125)
Excludes:
1) Criminal acts of insured
2) Liabilities as an administrator, officer,
stockholder, and similar positions of a
health care facility
3) Coverage under WC
Partnership, corporation,
and associations
Basic Limits: $250,000 per claim and $750,000
aggregate
WHAT are the coverages?
Individual
Hospitals
(p. 126)
WHO is insured?
(p. 126)
Named
Insured
Partners, if named
insured is a partnership
Executive
officers
Hospital
Administrators
Stockholders
Directors, trustees,
or governors
Covers: Liability of insured for medical incidents
Excludes:
1) Coverage under WC
2) Motor vehicles, trailers, watercraft, or aircraft
3) Insured’s own acts or omissions
Basic Limits: $250,000 per medical incident and $750,000 aggregate for
all claims
Miscellaneous Medical Professions Coverage Forms
(p. 126)
WHO is covered?
(p. 126)
Blood Banks
Medical or
X-Ray Labs
Optometrists
Veterinarians
Lawyers
(p. 127)
WHO is insured?
(p. 126)
Individual
Partnership
Corporation or
association
Each lawyer
employed by the
named insured
Lawyers after
termination for services
prior to termination
Covers:
1) Acts or omissions in rendering professional services
2) Duty to defend the insured, but differs from others because not in addition to the
limits. Claims expenses first deducted, then remainder for payment of damages
Excludes:
1) Dishonest, fraudulent, criminal acts, or omissions of any insured or employee
2) Claims by an employer against insured
3) Certain activities for which lawyers engage
Basic Limits: $25,000 per claim and $75,000 aggregate for all claims
FARM LIABILITY
Section 7.12 (p. 128)
WHAT is covered?
(p. 128)
Farmer’s personal
and business
liability
BI and PD arising out
of farming operations
or personal activities
Personal and
advertising injury
Medical
Payments without
regard to liability
Optional Coverages:
1) Custom Farming
endorsement
above $5,000
2) Farm Employers
Liability/ Medical
Payment
endorsement—for
employees not
eligible to receive
WC
Excludes:
1) Pollutants
2) Injuries to farm employees
3) Motor vehicles
4) Custom Farming Operations except first $5,000
in receipts in any 12 month period
5) Aircraft spraying
6) Damages to insured’s products
EMPLOYMENT-RELATED PRACTICES LIABILITY (EPL)
Section 7.13 (p. 128)
WHAT is covered?
(p. 128)
Claims-made coverage for
liability arising out of claims for
injury to an employee because of
employment-related offense
Defense
Cost
Excludes:
1) Criminal, fraudulent, malicious acts
2) American with Disabilities Act
3) Violations of laws applicable to employers
4) Strikes and Lockouts
5) Sexual harassment
6) Employment termination or relocation due
to business decisions
7) Intentional injury
8) Retaliatory actions
Claims must be made during the
policy period or during the
extended reporting period (ERP)
WHO is insured?
(p. 129)
Co-payment
Insured shares both damages and
Individual
defense expenses to maximum amount
ERP
3 year at additional charge. Similar to
claims-made CGL policy
Partnership
LLC
Organizations
Employees
that are
managers or
supervisors
Coverage Territory—Worldwide if
Defense Expense—Refer to
Discrimination—is a violation of a
suit is brought in the U.S. or
Puerto Rico and the insurer agrees
the expense of a legal defense
person’s civil rights
Injury—Termination, demotion,
Suit—Civil proceeding
Sexual Harassment—Unwelcomed
physical, mental or emotional abuse
alleging damages
sexual advances
UNIT EIGHT:
Commercial Package Policies
COMMERCIAL PACKAGE POLICIES
Section 8.1 (p. 131)
Commercial Package Policies—combine or
“package” individual lines into a single contract
WHAT are the two standard policy
forms?
Standard Packages Excludes:
1) Aviation
2) Surety
3) Health
4) Ocean Marine
5) Worker’s Compensation
(p. 131)
COMMERCIAL PACKAGE POLICY
Section 8.2 (p. 131)
Commercial
Package Policy
Businessowners
Policy
BUSINESSOWNERS POLICY
Section 8.3 (p. 131)
The Business Policy (BP) is similar to
the Homeowners Policy; the difference
between the CPP and the BP is the CPP
coverages are elected
and the BP is
basically a required package of
coverages to meet the needs of certain
business classes
CPP can combine two or more of
the following coverage parts:
1)
2)
3)
4)
5)
6)
Commercial Property
Commercial General Liability
Liquor Liability
Pollution Liability
Professional Liability
Employment-Related
Practices Liability
7) Commercial Crime/Employee
Dishonesty
8) Commercial Inland Marine
9) Boiler and Machinery
10) Commercial Auto (includes
BAP, Garage, Truckers)
11) Farm (includes both Property
and Liability coverage)
Eligibility for BP:
1) Apartment houses and residential condo association buildings: Not over 25,000 square feet for
incidental occupancies for contractors that do not occupy more than 7,500 square feet or more
than 15% of the total area
2) Office and office condo associations: Buildings not over 6 stories and not over 100,000 square
feet of area. Office tenants of a single building not over 25,000 square feet
3) Mercantile, wholesaler, service, or processing risks: Building not over 25,000 square feet.
Cannot exceed $3,000,000 gross sales at any insured location and no more than 25% of annual
gross sales derived from off-premises operations
4) Trade contractors: Single specialty such as plumbing. Building not over 25,000 square feet,
gross sales do not exceed $3,000,000 with no more than $300,000 annual payroll. No work over 3
stories, total subcontracted work cannot exceed 10%, no equipment rental to others, and unrelated
sales cannot exceed 25% of annual gross sales.
5) Limited cooking and fast food restaurants: Must meet numerous specified requirements such as
size, seating capacity, type of food and drinks served, method of serving customers, and methods
of cooking. Limited cooking means cooking normally done with microwaves, toasters, pizza
ovens. Fast food means can do the entire above plus grill, broil, deep-fry, roast, and barbeque.
6) Convenience food store: Can be with or without gas sales. Gas sales must be less 75% of the
total annual gross sales. No auto service or repairs, no car wash, no propane or kerosene tank
filling.
7) Self-storage facilities: Cannot exceed 2 stories, cannot have cold storage, storage of
industrial materials, chemicals, pollutants, and waste
BP policy excludes:
1) Auto repair or service stations, dealers of autos, mobile homes, or motorcycles.
Parking lots or garages
2) Bars and pubs
3) Condo associations OTHER THAN office or residential condos
4) Occupied buildings used in while or part for manufacturing or processing
5) Business operations with one or more locations used for manufacturing, processing, or
servicing
6) Household personal property
7) 1 or 2 family dwellings unless of the garden apartment variety where multiple units are
grouped in a single area and under common ownership
8) Place of amusement
9) Banks, savings and loan, credit unions, and similar financial institutions
10) Self-storage facilities with outdoor storage of any type of motorized vehicles,
campers, or RVs
Property Coverage:
BP policy is written on
an “open perils” basis
BP policy includes the following:
Section I:
Property
Section II:
Liability
Section III:
Common Policy
Conditions
PROPERTIES COVERED
(p. 133)
1) Buildings: contains features not found in other forms
a. Replacement Cost: Limit must equal at least 80% of replacement cost. If less than 80% then
ACV
b. No coinsurance
c. Appurtenant structures
d. Lessor’s property in furnished apartments and rooms
e. Outdoor property up to $2,500, but no more than $500 for any one tree, shrub, or plant
f. Inflation increases by 8% annually, unless a higher or lower percentage purchased
2) Business Personal Property:
a. No coinsurance
b. Household contents, property of others, used goods, manuscripts, art, and antiques are valued at
ACV
c. Property in insured’s CCC is covered
d. Tenants’ improvements and betterments covered on replacement cost basis
e. $5,000 for business personal property other than money and securities, valuable records and
papers, accounts receivable while off premises
f. Personal effects of insured, officers, partners or employees insured covered up to $2,500 at
premises
g. Valuable papers and records on premises up to $10,000 on premises and $5,000 away from
premises
h. 30-day automatic coverage up to $250,000 for buildings and $100,000 for business personal
property for newly acquired premises
i. If the insured purchases limit of insurance equal or greater than 100% of average monthly
values for preceding 12 months, then limit on business personal property is automatically
increased 25% for seasonal variations
Additional Coverages:
Business Income and Extra Expense:
1)
Up to 12 months of interruption covered
2) No dollar limit applies
3) Protection provided for the actual loss
sustained by the insured for loss of
profits, continuing expense, extra
expense, and loss of rents
Optional Coverages
(p. 135)
1) Employee Dishonesty: blanket coverage,
limits of $5,000, $10,000, $25,000, $50,000,
or $100,000 per occurrence
2) Accounts Receivable: increased limits
3) Valuable Papers and Records: increased
limits
4) Forgery or Alteration: increased limits
5) Outdoor Signs: all risk coverage for select
limit
6) Mechanical Breakdown: replacement cost
for boilers and A/C units
7) Money and Securities: insures against theft,
disappearance, or destruction. Separate
limits for both on and off premises.
