Casualty-Only cheat sheet

Insurable interest must exist at the time of loss in property/casualty lines; for life insurance it must exist at policy inception.

Principle of indemnity: recovery is limited to the actual financial loss, never exceeding the insured value; valued policies are the exception.

Utmost good faith imposes a duty of disclosure on the applicant; material misrepresentation can void coverage from inception.

Fortuity requirement: losses must be accidental or unintentional from the insured's standpoint; intentional acts are excluded.

Law of large numbers underpins ratemaking: larger, more homogeneous exposure pools produce more predictable loss experience.

Risk transfer moves loss uncertainty to the insurer; risk retention (deductibles, self-insured retentions) leaves part with the insured.

Adverse selection occurs when poorer-than-average risks buy coverage disproportionately; underwriting and exclusions counter it.

Moral hazard is a change in behavior caused by the presence of insurance; morale hazard is carelessness or indifference.

Subrogation lets the insurer pursue third parties after paying a loss, preventing double recovery and shifting cost to the at-fault party.

Declarations identify named insured, policy period, limits, deductibles, forms, and endorsements; they control over conflicting body text.

Coverage insuring agreements grant coverage; exclusions and conditions narrow or condition it. Ambiguity is construed against the drafter.

Occurrence vs. claims-made trigger: occurrence responds to injury/damage during the policy period; claims-made responds to claims reported during the period.

Claims-made policies carry a retroactive date; claims for acts before that date are excluded even if reported during the period.

Extended reporting (tail) provisions extend the reporting window after a claims-made policy ends, usually without extending the retro date.

Limits: per occurrence, general aggregate, products-completed operations aggregate, and per-person sublimits; aggregate caps total paid in a period.

Duties after loss typically include prompt notice, cooperation, proof of loss, and mitigation; prejudice to the insurer can bar coverage.

Other insurance clauses (pro rata, excess, escape) allocate loss among concurrent policies; excess applies only above primary limits.

Cancellation and nonrenewal provisions specify notice periods and permitted reasons, subject to state statutory minimums.

CGL Coverage A (bodily injury/property damage) and Coverage B (personal and advertising injury) are the core insuring agreements.

Coverage C (medical payments) pays regardless of fault, subject to a small per-person limit and a time window after the accident.

Occurrence-form CGL covers injury/damage during the policy period regardless of when the claim is made; the aggregate is the annual cap.

Products-completed operations hazard covers liability arising from products or completed work away from the premises, with its own aggregate.

The contractual liability exclusion has an exception for insured contracts (leases, easements, and some indemnity agreements).

The employer's liability exclusion bars coverage for employee injury; that exposure belongs to workers' compensation and employers' liability.

The your-work and impaired-property exclusions bar coverage for defective workmanship itself, not resulting damage to other property.

Additional insured endorsements extend coverage to others (e.g., landlords, GCs); their scope depends on the endorsement wording and limits.

Personal and advertising injury covers offenses like libel, slander, wrongful eviction, and infringement of copyright or slogan in an advertisement.

Personal auto forms: Part A liability, Part B medical payments, Part C uninsured/underinsured motorist, Part D damage to your auto.

Business auto coverage symbols (1-9) define which autos are covered; symbol 1 is any auto, symbol 7 is specifically described autos.

Hired auto and non-owned auto liability extend coverage to rented vehicles and employee-owned autos used in business.

Commercial auto uses the business auto, auto dealers, or motor carrier coverage forms; the motor carrier form adds MCS-90 filing.

Personal auto policies exclude business use, livery, and vehicles furnished for regular use; a named non-owner policy covers only liability.

UM/UIM pays when the at-fault driver has no insurance or insufficient limits; UIM stacks when damages exceed the tortfeasor's limit.

Physical damage: collision vs. other than collision (comprehensive); actual cash value vs. agreed value affects settlement.

Garagekeepers coverage protects a business holding customers' vehicles for service, storage, or repair.

Financial responsibility laws require minimum liability limits; SR-22 filings may be required after certain violations.

Workers' compensation is no-fault statutory coverage for work-related injury/illness; it bars most employee tort suits against the employer.

Part One (workers' compensation) pays statutory benefits with no dollar limit; Part Two (employers' liability) pays tort suits with a policy limit.

Benefits: medical, temporary total, permanent partial, permanent total, death, and rehabilitation, per state statute.

The exclusive remedy doctrine limits employee suits against the employer but not against third parties; subrogation recovers from them.

Experience modification (e-mod) adjusts premium based on the employer's loss history relative to expected losses for its class.

Premium = payroll (per $100) × class rate × experience mod; minimum premium and audit provisions apply.

Sole proprietors, partners, and some corporate officers may elect coverage; independent contractors are generally excluded.

