NM P&C cheat sheet

Principle of indemnity: restore the insured to the pre-loss financial position, never better; ACV = replacement cost − depreciation.

Insurable interest must exist at the time of loss for property insurance and at the time of application for life insurance.

Contract traits: adhesion (insurer drafts, ambiguity construed against insurer), aleatory (unequal values exchanged), unilateral (only insurer makes an enforceable promise), conditional (payment depends on insured's compliance), personal.

Utmost good faith duties: representations must be true to the best of the applicant's knowledge, warranties must be literally true, and intentional concealment of a material fact voids coverage.

Hazard types: physical (icy steps, faulty wiring), moral (dishonest intent such as arson or claim padding), morale (carelessness such as leaving a car unlocked).

Subrogation: after paying a loss the insurer takes the insured's right of recovery against the at-fault party; the insured may not impair that right (e.g., by signing a release).

Property coinsurance formula: (limit carried ÷ limit required) × loss = payment, where limit required = coinsurance % × value at time of loss; payment is capped at the limit carried.

Law of large numbers: the larger and more homogeneous the pool of similar exposure units, the more predictable losses become, which supports accurate ratemaking.

Adverse selection: below-average risks drop out and worse-than-average risks buy in, driving loss ratios up; underwriting and exclusions are controls against it.

Homeowners peril structure: HO-2 named perils throughout, HO-3 open perils on the dwelling and named perils on personal property, HO-5 open perils on both; HO-4 covers contents only (no Coverage A).

Standard HO limit relationships: B other structures = 10% of A, C personal property = 50% of A, D loss of use = 30% of A, E personal liability = 50% of A, F medical payments = $500 per person.

HO replacement cost condition: full replacement cost settlement requires Coverage A to equal at least 80% of the dwelling's replacement cost at the time of loss; otherwise loss settles at ACV or a proportion of the repair cost.

HO Section I exclusions include ordinance or law, earth movement, flood/water damage, neglect, intentional loss, power failure, war, and nuclear hazard.

Commercial property causes of loss: Basic (named, limited perils), Broad (named, adds water damage, breakage, falling objects), Special (open perils subject only to stated exclusions).

Commercial property coinsurance is typically 80%; alternatives are agreed value (no coinsurance penalty) and reporting forms (deposit premium adjusted by monthly reports).

Business income pays net income lost plus continuing normal operating expenses during the period of restoration, usually limited to 12 consecutive months; extended business income adds up to 30 days.

NFIP flood insurance is written separately from property policies, generally carries a 30-day waiting period, settles the building at replacement cost and contents at actual cash value.

Mortgagee/loss payable clause: the insurer pays the mortgagee to the extent of its interest, gives the mortgagee notice of cancellation or nonrenewal, and the mortgagee may pay premium to keep coverage in force.

Negligence requires four elements: legal duty owed, breach of that duty, proximate cause, and actual damages; missing any one defeats the liability claim.

Occurrence vs claims-made trigger: occurrence covers injury during the policy period whenever the claim is filed; claims-made covers claims first made during the period, limited by the retroactive date and extended by the ERP.

CGL limits stack as follows: each occurrence, general aggregate, products-completed operations aggregate, personal and advertising injury, damage to premises rented to you, and medical expense (no fault, no deductible).

Personal and advertising injury covers offenses such as libel, slander, wrongful eviction, and invasion of privacy; it does not cover bodily injury or property damage.

Personal auto policy parts: A liability, B medical payments, C uninsured/underinsured motorists, D damage to your auto (collision and other than collision); Part D is not required by law.

Split limits state three numbers (e.g., 25/50/10) for BI per person, BI per accident, and PD; a combined single limit states one total amount per accident for all damages.

Workers compensation exclusive remedy: statutory medical, disability (temporary, permanent, partial, total), and death benefits replace the employee's right to sue the employer for workplace injury.

Umbrella/excess liability sits above underlying auto, CGL, and employers liability limits and may drop down to cover gaps after a self-insured retention.

BOP eligibility: small apartment, office, retail, and service risks; it packages property and liability but excludes auto, workers compensation, and professional liability.

Regulator: the New Mexico Office of Superintendent of Insurance licenses insurers and producers, examines market conduct, and enforces the Insurance Code; the Superintendent is appointed by the Governor.

Producer licenses run for a two-year term and are renewed upon completion of 24 continuing education credit hours per term, including at least 3 hours of ethics.

Commission payments may be made only to licensed producers; paying or sharing a commission with an unlicensed person is a prohibited rebate and unfair trade practice.

Producers must report a change of address, administrative action, criminal prosecution, or other license-affecting event to the Superintendent within 30 days.

New Mexico minimum auto liability limits are 25/50/10: $25,000 per person and $50,000 per accident bodily injury plus $10,000 property damage per accident.

Uninsured/underinsured motorist coverage must be offered at limits equal to the auto liability limits; the named insured may reject it only by signing a written rejection.

Unfair trade practices under the Insurance Code include misrepresentation, false advertising, twisting, coercion, unfair discrimination, rebating, and unauthorized insurer transactions.

The New Mexico property and casualty guaranty fund pays covered claims of insolvent insurers; insolvency may not be used to induce an insured to replace a policy.

A temporary producer license may be issued for a limited period (up to 180 days) to continue business after the death, disability, or loss of a licensed producer.