1) Debris Removal: 25% of loss, subject to policy limit,
plus additional $10,000
2) Preservation of Property: 30 days at temporary
location
3) Fire Department Service Charge: $1,000
4) Collapse
5) Extended Business Income: 30 days (can increase
with endorsement)
6) Pollutant Clean Up and Removal: $10,000
7) Civil Authority, Business Income, and Extra
Expense: prohibits access to described premises due to
civil authority action. 72 hour waiting period, ends
after 3 consecutive weeks
8) Money Orders and Counterfeit Paper Company:
$1,000
9) Forgery or Alteration: $2,500
10) Increased Cost of Construction: $10,000 to comply
with ordinance or law exchange
11) Business Income from Dependent Properties: $5,000
12) Glass Expenses: cost to board up and install and to
remove obstructions
UNIT NINE:
Workers’ Compensation
WC in Florida is regulated by the
Division of Workers’
Compensation of
the Departments of Financial Services
Workers’ Compensation—basic thrust is that
employees are compensated for occupationally
incurred injuries, regardless of fault, in return
for which employers are immunized from
injury lawsuits by employees
SUMMARY OF THE WC LAW
Section 9.1 (p. 136)
The Florida WC law is found in F. S. 440
EMPLOYERS AND EMPLOYEES
Section 9.2 (p. 137)
Employer—one who must secure benefits for
Employment—defined to include all governmental
employees and includes the state, political subdivisions,
public and quasi-public corporations, employment
agencies, and employee leasing companies
employment regardless of the number of employees and
private employments with 4 or more employees (one or
more in the construction industry)
Employee—every person engaged in any employment
The following are NOT considered
employments:
under any appointment or contract of hire, including
alien and minors. This definition includes full time,
part time, and day labor
The following are NOT considered employees:
1) Independent contractors in non-construction
business
2) Causal work
3) Commissioned real estate agents
4) Certain musical and theatrical performers
5) Certain taxicab, limousine, and passenger
vehicle-for-hire drivers
6) Volunteers
1) Domestic servants in private homes
2) Small farms with 5 or less employees and
less than 12 for seasonal not exceeding 30
days
3) Professional athletes
4) Sports officials for interscholastic public or
private non-profit amateur sports events
5) State and county prisoners unless working
for private employers
6) Employers covered by Defense Base Act
Corporate Officers
(p. 137)
Sole Proprietors, Partners
(p. 138)
Corporate Officers are subject to WC unless the
corporate office elects to exempt coverage.
When the officer receives pay for his or her
services, the officer is considered an employee.
Sole proprietors and partners are
considered to be the employer not the
employee. They can elect to be covered by
WC by filing with the Division.
The big EXCEPTION is if they are in the
construction industry, then they are
considered employees and are provided
benefits and cannot be exempted.
If the corporation is in the
construction industry, they
can exempt no more than 3
officers. The 3 officers must
own a minimum of 10% of
the corporation.
Independent Contractors
(p. 138)
For independent contractors to be considered a non-employee,
they must meet 6 criteria. Non-construction has to meet 4
criteria.
If the corporation is in nonconstruction there is no
limit to the number of
exemptions. Non construction LLC members
are now included as
employees and may elect to
exempt
The criteria are:
Casual Labor
(p. 138)
Work to be completed in, not over, 10
days for less than $500, and not in the
course of normal business
Other Requirements
(p. 139)
The contractor is responsible for injuries to subcontractor’s employees if the sub does not carry WC If an employee is covered by the Federal Employers Liability Act, Longshore and Harbor Workers Act, or Jones Act, then WC is not payable for injuries. 1)
2)
3)
4)
5)
Maintain separate business with own accommodations
FEIN number unless sole proprietor
Compensation paid to business
Bank accounts in business name
Can bid, work, and receive compensation without an
employment application
6) Receives compensation for bidding and completing a
contractual agreement
Individuals engaged in the following are not required to meet
the 6, but must meet IRS guidelines:
1)
2)
3)
4)
Certain agriculture
Forestry
Farming occupations
Newspaper delivery
PENALTIES FOR NONCOMPLIANCE
Section 9.3 (p. 139)
WHAT are the penalties for noncompliance?
(p. 139)
Second-degree misdemeanor
Employer cannot hire or
conduct business
$1,000 fine, plus $100 each
day noncompliant
INJURIES COVERED
Section 9.4 (p. 139)
Injury—defined to mean personal injury
Accident—only an unexpected
or death by accident arising out of work
performed in the course of employment
or unusual event or result
happening suddenly
An injury is considered
“arising out of work” only if
the work performed is the
MAJOR contributing cause of
the injury or death.
Occupational diseases are
treated as injuries
Benefits are payable for
employees who suffer
injuries
When accidents occur outside of
Florida, it is covered under Florida WC
law IF the contract or employment was
made in Florida or IF the employment
was principally localized in Florida. Even
if the other state paid benefits, they
cannot exceed Florida benefits
Benefits are excluded or limited if:
1)
2)
3)
4)
Employee was intoxicated or illegal drug used
Willful intention to injure or kill
.08% or more blood alcohol
25% reduction if employee refuses to use safety
equipment or observe safety rules
COMPENSATION
BENEFITS
MEDICAL
BENEFITS
Section 9.5 (p. 140)
Section 9.6 (p. 140)
WHAT does the employer
furnish?
WHAT are the categories of
benefits under FL WC law?
(p. 140)
There is no dollar limitation
(p. 140)
Payment of
medical expenses
Compensation
for disability
Death
Required
medical
treatment
Care and attendance
under qualified
physician, surgeon,
and hospital
Medicine
and
crutches
Artificial
members or
other apparatus
DISABILITY BENEFITS
Section 9.7 (p. 140)
Waiting period is 7 days. If the disability lasts
longer than 21 days, then the benefits are payable
from day 1.
Amount paid is the minimum of $20 a week to a
maximum of the “statewide average weekly wage”.
Classes of Disability:
1) Permanent Total (total in nature and permanent duration):
a. 66% of the employees average weekly wage
b. No time limit
c. Only claimant with “catastrophic injuries” are eligible
2) Temporary Total (total in nature but temporary duration):
Disability—the incapacity, because of injury,
to earn in the same or any other employment
the wages that the employee was receiving at
the time of the injury
Average Weekly Wage—the measure to
determine disability benefits that uses the
average of the prior 13 weeks. If the average
is less than 13 weeks, then the average of a
similar employee will be used
Catastrophic Injuries—
1) Spinal cord injury with sever
paralysis of an arm, leg, or the trunk
2) Amputation of an arm, hand, foot, or
leg involving the effective loss of use
of appendage
3) Severe brain or closed-head injury
4) Second or third degree burns over
25% or more of the total body surface
5) Third degree burns over 5% or more
of the face and hands
6) Total or industrial blindness
a.
66% of the employees average weekly wage not to exceed 104
weeks
b. 80% of average weekly wage up to $700 for 6 months during
the retraining and rehabilitation period
3) Permanent Impairment (partial in nature but permanent in
duration):
a.
Based on medical impairment rating schedule approved by
Division of WC
b. 75% of employee’s average weekly Temporary Total Disability
benefit and continue until the earlier of either:
i. 2 weeks for each percentage of the impairment up to
10%
ii. 3 weeks for each percentage of impairment from 11%
to 15%
iii. 4 weeks for each percentage if impairment from 16% to
20%
iv. 6 weeks for each percentage of impairment from 21%
and higher
v. Or death of employee
4) Temporary Partial (partial in nature and temporary in
duration)
a.
Uses the wage loss formula to 104 weeks of impaired
earnings
b. If the disability still exists at the end of 104 weeks,
then reviewed for Permanent Impairment benefits
Death Benefits
(p. 142)
Funeral expenses
are paid up to
$7,500
A death benefit is payable if death
is within 1 year of an accident or if
it follows continuous disability
within 5 years after the accident
Benefits up to
$150,000 for all
dependent claims
combined
MISCELLANEOUS LAW PROVISIONS
Section 9.8 (p. 142)
Employers secure payment of compensation by:
1) Insure with any stock or mutual company authorized to do business in Florida
2) Individual self-insurer by submitting proof to the Division of the ability to pay
benefits and then receive approval from division
3) Pooling liabilities also known as self-insurance funds
Employer that has secured payment of compensation must:
1) Post a notice at place of business to notify employees
2) Notice must give name and address of insurance company and the expiration date
of the policy Third Party:
Employer may not deduct from payroll or
assess employee’s compensation to pay for
rd
WC premiums; it is a 3 degree felony if
caught.
Employer who makes false or misleading
statements to obtain or deny benefits is guilty
of 2
nd
degree felony
1) Employee not barred from bringing
action against 3rd party who have a
legal responsibility for the employees
injury
2) For one year the right to bring action
belongs solely to employee
3) During second year, if employee has
not sued, the employer or insurance
company may sue
4) After second year, the rights revert
solely to employee
WORKERS’ COMPENSATION AND EMPLOYERS
LIABILITY INSURANCE POLICY
Section 9.9 (p. 143)
WHAT does a standard policy contain?