Other states endorsement extends coverage for temporary out-of-state work; monopolistic state funds (e.g., ND, OH, WA, WY) require their fund.

Employers' liability typically carries limits like $100,000/$500,000/$100,000; the stop-gap endorsement fills gaps for monopolistic states.

Commercial property forms cover building, business personal property, and personal property of others; causes of loss forms (basic, broad, special) set the perils.

Replacement cost pays to rebuild with new materials without depreciation; actual cash value deducts depreciation and may include a market-value cap.

Coinsurance clause: insured must carry a limit at least equal to the stated percentage of value, or a penalty reduces recovery.

Coinsurance formula: (limit carried ÷ limit required) × loss = recovery, subject to the policy limit and deductible.

Business income covers lost net income plus continuing operating expenses during the period of restoration.

Extra expense pays costs to continue operations and minimize downtime; it is separate from business income.

Period of restoration begins at the time of loss and ends when the property is repaired with reasonable speed or the business relocates.

Contingent business income covers loss from damage to a supplier's or customer's property that halts the insured's business.

Ordinance or law, spoilage, and equipment breakdown are commonly added by endorsement rather than included in the base form.

Crime coverages: employee theft, forgery or alteration, computer fraud, funds transfer fraud, robbery, burglary, and safe deposit box.

Employee theft is the core crime coverage; discovery form vs. loss sustained form affects which policy responds to a discovered loss.

Crime policies usually require a fidelity bond or limit; the insured must maintain specified internal controls to preserve coverage.

Inland marine covers property in transit, mobile property, and property of others; it follows the property wherever it goes.

Motor truck cargo covers goods in transit; the carrier's liability is often limited by bill of lading terms and released-value rates.

Bailee coverage protects property of others held by the insured (e.g., dry cleaners, repair shops, warehouses).

Builders risk covers property under construction, including materials in transit and at the site, until the project is completed.

Surety bonds are three-party: obligee, principal, and surety; they guarantee performance, not insurance against loss.

Specialty casualty includes professional liability (E&O), D&O, employment practices liability, and cyber liability; each uses claims-made triggers.

First notice of loss: record date, time, location, parties, and policy information; verify coverage before committing to payment.

Coverage investigation confirms the policy applies: named insured, policy period, occurrence date, limits, and exclusions.

Liability investigation gathers statements, police reports, witness accounts, and physical evidence; document the chain of custody.

Reserves are estimates of ultimate loss; adjusters set and revise them as facts develop; reserves affect financial reporting.

Red flags of fraud: late reporting, prior claims history, exaggerated injuries, staged accidents, and inconsistent statements.

Special Investigation Unit (SIU) referrals are required in many states when fraud is suspected; document the basis for referral.

Bad faith exposure arises from unreasonable delay, failure to investigate, or failure to settle within limits; good-faith handling protects the insurer.

Subrogation and salvage recoveries reduce net loss; pursue them within the statute of limitations.

Total loss settlement uses actual cash value or replacement cost per the policy; document valuation methodology.

State regulation: insurance departments license insurers, agents, and adjusters; NAIC model laws guide uniformity but states adopt their own rules.

McCarran-Ferguson Act (1945) leaves insurance regulation to the states, with limited federal antitrust exemptions.

Producer licensing requires prelicensing education, exam passage, and continuing education; appointments and terminations are filed with the state.

Unfair trade practices acts prohibit misrepresentation, rebating, twisting, and unfair claim settlement practices.

Rebating (returning part of the commission or premium) is illegal in most states; it is an unfair trade practice.

Fiduciary duty: premiums collected are held in trust; commingling with personal funds is prohibited.

Consumer protections include grace periods, reinstatement rights, free-look periods, and required disclosure of policy terms.

Ethical duties: put the client's interest first, disclose conflicts, maintain confidentiality, and avoid misrepresentation of coverage.

Market conduct exams and producer investigations enforce compliance; penalties include fines, license suspension, and revocation.

Underwriting evaluates the risk: loss frequency and severity, hazards, controls, and financial stability of the applicant.

Risk selection aims to accept desirable risks, reject or modify undesirable ones, and price for the exposure.

Rating factors: class, territory, experience modification, schedule rating, and premium credits/debits.

Loss ratio = incurred losses ÷ earned premium; combined ratio = loss ratio + expense ratio; below 100% indicates underwriting profit.

Experience rating compares the insured's losses to expected losses for its class; schedule rating applies discretionary credits/debits.

Reinsurance (treaty or facultative) transfers part of the risk to a reinsurer and affects the insurer's capacity and surplus.

Underwriting authority limits specify the maximum premium or risk an underwriter may bind without referral.

Adverse selection is countered by exclusions, warranties, and accurate classification of exposures.

Documentation of underwriting decisions supports regulatory and market conduct compliance.