Property & Casualty common mistakes
Property & Casualty · Understand the traps and how to avoid them.
On contract-law items, selecting 'the policy is void' whenever an applicant's answer turns out to be inaccurate - including an innocent, immaterial misstatement - instead of testing materiality and intent.
Candidates memorize 'misrepresentation voids the policy' as a slogan and never separate innocent misrepresentation, concealment, and warranty breach, which carry different remedies.
What to do instead
Apply a written three-part test to every fact pattern before answering: (1) was the statement false, (2) was it material to the underwriter's decision, (3) was it intentional? Innocent and immaterial means no remedy; material means rescission may be available; a true warranty breach gives the insurer a defense regardless of materiality.
Reading an exclusion, stopping at the word 'excluded,' and missing an exception later in the same clause that carves coverage back in.
Policy wording is nested (exclusion, then exception, then sometimes an exception to the exception), and candidates skim for the word 'excluded' rather than parsing the structure.
What to do instead
For each exclusion question, copy the clause into a three-line skeleton on scratch paper - exclusion / exception / exception-to-exception - then map the facts onto the narrowest line before choosing an answer.
Computing a property loss payment by subtracting the deductible from replacement cost first, then applying the coinsurance or insurance-to-value ratio.
Coinsurance and deductibles are learned as separate formulas, so candidates default to the order in which the numbers appear in the fact pattern rather than the order in the policy's loss-payment condition.
What to do instead
Memorize the payment sequence as a fixed ladder: (1) establish the loss amount, (2) multiply by the coinsurance ratio (insurance carried / insurance required), (3) cap the result at the limit of insurance, (4) subtract the deductible last.
Treating Coverage C on an HO-3 as open peril because Coverage A is, and ignoring the special dollar limits on categories such as money, jewelry, and silverware.
Candidates learn the label 'special form' and apply it to the entire policy rather than to the specific coverages that are actually written on an open-peril basis.
What to do instead
Anchor the coverage-by-coverage peril structure: Coverage A and Coverage B are open peril; Coverage C is named peril and is subject to a schedule of special limits. On any HO question, identify which coverage letter the loss falls under before discussing perils or limits.
Using 'business income' and 'extra expense' interchangeably when a commercial property scenario involves a shutdown.
Both are time-element coverages that key off the period of restoration, so the two blur together, and the fact patterns often mention both dollar figures in the same paragraph.
What to do instead
Sort each dollar figure with one question: is this money the insured would have earned but did not (business income = net income plus continuing operating expenses), or is this money the insured spent to keep operating or resume sooner (extra expense = out-of-pocket cost to avoid or minimize shutdown)?
Answering crime-coverage questions with an occurrence trigger - assuming a theft discovered after the policy expired is covered because it happened during the policy term.
Almost every other property form the candidate has studied is occurrence-triggered, so the trigger is carried over by habit and never re-examined for crime forms.
What to do instead
Before analyzing a crime loss, ask 'when was it discovered?' not 'when did it happen?' Most commercial crime forms are discovery forms. Then identify which insuring agreement applies by the means of loss - employee theft, forgery or alteration, computer fraud, robbery - since each has its own terms.
Concluding 'the insured is liable' after finding only that a duty of care existed, skipping breach, causation, and damages.
The four elements are memorized as a list but not used as a filter, and fact patterns are written with sympathetic facts that pull the candidate straight to a liability conclusion.
What to do instead
Write D-B-C-D on scratch paper and enter a specific fact next to each element before selecting an answer. If any element has no supporting fact, the answer is no liability. Also remember that comparative negligence reduces recovery proportionally rather than barring it, so do not strike a plaintiff's recovery entirely.
Classifying a single-vehicle animal strike (deer, bird) as a Collision claim on the Personal Automobile Policy.
The mental shortcut 'collision equals the car hitting a thing' feels complete, so the PAP's explicit bird-or-animal carve-out never gets retrieved.
What to do instead
Memorize the PAP definitions verbatim: Collision means upset of or impact with another vehicle or object; contact with a bird or animal is Other Than Collision. Test every physical damage fact pattern against those two definitions before assigning a coverage part.
Assuming a dealership or garage policy pays, on a first-party basis, for damage to a customer's vehicle sitting on the lot.
Garage forms mix liability and physical damage coverages in one policy, and candidates apply the personal-auto 'damage to your car' reflex to vehicles the insured does not own.
What to do instead
On any garage question, first establish who owns the damaged vehicle. For customer vehicles, coverage is garagekeepers legal liability - it responds only to the extent the insured is legally liable and may be written on a direct, excess, or primary basis. Check the stated basis and any customer deductible or self-insured retention.
Treating every injury that occurs at the workplace as compensable without applying the course-and-scope test, especially for injuries during commuting, lunch breaks, and parking-lot incidents.
'Arising out of and in the course of employment' is used as a location test rather than a two-pronged legal test, and candidates also blur Part One statutory benefits with Part Two employers liability.
What to do instead
Apply both prongs explicitly - arising out of (work-related risk) and in the course of (time, place, activity) - then check the going-and-coming rule and its special-mission and dual-purpose exceptions. Finally, confirm whether the question asks about Part One benefits or a Part Two third-party suit before answering.