MD Property & Casualty key terms

A person has an insurable interest when they would suffer genuine financial loss from damage to or loss of the insured property, or from an event affecting an insured person. For property coverage it must exist at the time of loss.

The idea that insurance should restore an insured to roughly the same financial position held before a loss, no better and no worse. It prevents profiting from loss and underlies valuation methods such as actual cash value.

Both the applicant and the insurer must deal honestly and disclose material facts. Concealment or material misrepresentation by the applicant can allow the insurer to rescind the policy or deny a claim.

An insurance policy is drafted by the insurer and offered to the insured on a take-it-or-leave-it basis. Because the insured has no real bargaining power over the wording, ambiguities are generally read in the insured's favor.

A contract in which the values exchanged by the parties are unequal and depend on chance. The insured pays a relatively small premium, while the insurer may pay a much larger amount if a covered loss occurs.

After paying a covered loss, the insurer acquires the insured's legal right to recover those costs from the party that caused the loss. It helps hold wrongdoers accountable and helps control claim costs.

The specific cause of a loss, such as fire, windstorm, theft, or collision. A loss must trace back to a covered peril for payment under a named-peril policy form.

A condition that increases the likelihood or the severity of a loss from a given peril. Common types are physical hazards like icy steps, moral hazards like dishonesty, and morale hazards like carelessness.

The dominant, unbroken cause that sets in motion the chain of events producing a loss. If an excluded peril is the proximate cause, the claim is generally denied even when a covered peril followed.

The cost to repair or replace damaged property minus depreciation, often described as replacement cost less depreciation. It reflects what the property was worth at the time of loss rather than new-for-old value.

The amount needed to repair or replace damaged property with new property of similar kind and quality, with no deduction for depreciation. It usually exceeds actual cash value and may carry its own limit.

A property form that covers only the causes of loss specifically listed, such as fire, lightning, windstorm, hail, and theft. The insured must show the loss resulted from a listed peril.

A property form covering risks of direct physical loss unless the cause is specifically excluded. It is broader than named-peril coverage, and the insurer bears the burden of showing an exclusion applies.

A property provision requiring the insured to carry a limit of at least a stated percentage of the property's value, commonly eighty percent. If the limit is lower, claims are reduced in proportion to the shortfall.

A policy provision protecting a lender that holds a financial interest in insured property. The lender receives loss payment to the extent of its interest and advance notice if the policy is cancelled or nonrenewed.

Pays additional living expenses, such as temporary housing and meals, when a covered loss makes a residence uninhabitable, or pays fair rental value for a rented dwelling. Benefits run for a stated time period.

Pays the extra cost of rebuilding in compliance with current building codes, or of demolishing and removing undamaged remnants after a covered loss. Unendorsed property policies limit or exclude these costs.

Replaces lost net income and continuing normal expenses when a covered property loss suspends operations. It usually continues until the business could reasonably resume, subject to a waiting period and a policy limit.

Coverage for loss caused by rising water, including overflow of inland or tidal waters, mudflow, or unusual rapid surface water accumulation. Standard property policies exclude flood, so coverage is usually bought through the NFIP or private carriers.

Failure to use the degree of care a reasonable person would use under similar circumstances. A liability claim generally requires a duty, a breach of that duty, proximate cause, and actual damages.

Liability imposed by law without any proof of carelessness, applied to unusually hazardous activities such as blasting or keeping wild animals. The injured party need only show the activity caused the harm.

An accident, including continuous or repeated exposure to substantially the same harmful conditions, that causes injury or damage during the policy period. An occurrence-based liability policy responds no matter when the claim is reported.

A liability policy covering injury or damage that happens after a stated retroactive date but is first claimed and reported during the policy period. Extended reporting, or tail, endorsements are often available.

A policy covering a business against third-party claims of bodily injury, property damage, and personal and advertising injury arising from its premises, operations, and products. It typically excludes employee injuries, autos, and professional errors.

General liability coverage for bodily injury or property damage caused by the insured's products or completed work away from the insured's premises. It applies after the product or work has been released to others.

Pays reasonable medical and funeral expenses for third parties injured on the insured's premises or by the insured's operations, regardless of fault. Payment is subject to a per-person limit and does not require a lawsuit.

Pays the insured's damages when an at-fault driver has no liability insurance, or has limits too low to cover the loss. Maryland requires insurers to provide uninsured motorist coverage, and any waiver or reduction must be in writing.

First-party auto coverage paying medical expenses, lost wages, and essential services for the insured and passengers after an accident, regardless of fault. Maryland requires at least $2,500 of this coverage unless it is waived in writing.

The most an insurer will pay for all covered claims during a single policy period, in addition to any per-occurrence limit. Once the aggregate is used up, no further claims are paid under that policy.

A no-fault statutory benefit system that pays medical costs, lost wages, and death benefits for employees injured on the job. In exchange, employers receive immunity from most employee lawsuits over those injuries.

The state agency that regulates insurers, producers, and insurance transactions in Maryland. It issues licenses, reviews rates and policy forms, and investigates complaints and unfair trade practices.

A license issued by the Maryland Insurance Commissioner allowing an insurer to transact insurance business in the state. Transacting insurance without one is illegal and exposes the company to penalties.

The written authorization an insurer files with the Maryland Insurance Administration naming a licensed producer as its agent. A producer generally may not place business with a company unless the insurer has appointed them.

A producer's obligation to hold premiums collected from insureds in trust for the insurer and to account for those funds promptly. Misusing premium funds can lead to license suspension and personal liability.

Prohibited insurer conduct such as misrepresenting policy provisions, failing to investigate a claim promptly, or offering far less than a claim is worth without a reasonable basis. Maryland treats these acts as unfair trade practices subject to penalties.

Maryland rules requiring insurers to give advance written notice before ending most personal lines policies, with shorter notice permitted for nonpayment of premium. The notice states the reason and the insured's right to object.

A state-created insurer of last resort that provides auto liability and related coverage to Maryland drivers who cannot obtain coverage in the voluntary market. It is now marketed as Maryland Auto Insurance.

A nonprofit entity that pays covered claims of insolvent property and casualty insurers up to statutory limits. It protects policyholders and claimants when an admitted carrier becomes unable to pay its obligations.

Offering or giving something of value, such as a discount, gift, or commission split, that is not stated in the policy as an inducement to buy insurance. Maryland prohibits it as an unfair trade practice, with limited exceptions.

Inducing a policyholder to lapse, surrender, or replace an existing policy through misrepresentation or untrue statements in order to sell another policy. It is an unfair trade practice that can result in license penalties.