Property and Casualty Insurance Basics: Valuation, Limits, and Liability Rules
This domain tests the mechanics behind the numbers: how policies value losses, how limits and coinsurance reduce payment, and the liability rules an Oklahoma adjuster applies when fault is shared.
Valuation and policy structure
Actual cash value is replacement cost less depreciation; replacement cost pays new-for-old without depreciation. Policies are built from declarations, insuring agreement, exclusions, and conditions. Know the difference between occurrence forms (triggered by injury or damage during the policy period) and claims-made forms (triggered by the claim being made during the period, often with a retroactive date and extended reporting period). Per-occurrence limits cap each loss; aggregates cap the policy term.
Coinsurance (commercial property)
The insured must carry a limit equal to the coinsurance percentage times the value at risk. If underinsured, payment is reduced by the ratio carried ÷ required, then the deductible is subtracted.
Liability basics in Oklahoma
Oklahoma follows modified comparative fault (23 O.S. § 13): a claimant's recovery is reduced by their own percentage of fault and is barred when their fault exceeds the combined fault of the others. Subrogation lets the insurer stand in the insured's shoes after payment.
Worked example
80% coinsurance, value at risk $1,000,000, limit carried $600,000, loss $200,000, deductible $5,000. Required limit = 0.80 × $1,000,000 = $800,000. Ratio = $600,000 ÷ $800,000 = 0.75. Payment = ($200,000 × 0.75) − $5,000 = $150,000 − $5,000 = $145,000. The insured absorbs $55,000 of the loss plus the deductible.
Traps that cost marks
Applying the coinsurance penalty after the deductible; using ACV when the form promises replacement cost; importing coinsurance into personal lines or liability coverage; missing the aggregate limit; and assuming Oklahoma bars any claimant with any fault.