AL Property & Casualty cheat sheet

The Alabama Commissioner of Insurance is appointed by the Governor and heads the Alabama Department of Insurance, which licenses insurers and producers, reviews rates and forms, and enforces the Insurance Code.

Producer licenses are issued by line (life, health, property, casualty, personal lines) and renew on a biennial basis; renewal requires 24 continuing education hours every two years, at least 3 of which must be ethics.

An insurer must appoint a producer, and file that appointment with the Department, before the producer may solicit or transact business on the insurer's behalf.

Premiums collected belong to the insurer or the insured, not the producer; they must be held in a fiduciary capacity and may never be commingled with personal or agency funds.

Rebating, misrepresentation, twisting, false advertising, and unfair claim settlement practices are prohibited unfair trade practices and are grounds for license suspension, revocation, or fines.

The Alabama Insurance Underwriting Association (the beach pool) writes wind and hail coverage on eligible coastal Alabama property that admitted insurers decline to insure.

Alabama minimum auto liability limits are 25/50/25; uninsured motorist coverage must be offered, and proof of liability insurance is required to register a vehicle.

Alabama workers compensation is administered under the Workers' Compensation Act by the Department of Labor, and statutory benefits are the employee's exclusive remedy against the employer.

Principle of indemnity: the insured is restored to approximately the pre-loss financial position, no better and no worse, so recovery can never exceed the actual loss.

Insurable interest must exist at the time of loss for property insurance and at policy inception for life insurance.

Actual cash value = replacement cost minus depreciation; replacement cost pays the cost to repair or replace with new property of like kind and quality without depreciation.

Coinsurance penalty formula: (insurance carried / insurance required) x loss = payment, capped at the policy limit.

Three hazard types: physical (ice, fire, defective wiring), moral (dishonesty or intent to defraud), and morale (indifference or carelessness because insurance exists).

Utmost good faith means material misrepresentation or concealment in the application can void coverage; a warranty is a statement the insured promises is true.

Insurance contracts are contracts of adhesion (written by the insurer, construed against the drafter), aleatory (unequal exchange), unilateral (only the insurer makes a promise), and conditional (benefits depend on duties being met).

Subrogation lets the insurer pursue the third party who caused the loss; when two policies cover the same loss, other-insurance clauses usually pay pro rata by each policy's limit.

Every property policy contains declarations, an insuring agreement, conditions, exclusions, and definitions; endorsements amend these terms and prevail over the base form.

Named-peril forms cover only the perils listed and the insured must prove the loss came from one of them; open-peril (special) forms cover all risk of direct physical loss except exclusions, with the burden on the insurer.

An 80 percent coinsurance clause requires insurance equal to 80 percent of replacement cost; carrying less reduces every partial loss payment by the same ratio.

Deductibles apply per occurrence; percentage deductibles (common for wind, hail, or hurricane in coastal areas) are computed on the Coverage A limit, not the loss amount.

Loss valuation methods include actual cash value, replacement cost, functional replacement cost, and agreed value; the form selected controls whether depreciation is deducted.

A mortgagee (loss payable) clause gives the lender notice of cancellation, right to pay premium, and payment of loss to the extent of its interest.

A dispute over the amount of loss may be resolved by appraisal: each side names an appraiser, and the appraisers choose an umpire; the insured may not abandon damaged property to the insurer.

Vacancy and unoccupancy conditions restrict or suspend coverage for vandalism, glass, water damage, and similar perils when a building is empty or unfurnished.

Homeowners forms: HO-2 broad named perils, HO-3 special (open peril on Coverage A and B, named peril on C), HO-4 tenants, HO-5 comprehensive (open peril on A and C), HO-6 condominium unit owners, HO-8 modified for older homes.

Standard percentage relationships: Coverage B other structures 10 percent of A, Coverage C personal property 50 percent of A, Coverage D loss of use 30 percent of A; Coverage E personal liability is shown on the declarations (commonly 100,000) and Coverage F medical payments is commonly 1,000 per person.