(p. 143)
Workers’
Compensation
Insurance
Employers Liability
Insurance
Other States
Insurance
General Section
(p. 143)
Your Duties If
Injury Occurs
Premium
Conditions
Part One—Workers’ Compensation
(p. 143)
Contains basic information
and definitions that apply to
the policy
No
Exclusions
Covers BI resulting
from any accident
including death
Cost of
defending
employer
No dollar
limit
Supplementary
Benefits
Part Two—Employers Liability
(p. 143)
WHAT does Part Two
cover?
(p. 143)
Claims by
employees
not subject to
WC
Claims by others
for the liabilities to
insured’s employees
Claims by relatives of
injured employees for
consequential damage
Exclusions:
1) Liability assumed under contract
2) Punitive or exemplary damages for
employments in violation of law
3) Obligations under any compensation law
4) Injuries intentionally caused or
aggravated by the insured
5) Injuries outside the US and its territories
or Canada except if US or Canadian
citizens temporarily outside the country
6) Obligations under Federal Acts
(Longshore and Harbor Workers, Jones
Act)
7) Fines or penalties imposed for violation
of state or federal laws
Part Three—Other States
(p. 144)
Part three provides coverage for states
NOT listed in part one. The state must
be listed in part three and the insurer
must notify the insured if work begins
in the “part three state”.
Limits:
100/100/500
1) $100,000 for all
claims in each
accident
2) $100,000 per
employee for
disease
3) $500,000 for all
disease claims
Part Four—Your Duties If Injury Occurs
(p. 144)
Part four provides that the insured is required to notify
the insurer once an injury occurs and make sure the
injured employee is given immediate medical services.
Part Five and Six—Premiums and
Conditions
(p. 144)
Provides how the premiums are
calculated and the company reserves
the right to audit the insured’s records
for up to 3 years after the policy
expires. The company is also given the
right to inspect the employer’s
workplace at any time to determine
insurability or to establish premiums.
Other Exclusions, Provisions
(p. 145)
WHAT are the other exclusions and
provisions?
(p. 145)
No coverage
under federal
laws, but can be
endorsed to afford
such coverage
No coverage
if provided
under another
policy or
self-insured
RATING
Section 9.10 (p. 145)
WHAT are the rates
determined by?
(p. 145)
Classifying
Risks
Payroll
Loss
Experience
y
Enforced b
rules
NCCI and
filed
and rates
ffice
with th e O
ce
of Insuran
Regulation
No cancellation
without 30 days’
notice to insured and
the Division. Once
the policy has been in
force for over 90
days, the cancellation
is extended to 45 days
Non-payment
cancellation is
10 days
UNIT TEN:
Crime
CRIME AND EMPLOYEE DISHONESTY INSURANCE
Section 10.1 (p. 146)
WHAT is covered under this Commercial
Property Causes of Loss special form?
(which includes the “open perils” feature)
(p. 146)
Keep in mind that
exclusions and
limitations
define the coverage
Theft
Burglary
Robbery
Commercial Property Cause of Loss-Special Form excludes:
1) Loss form employee dishonesty
2) Voluntary parting with property through trick and device
3) Limits coverage for property of others and property away from insured
premises
Commercial Property Building and Personal Property Form excludes or limits for
loss of:
1) Money
2) Securities
4) Jewelry
5) Precious Metal
7) Patterns and Molds
3) Evidence of Debt
6) Furs
8) Stamps and Tickets
COMMERCIAL CRIME FORMS
Section 10.2 (p. 146)
Exclusions:
COVERAGE:
1) Acts committed by named insured, partners,
members, employees, directors, trustees, or
representatives (except under Employee
Theft)
2) Governmental action
3) Indirect Loss
4) Legal Expenses
5) Nuclear Losses
6) War
Coverage can be written
as part of a package or
stand-alone policy.
Coverage includes
primary insuring
agreements. Each
agreement carries its
own limit and deductible
or can be left out
PRIMARY INSURING AGREEMENTS
Section 10.3 (p. 147)
7 Primary Insuring Agreements in Commercial Crime Coverage Form
1) Employee Theft: Provides coverage for loss or damage to money, securities, and other property
resulting from theft by an employee.
Theft—the unlawful taking of
•
Employee Theft can be written:
a. Scheduled person
b. Scheduled position
c. Blanket coverage
•
•
•
•
The employee doesn’t have to be identified
Deductible of $500 applies
No coverage for loss is the proof is dependent upon inventory shortage or profit or loss computation
Coverage is cancelled upon discovery of any dishonest act committed by the employee; 30 days
written notice
money, securities, or other property
to the deprivation of the insured
2) Forgery or Alteration: Provides coverage for loss by forgery or alteration of negotiable instruments
• Negotiable instruments must be drawn by named insured or one acting as the named insured’s agent
• Gives back the generally excluded coverage for legal expenses incurred in defending a lawsuit for
refusing to pay
3) Inside the Premises-Theft of Money and Securities: Provides coverage for loss from within the
insured’s building within a banking premise or similar place of safe depository
Money—is defined as currency, coins,
Securities—negotiable or nonnegotiable
bank notes, travelers checks, and money
orders
instruments or contracts representing
money or property
4) Inside the Premises-Robbery or Safe Burglary of Other Property: Provides coverage for loss or
damage to property other than money and securities from INSIDE the premises resulting from a
robbery (attempted or actual) of a custodian. Damage to premises, locked safe or vault is also
provided.
Custodian—is you, your
Other Property—any tangible
Safe Burglary—is the taking or attempted
partners, or an employee, but
not leased employees
property other than money and
securities that has intrinsic
value not otherwise excluded
taking of property from within a locked safe
or vault by unlawful entry, with visible
marks of forcible entry or taking of the safe
or vault from inside the premises
Exclusions:
a. Accounting errors
b. Giving, surrendering, voluntary parting of title of any property
c. Fire, except damage to safe or vault
d. Vandalism
e. Transferring property to someone based on unauthorized instructions or threat to harm others
•
Special Limit: $5,000 per occurrence for precious metals, precious or semiprecious stones, pearls,
furs, manuscripts, drawings or records
5) Outside the Premises: Provides coverage for loss of money and securities outside the premises in the
CCC (care custody, control) of a messenger or armored car service resulting from theft, disappearance
or destruction. Also includes robbery of other property under the same circumstances.
Exclusions:
a. Accounting errors
b. Giving, surrendering, voluntary parting of title of any property
c. Fire, except damage to safe or vault
d. Vandalism
e. Transferring property to someone based on unauthorized instructions or threat to harm others
6) Computer Fraud: Provides coverage for loss of or damage to money, securities, and other property
resulting from using a computer to fraudulently transport property from inside the insured’s premise (or
banking premise) to a person or place outside the premise, which encompasses anywhere in the world.
Exclusions:
a. Inventory shortage
•
Special Limit: $5,000 loss of manuscripts, drawings, records, and cost of reconstruction
7) Money Orders and Counterfeit Paper Currency: Provides coverage for loss resulting from having
accepted counterfeit currency or money orders in good faith in exchange for merchandise, money, or
securities. This includes money from any country.
ADDITIONAL INSURING AGREEMENTS AVAILABLE
BY ENDORSEMENTS
Section 10.4 (p. 149)
1) Extortion: Covers for all types of property when surrendered away from the premises as a result of
a threat to do bodily harm to the insured or an employee, or to a relative or invitee of either, who is
(or allegedly is) being held captive. The coverage is also triggered by threats to damage property
within the premises.
2) Client’s Property: Covers non-owned property for which the insured is legally liable while the
property is on the premises of the insured’s client
3) Funds Transfer Fraud: Covers loss due to fraudulent transfer of funds through the use of
telephone or fax machine
4) Lessee of Safe Deposit Boxes: Covers theft, disappearance, or destruction of securities: burglary or
robbery of other property from within places of safe depository.
5) Securities Deposited With Others: Covers theft, disappearance, or destruction of securities, which
have been deposited with a custodian, such as a bank or stockbroker.
6) Safe Depository: Covers the named insured’s legal liability if it is the safe depository for
customer’s property. Includes burglary, robbery, destruction, or damage
7) Guest’s Property: Covers the named insured’s legal liability for guest’s property while in a safe
deposit box or while the property is inside the premises or in the named insured’s possession.
“All Risk” Coverage, but excludes:
1) Loss due to fire
2) Loss due to spilling food or beverages
3) Loss resulting from insects, animals
4) Loss resulting from wear and tear
5) Loss resulting from inherent vice
6) In care, custody, of named insured for laundering or cleaning
DISCOVER VS. LOSS SUSTAINED COVERAGE
Section 10.5 (p. 150)
Discovery: form that states any loss
discovered during the policy period or
within 60 days after its expiration (one
year from expiration for losses connected
with employee benefit plan) regardless of
when it occurred. Retroactive date may be
established to limit exposure for the
insured.
