DE Property & Casualty cheat sheet

The McCarran-Ferguson Act (1945) reserves primary insurance regulation to the states; the NAIC writes model laws but has no enforcement authority.

An insurer must hold a certificate of authority to be an admitted carrier; non-admitted insurers may write only through surplus lines channels where permitted by state law.

A producer must be licensed in the state where the risk is located and appointed by the insurer, with the appointment filed with the insurance department.

Premiums are held in a fiduciary capacity; commingling premium funds with personal money is prohibited and is grounds for license revocation.

Unfair trade practices include rebating, twisting, misrepresentation, false advertising, boycott, coercion, and unfair claim settlement practices.

State guaranty associations pay covered claims of insolvent admitted insurers up to statutory caps; they do not protect the insurer's owners or creditors.

Continuing education is required for license renewal, commonly 24 credit hours per two-year term including an ethics component.

A producer must report address changes, felony convictions, and administrative actions against a license to the department within a stated period, often 30 days.

Commission sharing is permitted only with properly licensed persons, except as state statute otherwise allows.

Insurable interest must exist at the time of loss for property insurance, but only at policy inception for life insurance.

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

Coinsurance payment = (limit carried / limit required) x loss, less deductible, where limit required = coinsurance percentage x value at risk.

Valid contract elements are offer, acceptance, consideration, competent parties, and legal purpose; insurance is a contract of adhesion drafted by the insurer.

Hazards divide into physical (icy steps), moral (dishonest intent such as arson), and morale (carelessness or indifference).

Insurable risks are definite and measurable, accidental, shared by many similar exposure units, not catastrophic to the insurer, and priced at a feasible premium.

Utmost good faith imposes duties of representation, warranty, and non-concealment; a material misrepresentation makes the policy voidable.

The law of large numbers allows loss prediction across many units; adverse selection occurs when substandard risks buy coverage disproportionately.

Subrogation transfers the insured's recovery rights against a negligent third party to the insurer after payment, preventing double recovery.

Named-peril forms list covered causes of loss; special (open-peril) forms cover all risks of direct physical loss except those excluded, with the insurer bearing the burden of proving an exclusion.

Many commercial property forms include an 80% coinsurance clause; carrying a lower limit produces a proportional penalty on partial losses.

Section I property coverages typically include building, other structures, personal property, and loss of use or business income.

Debris removal, preservation of property, and reasonable repairs after a loss are additional coverages that generally do not increase the limit of insurance.

A mortgagee or loss payable clause protects the lender's interest, giving it loss payment, notice of cancellation, and the right to submit proof of loss.

Vacancy conditions commonly suspend vandalism, sprinkler leakage, and glass coverage after 60 days of vacancy.

Pair or set: a loss to part of a set is settled as a fair proportion of the value of the whole, or the insurer may repair or replace the part.

Common exclusions include earth movement, flood, ordinance or law, neglect, intentional loss, and off-premises utility service interruption.

Business income pays lost net income and continuing expenses during the period of restoration; extra expense pays costs to avoid or shorten a shutdown.

Negligence requires a duty owed, a breach of that duty, proximate cause, and actual damages.

Compensatory damages consist of special damages (medical bills, lost wages) plus general damages (pain and suffering); punitive damages punish gross or intentional misconduct.

Vicarious liability holds one party, such as an employer, responsible for another's acts; strict liability applies without proof of negligence.

An occurrence policy covers injury or damage that takes place during the policy period even if the claim is made years later; a claims-made policy covers claims first made during the period.

A claims-made retroactive date bars coverage for acts occurring before that date; an extended reporting period lengthens the window for reporting claims.

Supplementary payments such as defense costs, bail bond premiums, and loss of earnings are paid in addition to the limit of liability.

Split limits state bodily injury per person, bodily injury per occurrence, and property damage per occurrence separately; a combined single limit applies one amount to all damages per occurrence.

Primary coverage pays first; excess coverage responds only after underlying limits are exhausted.

Medical payments coverage pays reasonable medical expenses regardless of fault, subject to a per-person limit.

HO-3 insures the dwelling and other structures on an open-peril basis and personal property for named perils; HO-5 opens both sections to open peril.

