Mixed Deck — All P&C Topics Flashcards

Under the 'other insurance' provision, when two policies cover the same loss, each typically pays:

Answer: A pro rata share based on each policy's limit relative to the total

The pro rata 'other insurance' clause splits the loss proportionally between policies based on each policy's limit relative to the combined limits.

The 'NAIC Insurance Information and Privacy Protection Model Act' is designed to:

Answer: Govern how insurers collect, use, and disclose personal information about insurance applicants and policyholders

The NAIC model privacy act establishes standards for insurers' collection and use of personal information, giving individuals the right to access their records, challenge inaccurate information, and limit disclosure.

Workers compensation insurance is required in most states because:

Answer: State statutes mandate employers provide no-fault wage replacement and medical benefits to injured workers

Workers compensation is a statutory program — nearly every state requires employers to carry it, providing injured employees with medical care and wage replacement on a no-fault basis in exchange for the employee giving up the right to sue the employer.

In a liability lawsuit, a court awards damages to the injured party to punish the defendant for extreme negligence and to deter similar future conduct. What type of damages are these?

Answer: Punitive damages

Punitive damages (also known as exemplary damages) are awarded not to compensate the plaintiff for their losses, but to punish the defendant for egregious, malicious, or grossly negligent conduct and to deter others from engaging in similar behavior. Special damages cover specific economic losses (like medical bills), and general damages cover non-economic losses (like pain and suffering).

A 'floater' policy in inland marine insurance is best described as:

Answer: A policy that covers property wherever it may be located

A floater policy covers property wherever it may be located, meaning coverage travels with the insured item rather than being restricted to a specific location.

What is the purpose of a 'mortgagee clause' in a property insurance policy?

Answer: To protect the lender's (mortgagee's) insurable interest by ensuring the lender receives insurance proceeds even if the insured's coverage is voided by the insured's acts

The standard mortgagee clause (also called the 'union mortgage clause') gives the lender independent rights under the policy, meaning the insurer must pay the mortgagee even if the insured commits an act that would otherwise void the policy.

To maintain their license, producers in most states must satisfy continuing education (CE) requirements. Which of the following is a common component of a state's CE requirements for a Property & Casualty producer?

Answer: Completing a specific number of CE hours, including a course on ethics, during each renewal period.

Most states require licensed producers to complete a set number of continuing education hours every renewal period to ensure they remain knowledgeable about industry changes, regulations, and ethical standards. A specific requirement for ethics training is also a standard part of the overall CE hours.

What does the term 'pro rata cancellation' mean in insurance?

Answer: The insurer returns the unearned premium proportional to the unused policy period

Pro rata cancellation refunds the exact unearned portion of the premium based on the number of days remaining in the policy period, with no penalty.

What is a 'monoline' commercial insurance policy?

Answer: A policy that covers only one line of insurance, such as property or liability alone

A monoline policy covers only one specific line of coverage (e.g., property only or liability only), as opposed to a package policy like a BOP that bundles multiple lines together.

'Temporary total disability' (TTD) in workers' compensation is best described as:

Answer: A condition during which the injured worker is completely unable to work but is expected to eventually recover

TTD applies when an injured worker is totally unable to perform any work duties during the healing period, but the condition is expected to improve so the worker can eventually return to work.

What does the term 'subrogation' mean in property and casualty insurance?

Answer: The insurer's right to pursue a third party that caused an insurance loss

Subrogation gives the insurer the right to recover claim payments from the responsible third party after compensating the insured.

Title insurance protects against which type of loss?

Answer: Defects in the title to real property that existed before the policy was issued

Title insurance protects property buyers and lenders against financial loss from prior ownership disputes, liens, encumbrances, or other defects in the title that existed before the policy's effective date.

Which rating factor most directly affects a commercial auto policy premium for a fleet of delivery trucks?

Answer: The radius of operations and type of cargo hauled

For commercial autos, the radius of operations and cargo type are primary rating factors because they directly affect the frequency and severity of potential losses.

Under the personal auto policy, 'underinsured motorist coverage' (UIM) responds when:

Answer: The at-fault driver's liability limits are insufficient to cover the insured's damages

UIM coverage pays the difference between the at-fault driver's liability limits and the insured's actual damages when those limits are too low to fully compensate the insured.

Which party has the right to defend a claim under a standard liability policy?

Answer: The insurer, who has the duty and right to select defense counsel and control the defense

Standard liability policies grant the insurer both the duty and the right to defend covered claims, including selecting defense counsel, without being limited by the policy's liability limits.

Under a personal auto policy, which party is covered for a loss that occurs while the named insured's covered auto is being used by a mechanic test-driving the vehicle?

Answer: The named insured's PAP generally excludes coverage for vehicles used by auto repair shops, deferring to the shop's garagekeepers and garage liability coverage

The PAP typically excludes coverage when a covered auto is in the custody of someone in the auto business (repair shop, dealer) who is using it in connection with their business, deferring to the garage's commercial insurance.

A homeowner's policy excludes flood damage. After a storm, the insured's home suffers both wind and flood damage. What doctrine determines how losses are settled when a covered and excluded peril combine?

Answer: Doctrine of concurrent causation

The doctrine of concurrent causation addresses how insurers handle losses caused by a combination of covered and excluded perils occurring simultaneously.

An EDP (Electronic Data Processing) floater provides coverage that standard commercial property policies may not fully address, specifically including:

Answer: Computer hardware, software, data media, and extra expenses from equipment breakdown

EDP policies are specifically tailored to cover the unique exposures of computer systems, including hardware, software, data media, and the extra expenses a business incurs when computer systems are damaged or unavailable.

A licensed insurance producer moves to a new apartment, which is in the same city but has a different street address. According to typical state insurance regulations, what is the producer's primary responsibility regarding this change?

Answer: Notify the Department of Insurance of the new address within a specified timeframe.

State laws require licensees to notify the Department of Insurance of any change in their residential or business address, typically within 30 days, to ensure the regulator has accurate and current contact information. Failure to do so can result in penalties.

Can an employee sue their employer under employer liability insurance in addition to making a workers' compensation claim?

Answer: Yes, under a dual capacity claim

Workers' compensation is typically the exclusive remedy for employees injured on the job, preventing them from suing their employer for negligence. However, a dual capacity claim is an exception where an employer acts in a capacity other than just an employer, such as a product manufacturer, and causes injury. In such specific circumstances, an employee might be able to sue their employer outside of workers' compensation.