Loss Sustained: form that covers only
losses that both occurred and were
discovered during the policy period or
within one year of its expiration. Will also
cover losses that occurred under previous
crime policies that have expired and were
discovered during the current policy year,
as long as coverage had continued without
interruption at the time of loss.
OTHER CRIME COVERAGE PROVISIONS
Section 10.6 (p. 150)
Other Insurance: policy is EXCESS over any other recoverable insurance
Property Covered: covers only property the named insured owns or holds or for
which the insured is legally liable, and only for the benefit of the insured
Valuation: money is valued at face value, securities at their value on the day loss
is discovered, and other property at replacement cost or cost to repair
Government Crime: form tailored for insuring governmental entities
UNIT ELEVEN:
Surety Bonds
SURETY VS. INSURANCE
Section 11.1 (p. 151)
The difference between surety and insurance:
SURETY
INSURANCE
Three-Party Contract
Non-cancelable
Recovery Rights by Surety
Two-Party Contract
Cancelable
No Recovery Rights by Insurance
Surety Bond is one wherein the fulfilling of an obligation
by one party to another is guaranteed by a third party.
PARTIES TO A BOND
Section 11.2 (p. 151)
WHAT are the three parties to a
contract of suretyship?
(p. 151)
Principal: One who
promises to perform,
fulfill a contract, or
meet an obligation
Obligee: One who
is to be guaranteed
that the principal
will perform
Surety: One who
guarantees the
performance of the
principal to the obligee
At times there may be another
party to the bond, called an
indemnitor (one who agrees to
reimburse the surety for any loss it
may suffer from having bonded the
principal.
THE BONDING PROCESS
Section 11.3 (p. 152)
WHAT does surety wish to satisfy itself on?
(p. 151)
Character of the
principal
Financial
resources of the
principal
Experience or
capabilities of the
principle
CONTRACT BONDS
Section 11.4 (p. 153)
Contract Bonds are normally required by law on construction work for public entities. Principal subclassifications of contract bonds:
1) Bid Bond: Surety guarantees that if the bud is accepted, the bidder will enter into a contract and
will satisfy further bonding requirements. If the bidder cannot perform the work, the bond will pay
the difference between his bid and the next highest bidder
2) Performance Bond: Guarantees indemnification to the oblige for any losses resulting from the
principal’s failure to complete the contract work in accordance with specifications. If in default, the
surety can:
a. Have the defaulting contractor complete the work and pay the costs
b. Call in another contractor
c. Pay the costs to have the oblige have someone else finish the job
3) Payment Bond: Guarantees all labor and materials for the project will be paid by the contractor
upon completion of work. This assures no liens on the project.
4) Maintenance Bond: This bond is required if the principal is responsible after completion of the
project for faulty work or defective materials.
5) Subdivision Bond: Guarantees the promised streets, sidewalks, sewer, and other required
improvements will be installed
6) Supply Contract Bond: Guarantees delivery of supplies at an agreed upon price.
FIDUCIARY AND COURT BONDS
Section 11.5 (p. 156)
Fiduciary Bonds guarantees
the performance of a person
appointed by a court, will,
or deed, or other financial
matters of another.
Judicial Bonds are
either fiduciary or
court.
WHAT are the three types
of fiduciary bonds?
(p. 154)
Probate Bond:
designed for those who
administer estates of
deceased persons
Court Bonds are furnished by
both the plaintiff and defendants
in litigation to protect opposing
party if the opposing party fails
to show a legal entitlement to the
remedy sought
Conservation Bond:
designed for those who are
appointed to manage and
preserve property other than
estates of descendants, such
as guardian of a minor
Insolvency Bond:
required of persons
appointed to conserve
remaining assets and
protect creditors such as
receivers and trustees
One type of court bond is a Bail
Bond, which guarantees
the
appearance in the court.
LICENSE AND PERMIT BONDS
Section 11.6 (p. 154)
1) License Bond: Required a public body to guarantee licensee will operate in conformity with laws,
protect public against harm from unfair business practices, and guarantees the proper collection
and payment of taxes
2) Permit Bond: Similar to a license bond except it deals with permitting a specific function rather
than a continuous operation
3) Indemnity Bond: Hold governmental bodies harmless from any injuries or damage caused by the
principal’s activities
4) Franchise Bond: Required by a public body when it awards a franchise such as a TV cable
system, transportation system, gas, or telephone company
MISCELLANEOUS BONDS
Section 11.7 (p. 155)
1) Public Official Bonds: Guarantees the principal will uphold the oath of the office and faithfully
perform the duties of the office
2) Lost Instrument Bond: Guarantees to save the issuer of stock certificates, bonds, or similar
instruments from any loss when a person loses the instruments
3) Self-Insurance Bond: Provide to an authority as evidence of compliance with insurance
requirement
4) Blue Sky Bond: Required of investment companies, guaranteeing against misrepresentation of
securities and defrauding the public
5) U.S. Internal Revenue Bond: Required of those who collect and report taxes for certain
controlled commodities
6) Customs Bond: Required of those who import or export, guarantees customs will be collected,
reported, and paid
UNIT TWELVE:
Marine
INLAND MARINE INSURANCE
Section 12.1 (p. 156)
WHAT risks are eligible for Ocean or Marine
Insurance?
(according to the Nationwide Definition)
(p. 156)
Imports
Exports
Domestic
Shipments
Instrumentalities of
Transportation or
Communication
Function of Inland Marine:
Personal
Property
Floaters
Risks
Commercial
Property
Floater
Risks
Categorized as:
Covering property while in transit or subject
1) Controlled: One wherein a
standard provision is promulgated
by a bureau, such as ISO and
filed for uniform use
2) Uncontrolled: One wherein the
individual may use its own form
and vary it for the individual risk
to transit, land mobile equipment (not licensed
highway equipment), and instrumentalities of
transportation and communication such as
bridges, tunnels, radio, TV towers, aerial
navigation beacons, dams, piers and docks,
pipelines, and power transmission lines
COMMERCIAL INLAND MARINE POLICIES
Section 12.2 (p. 156)
When written as part of the CPP, the
Commercial Inland Marine requires three
additional items along with the Common
Policy Declarations and the Common
Policy Conditions.
There is no one standard policy since there is
a wide variety of mobile property. Instead,
each property requires a unique policy form.
The Three Additional Items:
1) Commercial Inland Marine Declarations Form
2) Commercial Inland Marine General Condition
Form
3) One or more of the following Controlled
Coverage Forms:
a. Account Receivable
b. Camera and Musical Instruments Dealers
c. Commercial Articles
d. Equipment Dealers
e. Film
f. Floor Plan
g. Jewelers Block
h. Mail Coverage
i. Physicians and Surgeon Equipment
j. Signs
k. Theatrical Property
l. Valuable Papers and Records
There are also Commercial Inland Marine
Uncontrolled Forms:
1)
2)
3)
4)
Annual Transit
Trip Transit
Motor Truck Cargo
Instrumentalities of Transportation or
Communication
5) Bailees Customers (Cleaners, Dryers, and
Laundries, Furriers, and Warehousers)
6) Furriers Customers
7) Contractors Equipment
8) Installation
9) Installation Sales
10) EDP
11) Dealers (Furriers Block, Art, Coin and Stamp)
Uncontrolled forms may be written on an
all-risk or named peril basis.
Domestic Shipments
(p. 158)
Domestic Shipments: Covers against loss to cargoes while in transit.
Annual Transit Policy: Uncontrolled for that protects the shipper or receiver of goods against loss to
goods in transit. Written on a named peril basis. Covers insured’s incoming or outgoing shipments
during the year.
Trip Transit Policy: Uncontrolled form similar to annual transit but it is used to insure single
shipments for companies who only occasionally ship.
Motor Truck Cargo Policy: Uncontrolled form designed to protect the carrier instead of the shipper
for the loss of shipments in transit. Carrier is not responsible for acts of God.
Mail Coverage Form: Controlled form that provides all risks coverage against loss to property sent by
registered mail, first class mail, certified mail, or express mail.
Instrumentalities of Transportation and Communication
(p. 158)
Bridges, tunnels, oil pipelines, dams, piers, docks, radio, and TV
towers can be covered under uncontrolled forms. Coverage is for
both direct damage and loss of revenue caused by damage.
Commercial Property Floater Risks—Bailees
(p. 159)
Bailment—the delivery of property
Consists
of bailee
policies
by the owner to someone else to be
held by the latter for some special
purpose and then returned to the
owner
Bailee—the one who
Bailor—the one who
receives the property
owns the property
WHAT are the bailee policies?
(p. 159)
Cleaners, dryers, and
laundries—confusion of goods
Furrier
Warehouse
Commercial Property Floater Risks—Equipment Dealers
(p. 159)
Contractors Equipment Floater: Uncontrolled form that covers heavy machinery, equipment,
tools that contractors need. Protected from fire, landslide, theft, and other perils while on the
job site, on the way to and from a job site, and while equipment is temporarily stored.
