KY Property & Casualty cheat sheet

The McCarran-Ferguson Act (1945) leaves insurance regulation to the states and exempts insurance from federal antitrust law only to the extent the states actually regulate it.

The NAIC drafts model laws, maintains the Producer Database, and accredits state departments, but it has no independent licensing or enforcement authority.

A producer must hold a state license for the line of business sold and must be appointed by the insurer before soliciting, binding, or submitting business for that insurer.

Nonresident licenses are generally issued through reciprocity and NIPR when the home-state license is in good standing and the home state extends reciprocity.

Unfair trade practices include rebating, twisting, misrepresentation, coercion, and unfair discrimination; violations support fines, suspension, or revocation.

Premiums collected by a producer are held in trust: commingling with operating funds is prohibited and net premiums must be remitted per the agency contract and state rules.

Fiduciary duties of a producer include timely remittance, accurate records, and segregation of premium funds.

License renewal requires completing the state's continuing education requirement, paying renewal fees, and keeping name, address, and background information current.

Risk is uncertainty about loss; insurance transfers pure risk (chance of loss or no loss) and generally will not insure speculative risk (chance of gain).

Tests of insurable risk: accidental, definite and measurable, large number of similar exposure units, loss not catastrophic to the insurer, lawful subject matter, and calculable expected loss.

The indemnity principle limits recovery to the actual financial loss, less any deductible and subject to policy limits; the insured should not profit from a loss.

Insurable interest is required at the time of loss for property insurance and at policy inception for life insurance.

Elements of a valid insurance contract: offer, acceptance, consideration, competent parties, and legal purpose.

Representations are statements believed to be true; warranties are conditions of the contract; material misrepresentation or concealment permits rescission.

Property coinsurance formula: (insurance carried / insurance required) x loss, capped at the policy limit, where insurance required equals the coinsurance percentage times the value of the property.

Adverse selection is controlled through underwriting, exclusions, deductibles, and classification-based rating.

Subrogation allows the insurer to pursue the negligent third party after paying the insured; contribution allocates a loss among concurrent insurers.

The Kentucky Department of Insurance, headed by a Commissioner appointed by the Governor (not elected), enforces the insurance code and adopts administrative regulations.

Producers and adjusters must be licensed by the Department; business entity licenses require a designated licensed individual responsible for compliance.

Continuing education for Kentucky producers is 24 credit hours per two-year renewal cycle, including 3 hours of ethics.

Kentucky is a choice no-fault state: personal injury protection is required and the insured selects between no-fault and full tort recovery options.

Kentucky Access is the state's residual market auto insurance plan for drivers who cannot obtain coverage in the voluntary market.

Insurers must file rates and policy forms with the Department unless exempt; rates may not be inadequate, excessive, or unfairly discriminatory.

Unfair claim settlement practices include misrepresenting policy provisions, unreasonable delay, and failing to conduct a reasonable investigation of a claim.

Placing business with an unauthorized insurer is prohibited except through properly licensed surplus lines brokers.

Producers must report changes of name or address and any administrative action taken against a license within the time set by regulation.

Declarations identify the insured, property, policy period, limits, and deductible; the insuring agreement states the promise; conditions state duties; exclusions state what is not covered.

Named-peril forms list the covered perils; open-peril (special) forms cover direct physical loss unless excluded, shifting to the insurer the burden of proving an exclusion applies.

Actual cash value equals replacement cost minus depreciation; replacement cost pays to repair or replace with new property of like kind and quality when policy conditions are met.

Coinsurance payment equals (insurance carried / insurance required) x loss, not exceeding the policy limit, where insurance required equals the coinsurance percentage times the value at loss.

Deductibles may be flat dollar amounts, a percentage of the Coverage A limit (common for wind and hail), or applied per occurrence.

Loss of use pays the increase in living expenses while the dwelling is uninhabitable; fair rental value covers loss of rent from rented premises.

A mortgagee or lender's loss payable clause protects the lender's interest and entitles the lender to notice of cancellation and to loss payment.

Other insurance provisions apply pro rata shares by limit when policies are concurrent, while excess coverage responds only after primary limits are exhausted.

