ME Property & Casualty key terms

The uncertainty about whether a loss will occur and how large that loss might be. Insurance transfers the financial consequences of certain risks from one person to a larger group of policyholders.

A situation that offers only the chance of loss or no loss, with no possibility of gain. Insurers generally insure pure risks such as fire, accident, or liability claims.

A financial stake in the person or property insured such that the insured would suffer a real economic loss if a covered event occurred. It must exist when the policy is issued.

The rule that a property insurance recovery should not exceed the insured's actual financial loss, so that a claimant cannot profit from an insurance claim.

The mutual duty of applicant and insurer to deal honestly, disclosing every material fact that would affect the decision to issue a policy or set its rate.

An agreement in which the values exchanged are unequal and depend on chance, because the insured pays a set premium while the insurer may pay far more or nothing at all.

A policy drafted by the insurer and offered to the insured on a take-it-or-leave-it basis. Because the insured has no bargaining power, ambiguities are generally resolved against the insurer.

The insurer's right, after paying a claim, to pursue the responsible third party and recover the amount paid, so the insured is not compensated twice for the same loss.

A condition that increases the likelihood or severity of a loss, such as oily rags in a garage, worn wiring in an old building, or a driver with a reckless record.

The dominant, uninterrupted cause that sets in motion the chain of events producing a loss. Coverage applies when an insured peril leads to damage through a continuous sequence.

The value of damaged property measured as replacement cost minus depreciation. It reflects what the item was worth at the time of loss rather than what a new one costs.

The amount needed to repair or replace damaged property with new materials of like kind and quality, without any deduction for depreciation.

A property provision requiring the insured to carry insurance equal to a stated percentage of the property's value; carrying less than that amount reduces the claim payment proportionally.

A policy form that lists the specific causes of loss it covers, such as fire, lightning, windstorm, or vandalism. Losses from causes not listed are not paid.

A policy form that covers risks of direct physical loss unless the cause is specifically excluded, placing the burden on the insurer to show that an exclusion applies.

The amount of a covered loss the insured must absorb before the insurer pays anything. It eliminates small claims, reduces paperwork, and lowers the premium charged.

Homeowners coverage that pays the extra cost of temporarily living elsewhere, above normal living costs, while the damaged dwelling is being repaired or rebuilt.

A provision naming a lender as loss payee on a property policy, so the lender receives notice of cancellation and payment for its interest in a covered loss.

Coverage for the added cost of rebuilding to current building codes and for the lost value of an undamaged portion when a code requires demolition or upgrading.

Coverage that replaces a business's lost net income and pays continuing normal operating expenses during the period reasonably needed to restore operations after a covered loss.

Failure to use the degree of care a reasonable person would use under similar circumstances, resulting in unintended injury or damage. It is the legal basis for most liability claims.

An accident, including continuous or repeated exposure to substantially the same harmful conditions, that causes bodily injury or property damage during the policy period.

A liability policy form that covers claims first reported during the policy period, regardless of when the injury or damage happened, often limited by a retroactive date.

Coverage for offenses such as libel, slander, invasion of privacy, and infringement of copyright in an advertisement, as distinct from coverage for bodily injury or property damage.

Liability coverage for injury or damage arising from a product after it has left the insured's control, or from completed work performed away from the insured's premises.

A no-fault coverage paying reasonable medical or funeral expenses for persons injured on the insured's premises or by the insured's operations, regardless of legal liability.

The maximum amount an insurer will pay for all covered claims arising during a single policy period, regardless of how many separate occurrences are involved.

A policy providing excess limits over underlying auto, general liability, or homeowners coverage and possibly filling gaps, usually requiring the insured to maintain specified underlying policies.

Auto coverage that pays the insured's injuries caused by a driver who carries no liability insurance, or whose limits are too low to pay the loss.

The principle that an employee injured on the job receives statutory benefits from the employer's workers compensation coverage and generally may not sue the employer for that injury.

The official who heads the Maine Bureau of Insurance and administers state insurance law, including licensing insurers and producers, reviewing policy forms, and enforcing market conduct rules.

An insurer licensed by the Maine Bureau of Insurance to transact business in the state; it is fully subject to state regulation and its policyholders are protected by the guaranty association.

Coverage placed with a non-admitted insurer when the risk cannot be insured by admitted carriers in the state. The producer needs special authority and guaranty fund protection does not apply.

The state-issued authorization an individual must hold before soliciting, negotiating, selling, or servicing insurance in Maine, and before any insurer may appoint that person.

An insurer's formal notice to the state that it authorizes a licensed producer to act on its behalf. A producer may not submit business for an insurer that has not appointed them.

A producer's obligation to hold premiums and other funds belonging to clients or insurers in a position of trust, keeping them separate and accounting for them promptly.

Offering an applicant anything of value not stated in the policy, such as cash, gifts, or a share of commission, as an inducement to buy insurance. It is an illegal inducement in Maine.

Inducing a policyholder to lapse or surrender an existing policy by misrepresenting the terms of the replacement coverage or of the policy already in force.

Prohibited claim handling conduct, such as failing to investigate promptly, denying a claim without a reasonable basis, or offering far less than the claim is actually worth.