DC Property & Casualty cheat sheet

Risk is the chance of loss; insurance transfers pure (fortuitous, non-speculative) risk from insured to insurer in exchange for premium.

Requirements of an insurable risk: large number of similar exposure units, accidental/fortuitous loss, definite and measurable loss, determinable probability, losses not catastrophic to the insurer, and economically feasible premium.

Insurable interest in property-casualty exists when the insured would suffer financial loss from the destruction of the property; it must exist at the time of loss (life insurance requires it only at policy inception).

Principle of indemnity: the insured is restored to approximately the pre-loss financial position, no better and no worse; valued policies and replacement cost coverage are exceptions.

Actual cash value = replacement cost minus depreciation; replacement cost = cost to repair or replace with new property of like kind and quality, without depreciation.

A valid insurance contract needs offer and acceptance, consideration (premium and promise to pay), legal purpose, and competent parties; insurance is a contract of adhesion, conditional, unilateral, aleatory, and personal.

Utmost good faith imposes duties on both parties: representations must be substantially true, concealment of material facts voids coverage, and a material misrepresentation may allow rescission.

Agent authority comes from express (written in the agency agreement), implied (customary to perform the duties), and apparent (created by the insurer's own words or conduct) sources; brokers represent the insured, agents represent the insurer.

Insurer types and marketing: stock insurers (shareholders, nonparticipating), mutual insurers (policyholders, participating dividends), reciprocals/exchanges, Lloyd's associations; distribution through exclusive agents, independent agents, direct writers, and managing general agents.

Homeowners policy structure: Declarations, Insuring Agreement, Conditions, Exclusions, and Definitions; Section I provides property coverages A-D, Section II provides Coverage E personal liability and Coverage F medical payments to others.

Standard HO-3 limits as percentages of Coverage A: Coverage B other structures 10%, Coverage C personal property 50%, Coverage D loss of use 30%; Coverage E commonly $100,000 and Coverage F commonly $1,000-$5,000 per person.

HO forms: HO-2 broad form (named perils on both dwelling and contents), HO-3 special form (open perils on dwelling, named perils on personal property), HO-5 comprehensive (open perils on both), HO-4 renters, HO-6 condominium unit owners, HO-8 modified replacement cost for older homes.

Named-peril forms list the covered perils; open-peril (special) forms cover all risk of direct physical loss except those specifically excluded.

Common property exclusions: earth movement, water damage from flood or surface water, ordinance or law, neglect, intentional loss, freezing of plumbing while the dwelling is vacant, and wear and tear or deterioration.

Loss settlement: Coverage A is typically replacement cost; personal property is typically actual cash value unless replacement cost contents coverage is endorsed; a deductible applies per occurrence.

Dwelling policies (DP-1 basic, DP-2 broad, DP-3 special) insure the dwelling and personal property for non-owner-occupied or homeowners-ineligible risks and may be written with or without liability coverage.

Coinsurance clause: payment = (limit carried / limit required) x loss, where required limit = coinsurance percentage x insurable value at time of loss; a policy carrying at least the required amount pays the full covered loss up to the limit.

Commercial property covers Building, Business Personal Property, and Personal Property of Others; the Building and Personal Property Coverage Form is the base form and can be written on a specific or blanket basis.

Causes of Loss forms: Basic (named perils such as fire, lightning, explosion, windstorm, vandalism), Broad (Basic plus sprinkler leakage, water damage, falling objects, weight of ice and snow), and Special (open peril, all direct physical loss unless excluded).

Commercial property excludes flood, earthquake, wear and tear, employee dishonesty, ordinance or law, and utility service interruption unless added by endorsement.

Business income coverage pays net income plus continuing normal operating expenses, including payroll, during the period of restoration; extra expense pays costs to continue operations and avoid or minimize shutdown.

Period of restoration begins 72 hours after the direct physical loss and ends when the property is repaired, rebuilt, or replaced with reasonable speed; extended period of indemnity can add a tail after restoration.

A reporting (value reporting) form uses a provisional deposit premium plus periodic value reports, with the premium adjusted at year end based on reported values; it avoids coinsurance penalties for fluctuating values.

Crime forms cover employee dishonesty, forgery or alteration, theft, robbery, safe burglary, computer fraud, and funds transfer fraud; discovery forms cover loss discovered during the policy period, loss-sustained forms cover loss occurring during the period.

Inland marine covers property in transit, in the hands of others, or movable; typical forms include personal articles floaters, bailee's customer goods, motor truck cargo, contractors equipment, accounts receivable, valuable papers, and signs; inland marine forms generally carry no coinsurance and follow the property.

Negligence elements: a legal duty owed, breach of that duty, proximate cause linking the breach to the injury, and actual damages.

Defenses to negligence include contributory negligence (a complete bar in the few jurisdictions that still use it), comparative negligence, assumption of risk, and statute of limitations.

