AZ Property & Casualty flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Certificate of authority

A license issued by the Arizona Department of Insurance and Financial Institutions that authorizes an insurer to transact insurance business in the state.

Rebating

Offering a buyer any inducement not stated in the policy, such as cash, gifts, or fee waivers, to purchase insurance; an unlawful unfair trade practice.

Twisting

Inducing a policyholder to lapse, surrender, or replace a policy through misleading or incomplete comparisons, which is prohibited as an unfair trade practice.

Producer fiduciary duty

Premiums and returned premiums a producer collects are held in trust for the insurer or the insured and must never be commingled with the producer's personal or business funds.

Unfair claim settlement practice

Misrepresenting policy provisions, failing to investigate a claim reasonably, or refusing to pay without a reasonable basis; prohibited conduct under state insurance law.

Continuing education requirement

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

Pure risk

A risk with only the chance of loss or no loss and no possibility of gain; this is the type of risk insurance is designed to transfer.

Moral hazard

Dishonesty or a character flaw in an insured that increases the likelihood or severity of loss, such as exaggerating or fabricating a claim.

Morale hazard

Indifference or carelessness toward loss because insurance will pay for it, such as leaving keys in a car or neglecting property maintenance.

Insurable interest

A financial stake in the insured property such that a loss would cause the insured economic harm; it must exist at the time of loss.

Principle of indemnity

The insured should be restored to approximately the same financial position held before the loss, no better and no worse.

Subrogation

The insurer's right, after paying a covered loss, to recover that payment from the negligent third party who caused the damage.

Utmost good faith

A principle requiring both parties to deal honestly, so that the insured discloses all material facts the insurer needs to evaluate the risk.

Coverage A: dwelling

Homeowners coverage for the dwelling and structures attached to it on the residence premises, written on an open-perils basis in the HO-3 and HO-5.

Coverage C: personal property

Homeowners coverage for household contents, usually written at 50 percent of the Coverage A limit, with special dollar limits on items such as jewelry and cash.

Coverage D: loss of use

Pays additional living expenses or fair rental value when a covered loss makes the residence uninhabitable, typically limited to 30 percent of Coverage A.

Actual cash value

A loss settlement method equal to replacement cost minus depreciation, used when the policy does not provide replacement cost coverage.

Replacement cost

A loss settlement method that pays the cost to repair or replace damaged property with new property of like kind and quality, without deducting depreciation.

Coinsurance formula

Payment equals insurance carried divided by insurance required, multiplied by the loss; the insured absorbs a penalty when underinsured.

HO-4 tenant policy

Covers a renter's personal property, loss of use, personal liability, and medical payments; it has no dwelling coverage because the tenant does not insure the building.

Coverage E: personal liability

Homeowners coverage that pays sums the insured becomes legally obligated to pay as damages because of bodily injury or property damage to others.

Coverage F: medical payments

Pays reasonable medical expenses to non-insured persons injured on the insured premises, without regard to fault and subject to a per-person limit.

Occurrence liability policy

Responds to bodily injury or property damage that occurs during the policy period, regardless of when the claim is later reported or filed.

Claims-made liability policy

Responds to claims first made during the policy period, with a retroactive date that bars coverage for acts occurring before that date.

Negligence elements

Duty owed to another, breach of that duty, proximate cause linking the breach to harm, and actual damages; all four must be shown.

Exclusive remedy

The rule that workers compensation benefits are the employee's sole recovery from the employer for a work-related injury, barring most negligence suits.

Ordinance or law exclusion

Bars payment for the extra cost of rebuilding to current building codes after a loss; homeowners forms return a limited amount, commonly 10 percent of Coverage A.

Earth movement exclusion

Excludes loss caused by earthquake, landslide, mudflow, or settling; coverage must be added by endorsement or purchased as a separate policy.

Flood exclusion

Excludes water damage from flooding, surface water, waves, and overflow of a body of water; separate flood insurance is required for that exposure.

Expected or intended injury exclusion

Bars liability coverage for bodily injury or property damage the insured expected or intended, and it applies in homeowners and general liability forms.

Damage to your work exclusion

Commercial general liability exclusion barring property damage to the insured's own work product or to property on which the insured is working.

Duties after loss

Insured obligations after a claim, including prompt notice, protecting the property from further damage, cooperating with the insurer, and filing a proof of loss.