Homeowners special limits commonly include 200 for money, 1,500 for securities, 1,500 for theft of jewelry, 2,500 for theft of firearms, 2,500 for theft of silverware, and 2,500 on premises / 500 off premises for business property.

Coverage D pays additional living expense and fair rental value while the residence is uninhabitable; coverage for action of civil authority is typically limited to two weeks.

Section II Coverage E pays sums the insured becomes legally obligated to pay for bodily injury or property damage; Coverage F pays medical expenses to others without regard to fault but excludes the named insured and regular residents.

Dwelling policies: DP-1 basic, DP-2 broad, DP-3 special; Coverage B is 10 percent of A, C is 50 percent of A, and D is 20 percent of A, and standard DP-1 and DP-2 settle losses at actual cash value.

Replacement cost settlement on the dwelling usually requires insurance equal to at least 80 percent of full replacement cost; otherwise loss is settled on an actual cash value basis.

Coverage C under HO-3 is written on a named-peril basis, so the insured must show the loss resulted from a listed peril such as fire, lightning, windstorm, hail, theft, or accidental discharge of water.

The Building and Personal Property Coverage Form insures the building, business personal property, and personal property of others in the insured's care, custody, or control at a described location.

Coinsurance options are 80, 90, or 100 percent; the payment formula is (limit carried / limit required) x loss, and the agreed value option suspends coinsurance when the insured submits a statement of values.

Causes of loss forms are basic, broad, and special; the special form is open peril and the insurer must prove an exclusion applies.

Business income covers net income plus continuing normal operating expenses during the period of restoration; extra expense pays costs to avoid or minimize shutdown.

Civil authority coverage typically begins after 72 hours of prohibited access caused by covered damage to nearby property; extended period of indemnity endorsements add days after repairs are complete.

Common extensions include debris removal, preservation of property, newly acquired or constructed property, valuable papers and records, and pollutant cleanup.

Blanket insurance applies a single limit across multiple locations or coverages, while specific insurance lists a separate limit for each; reporting forms adjust premium based on reported values.

A commercial package policy must contain at least two coverage parts (for example property plus general liability) under one declarations page, with interline and common policy conditions.

Negligence requires four elements: a legal duty owed, a breach of that duty, proximate cause, and actual damages; missing any one element defeats the claim.

Common defenses include contributory negligence (bars recovery in the few jurisdictions that still use it), comparative negligence (reduces recovery by the claimant's share of fault), assumption of risk, immunity, and statutes of limitation.

Res ipsa loquitur allows a presumption of negligence when the instrumentality was under the defendant's exclusive control and the accident would not ordinarily occur without negligence.

Compensatory damages include special damages (medical bills, lost wages) and general damages (pain and suffering); punitive damages punish intentional or reckless conduct and are often uninsurable.

Vicarious liability holds one party responsible for another's acts (employer for employee); strict liability applies without fault (products, abnormally dangerous activities); absolute liability applies to workers compensation and certain statutory situations.

Occurrence policies respond to injury or damage that takes place during the policy period; claims-made policies respond to claims first made during the period, subject to a retroactive date and extended reporting options.

Liability limits are written as per occurrence (or per person) and aggregate limits; a self-insured retention is the amount the insured pays before coverage responds and is common where no underlying policy exists.

An additional insured is granted coverage by endorsement, while a certificate of insurance is only evidence of coverage and does not amend, extend, or create coverage.

Coverage A pays damages the insured is legally obligated to pay because of bodily injury or property damage; Coverage B covers personal and advertising injury offenses; Coverage C pays medical expenses regardless of fault.

The trigger for the occurrence form is bodily injury or property damage that occurs during the policy period, not the date of the negligent act.

Limits structure: general aggregate, products-completed operations aggregate, each occurrence, damage to premises rented to you, and medical expense, with supplementary payments outside the limits.

Supplementary payments include costs of defense, bail bonds, appeal bonds, and loss-of-earnings payments for attendance at trial, and do not reduce the limits of liability.

Key exclusions: expected or intended injury, contractual liability (except an insured contract), your product, your work, impaired property, recall of products, pollution, employment-related practices, liquor liability, and use of autos, aircraft, or watercraft.

