TN Property & Casualty cheat sheet

The Tennessee Department of Commerce and Insurance, headed by a Commissioner appointed by the Governor, licenses producers and insurers and enforces the state's insurance statutes.

A person must hold a Tennessee producer license in the line being sold before soliciting, negotiating, or selling insurance; clerical and administrative staff do not need a license.

Producer licenses renew biennially and require 24 hours of approved continuing education per two-year term, including at least 3 hours of ethics.

Producers must report administrative actions against a license and criminal prosecutions to the Commissioner within 30 days of the final disposition.

Premiums collected from insureds are held in a fiduciary capacity and must not be commingled with the producer's own business or personal funds.

Commissions may be paid only to properly licensed producers; splitting or sharing a commission with an unlicensed person is prohibited.

Unfair trade practices include misrepresentation, twisting, rebating, false advertising, and unfair claim settlement practices; the Commissioner may issue cease-and-desist orders and impose civil penalties.

Surplus lines coverage may be placed with a nonadmitted insurer only through a licensed surplus lines broker after a documented diligent search shows no authorized insurer will write the risk.

Insurance fraud is a criminal offense in Tennessee; the department investigates fraudulent claims and applications and may refer cases for prosecution.

Risk is the chance of loss; a peril is the cause of loss (fire, wind, theft); a hazard is a condition that increases the chance or severity of loss (physical, moral, morale).

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

Insurance contracts are contracts of adhesion, aleatory, unilateral, conditional, and require utmost good faith from both parties.

Insurable interest in property must exist at the time of loss; insurable interest in a life must exist at the time of application.

The principle of indemnity restores the insured to approximately the pre-loss financial position and bars profit from a loss; subrogation supports indemnity.

Property coinsurance formula: (limit carried / limit required) x loss = payment, then apply the deductible, and never pay more than the policy limit.

Actual cash value equals replacement cost minus depreciation; replacement cost pays the cost to repair or replace with new property of like kind and quality.

Other insurance conditions typically pay pro rata by limit, or treat one policy as primary and the other as excess; deductibles generally apply per occurrence.

A representation is a statement believed true to the best of the applicant's knowledge; concealment or material misrepresentation of a material fact can void the policy.

A property policy has five parts: declarations, insuring agreement, conditions, exclusions, and definitions.

Named-peril forms cover only perils listed; open-peril (special) forms cover all risks of direct physical loss unless excluded, shifting the burden of proof to the insurer.

Common property exclusions: earth movement, flood and surface water, ordinance or law, neglect, intentional loss, war, nuclear hazard, power failure, and faulty workmanship.

Insurance-to-value provisions (commonly 80 percent) determine the coinsurance requirement that must be met to avoid a reduced claim payment.

Settlement options include actual cash value, replacement cost, functional replacement cost, and agreed value; the policy must be endorsed for replacement cost on commercial property.

Additional coverages commonly included: debris removal, preservation of property after a loss, fire department service charges, and reasonable repairs to protect property from further damage.

The pair and set clause pays the difference in value before and after the loss when only part of a set is damaged, rather than the full cost of a new set.

Vacancy and unoccupancy conditions can suspend or restrict coverage when a building has no occupants or no contents beyond a stated period.

Homeowners Coverage A is the dwelling; B other structures (typically 10 percent of A); C personal property (typically 50 percent of A); D loss of use (typically 30 percent of A).

HO-3 insures the dwelling on an open-peril basis and personal property for broad named perils; HO-5 insures both on an open-peril basis; HO-2 is broad named perils on both; HO-8 is a modified form for older homes.

Homeowners Section II provides Coverage E personal liability (minimum limit usually $100,000) and Coverage F medical payments to others (minimum usually $1,000 per person), paid without regard to fault.

Coverage C special limits include $200 for money and $1,500 for theft of jewelry, watches, and furs per loss, regardless of the stated Coverage C limit.

Homeowners forms exclude business pursuits, motor vehicles, aircraft, watercraft (with limited exceptions), intentional loss, ordinance or law, earth movement, and flood.

Dwelling policies (DP-1, DP-2, DP-3) cover the dwelling and contents but contain no liability coverage unless added by endorsement; they are common for rental and non-owner-occupied property.

Commercial property uses the Building and Personal Property Coverage Form with Causes of Loss Basic, Broad, or Special, and coinsurance percentages of 80, 90, or 100 percent.

Business income and extra expense coverage replaces lost net income plus continuing expenses and the extra cost of operating during the period of restoration after a covered loss.

Equipment breakdown, crime, and inland marine coverages are written separately from or by endorsement to the commercial property policy.

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

Tennessee follows modified comparative fault: a claimant 50 percent or more at fault recovers nothing, and a claimant less than 50 percent at fault has damages reduced proportionally.

Damages categories: special damages (medical bills, lost wages), general damages (pain and suffering), and punitive damages awarded for egregious conduct.

Liability policy structure: declarations, insuring agreement, supplementary payments, exclusions, conditions, and definitions.

The insurer's duty to defend is broader than the duty to indemnify and is generally triggered by allegations in the complaint, even if groundless.

Supplementary payments (defense costs, bail bonds, appeal bond premiums, interest on judgments) are paid in addition to the limits of liability.

Occurrence forms cover injury or damage that takes place during the policy period whenever reported; claims-made forms cover claims first made and reported during the policy period or extended reporting period, subject to the retroactive date.

Limits are stated per occurrence and per aggregate; a self-insured retention is a dollar amount the insured pays before coverage responds.

Vicarious liability holds one party responsible for another's acts; strict liability imposes responsibility without a showing of negligence.

Personal auto policy parts: Part A liability, Part B medical payments, Part C uninsured/underinsured motorists, Part D coverage for damage to your auto (collision and other than collision).

Tennessee requires insurers to offer uninsured motorist coverage at limits equal to the liability limits unless the insured rejects it in writing.

Tennessee financial responsibility law can be satisfied by liability insurance, a bond, or a cash deposit; proof is required after an accident or conviction.

Commercial auto covered-auto designations use numerical symbols: 1 any auto, 7 specifically described autos, 8 hired autos, 9 nonowned autos.

The commercial general liability occurrence form covers premises/operations, products-completed operations, personal and advertising injury, and medical payments.

CGL limits include general aggregate, products-completed operations aggregate, each occurrence, damage to premises rented to you, and medical expense per person.

Products-completed operations coverage responds to injury or damage occurring away from the premises after the insured's product or completed work has left its control.

Umbrella and excess policies sit above underlying auto, general liability, and employers liability coverage and may drop down for some uncovered exposures.

Workers compensation provides statutory benefits (medical, disability, death) regardless of fault, and employers liability (Part Two) responds to employee tort suits.