Physicians and Surgeons Equipment Form: Controlled Form that covers medical, surgical,
and dental instruments on and off the premises. Also covers furniture at the doctor’s office.
Theatrical Property Coverage Form: Controlled form that covers scenery, props, and
costumes used by a theatre group.
Film Coverage Form: Controlled form covers exposed film, sound tracks, and properly
recorded tapes.
Commercial Articles Coverage Form: Controlled floater that covers photographic equipment
or musical equipment used commercially by newspapers or orchestras.
Commercial Property Floater Risks—Business Floaters
(p. 160)
Accounts Receivable Coverage Form: Controlled form that covers amounts that can’t be
collected from customers due to damage to the company’s accounts receivable records. Also
covers extra collection expenses, cost to reestablish records, and interest on any loans used to
stay in business.
Valuable Papers Coverage Form: Controlled form that reimburses the insured for the cost of
replacing manuscripts, films, maps, drawings, deeds, books, or other printed, inscribed, or
written documents not including money or securities.
Installation Coverage Form: Uncontrolled form that insures against loss to machinery,
equipment, building materials, or supplies in transit to or being used in installation.
Installment Sales Floater: Covers property sold on installment basis.
Signs Forms: Controlled form that covers fluorescent, automatic, or mechanical electrical signs.
Electronic Data Processing: Property covers data, equipment, media, and extra expenses.
Liability covers insured’s handling and storing data for other firms.
Floor Plan Form: Controlled form that covers merchandise for sale that has been financed.
Commercial Property Floater Risks—Dealers Policies
(p. 161)
Policy includes coverage for jewelers, furriers, art, coins, stamp, camera, musical
instruments, and equipment (mobile agriculture or construction). Covers all risks on or
off premises, while in transit, and in the custody of employees. Also covers property
of others in the insured’s custody. Can be reporting or non-reporting.
RATING
Section 12.3 (p. 161)
Personal:
Generally rated based
on a rate per $100
insurance which varies
by class
Commercial:
Uses rating applicable
to Commercial
Property as a base
OCEAN MARINE INSURANCE
Section 12.4 (p. 162)
This is the oldest form of insurance.
Uses “utmost good faith” because
underwriters cannot be in a position
to investigate the risk.
Ocean Mar ine cover ages classified as:
1) Hull: Covers for loss of or damage to the vessel
for perils of fire, lighting, earthquake, assailing
thieves, perils of the sea, jettison, barratry of the
master or mariners, and all other like perils.
Typical coverage would use an average (stated
flat deduction is made) or a franchise (no payment
until the loss reaches a certain limit. If loss is
reached usually applied as a percentage or
expressed in dollars) form of deductible.
2) Cargo: Covers goods being shipped. Uses two
forms:
a. Floating or open form: covers goods of a
certain class up to certain limits both
incoming and outgoing shipments
throughout the year
b. Single risk form: Covers a particular
shipment only
3) Freight Coverage: Covers freight charges if they
are not paid.
4) Liability Coverage: Risk that the ship will
collide with another vessel will be covered
through a collision or running down clause
which is made part of the policy.
Demurrage—Damages which a charterer agrees to pay as
damages for delay in loading or unloading or for time lost by
vessel from pursuing profitable employment by perils of the
sea or accidental causes. This is excluded by marine policies
Ocean Marine Perils
(p. 163)
1) Perils of the Seas: Includes wind, waves,
collision, stranding, sinking, and other such
accidents. Fire loss is called perils on the seas
not of the seas.
2) War: Ocean Marine does not include loss
from war perils, but can be added by
endorsement called a “free capture and seizure
clause”.
3) Fire: Named as a separate peril. Includes both
direct and consequential losses.
4) Enemies: Includes all types of taking of the
insured property by force.
5) Jettison: Voluntary throwing overboard parts
of the ship or cargo in order to save the vessel
from sinking.
6) Barratry: Covers fraud by the master crew
with intentions of reaping gains at the expense
of the owner.
7) All Other Like Perils: Includes perils of
the same nature as otherwise covered in
Total Losses
(Actual and Constructive)— Actual: property
the policy.
no longer exists or is beyond salvage
Constructive: cost to salvage plus cost to recondition exceeds
value
C.F.—Cost and Freight.
General
Average
Clause
C.I.F.
means
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average
loss
will
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which
might
destroy
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reach
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UNIT THIRTEEN:
Aviation
AIRCRAFT HULL POLICIES
Section 13.1 (p. 166)
WHAT are the coverage options?
(p. 166)
Protects against the risk or loss or
damage to an insured aircraft.
Deductible:
All risk of physical
damage for aircraft
not in flight
Named peril
while in flight
All risk whether
in flight or not
“Not in motion”—does not require
a deductible
“In motion”—expressed as
percentages: 2.5%, 5%, and 10%
AIRCRAFT LIABILITY COVERAGES
Section 13.2 (p. 166)
Covers public and passenger liability and property damage liability
Limits: Usually applied in same manner as auto, split per person for each occurrence and each
occurrence for property damage. Single limit coverage is one single amount for BI and PD per
occurrence.
Territory limits include:
1) U.S.
2) Canada
3) Mexico (limited to within 100 miles of the border)
ADMITTED AIRCRAFT LIABILITY COVERAGE
Section 13.3 (p. 167)
Written as adjunct to Passenger Liability, not applicable to passengers carried for hire.
Provides for principal sum payments for death or dismemberment if:
1) The named insured requests it
2) The company is released from further liability
MEDICAL PAYMENTS COVERAGE
Section 13.4 (p. 167)
Provides medical expenses for BI injuries by accident, without regard to legal liability.
Similar to PAP medical payments in that it provides for medical, surgical, ambulance,
hospitals, etc. while in, entering into, or alighting from the aircraft.
SPECIAL AVIATION INSURANCE COVERAGES
Section 13.5 (p. 167)
Miscellaneous coverages are also available:
1) Hangerkeeper’s Liability Coverage: Form of bailee insurance, covers liability for
damage to aircraft stored for safekeeping or repair. Similar to garagekeeper’s insurance.
Protects the insured against legal obligations for injury or destruction of the aircraft of
others in the custody of the insured for storage, repair, or safekeeping. Covers all damages
except those excluded.
2) Airport or Air Meet Liability: Provides protection very similar to premises and
operations liability under a CGL policy. Covers BI and PD liability.
3) Products Liability: Provides coverage for manufacturers and sales or repair organizations
against liability claims that are attributed to defective products or work.
4) Cargo Liability: Protects against legal liability for loss or damage to cargo or
baggage.
EXCLUSIONS
Section 13.6 (p. 168)
Policy will not cover while insure aircraft is:
1) Maintained for any purpose other than the use classification
2) Operated while in flight by
a. Someone other than the pilot named in the policy
b. By a declared pilot operating outside the limitations imposed
by the declarations
c. Any other condition requiring special permit by FAA
All apply to all
coverages for
both hull and
liability
sections of
the policy
The following exclusions apply also to hull insurance:
1) No coverage for loss caused by conversion, embezzlement,
or secretion by any leassee or any other person in possession
of the aircraft under bailment lease, conditional sale,
mortgage, or other encumbrance
2) Other all-risk exclusions such as wear and tear,
deterioration, freezing, mechanical or electrical breakdown
UNDERWRITING CONSIDERATIONS
Section 13.7 (p. 169)
WHAT basic questions are asked when
underwriting an aircraft hull policy?
(p. 169)
Pilot qualifications
Size
Type
Age and
Condition
UNIT FOURTEEN:
Boiler and Machinery
BOILER AND MACHINERY POLICY
Section 14.1 (p. 170)
WHAT does the policy contain?
(p. 170)
Declarations
Common
Policy
Conditions
Coverage
Form
Object
Definitions
Endorsements
WHAT are the coverage forms?
(p. 170)
Boiler and
Machinery
Small Business
Boiler and
Machinery
Small Business Boiler
and Machinery Broad
Form
BOILER AND MACHINERY COVERAGE FORM
Section 14.2 (p. 170)
Covered Cause of Loss—an
Boiler and Machinery Coverage Form is divided into the following sections: A—Coverage B—Exclusions C—Limits of Insurance D—Deductible E—Conditions F—Definitions accident to an object shown in
the declarations, which is in
use or connected for use at a
specified location
Coverage Section
states insurer will
pay for direct
damages to
covered property
from a covered
cause of loss.
Accident—a sudden and
accidental breakdown of the
object or part of the object,
which, at the time of
breakdown, manifests itself by
physical damage to the object
that necessitates replacement or
repair
Excluded from accident definition:
1) Depletion, deterioration, corrosion,
erosion, wear, and tear
2) Leakage at any valve, fitting, shaft,
seal, etc.
3) Breakdown of any vacuum tube,
gas tube, brush, etc.
