Policy Structure and Statutory Conditions
Anatomy of the policy
Every candidate should be able to map a property policy from declarations through insuring agreement, coverages, exclusions, conditions, and endorsements. Endorsements amend the base form and prevail over conflicting printed wording; handwritten terms generally prevail over typed, and typed over printed.
Statutory conditions are minimum terms imposed by law - commonly notice of loss, proof of loss, appraisal, salvage, abandonment, and the limitation period for bringing action. These conditions cannot be contracted away to the insured's detriment. Typical duties after loss include prompt notice, protection of property from further damage, cooperation, and submission of a sworn proof of loss within a stated period.
Traps to watch
- Abandonment: the insured cannot simply hand over damaged property and demand a total-loss payment; the insurer must consent.
- Appraisal resolves the amount of loss only - it does not decide coverage or liability.
- Limitation periods are strict; a late suit is barred even where the claim is otherwise valid.
- Salvage is the insured's duty to mitigate; failure can reduce the recovery.
Rule of thumb
Order of precedence: handwritten > typed > printed, and specific endorsement > general form. When two clauses conflict, the more specific and later-added wording usually controls.
Worked example
A policy requires proof of loss within 60 days. The insured submits it on day 75 but the insurer had already inspected and never objected. On exam, note that statutory conditions may allow relief where the insurer was not prejudiced - but the safer answer is that strict compliance is required unless the insurer waives or is estopped.