PA Property & Casualty cheat sheet

The McCarran-Ferguson Act (1945) reserves regulation of the business of insurance to the states; federal antitrust statutes apply only to the extent states do not regulate.

The NAIC drafts model laws, model rates, and accreditation standards, but it holds no statutory authority to enforce them - enforcement rests with each state insurance department.

Rate standards: rates must be adequate to support solvency, not excessive, and not unfairly discriminatory among insureds of similar risk classification.

Only an admitted insurer holding a certificate of authority may transact insurance in a state; non-admitted carriers reach the market only through surplus lines brokers.

Financial examinations test solvency and reserves; market conduct examinations test sales, underwriting, rating, and claims practices.

Stock insurers are owned by shareholders and pay taxable dividends; mutual insurers are owned by policyholders and pay dividends as non-taxable return of premium.

State guaranty associations fund covered claims of insolvent admitted insurers, typically subject to a per-claim cap; Pennsylvania's cap is $300,000.

A producer's authority over the insured flows from express authorization, implied authority to perform incidental acts, and apparent authority created by the insurer's conduct.

Risk is uncertainty about loss; peril is the cause of a loss (fire, windstorm); hazard is a condition that increases the chance or severity of loss.

Hazard types: physical (icy steps), moral (intent to defraud), morale (indifference or carelessness).

Only pure risk - loss or no loss - is insurable; speculative risk, which carries a chance of gain, is not insurable.

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

Actual cash value = replacement cost − depreciation. Replacement cost pays new-for-old with no depreciation deduction, subject to policy limits.

Property coinsurance formula: (limit carried ÷ limit required) × loss = recoverable amount, and the payment never exceeds the limit carried.

Elements of a valid insurance contract: offer, acceptance, consideration, legal purpose, and competent parties.

Insurance contracts are contracts of adhesion (insurer drafts, ambiguities favor the insured), aleatory (unequal exchange), unilateral (only the insurer makes an enforceable promise), and require utmost good faith.

Subrogation transfers to the insurer, after claim payment, the insured's legal right to recover the loss from the negligent third party.

Homeowners HO-3 insures the dwelling against open perils and personal property against named perils; HO-5 uses open perils on both; HO-2 is named perils throughout.

HO-4 (renters) and HO-6 (condo unit owners) contain no Coverage A dwelling; HO-8 covers older homes on an actual cash value or repair basis.

Homeowners Coverage A dwelling, B other structures, C personal property, D loss of use, E personal liability, F medical payments to others.

Common named perils include fire, lightning, windstorm, hail, explosion, riot, aircraft, vehicles, smoke, vandalism, theft, falling objects, weight of ice or snow, accidental discharge, freezing, and sudden tearing.

Flood and earth movement are excluded, so separate flood policies (NFIP or private) and earthquake endorsements are required.

Under a mortgagee clause, the insurer pays the lender's interest regardless of the insured's acts or neglect, and subrogation against the insured runs for the lender's benefit.

Commercial property coinsurance requires carrying insurance equal to a stated percentage (commonly 80% or 90%) of the value at the time of loss or payment is reduced proportionally.

Business income coverage replaces lost net income plus continuing normal expenses during restoration; extra expense pays costs incurred to resume operations quickly.

Section I property deductibles apply per occurrence; Section II liability coverages carry no deductible.

Negligence requires four elements: a duty of care owed, a breach of that duty, proximate cause, and actual damages.

Occurrence-form CGL covers injury or damage that happens during the policy period; claims-made CGL covers claims first made during the period, subject to a retroactive date.

CGL Coverage A is bodily injury and property damage; Coverage B is personal and advertising injury; Coverage C is medical payments, paid without fault or deductible.

CGL limits include each occurrence, general aggregate, products-completed operations aggregate, personal and advertising injury limit, and damage to premises rented to you.

Personal auto policy parts: A liability, B medical payments or PIP, C uninsured/underinsured motorist, D physical damage to your auto (collision and other than collision).

Workers compensation Part One pays statutory benefits with no fault finding; Part Two provides employers liability, and exclusive remedy bars most employee tort suits against the employer.

An umbrella policy pays excess of underlying auto, general liability, and employers liability limits and may drop down for losses not covered by the underlying policies, subject to a self-insured retention.

Comparative negligence reduces an award by the claimant's percentage of fault; contributory negligence bars recovery entirely in strict jurisdictions.

Strict and absolute liability apply without proof of negligence to activities such as hazardous operations and to workers compensation and products liability claims.

Pennsylvania minimum auto liability limits are 15/30/5: $15,000 per person, $30,000 per accident bodily injury, and $5,000 property damage.

Insurers must provide at least $5,000 of first-party medical benefits (PIP) on a Pennsylvania private passenger auto policy.

Pennsylvania is a choice no-fault state: the insured selects full tort or limited tort in writing; limited tort bars suits for non-economic damages unless the injury is serious or an enumerated exception applies.

Uninsured and underinsured motorist coverage must be offered in writing up to the liability limits, may be rejected only in writing, and stacking is optional.

The Pennsylvania Property and Casualty Insurance Guaranty Association (PPCIGA) pays covered claims of insolvent member insurers, capped at $300,000 per claim.

Pennsylvania producers complete 24 continuing education credit hours every two years, including 3 hours of ethics.

Insurers writing auto coverage in Pennsylvania participate in the Pennsylvania Automobile Insurance Plan, the state's assigned risk mechanism for high-risk drivers.

The Unfair Insurance Practices Act prohibits misrepresentation, twisting, rebating, unfair discrimination, and unfair or deceptive claim settlement practices, enforced by the Insurance Department.