4) The functioning of any safety or
protective device
Extension of Coverage from Part A
Expediting Expenses: Reimbursement for cost to
temporary repairs and to expedite permanent repairs or
replacement ($250 deductible)
Automatic Coverage: 90 days automatic coverage for an
accident at newly acquired location. Subject to highest
limit and deductible as stated in declarations for same
type of object
Defense: Insurer will defend the insured against claims or
suits arising out of covered occurrences. No dollar limit
Exclusions from Part B
1) Any increase in a loss from
enforcement of a law regulating repair,
alteration, use, operation, construction,
or installation
2) War and nuclear hazard
3) Fire and explosions under varying
circumstances designed to overlap
between coverage provided in CP and
BM
4) Windstorm, hail, freezing
5) Lightning, aircraft, vehicles, sinkhole
collapse, smoke, sprinkler leakage or
weight of ice, snow, or sleet, if
coverage is otherwise provided
6) Flood, except if an accident results
from flood, direct damage is covered
7) Accident to object while it is being
tested
8) Lack of power, light, heat, steam, or
refrigeration
9) Any direct loss
Supplementary Payments: Liability claims, the insurer
pays all litigation costs
Limits from Part C
Basic limit is $500,000
Limitations:
1) $25,000 maximum for expediting expenses
2) $25,000 for cleanup, repair, replacement, disposal if
damage is caused by substance declared hazardous by
government (except ammonia)
3) $25,000 caused by ammonia contamination
4) $25,000 damage by water refrigeration
Deductibles from Part D
Dedictible is subtracted from the amount that would
otherwise be paid for each accident. If more than one object
is involved in a single accident, the highest deductible will
apply.
$500 standard deductible, higher deductibles are optional
Conditions from Part E
Valuation Clause: Provides for replacement cost on all covered property. If
replacement or repair is not made within 18 months, then ACV applies.
Suspension Condition: Contains condition that states when an object is found to
be in, or exposed to a dangerous condition, any representative from the company
can suspend the insurance against loss or accident. The suspension can be done
by delivering or mailing a written notice to your last known address or the
address where the object is located.
OBJECTS DEFINITION FORMS
Section 14.3 (p. 173)
A brief list of some of the types covered are:
1) Boilers
2) Refrigeration
3) A/C equipment
4) Generators
5) Pumps
6) Engines
7) Machinery
8) Compressors
9) Transformers
10) Turbines
It is not important to know
the details of all the object
definitions. Definitions of
objects forms are highly
technical.
INDIRECT LOSS COVERAGE ENDORSEMENTS
Section 14.4 (p. 173)
There are three forms available:
1) Valued Business Interruption: Pays an agreed dollar limit for each day of total interruption, or a
proportionate part of that limit for partial interruption. States daily limit and dollar amount based on 10,
100, 126, 153, 180, 215, 270, or 360 times the daily limit. Deductible can be expressed in days (number of
days before recovery) or dollar amount.
2) Actual Loss Sustained Business Interruption: Covers actual loss profits and continuing through the
interruption period. Subject to 100% coinsurance. The amount of insurance is related to the annual net
profits plus fixed expenses of the insured contained in the required annual reports. Deductible same as
Valued form.
3) Extra Expense: Pays for extraordinary expenses incurred to maintain ongoing operations, over and above
normal expenses that would have been experienced if no accident to the covered object. Endorsement
schedule applies limits to selected amount of coverage. Deductible dollar amount applies.
MISCELLANEOUS OPTIONS
Section 14.5 (p. 174)
Limited Coverage Endorsement: Redefines accident to cover only sudden and accidental tearing asunder of
the object as opposed to sudden and accidental breakdown.
Actual Cash Value: Change loss settlement conditions from replacement to ACV basis
Additional Expediting Expenses, Water Damage, and Ammonia Contamination Endorsements: Increases
$25,000 limit for each to any desired higher amount. Does not increase per accidental limit, only the amount
available within such limit for those exposures.
Bodily Injury Liability Endorsement: Provides excess coverage over any other liability insurance.
Consequential Damage Endorsement: Covers loss due to spoilage from lack of power, light, heat, steam, or
refrigeration caused by an accident to a covered object. Object must be stated in endorsement. This is a form
of indirect loss.
SMALL BUSINESS FORMS
Section 14.6 (p. 176)
Small Business Boiler Machinery Form:
Used by risks that has an 80%
equipment replacement
value not
over $5,000,000
1) Blanket coverage for all objects without specific
identification in the Declarations
2) Covered property and covered causes of loss are the same
as in the Boiler and Machinery policy
3) Business Interruption includes extra expense and covers
on an actual loss sustained basis for 25% of the limit that
applies to property damage as an additional amount of
insurance
4) Exclusions
a. No coinsurance clause
b. No coverage for increased loss expenses due to
hazardous substances
5) Standard Deductible of $500 per accident
Small Business Boiler and Machinery Broad Form includes all the above by
differs in the following:
1) Property Damage and Business Interruption/Extra Expenses applies blanket to
all objects
2) Spoilage coverage may be included, subject to limit of $5,000, $10,000, or
$25,000 and a separate deductible of $500
3) Internal limits for hazardous substances (other than ammonia) and ammonia
contamination are each $25,000 per accident
UNIT FIFTEEN:
Health
Health Insurance—also known as disability insurance, is
Health insurance does not include
Workers’ Compensation coverage.
insurance of human beings against bodily injury,
disablement, or death by accident or accidental means, or
the expense resulting form sickness or disablement
GENERAL POLICY PROVISION
Section 15.1 (p. 176)
No sta ndard
forms of health
insurance
policies
Typical Exclusions:
1) WC applies or no-fault benefits apply
2) Childbirth, normal pregnancy, elective abortions
3) Treatments in a VA hospital
4) Self-inflicted injury or suicide
5) Dental expenses
6) Mental illness
7) Injury while member of an aircraft crew
8) Cosmetic surgery
9) War
10) Illness before inception of policy
Coverage Continuation Provisions:
1) Cancellation Clause: Florida law requires no
less than 20 days notice
2) Optionally Renewable: Company cannot
cancel, but reserves the right to non-renew at
expiration
3) Conditionally Renewable: Company can
refuse to renew only under certain conditions,
but the company must state the condition
4) Guaranteed Renewable: Company must
renew to a stated age, usually 65. Company
cannot cancel but can raise the premium
5) Non-Cancellable: Company cannot
cancel, non-renew, or raise the premium
Other General Provisions:
1) Grace Period:
a. Weekly, 7 days
b. Monthly, 10 days
c. All other, 31 days
2) Reinstatement:
a. Policy will lapse if insured does not pay by end of the grace period
b. Florida law reinstates at time of approval by application
c. Automatic after 45 days if insurer fails to notify insured
d. After reinstatement, all accidents are covered immediately, but sickness is subject to a 10-day
waiting period
3) Limitations on Insurer Defense: A clause required by Florida law states that after 2 years from issue date,
only fraudulent misstatements in the application can be used to void the policy or deny a claim
4) Waiting or Elimination Period: States a time period between issuance and acceptance before sickness
benefits begin
5) Waiver of Premium: Waives premium if insured becomes disables
6) Double Indemnity: Doubles the death benefit under certain circumstances
APPLICATION
Section 15.2 (p. 178)
WHAT does the application include?
(p. 178)
Age
Sex
Occupation
Earnings
Present and
past health
Previous
claims
Other
coverage
owned
Beneficiary
designation
TYPES OF POLICIES
Section 15.3 (p. 179)
Hospitalization
Expense
Insurance
Hospital
Indemnity
Insurance
Physicians
Coverage
Accident
Insurance
Major
Medical
Insurance
Surgical
Expense
Insurance
Disability
HMO
And
PPO
Medicare
Supplement
HOSPITALIZATION EXPENSE INSURANCE
Section 15.4 (p. 179)
WHAT does the hospitalization expense
insurance cover?
(p. 179)
Room and
board
Nursing
Lab
fees
Operating
room
Medical supplies
and related items
Policy states a limit
for daily room and
board charges up to
a maximum number
of days and other
limits OR one
blanket limit on the
additional hospital
fees. HOSPITAL INDEMNITY
INSURANCE
Maternity benefits are usually optional but if
elected a 9-month waiting period applies.
Section 15.5 (p. 179)
This policy pays a flat amount per day and
provides supplemental coverage for other
inadequate policies due to rising costs
ACCIDENT INSURANCE
Section 15.6 (p. 179)
Covers costs due to accidents
including loss of income.
SURGICAL EXPENSE
INSURANCE
Exclusions:
1)
2)
3)
4)
5)
Hernia
War
Bacterial infections
Suicide attempts
Air travel injuries if not a fare-paying
passenger
6) Accidents while committing a felony
7) Accidents under the influence
Section 15.7 (p. 180)
Policy covers fees for physicians performing surgery
with a maximum cap. The policy provides a fee
schedule for certain types of surgeries.
PHYSICIANS COVERAGE
Section 15.8 (p. 180)
The policy pays for nonsurgical care provided by the physician either in the
hospital, patient’s home, or office.
