MT Property & Casualty flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Montana Commissioner of Securities and Insurance

Elected statewide official who heads Montana's insurance department, serves a four-year term, and enforces the state's insurance laws and regulations.

Certificate of authority

A license issued by a state that authorizes an insurer to transact insurance business there; an insurer without one is nonadmitted and generally cannot sell locally.

Domestic insurer

An insurer incorporated under the laws of the state in which it operates; for Montana, a company chartered by Montana, as opposed to a foreign or alien insurer.

Surplus lines broker

A specially licensed broker who places coverage with nonadmitted insurers when admitted insurers decline the risk; those policies are not protected by the state guaranty association.

Rebating

Offering a buyer part of the producer's commission or any inducement not stated in the policy; a prohibited unfair trade practice in Montana and most states.

Twisting

Using misrepresentation or an incomplete comparison to persuade a policyholder to lapse, surrender, or replace an existing policy; classified as a prohibited unfair trade practice.

Insurance guaranty association

State entity, funded by assessments on member insurers, that pays covered claims of insolvent insurers up to statutory limits; it does not replace solvency regulation.

Producer fiduciary duty

A producer holds collected premiums in a fiduciary capacity for the insurer or the insured; commingling premium funds with personal or business money is prohibited.

Indemnity principle

Insurance restores the insured to approximately the pre-loss financial position, no better and no worse, preventing profit from loss and underlying property valuation methods.

Insurable interest

A financial stake in the person or property insured; in property insurance it must exist at the time of loss, while in life insurance it must exist at application.

Contract of adhesion

A contract drafted by one party, the insurer, and accepted or rejected by the other; ambiguities are construed in favor of the insured.

Aleatory contract

An insurance contract in which the values exchanged are unequal and depend on chance; a small premium may produce a large claim payment or no payment at all.

Moral hazard

A hazard arising from dishonesty or character traits that increase the likelihood of an intentional or exaggerated loss, such as arson for insurance proceeds.

Morale hazard

Carelessness or indifference toward loss because insurance is in place, such as leaving a car unlocked or neglecting routine property maintenance.

Law of large numbers

Statistical principle that loss predictions become more accurate as the number of similar, independent exposure units increases, allowing insurers to set rates from historical data.

Subrogation

The insurer's right, after paying a claim, to pursue the negligent third party responsible for the loss and recover the amount paid, preventing double recovery by the insured.

Actual cash value

A property valuation method equal to replacement cost minus depreciation; it reflects the used value of the damaged item rather than the cost of a new one.

Coinsurance clause

A property requirement to insure for a stated percentage of value; if underinsured, the claim is reduced by the ratio of insurance carried to insurance required.

HO-3 policy

Homeowners form covering the dwelling and other structures on an open-perils basis while personal property is covered for named perils only; the most widely sold homeowners form.

HO-4 policy

Renters form insuring the personal property and liability of a tenant who does not own the dwelling; the building itself is insured by the landlord.

HO-6 policy

Condominium unit-owners form covering personal property, liability, and building items the association's master policy does not insure, such as interior improvements.

Additional living expense

Coverage that pays the extra cost of temporary housing and meals above normal living costs when a covered loss makes the residence uninhabitable.

Business income coverage

Commercial property coverage replacing lost net income and continuing expenses during the period of restoration after a covered loss at the insured premises.

NFIP flood insurance

Federally backed flood coverage sold in participating communities; separate from homeowners policies, it typically has a 30-day waiting period and separate building and contents limits.

Negligence elements

Four elements a claimant must prove: a legal duty owed, breach of that duty, proximate cause linking the breach to the injury, and actual damages.

Comparative negligence

A doctrine that reduces a claimant's damages in proportion to the claimant's own fault; most states bar recovery when that fault reaches or exceeds a set percentage.

Occurrence policy

Liability policy covering injury or damage that takes place during the policy period, regardless of how many years later the claim is actually filed.

Claims-made policy

Liability policy covering claims first reported during the policy period; a retroactive date limits how far back the covered occurrence may have happened.

Combined single limit

One liability limit that applies to the total of bodily injury and property damage from a single accident, rather than separate per-person and per-accident amounts.

PAP Part D

Personal auto physical damage coverage for the insured vehicle, split into collision and other-than-collision, paid regardless of fault and subject to a deductible.

Exclusive remedy

Workers compensation principle that statutory benefits are the employee's only recovery from the employer for a work-related injury, barring most tort suits.

Umbrella policy

Liability policy providing limits above underlying auto, general liability, and employers liability coverage that can drop down when underlying coverage is exhausted or missing.