Pure comparative negligence reduces the plaintiff's recovery by the plaintiff's percentage of fault; modified comparative negligence bars recovery at 50% or 51% depending on the jurisdiction.

Damages: compensatory damages include special (medical bills, lost wages, property damage) and general (pain and suffering); punitive damages punish intentional or reckless conduct and are often uninsurable.

Liability policy structure: Declarations, Insuring Agreement, Supplementary Payments, Exclusions, and Conditions; the insurer's duty to defend is broader than and in addition to the duty to pay damages.

Occurrence policies cover injury or damage that takes place during the policy period; claims-made policies cover claims first made and reported during the policy period, limited by a retroactive date, with an optional extended reporting period.

Limits may be split (separate per-person and per-occurrence amounts), combined single limit, or per-occurrence with a general aggregate; defense costs may be inside or outside the limit.

Vicarious liability holds one party responsible for another's acts (respondeat superior for employers); joint and several liability allows a plaintiff to collect from any liable defendant, and strict liability applies without proof of negligence.

Personal auto policy parts: A Liability, B Medical Payments, C Uninsured/Underinsured Motorists, D Coverage for Damage to Your Auto (collision and other than collision), plus E Duties After an Accident or Loss and F General Provisions.

Covered auto definitions include any auto shown in the declarations, newly acquired autos (automatic coverage for a limited period, commonly 14 days), temporary substitute autos, and non-owned autos used with permission.

Key exclusions: intentional damage, vehicles used as public or livery conveyance, vehicles used in racing, vehicles with fewer than four wheels, and property owned by or transported by the insured for business.

Part D settles collision and other than collision losses on an actual cash value basis (replacement cost minus depreciation) unless the policy provides a different valuation method.

Financial responsibility laws require proof of ability to pay after an accident or conviction; compulsory insurance laws require liability coverage before the vehicle may be registered.

No-fault systems pay first-party personal injury protection (medical expense and wage loss) regardless of fault and restrict tort claims by a monetary or verbal threshold.

Commercial auto uses the Business Auto Coverage Form with covered auto symbols 1-9 (for example, symbol 1 = any auto, symbol 7 = specifically described autos, symbol 8 = hired autos, symbol 9 = non-owned autos).

District of Columbia minimum automobile liability limits are $25,000 per person / $50,000 per accident bodily injury and $10,000 property damage; uninsured motorist coverage must be provided at those limits.

Commercial general liability (occurrence form) coverages: Coverage A bodily injury and property damage, Coverage B personal and advertising injury, Coverage C medical payments.

CGL limits: general aggregate, products-completed operations aggregate, each occurrence, damage to premises rented to you, and medical expense limit; the general aggregate applies to all losses except products-completed operations.

Claims-made CGL forms respond to claims first made during the policy period for injuries occurring on or after the retroactive date and reported within the policy or extended reporting period.

An umbrella policy provides broader coverage than underlying policies and can drop down to cover gaps not covered by the underlying; an excess policy follows the form of the underlying and responds only after the underlying limits are exhausted.

Umbrella policies typically require self-insured retention for exposures not covered by underlying insurance and require underlying coverages to be maintained at specified limits.

Workers compensation provides four benefit types: medical care, disability income (temporary total, temporary partial, permanent partial, permanent total), death benefits for dependents, and rehabilitation; employers liability (Part Two) covers injury-related suits not covered by the statutory benefit.

Workers compensation is the exclusive remedy for workplace injury in most jurisdictions; premium is based on payroll, classification, and an experience modification factor.

Professional liability (errors and omissions) is usually written claims-made and covers negligent acts, errors, or omissions in rendering professional services; related lines include directors and officers, employment practices, and fiduciary liability.

The Department of Insurance, Securities and Banking (DISB) regulates insurance in the District of Columbia; the Commissioner is appointed by the Mayor and has authority to examine insurers, issue licenses, hold hearings, and impose penalties.

A person must hold a valid DC producer license before soliciting, negotiating, or selling insurance; insurers must appoint producers and report appointments and terminations to DISB.

Producers act in a fiduciary capacity for premiums collected, may not commingle premium funds with personal funds, and commissions may be paid only to licensed persons.

Prohibited unfair trade practices include misrepresentation of policy terms, twisting (inducing lapse or replacement through misrepresentation), rebating, false advertising, unfair discrimination, coercion or intimidation, and failure to settle claims without a reasonable explanation.

The Commissioner may issue cease and desist orders, levy fines, suspend or revoke licenses, and require restitution; affected parties are entitled to notice and an administrative hearing.

DC residual market and protection mechanisms include the Property Insurance Placement Facility (FAIR Plan) for hard-to-place property risks, the DC Automobile Insurance Plan for high-risk drivers, and the DC Insurance Guaranty Association for claims against insolvent insurers.

Property and casualty claims must be acknowledged and resolved in good faith, with a written explanation when a claim is denied or a settlement offer is made.