Products-completed operations coverage applies to injury or damage occurring away from the insured's premises after the product or work is complete, subject to its own aggregate.

The damage-to-premises-rented sublimit (fire legal liability) responds when the insured's negligence causes fire damage to rented space; a lease may be an insured contract shifting that risk to the tenant.

The 'your work' exclusion does not apply if the damaged work or the work out of which the damage arises was performed on the insured's behalf by a subcontractor.

The personal auto policy has Part A liability, Part B medical payments, Part C uninsured/underinsured motorists, and Part D physical damage (collision and other than collision), plus duties after an accident and general provisions.

Split limits state three numbers (for example 25/50/25 for per-person bodily injury, per-accident bodily injury, and per-accident property damage); a combined single limit states one total amount per accident.

Business auto coverage is defined by numbered symbols: 1 any auto, 7 specifically described autos, 8 hired autos, 9 nonowned autos, with 2-6 covering owned autos by category.

Alabama requires 25/50/25 liability; a financial responsibility filing (SR-22) is required after certain violations, and operating without required insurance can result in registration and license suspension.

Uninsured motorist coverage pays for damages caused by a negligent driver with no insurance or an unidentified hit-and-run driver; underinsured motorist coverage responds when the at-fault driver's limits are inadequate.

The PAP extends liability and medical payments coverage to a temporary substitute auto and, in most cases, to a nonowned auto the insured uses with permission, subject to exclusions for business use of nonowned autos.

Common PAP exclusions include intentional damage, vehicles used as public livery, racing or speed contests, vehicles furnished for regular use, and use without a reasonable belief of permission.

Garagekeepers coverage insures customers' autos in the care of a repair or service business and can be written on a direct (primary) or excess basis over the customer's own coverage.

Workers compensation is a no-fault, exclusive-remedy system: employees give up most tort claims against the employer and receive statutory benefits for work-related injury or disease.

Four benefit categories are medical care, disability income, death benefits for dependents, and rehabilitation services.

Disability categories are temporary total, temporary partial, permanent total, and permanent partial; wage replacement is generally two-thirds of the average weekly wage, subject to the state maximum and minimum.

Premium is based on payroll per 100 of remuneration by classification, modified by the experience modification factor, schedule or premium credits, and adjusted at audit based on actual payroll.

The policy has Part One (workers compensation benefits), Part Two (employers liability for injury claims outside the statute), and Part Three (other states coverage, which must be listed to apply).

Sole proprietors, partners, and certain corporate officers may be excluded from coverage and must elect to be included; uninsured independent contractors are often treated as employees under state tests.

Federal programs that parallel state acts include the Federal Employees Compensation Act, the Longshore and Harbor Workers' Compensation Act, and the Defense Base Act.

Employers liability limits are shown per accident, per disease per employee, and per disease policy aggregate, and respond to claims such as third-party-over actions.

An umbrella policy provides limits above scheduled underlying policies and can drop down over a self-insured retention to cover exposures the underlying policies exclude; a pure excess policy follows the underlying terms with no drop-down.

Underlying policies must be maintained at required limits; if an underlying limit is not met, the insured pays the gap out of pocket before the umbrella responds.

Inland marine covers property in transit, property of a mobile nature, and property of others in the insured's care, following the nationwide marine definition and written on filed or nonfiled forms.

Common inland marine lines include motor truck cargo, bailees' customers, builders risk, accounts receivable, valuable papers, electronic data processing, and fine arts.

Crime coverage insures money, securities, and other property against employee theft, forgery or alteration, computer fraud, funds transfer fraud, robbery, safe burglary, and counterfeit currency.

Discovery crime forms cover losses discovered during the policy period regardless of when the loss occurred, subject to a retroactive date; loss-sustained forms cover only losses actually occurring during the period.

A fidelity bond is a form of insurance protecting an employer from employee dishonesty, while a surety bond is a three-party guarantee that the principal will perform an obligation to the obligee.

Equipment breakdown (boiler and machinery) covers loss from accidental breakdown of mechanical, electrical, or pressure equipment, including damage to the equipment, other property damage, and resulting business income loss.