Patient is usually set a limit per visit subject to a maximum number of visits.
MAJOR MEDICAL INSURANCE
Section 15.9 (p.180)
This policy is intended for catastrophic losses.
Policy provides for:
1) Most expenses relating to a covered sickness or injury
2) Expenses in the doctor’s office, hospital, or home
3) Room and Board
4) Physicians and surgeons fees
5) Operating room
6) Lab
7) Transfusions
8) Drugs
9) X-rays
10) Anesthetics
11) Nursing services
WHAT is the policy
characterized by?
(p. 180)
Deductible
High maximum
limit
Percentage
participation or
coinsurance
DISABILITY INCOME INSURANCE
Section 15.10 (p. 181)
Policy provides periodic income payments when the
insured is unable to work due to sickness or injury
Policy may have rates that
vary, depending on
occupation of insured.
Waiting period before payments begin:
1) 30, 60, 90 days are common
2) 6 months to year on some policies
“Non-prorating policy”
does not reduce benefits
if the insured changes to
a more hazardous
occupation.
Some policies pay reduced benefits for: Florida law requires the
benefits not to exceed the
Total
disability
average monthly earnings
for the 2 years preceding
the disability
Partial
disability
Riders:
Total Disability—means a
Partial Disability—means
complete inability to do any work
or to do work that the insured is
qualified by education, training,
experience, or own occupation
the insured can perform
limited duties or the time is
reduced that the insured can
work
1) Social security provides for additional
income when the insured is eligible for
Social Security, but the benefits have not
begun, or have been denied or reduced
2) COLA (cost of living adjustment) rider
provides for indexing the benefit payable
under the policy to changes in the
Consumer Price Index
3) Guaranteed insurability rider guarantees
the right to purchase additional coverage at
predetermined times in the future without
evidence of insurability. The rider may be
contingent upon the insured meeting
certain earnings test prior to each purchase
to avoid over-insurance
Indemnity Benefit—means the
insured may elect to receive a
lump-sum on a loss-by-loss
basis for certain injuries in lieu of
weekly or monthly benefits
MEDICARE SUPPLEMENT INSURANCE
Section 15.11 (p. 183)
This supplement fills medical cost
Supplemental policies must be:
gaps that are not covered by
1)
2)
3)
4)
5)
Medicare. Florida Statute 627.671675 establishes standards for any
policy to be advertised as a Medicare
Supplement policy.
In understandable language
Returnable in 30 days
Accompanied by an outline of coverage
Accompanied by a Supplement Buyer’s Guide
Unable to limit coverage for more than 6 month
because of pre-existing health conditions
HEALTH MAINTENANCE ORGANIZATIONS
Section 15.12 (p. 183)
The HMO provides comprehensive health
coverage to its members for a prepaid fixed fee
equivalent to an insurance premium.
HMO characteristics include:
1)
2)
3)
4)
Employed physicians
Fewer exclusions
Small or nonexistent deductibles
Coinsurance provisions
The HMO’s primary goal is to decrease
the extent of health losses through
preventative activities such as:
1) Wellness programs
2) Diagnostic screening
3) Early treatment
PREFERRED PROVIDER ORGANIZATIONS
Section 15.13 (p. 183)
A PPO is a select group of hospitals and medical practitioners who
have joined together to reduce medical costs.
The PPO has a contract with a traditional insurance company or the
Blue Cross to provide the groups services at a prearranged cost.
HMO VS. PPO
Some of the differences between the HMO and the PPO are: 1) PPOs have no separate facility in which to see patients 2) PPO members go to their physicians and hospitals and, of those physicians or hospitals have a contract with the PPO, then the contracted price will be paid 3) PPOs can negotiate a volume discount from the service providers 4) PPOs allows their members to be treated at an emergency center if they are not PPO service providers UNIT SIXTEEN:
Residual Markets
When the voluntary insurance market is
unable to meet the needs of Florida residents,
the Florida Legislature establishes various
These various market
organizations are known as
“residual markets.”
market organizations to provide coverage.
These are:
1)
Required by state statutes
2) Deemed crucial to various insureds
FLORIDA AUTOMOBILE JOINT
UNDERWRITING ASSOCIATION (FAJUA)
Section 16.1 (p.185)
FAJUA is a market
source to those who
are unable to purchase
auto insurance through
normal channels
It is
composed of
All licensed
companies in
Florida that write
auto insurance
by a group of
serving earners
It is available to
Coverage Available
Private Passenger Auto:
1) Liability coverage up to 100/300/50
2) PIP
3) UM
4) Medical Payments $500,$1,000, or $2,000 limit
5) Physical Damage subject to $100, $250, $500 deductibles
Commercial Automobiles:
1) Liability: unlimited limits if required by any law
2) PIP
3) UM
4) Property Damage only for light vehicles under 10,000 lbs
1) Florida Residents 2) Military nonresidents stationed in Florida 3) Nonresidents with autos registered in Florida 4) Subject to Florida No-­‐Fault Law CITIZENS PROPERTY INSURANCE COPORATION
Section 16.2 (p.186)
The Florida Residential Property and
Casualty Joint Underwriting Association
and the Florida Windstorm
Underwriting
Association were merged to form
Citizens in 2001
Eligibility: Applicant must certify that they were
unable to obtain and have received no offer from
an authorized insurer that is less than 15% higher
than the price quoted through Citizens.
Consumer Choice Legislation: Asserts the right
of consumers to select and maintain their agent of
choice. This includes all keep-out and take-out
plans of Citizens
Uninsurable Properties:
1) Vacant or unoccupied properties
2) Disrepair
3) Over 50 years old, unless wiring, heating,
and roof updated
4) Do it yourself construction
5) Condemned properties
6) Inaccessible or property build over water
Commercial Property Market For:
1) Condo associations
2) Apartment buildings
3) Common elements of homeowners
associations
4) Other commercial coverages for
residences
Commercial Property Ineligible:
1) Hotels, motels, boarding houses, rooming
houses, and similar risks
2) Vacant properties, less than 60% occupied
3) Builders risk
4) Mercantile occupancy exceeding 25% of total
building area
5) Condemned risks
6) Disrepair due to neglect
7) No intention to repair by owner
8) Existing sinkhole damage, unless engineer
certifies stabilized
A policy may be
replaced with a
policy from an
authorized
insurer at any
time during the
policy period with
a 60-day notice
Commercial Eligibility: Entitled but unable to
procure commercial property coverage in
voluntary market
Commercial Property Effective: September 1,
2007 up to $2,500,000
Commercial Property Coverage: Utilized
standard commercial property coverage forms and
endorsements. Only the basic Form Perils Causes
of Loss are available
Wind-Only
Covers wind and hail only
Eligible:
1) All types of buildings, including mobile
homes if tied down, and contents
2) Local area must request certification from
DFS
FLORIDA WORKERS’ COMPENSATION JOINT
UNDERWRITING ASSOCIATION
Section 16.3 (p. 188)
Covers: Employees who are unable to either self-insure or secure through normal marketing channels
Eligible:
1) Unable to obtain coverage from at least 2 other carriers
2) Not indebted for any previous unpaid WC premium
Tiers: All FWCJUA are assigned to one of three tiers
•
Tier One
Employees with an experience
modification factor: Below 1.00
•
No lost-time claims subsequent
to the experience modification
rating period
•
Medical-only claims did not
exceed 20% of premium
Employees without experience
modification factor:
•
1)
2)
3)
4)
5)
No lost-time claims for 3 years preceding
inception date or renewal of coverage under
the plan
Medical claims only for 3 years preceding
inception or renewal did not exceed 20%
Has secured coverage for entire 3-year
period preceding inception or renewal
Provide loss history from previous carrier
Not a new business
•
1)
2)
3)
Tier Two
Employers with an experience
modification factor:
Equal or greater than 1.00 but not
greater than 1.10
No lost-time claims subsequent to the
applicable experience modification rating
period
Medical only claims subsequent to the
applicable experience modification did
not exceed 20% of premium
•
Employer has no experience
modification due to being a
new business:
1)
No lost-time claims during that 3 year
period
Medical only claims for that period did
not exceed 20% of premium
Able to provide a loss history during the
period that WC was secured
2)
3)
•
Tier Three
For all
employers who
do not meet
criteria for Tier 1
or Tier 2
Miscellaneous Provisions
(p. 190)
Rates:
Deficit:
Renewal:
Tier 1 rates are set at 25% above
comparable voluntary market rates
If a deficit was to occur in either Tier
1 or Tier 2, funding would come
form an assessment for 1 year on all
WC policies in the voluntary market
Sent 45 days prior to expiration
Tier 3 deficit funding would come
from assessments from Tier 3
participants
FWCJUA insured are entitled
to prorate cancellation when
coverage is secured through the
voluntary market
Tier 2 rates are set at 50% above
comparable voluntary market rates
Tier 3 rates are to be actuarially
sound from the beginning
If premium is not received by
expiration date, coverage ends
UNIT SEVENTEEN:
Florida Statutes and Rules
This unit will focus on the statutes and rules
that normally appear on the state exam
AGENT PRE-LICENSING TRAINING UNAUTHORIZED ENTITIES
Section 17.1 (p. 192)
McCarran-Ferguson Act
Made the business of insurance state regulated in 1945
Unauthorized Entities
Health insurance has been the main problem area for “unauthorized entities”
Insurance market is cyclical (hard and soft market). The hard markets spawn fraudulent
activity.