HO-3 insures the dwelling on an open-peril basis and personal property on a named-peril basis; HO-5 is open peril on both dwelling and personal property.

HO-3 coverages: A dwelling, B other structures, C personal property, D loss of use, E personal liability, F medical payments to others.

Homeowners forms impose special sublimits on money, jewelry, silverware, firearms theft, business property, and electronic data.

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

The businessowners policy packages commercial property and general liability for eligible small, low-hazard businesses and includes business income coverage.

Commercial causes of loss forms: basic (named perils), broad (named perils plus breakage and water damage), and special (open peril).

Commercial property coinsurance operates like the homeowners formula; an agreed value provision suspends the coinsurance requirement.

Flood and earthquake are excluded in standard property forms; flood is written through NFIP or private markets, and difference-in-conditions forms fill coverage gaps.

Builders risk covers structures under construction; inland marine covers property in transit and mobile or specialized property.

Liability policies pay third parties for the insured's legal obligation; there is no first-party benefit except supplementary payments and medical payments in some forms.

Negligence requires duty, breach, proximate cause, and damages; comparative negligence reduces the plaintiff's recovery by the plaintiff's share of fault.

Compensatory damages include special damages (medical bills, lost wages) and general damages (pain and suffering); punitive damages punish reckless or intentional conduct.

Occurrence policies respond to injury or damage occurring during the policy period; claims-made policies respond to claims first made during the period, subject to the retroactive date.

Limits include per occurrence (each accident), general aggregate (all claims in the period), and per-person sublimits; defense costs may be inside or outside the limit.

Personal and advertising injury covers offenses such as libel, slander, invasion of privacy, and infringement in advertising.

Workers compensation: Part One statutory benefits (no dollar limit), Part Two employer's liability, Part Three other-states coverage.

Medical payments coverage pays reasonable medical expenses regardless of fault and without a lawsuit.

A self-insured retention is the insured's own payment before coverage responds, and it commonly applies to umbrella and excess policies.

CGL Coverage A covers bodily injury and property damage; Coverage B covers personal and advertising injury; Coverage C provides medical payments.

The Coverage A insuring agreement covers sums the insured becomes legally obligated to pay because of bodily injury or property damage caused by an occurrence in the coverage territory.

The duty to defend is broader than the duty to indemnify and applies to suits seeking covered damages, even suits that are groundless or fraudulent.

Key exclusions: expected or intended injury, contractual liability (except insured contracts), liquor liability, pollution, autos, aircraft, watercraft, workers compensation, professional liability, impaired property, and recall.

Products-completed operations coverage applies after the product or completed work has left the insured's control and carries its own aggregate limit.

Limits include each occurrence, general aggregate, products-completed operations aggregate, personal and advertising injury limit, damage to premises rented limit, and medical expense limit.

Insured contracts include leases of premises, sidetrack agreements, and easement agreements, restoring coverage removed by the contractual liability exclusion.

Additional insured status and waiver of subrogation are added by endorsement and are not automatic under the standard CGL form.

Umbrella policies provide excess limits above the CGL and may drop down for gaps; a self-insured retention applies where no underlying coverage exists.

Personal auto policy parts: A liability, B medical payments, C uninsured/underinsured motorist, D damage to your auto, E duties after an accident or loss, F general provisions.

Your covered auto includes listed autos, newly acquired autos (per policy conditions), trailers, and temporary substitute autos.

Liability pays third-party bodily injury and property damage for which the insured is legally responsible, subject to per-person and per-accident limits.

Physical damage coverage consists of collision (impact) and other than collision/comprehensive (theft, fire, glass, weather, animals).

Kentucky mandates liability and personal injury protection coverage and requires uninsured motorist coverage to be offered; certain coverages may be rejected only in writing.

PIP pays medical expenses, lost income, and replacement services regardless of fault, subject to the policy limit and any deductible or coordination of benefits.

Permissive users and resident relatives generally qualify as insureds, and liability coverage follows the vehicle in most personal auto policies.

Commercial auto uses numerical symbols to designate covered autos (symbol 1 any auto, symbol 7 scheduled autos), and hired and non-owned auto coverage may be added.

Stacking allows the insured to add UM/UIM limits from multiple policies or vehicles when a single loss exceeds one limit.