MA Property & Casualty cheat sheet

Pure risk involves only the chance of loss or no loss and is insurable; speculative risk (chance of gain as well as loss) generally is not.

Indemnity restores the insured to roughly the pre-loss financial position; the insured should not profit from a loss.

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

An aleatory contract exchanges unequal dollar amounts that depend on chance, such as whether a covered loss occurs.

Insurance is a contract of adhesion: the insurer drafts the wording, and ambiguities are construed against the insurer (contra proferentem).

Subrogation transfers the insured's right of recovery against a negligent third party to the insurer after the insurer pays the claim.

Loss ratio = incurred losses divided by earned premium; combined ratio = loss ratio plus expense ratio.

Hazard types: physical (tangible conditions), moral (dishonest intent to create or exaggerate loss), morale (carelessness or indifference).

Risk management techniques: avoidance, prevention, reduction, retention, transfer, and sharing.

Policy structure follows DICE: Declarations, Insuring agreement, Conditions, Exclusions, supported by Definitions.

Coinsurance payment = (insurance carried divided by insurance required) times the loss, never exceeding the policy limit; insurance required = coinsurance percentage times value at risk.

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

Deductibles apply per occurrence and reduce the claim payment; the insured retains the first dollar amount of each loss.

The standard mortgage clause gives the lender independent rights: notice of cancellation or nonrenewal, ability to pay premium, and loss payment up to its interest.

Other-insurance provisions allocate a loss by pro rata shares, by excess coverage after primary limits are exhausted, or by equal shares until limits are exhausted.

The appraisal provision resolves disputes over the amount of loss: each party selects a competent appraiser, and the appraisers may choose an impartial umpire.

Policies are not assignable without the insurer's written consent, because coverage is underwritten based on the named insured.

Under the pair or set clause, loss of part of a set is valued at the difference between the value of the whole set and the value of the remaining part.

Negligence requires four elements: a legal duty owed, a breach of that duty, proximate cause, and actual damages.

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

Massachusetts applies modified comparative negligence: a claimant 51 percent or more at fault recovers nothing.

Massachusetts requires workers' compensation coverage for employers with one or more employees, and statutory benefits are the exclusive remedy against the employer.

An occurrence policy covers injury or damage that takes place during the policy period regardless of when the claim is reported; a claims-made policy covers claims first made during the period.

Claims-made forms use a retroactive date to bar coverage for acts occurring before that date and typically offer an extended reporting (tail) period.

Supplementary payments, such as defense costs, bail bonds, and lost earnings up to a stated daily maximum, are paid in addition to the liability limits.

Personal and advertising injury covers offenses such as libel, slander, false arrest, and invasion of privacy, and is separate from bodily injury coverage.

Liability limits: a per-person limit caps bodily injury damages for one claimant, a per-occurrence limit caps all covered injury and damage from one event, and an aggregate caps total payment in the policy period.

The Massachusetts Division of Insurance, headed by the Commissioner of Insurance, regulates insurers, rates, forms, and producer licensing.

Minimum compulsory Massachusetts auto limits are $20,000 per person and $40,000 per accident for bodily injury, plus $5,000 for property damage.

Every private passenger auto policy in Massachusetts must include $8,000 of Personal Injury Protection, which pays regardless of fault.

PIP pays medical expenses, 75 percent of lost wages, and replacement services, subject to deductible and copayment options that reduce premium.

Massachusetts tort threshold: a pain-and-suffering suit is permitted only if medical expenses exceed $2,000 or the injury is a fracture, disfigurement, permanent loss of body function, or death.

Massachusetts private passenger auto policies are written for a 12-month term, and uninsured motorist coverage is mandatory at limits equal to the bodily injury limits.

Producers must complete 45 hours of continuing education every three years, including at least 3 hours of ethics.

The Massachusetts Property Insurance Underwriting Association (FAIR Plan) provides basic property insurance when the voluntary market declines to write the risk.

The Safe Driver Insurance Plan assigns surcharge points for at-fault accidents and traffic violations and grants credits for consecutive clean driving years.

HO-3 provides open-peril (special) coverage on the dwelling and other structures but only named-peril coverage on personal property.

Standard HO limits: Coverage B other structures 10 percent of Coverage A, Coverage D loss of use 30 percent of Coverage A, Coverage E personal liability $100,000, Coverage F medical payments $1,000 per person.

Replacement-cost settlement of the dwelling under the HO forms requires carrying at least 80 percent of replacement cost; otherwise a proportional penalty applies.

HO special limits include $200 for money, $1,500 for jewelry theft, $2,500 for firearms theft, and $2,500 for silverware theft.

HO-4 covers a tenant's personal property, liability, and loss of use but not the building; HO-6 covers a condo unit owner's personal property plus building items the owner must insure.

Dwelling policies DP-1, DP-2, and DP-3 insure the building and personal property; they contain no liability coverage unless added by endorsement.

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

Under the personal auto policy, a newly acquired auto of the same type as a covered auto has coverage for 14 days, and a newly acquired trailer is also covered for 14 days.

Massachusetts personal auto policies use a state-specific form with numbered Parts, including compulsory Bodily Injury to Others, PIP, and Damage to Someone Else's Property.

CGL Coverage A pays bodily injury and property damage; Coverage B pays personal and advertising injury; Coverage C pays medical expenses regardless of fault.

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

The CGL exclusions for your product and your work bar damage to the insured's own product or completed work but not damage to other property arising from it.

The businessowners policy packages commercial property and general liability for eligible small businesses and includes business income with a 72-hour waiting period.

Commercial property causes-of-loss forms are basic, broad, and special; the special form is open peril subject to stated exclusions.

Commercial property coinsurance requires insurance equal to a percentage of the property's value, and a penalty applies when the limit carried falls short.

Workers compensation Part One pays statutory benefits; Part Two employer's liability responds to employee lawsuits not covered by the statutory benefit system.

Business auto coverage is triggered by the covered-auto symbols (1 through 9) shown on the declarations, which also determine hired and non-owned auto coverage.

Umbrella policies provide excess limits above underlying policies and can drop down to cover gaps, subject to a self-insured retention.