Common HO-3 relationships: Coverage B other structures 10% of Coverage A; Coverage C personal property 50% of A; Coverage D loss of use typically 30% of A.

Standard HO liability limits are Coverage E personal liability $100,000 and Coverage F medical payments to others $1,000 per person.

Coverage C special limits cap theft losses for money (about $200), jewelry and furs (about $1,500), firearms (about $2,500), and silverware (about $2,500) unless items are scheduled.

HO-4 renters covers personal property, loss of use, liability, and medical payments but provides no Coverage A or Coverage B.

HO-6 condo unit-owners covers building property within the unit (typically $1,000), personal property, loss assessment, liability, and medical payments.

Section I exclusions include earth movement, flood, neglect, intentional loss, ordinance or law, and off-premises power failure; flood and earthquake need separate policies.

After a loss the insured must give prompt notice, protect the property, prepare an inventory, and file proof of loss; suit must be brought within the policy's suit limitation period.

Water backup of sewers or drains, service line damage, and scheduled valuables require endorsements and are not covered by the base HO-3 form.

Part A liability pays damages the insured is legally liable for plus defense costs; split limits such as 100/300/50 are common.

Part B medical payments pays medical and funeral expenses for the insured and passengers regardless of fault, typically within three years of the accident.

Part C uninsured/underinsured motorist pays when the at-fault driver has no insurance or insufficient limits, and covers hit-and-run accidents.

Part D physical damage splits into collision (impact with another object or upset) and other than collision (comprehensive) coverage.

Newly acquired autos: liability coverage extends automatically; physical damage coverage applies for 14 days when the policy already carries that coverage on another auto.

Exclusions include intentional damage, racing, use as a public livery or conveyance for hire, and vehicles with fewer than four wheels.

A temporary substitute auto is covered while the insured vehicle is out of service due to breakdown, repair, or loss.

Physical damage losses are settled at actual cash value unless replacement cost or loan/lease gap coverage is purchased.

Financial responsibility laws require proof of liability insurance, and an SR-22 filing certifies coverage following serious violations.

The BOP combines property, business income, and liability coverage in one policy for eligible small businesses such as offices, retail stores, and service risks.

BOP-ineligible risks typically include auto dealers, bars and taverns, and manufacturers, which must use a commercial package policy.

The BOP property form covers building, business personal property, and business income for up to 12 months; a special (open-peril) form is available.

The commercial package policy is modular, combining commercial property, general liability, auto, crime, inland marine, equipment breakdown, and farm coverages.

The CGL occurrence form provides Coverage A bodily injury and property damage, Coverage B personal and advertising injury, and Coverage C medical payments.

CGL limits include each occurrence, general aggregate, products-completed operations aggregate, damage to premises rented to you, and medical expense limit.

Commercial property causes-of-loss forms are basic, broad, and special; theft is added by endorsement under the basic and broad forms.

Business income responds during the period of restoration; extra expense covers reasonable costs to continue operations after a covered loss.

Additional insured endorsements and waivers of subrogation are frequently required by construction contracts and commercial leases.

Workers compensation is a no-fault, exclusive-remedy system providing medical care, disability income, death benefits, and rehabilitation.

Part One workers compensation pays statutory benefits with no dollar limit; Part Two employers liability responds to injury claims that fall outside the statutory system.

Disability benefits replace a percentage of pre-injury wages, commonly 66 2/3% of the state average weekly wage, subject to state maximums.

Premium = payroll per $100 of remuneration x class code rate x experience modification factor, adjusted by premium discounts or credits.

An experience modification below 1.00 credits favorable loss history; a factor above 1.00 debits unfavorable loss history.

Monopolistic state funds (for example North Dakota, Ohio, Washington, and Wyoming) require coverage through the state fund, while most states allow private carriers.

Federal statutes cover specific workers: FELA for railroad employees, LHWCA for longshore and harbor workers, and the Defense Base Act for overseas contractors.

A commercial umbrella provides limits excess of underlying general liability, auto, and employers liability coverage and may drop down for gaps.

The NFIP writes flood coverage with limits of $250,000 building and $100,000 contents for residential risks and $500,000 each for commercial risks.