AZ Property & Casualty cheat sheet

The Arizona Department of Insurance and Financial Institutions (DIFI) licenses insurers, producers, and adjusters and enforces the state insurance code.

An insurer may not transact insurance business in Arizona without a certificate of authority issued by the director.

Arizona resident producer licenses are issued for a four-year term and must be renewed before expiration to avoid a lapsed license.

Resident producers must complete 48 credit hours of approved continuing education every four-year term, including required ethics hours.

Unfair trade practices include misrepresentation, twisting, rebating, coercion, and unfair discrimination in rates, terms, or claim handling.

Rebating is offering anything of value not stated in the policy as an inducement to buy; commissions may not be shared with an unlicensed person.

Premiums a producer collects are held in a fiduciary capacity, may not be commingled with personal funds, and must be remitted promptly to the insurer.

Licensees must notify DIFI of a change of address and must report administrative actions taken against the license within the required reporting period.

Knowingly making a false statement on an application to obtain coverage is a fraudulent insurance act subject to criminal and civil penalties.

Insurance transfers pure risk from an individual to a pool of similar exposure units; speculative risk (chance of gain or loss) is not insurable.

Characteristics of an insurable risk: many similar units, accidental loss, definite as to time and place, measurable, and not catastrophic to the insurer.

Three hazard types: physical (a tangible condition), moral (a dishonest tendency), and morale (carelessness or indifference because insurance exists).

Insurable interest in property must exist at the time of loss; in life insurance it must exist at the time of application.

Principle of indemnity: the insured is restored to the pre-loss financial position, no better and no worse.

Actual cash value = replacement cost minus depreciation; replacement cost settlement pays new-for-old without deducting depreciation.

Contract characteristics of insurance: contract of adhesion, aleatory, unilateral, conditional, and personal as to the insured.

Utmost good faith requires honest representations; concealment or misrepresentation of a material fact can void coverage, and a warranty is a promise the insured must meet.

Subrogation lets the insurer pursue the negligent third party after paying the claim; the insured must not impair that right, such as by signing a release.

Homeowners forms: HO-2 broad form (named perils on dwelling and contents), HO-3 special form (open perils on dwelling, named perils on contents), HO-5 comprehensive (open perils on both).

HO-3/HO-5 default limits: Coverage B other structures 10% of Coverage A, Coverage C personal property 50%, Coverage D loss of use 30%.

HO-4 insures a tenant's contents, loss of use, and liability; HO-6 insures a condo owner's contents, liability, and limited building additions and alterations.

Dwelling policy forms: DP-1 basic (named perils, actual cash value), DP-2 broad, DP-3 special (open perils on the dwelling).

Coinsurance payment = (insurance carried / insurance required) x loss, applied when the amount carried falls below the requirement.

Trees, shrubs, and other plants are covered for a limited amount, commonly 5% of Coverage A with a per-item maximum.

Debris removal, reasonable repairs, and fire department service charges are additional coverages that generally do not reduce the Coverage A limit.

Standard property exclusions: earth movement, flood and surface water, ordinance or law, neglect, war, nuclear hazard, and intentional loss.

Vacancy: when a dwelling is vacant beyond 60 consecutive days, coverage for perils such as vandalism, glass breakage, and water damage is suspended.

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

CGL limits include the general aggregate, products-completed operations aggregate, each-occurrence limit, personal and advertising injury limit, damage to premises rented to you, and medical expense limit.

An occurrence form responds to injury or damage that happens during the policy period; a claims-made form responds to claims first made during the policy period, subject to a retroactive date.

Elements of negligence: duty owed, breach of that duty, proximate cause, and damages; all four must be established for liability to attach.

Defenses to negligence include contributory negligence, comparative negligence, assumption of risk, and expiration of the statute of limitations.

Split limits such as 100/300/50 state maximums for bodily injury per person, bodily injury per accident, and property damage per accident; a combined single limit uses one amount for all damages.

Personal auto policy parts: A liability, B medical payments, C uninsured/underinsured motorists, D damage to your auto, plus duties after an accident.

Workers compensation is no-fault, pays statutory benefits, and is generally the employee's exclusive remedy against the employer for a work injury.

Umbrella and excess liability policies pay after underlying limits are exhausted and may drop down to cover some exposures the underlying policies do not.

Homeowners Section I exclusions include earth movement, water damage from flood or sewer backup (limited buy-back), ordinance or law, neglect, intentional loss, war, and nuclear hazard.

Homeowners Section II excludes motor vehicle liability, business liability, professional services, and injury to insureds, with limited exceptions such as residence employees.

CGL exclusions include expected or intended injury, contractual liability, liquor liability, workers compensation, auto, aircraft, watercraft, pollution, damage to your product, damage to your work, and recall.

The absolute pollution exclusion bars bodily injury and property damage arising from pollutants, with only narrow exceptions for hostile fire and certain enclosed buildings.

Duties after loss in a property claim: give prompt notice, protect the property from further damage, prepare an inventory of damaged property, cooperate, and submit a proof of loss.

Proof of loss is a sworn statement of the amount and cause of loss; most property forms require it within 60 days after the insurer's request.

The mortgage clause protects the lender: the mortgagee receives loss payment to the extent of its interest and advance notice of cancellation or nonrenewal.

Business income coverage pays lost net income and continuing normal expenses during the period of restoration; extra expense pays costs to resume operations quickly.

Property forms cover theft but exclude mysterious disappearance, meaning property that is simply missing with no explanation of how the loss occurred.

a

b

c

d

e

f