ID Property & Casualty cheat sheet

McCarran-Ferguson Act (1945): insurance regulation is reserved to the states; federal antitrust law applies only to the extent the states do not regulate the business.

A producer must be licensed in the state where the insured risk is located; nonresident licenses are issued through state reciprocity, usually filed through NIPR.

Insurers must hold a certificate of authority to be 'admitted'; nonadmitted placements go through a licensed surplus lines broker after a documented diligent search.

Premiums collected are held in a fiduciary capacity; commingling premium funds with personal or operating money is grounds for license suspension or revocation.

Appointment: an insurer appoints a producer to act on its behalf, and most states prohibit a producer from submitting business for an unappointed insurer.

Continuing education: commonly 24 credit hours per two-year license term, including a state-mandated ethics or insurance law component (state-specific).

Unfair trade practices include misrepresentation, twisting, rebating, false advertising, coercion, and illegal boycott or intimidation.

Commissioner authority: examine insurers and producers, issue and revoke licenses, hold hearings, adopt rules, impose fines, and place insurers in rehabilitation or liquidation.

Insurable interest is a financial stake in the exposure: property insurance requires it at the time of loss, life insurance at the time of application.

Principle of indemnity restores the insured to the pre-loss financial position; insurance may not create profit from a loss.

Aleatory contract: the dollar values exchanged by the parties are unequal and depend on an uncertain future event.

Contract of adhesion: the insurer drafts the policy and offers it take-it-or-leave-it, so ambiguities are construed against the insurer (contra proferentem).

Utmost good faith requires accurate representations and disclosure of material facts; concealment or material misrepresentation can void coverage.

Hazard types: physical (tangible conditions), moral (dishonest intent), and morale (carelessness or indifference).

Proximate cause is the unbroken causal chain linking a peril to the loss; an intervening cause can break the chain and defeat coverage.

Law of large numbers allows loss prediction across a pool; adverse selection (concentrating high-risk exposures) undermines that prediction.

Reinsurance: treaty agreements cover an entire class of policies automatically; facultative reinsurance is negotiated risk by risk.

HO-3 insures the dwelling on an open-perils (special) basis and personal property on named perils; HO-5 is open perils on both.

HO-3 standard limits: Coverage B other structures = 10% of Coverage A; Coverage C personal property = 50% of A; Coverage D loss of use = 30% of A.

HO-4 covers a renter's personal property and liability but not the building; HO-6 is the condominium unit-owners form.

Actual cash value = replacement cost minus depreciation; replacement cost pays new-for-old without depreciation up to the limit shown.

Coinsurance recovery = (limit carried / limit required) x loss, then subtract the deductible; limit required = coinsurance percentage x replacement cost.

Commercial causes of loss forms: Basic and Broad are named-peril forms; Special is open perils subject to listed exclusions.

Business income pays net income loss plus continuing normal operating expenses during the period of restoration, typically after a 72-hour waiting period.

Mortgagee clause: loss payments go to the lender, the lender may pay premium, and the lender's rights survive acts of the insured that void coverage.

Ordinance or law exclusion bars the added cost of rebuilding to current code unless coverage is added by endorsement.

CGL Coverage A = bodily injury and property damage; Coverage B = personal and advertising injury; Coverage C = medical payments (no fault, no negligence finding needed).

CGL limits: each occurrence, general aggregate (commonly two times the occurrence limit), products-completed operations aggregate, personal and advertising injury limit, and damage to premises rented.

Claims-made responds to claims first reported during the policy period for acts on or after the retroactive date; occurrence responds to injury or damage during the policy period whenever the claim is filed.

Extended reporting period (tail) lengthens the reporting window after a claims-made policy ends; a retroactive date moved earlier is 'nose' coverage.

Personal auto policy parts: A liability, B medical payments, C uninsured/underinsured motorists, D damage to your auto (collision and other than collision).

Split limits (e.g., 100/300/50) state per-person, per-occurrence, and property damage amounts separately; a combined single limit applies one amount to all damages.

Commercial auto uses covered-auto numerical symbols (1 = any auto, 7 = specifically described autos, 8 = hired autos, 9 = nonowned autos).

Workers compensation Part One pays statutory benefits regardless of fault; Part Two employers liability responds to injury claims outside the exclusive remedy.

Umbrella policies sit above underlying limits and may drop down for exposures not covered below, often subject to a self-insured retention.

Guaranty associations pay covered claims of insolvent admitted insurers, are funded by assessments on member insurers, and pay up to statutory limits that vary by state and by line.

Residual markets (FAIR plans, auto assigned risk plans, beach and windstorm pools) provide coverage when the voluntary market will not write the risk.

Insurer midterm cancellation is limited to stated reasons such as nonpayment, fraud, or license revocation after the policy has been in force a set period; statutory notice periods apply.

Unfair claim settlement practices include failing to acknowledge or act promptly on a claim, unreasonable delay, inadequate investigation, and offering substantially less than the amount owed.

Material misrepresentation on an application supports rescission; the life insurance contestable period is typically two years from issue.

Gramm-Leach-Bliley Act requires privacy notices and opt-out rights before nonpublic personal financial information is shared with nonaffiliated third parties.

Rebating (offering anything of value not stated in the policy) and twisting (misrepresentation to induce replacement) are prohibited unfair trade practices in nearly every state.

NFIP and TRIA are federal programs; flood policies are written through licensed producers but backed by the federal government.

A valid contract requires offer, acceptance, consideration, legal purpose, and competent parties; missing any element leaves the agreement unenforceable.

In insurance the application plus premium payment is the offer, and issuance of a binder or policy is the acceptance.

Policy structure order: declarations, insuring agreement, conditions, exclusions, definitions, and attached endorsements.

Conditions set the insured's post-loss duties: prompt notice, proof of loss, protecting property from further damage, cooperation, and examination under oath.

Waiver is the voluntary surrender of a known right; estoppel bars the insurer from later asserting a right the insured relied on it to give up.

A representation is a statement believed true to the best of the applicant's knowledge; a warranty is a statement the policy requires to be literally true.

Ambiguity in policy language is construed against the insurer; some states also apply the reasonable expectations doctrine.

Endorsements amend the policy and control over conflicting printed form language.

Third-party beneficiaries such as mortgagees and additional insureds may enforce coverage rights independently of the named insured.