Casualty Policy Structure, Provisions, and Conditions
Casualty policies share one skeleton: declarations, insuring agreement, exclusions, conditions, and endorsements. This domain tests whether you can read that skeleton, apply limits correctly, and honor conditions and other-insurance mechanics the way a claim file or underwriting referral demands.
The building blocks
- Declarations: named insured, policy period, limits, forms and endorsements attached, deductibles and retentions.
- Insuring agreement: the broad promise; exclusions narrow it back; conditions set the insured's duties.
- Endorsements amend the form and control over conflicting base-form language - read the endorsement first.
Conditions that decide claims
- Notice must be prompt; in most states the insurer must show prejudice before denying for late notice.
- The insured must cooperate, and the insurer holds the right to control defense and settlement.
- Subrogation transfers the insured's recovery rights to the insurer after payment, and the insured may not impair them.
- Liberalization clauses extend newly broadened form provisions to existing policies at no charge.
Limits and defense
- Split limits apply per person and per occurrence; a combined single limit applies one amount to all damages from one accident.
- Self-insured retentions are paid by the insured before the insurer responds; deductibles are typically subtracted from the payment.
- Supplementary payments - defense costs, bail bonds, loss-of-earnings up to a daily cap - usually sit outside the limit.
Other insurance
- Pro rata: each policy pays its share based on its limit.
- Excess: this policy pays only after primary limits exhaust.
- When primary and excess clauses conflict, the more specific clause often prevails, and courts may make both policies primary and equal.
Worked example
A $300,000 auto liability loss is covered by Policy A ($1,000,000 limit, pro rata other-insurance clause) and Policy B ($500,000 limit, pro rata clause). Combined limits are $1,500,000. Policy A pays $1,000,000 ÷ $1,500,000 × $300,000 = $200,000; Policy B pays $500,000 ÷ $1,500,000 × $300,000 = $100,000. The loss is fully paid and the insured owes nothing.
Traps that cost marks
- Assuming a certificate of insurance grants coverage.
- Forgetting an endorsement overrides the printed form.
- Treating the aggregate as replenished per claim.