Problems with “unauthorized entities started about 1974 with the enactment of the Employee
Retirement Income Security Act (ERISA)
Union Plans
Can be an exception to the MEWA if U.S. Department of Labor makes express finding.
If no express finding by the US DOL, then is subject to state regulations
Association Plans
These plans are not exempt from state regulation
Professional Employer Organization
PEG-sponsored health plans not exempt from state regulation
Concerns with Unauthorized Entities:
1)
2)
3)
4)
5)
6)
Ongoing
Criminal activity
Adverse economic impact
Unpaid claims
No guaranty fund to cover unpaid claims
Adverse impact on future insurability of
participants
7) Adverse impact on health care providers
8) Lack of comprehensive federal oversight
9) Perception that state government is
responsible for protecting the consumer
from insurance schemes
WHAT are possible consequences
for aiding and abetting an
unauthorized insurer?
(p. 195)
Third-degree
felony
Liability of
unpaid
claims
Suspension or
revocation of all
insurance licenses
WHAT are possible consequences for acting
as an insurer without a proper license?
(p. 195)
Third-degree felony
Liability of unpaid claims
Suspension or revocation of
all insurance licenses
AGENT PRE-LICENSING TRAINING EITHICS
Section 17.2 (p. 195)
Ethics is striving to
do what is right.
Florida Statute (F.S.) 626.730, Purpose of License
To engage in the insurance business and supervise
activities with respect to the public interest and not just
for controlled business
WHAT is the code of ethics?
(p. 196)
Honesty
and truth
Responsibility
and accountability
Respect and
tolerance
Fairness
and justice
Compassion
and caring
INSURANCE DISCOUNTS FOR WIND MITIGATION
Section 17.3 (p. 201)
Background
In 2007, the Florida Legislature required insurance companies to give discounts on the wind portion
of the homeowners insurance premium for certain and protection features.
Roof Features
1) Roof Shape:
a. Gable Roof: Two slopes that come together to form a peak or ridge giving the appearance of
an “A” shape where the slopes come together.
b. Hip Roof: Slopes upward from all sides so that the lowest point of the roofline is consistent
all the way around the dwelling
2) Roof Covering:
a. Shingle
b. Tiles
C. Metal panels
(all must be tested and installed according to Building Code requirement)
3) Roof Decking:
Neither of these receives discounts
a. Plywood
b. Oriented Strand Board
Credits can be applied based on how the decking is attached to the trusses
4) Roof to Wall Connection: Use of straps and clips in accordance with the Florida Building Code
will qualify the consumer for mitigation discounts. Basic toe nailing does not receive any
discounts.
Opening Protection
Openings such as windows, skylights, doors with and without glass, sliding glass doors, and garage
doors must be tested and approved with either the Florida Building Code or Miami-Dade County
Building Code. Unless they have been tested and approved, they do not qualify for mitigation
discounts.
Miscellaneous Mitigation Credits
Credits are also available for the following types of protection:
1) Secondary water resistance: peel and seal strips
SELECTED FLORIDA STATUTES
Section 17.4 (p.205)
All statutes are paraphrased for purposes of studying for the exam
F.S. 624.06: “Domestic”, “Foreign”, “Alien”, insurer defined
1) A domestic insurer is formed under the laws of this state
2) A foreign insurer is formed under the laws of any other state but Florida
3) An alien insurer is other than domestic or foreign
F.S. 624.09: “Authorized”, “Unauthorized”, insurer defined
1) An authorized insurer is certified by the state to transact insurance in Florida
2) An unauthorized insurer is not authorized
F.S. 626.175, Temporary Licensing
The DFS can issue a temporary license up to 6 months to an employee, family member, business
associate, or personal representative for the purpose of continuing or winding up the business affairs of
an agent in the event the agent dies or is other wise unable to person his or her duties.
F.S. 626.112, License and appointed requirement
1) Cannot represent themselves as an agent, customer rep, or adjuster without properly being licensed
and appointed
2) If an agency is required to be licensed but fails to file for application, the DFS can impose a penalty
of $10,000
3) If the agency is eligible for registration but fails to register, the DFS can impose a penalty of $5,000
F.S. 626.2815, Continuing Education Requirements
CE is required every 2 years, due by the end of agents birth month.
F.S. 626.382, Continuation, Expiration of License; insurance agencies
An agency license is issued for a period of 3 years
F.S. 626.431, Effect of Expiration of License and Appointment
An individual who goes without an appointment for 48 months loses the license and has to start as a
first-time applicant
F.S. 626.551, Notice of Change of Address, Name
A license has 30 days to notify the DFS if there is a change in any of the following:
1) Name
2) Residence address
3) Business address
4) Mailing address
5) Contact telephone number
6) Business telephone number
7) Email Address
The license is subject to a $250 fine for their first offense
F.S. 626.561, Reporting and Accounting for Funds
Every license shall keep books, accounts, and records pertaining to a premium payment for at least 3
years after payment
F.S. 626.572, Rebating, when allowed
Rebating is allowed under certain circumstances. The key to remember is, if you rebate, for one you have
to rebate for all
F.S. 626.611, Grounds for Compulsory Refusal, Suspension, or Revocation of Agent or Customer
Representative License
1) Lack qualifications
2) Material misstatement, misrepresentation, or fraud in obtaining a license or appointment or
attempting to obtain
3) Using the license to circumvent the requirements or prohibitions of this code
4) Willful misrepresentation of any insurance policy in person or advertising or any form of
dissemination
5) Materially misrepresented the terms or coverages of the policy to effect the settlement of the claim
6) Demonstrate lack of fitness or trustworthiness
7) Demonstrate lack of reasonable knowledge and technical knowledge
8) Fraudulent or dishonest practices in the conduct of business
9) Misappropriation, conversion, or unlawful withholding of moneys belonging to the insurer or insureds
or to others
10) Unlawful rebating or attempting to unlawfully rebate
11) Using license or appointment to handle controlled business
12) Willful failure to comply or willful violation of rules of the DFS or the insurance code
13) Found guilty or plead nolo contendere to a felony or a crime punishable by imprisonment of 1 year or
more
F.S. 626.730, Purpose of License
The purpose of the license is to engage in the insurance business with respect to the public and to
facilitate the public supervision of such activities in the public interest.
The license cannot be used for the purpose of securing rebates or commissions on “controlled business”
(controlled business is insurance written on the agent’s own interests or their family’s interest or their
business).
F.S. 626.731, Qualifications for General Lines Agent’s Test
1) Must be 18 years or older
2) United States citizen or legal alien
3) Bona fide resident of Florida
4) Place of business located in Florida
5) Not licensed for purpose of writing or handling controlled business
F.S. 626.7354, Customer Representative’s Power; Agent’s or Agency’s Responsibility
A customer representative shall not engage in transacting insurance outside of the office or his or her
agency
F.S. 626.748, Agent’s Records
The agent must always have daily reports, application, change endorsements, and documents signed or
initialed available to the policyholder and the DFS
F.S. 626.753, Sharing Commission Penalty
An agent may divide or share in commission only with other agents appointed and licensed to write the
same kind or kinds of insurance
F.S. 626.9521, Unfair Methods of Competition and Unfair or Deceptive Acts or Practices
Prohibited, Penalties
Any person who violates any provision of this part is subject to a fine in an amount not greater than
$5,000 for each non-willful violation and not greater than $4,000 for each willful violation
F.S. 626.9541, Unfair Methods of Competition and Unfair or Deceptive Acts or Practices Defined
Misrepresentation—knowingly
Sliding—telling the insured that additional
Defamation—to
making untrue statements in an
insurance application so that a
benefit can be gained
coverage is required by law when purchasing auto
insurance or including the additional coverage
without the insured knowing
injure a person by
libel or slander
Coercion—Using
Twisting—tricking the insured or
intimidation in the
business of insurance
prospect so that they will change
their policy to another insurer
Unlawful use of designation, misrepresentations, or
agent qualifications—agent falsely telling an insured
or prospect that they hold a certain designation (CPCU
or CLU), degree, or license
Fraudulent signature on applications or
policy related document—submitting to
the insurer an application with false or
fraudulent signatures
Unfair Discrimination—favoring one insured
over other insureds
Advertising gifts permitted—giving prospect or
insured merchandise for the purpose of advertising
must be $25 or under
F.S. 628.021, “Stock Insurer” defined:
An incorporated insurer with its capital divided into shares and owned by its stockholders
F.S. 628.031, “Mutual Insurer” defined:
An incorporated insurer without permanent capital stock, the governing body of which is
elected in accordance with this part