NM P&C key terms

A financial stake in the person or property insured such that the insured would suffer a real economic loss if a loss occurred. In property insurance it must exist at the time of loss.

The idea that an insured should be restored to roughly the same financial position held before a loss, no better and no worse. It is the reason insurance cannot produce a profit.

The high standard of honesty owed by both insurer and applicant, requiring full and accurate disclosure of facts that would materially affect the decision to accept or rate the risk.

An insurance policy drafted by the insurer and offered on a take-it-or-leave-it basis, so ambiguous wording is generally interpreted in favor of the policyholder rather than the drafter.

An agreement in which the values exchanged by the parties are unequal and depend on chance, as when a modest premium buys the right to a very large claim payment.

The insurer's right, after paying a claim, to step into the insured's shoes and pursue the responsible third party to recover the amount paid out.

The specific event or cause of loss, such as fire, windstorm, theft, or collision, that damages property or creates legal liability.

A condition that increases the chance or severity of a loss, such as poor housekeeping, icy steps, faulty wiring, or a careless attitude toward safety.

The dominant, efficient cause that sets in motion an unbroken chain of events leading to a loss, without which the loss would not have happened.

A statistical principle holding that as the number of similar exposure units grows, actual losses tend to match predicted losses, allowing insurers to set accurate rates.

The value of damaged property measured as replacement cost minus depreciation, reflecting what the item was worth in its used condition just before the loss.

The amount needed to repair or replace damaged property with new property of similar kind and quality, with no deduction taken for depreciation.

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

A policy provision naming a lender as an interested party, giving it notice of cancellation and payment for its interest even when the insured's own acts would otherwise void coverage.

Coverage that pays the added cost of rebuilding to current building codes, or of demolishing undamaged remnants, after a covered loss.

Coverage that pays the earnings a business loses during the period it must shut down or slow operations because of a covered property loss at the described premises.

Coverage on a structure under construction or renovation, protecting the building, materials, and sometimes equipment while the work is in progress.

Coverage for property that is mobile or in transit, such as tools, cameras, shipments, or fine arts, rather than property fixed at one location.

Coverage for water damage from rising water, overflow, or mudflow, usually written through the National Flood Insurance Program because standard property policies exclude it.

Failure to use the care a reasonable person would use in similar circumstances, resulting in unintended injury to a person or damage to property.

A civil wrong other than breach of contract that causes harm to another person and gives the injured party a right to sue for damages.

Money awarded to make an injured party whole, paying for medical bills, lost wages, property damage, and pain and suffering caused by the wrongdoer.

A rule that reduces an injured party's damages in proportion to that party's own share of fault for the accident, allowing recovery despite some personal negligence.

Legal responsibility assigned to one party for the acts of another, as when an employer is held liable for an employee's negligent act committed within the scope of employment.

Liability imposed without proof of negligence, commonly applied to defective products, abnormally dangerous activities, and workplace injuries covered by workers compensation.

The legal responsibility of manufacturers, distributors, and sellers for injury or damage caused by products that are defective or unreasonably dangerous.

The most an insurer will pay for all covered claims during a policy period, no matter how many separate occurrences take place.

Coverage that pays an insured's bodily injury damages caused by a driver who carries no liability insurance or who flees the scene of a hit-and-run accident.

A state-mandated benefit system that pays medical and wage-replacement benefits to employees injured on the job, regardless of fault, in exchange for limits on suing the employer.

A license issued by the New Mexico Superintendent of Insurance that permits an insurer to transact insurance business in the state.

An insurer authorized by the state to do business there and therefore subject to its solvency rules, rate and form filing requirements, and guaranty fund protection.

A producer specially licensed to place coverage with nonadmitted insurers when authorized insurers will not write the risk, after completing required due diligence.

An insurer's notice to the state that a licensed producer is authorized to sell its products, a step generally required before the producer may submit business for that insurer.

A producer's legal obligation to hold premiums and client funds in trust, account for them accurately, and use them only for the purposes intended.

Mixing premiums or other client money with a producer's own operating funds in the same account, a practice prohibited by state insurance law.

Offering part of a producer's commission, or anything of value not stated in the policy, to persuade a buyer to purchase insurance; illegal in New Mexico.

Misrepresenting or making misleading comparisons about a policy in order to induce a person to lapse, surrender, or replace existing coverage.

Improper claim handling such as unreasonable delay, inadequate investigation, or low offers made without a reasonable basis, which state law prohibits as a trade practice violation.

A state-created entity that pays covered claims of insolvent admitted insurers, funded by assessments on insurers licensed to do business in the state.