MS Property & Casualty cheat sheet

Insurable interest must exist at the time of loss for property insurance, but only at the time of application for life insurance.

Principle of indemnity: the insured is restored to approximately the pre-loss financial position, no better and no worse, so recovery cannot exceed the actual loss.

An insurance policy is an aleatory contract: the values exchanged are unequal and depend on an uncertain future event.

Law of large numbers: as the number of similar, independent exposure units increases, actual losses converge on expected losses and rates become more predictable.

Adverse selection is the tendency of applicants with the highest loss potential to buy coverage most eagerly; underwriting, exclusions and rating classes control it.

Insurance handles pure risk (loss or no loss); speculative risk (loss, no loss, or gain) is not insurable.

Hazards: physical (tangible conditions), moral (dishonest intent), and morale (carelessness or indifference created by having insurance).

STARR methods of handling risk: Sharing, Transfer, Avoidance, Reduction, Retention.

Subrogation: after paying a loss the insurer takes over the insured's right of recovery against the at-fault party, preventing double recovery.

Coinsurance payment = (limit carried ÷ limit required) × loss, never exceeding the policy limit, where limit required = coinsurance percentage × value of the property.

Actual cash value = replacement cost − depreciation; replacement cost pays to repair or replace with new property of like kind and quality with no depreciation deduction.

HO-3 covers the dwelling and other structures on open (special) peril and personal property on named perils only.

HO-5 (comprehensive form) covers both the dwelling and personal property on open peril.

HO-4 (contents broad form) is written for tenants and covers personal property and loss of use; the building itself is the landlord's exposure.

HO-6 (unit-owners form) covers a condominium owner's personal property, building additions and alterations, and loss assessment charges.

HO-8 (modified coverage) is designed for older homes whose replacement cost exceeds market value and settles losses on a functional replacement or repair basis.

Additional living expense / fair rental value pays the increase in living costs needed to maintain the insured's normal standard of living while the dwelling is repaired.

When two policies cover the same loss, each pays pro rata: its limit of insurance divided by the total insurance in force, applied to the loss.

Occurrence trigger: the bodily injury or property damage must happen during the policy period, but the claim may be reported and paid years later.

Claims-made trigger: the claim must first be made against the insured during the policy period or a stated extended reporting period.

The general aggregate limit caps all covered claims in a policy period other than those paid under products-completed operations coverage.

Personal and advertising injury covers offenses such as libel, slander, wrongful eviction, invasion of privacy, and copyright infringement in an advertisement, not bodily injury.

Products-completed operations coverage responds to bodily injury or property damage arising from the insured's product or completed work away from the premises.

Workers compensation Part One pays statutory benefits with no dollar limit; Part Two (employer's liability) responds to employee tort suits with a stated limit.

Exclusive remedy: statutory workers compensation benefits are the employee's sole remedy against the employer for work-related injury, except for intentional acts.

Split limits (for example 100/300/50) state per-person bodily injury, per-accident bodily injury, and per-accident property damage maximums; a combined single limit states one total per accident.

Mississippi applies pure comparative negligence: damages are reduced in proportion to the claimant's own fault, and recovery is not barred merely because the claimant's fault exceeds the defendant's.

The Mississippi Commissioner of Insurance is an elected statewide official serving a four-year term and heads the Mississippi Department of Insurance.

A producer must hold a Mississippi license for each line of insurance sold and must be appointed by the insurer before soliciting or selling that insurer's business.

Resident producers must complete 12 hours of approved continuing education each year, including at least 3 hours of ethics, to keep the license in force.

Rebating - offering any inducement not stated in the policy, such as sharing commissions or giving gifts - is prohibited as an unfair trade practice.

Twisting is misrepresenting a policy to induce a policyholder to lapse, surrender, or replace existing coverage.

Other prohibited practices include misrepresentation, false advertising, boycott or coercion, unfair claim settlement practices, and commingling of premium funds.

A producer holds premiums in a fiduciary capacity: funds collected for an insurer or insured must be kept separate and may not be used as personal funds.

The Mississippi Insurance Guaranty Association pays covered property and casualty claims of insolvent member insurers, subject to statutory per-claim limits and a deductible.

Rates and policy forms must be filed with the Department, and rates may not be excessive, inadequate, or unfairly discriminatory.

Policy structure: Declarations, Insuring agreement, Conditions, and Exclusions (DICE).

Conditions precedent to recovery typically include prompt notice of loss, a signed proof of loss, and cooperation with the insurer's investigation.

An insurance policy is a contract of adhesion; ambiguous language is construed against the insurer that drafted it (contra proferentem).

An endorsement or rider changes the base policy and prevails over conflicting printed policy language; handwritten terms prevail over typed, and typed over printed.

Appraisal resolves a dispute over the amount of a covered loss, not whether coverage exists; each party selects an appraiser and the appraisers choose an umpire.

Waiver is the voluntary relinquishment of a known right; estoppel prevents the insurer from asserting a right when its conduct misled the insured to his or her detriment.

Refunds are pro rata when the insurer cancels and short rate when the insured cancels, unless the policy states otherwise.

A mortgagee (loss payable) clause protects the lender's interest, paying the lender to the extent of its interest and giving it notice of cancellation.

A liberalization clause applies broader coverage the insurer later adopts, at no added premium, to policies already in force.