TN Property & Casualty key terms

A license issued by Tennessee's insurance commissioner that authorizes an insurer to transact insurance business in the state. Without one, an insurer cannot legally sell coverage, and the certificate lists which lines it may write.

Coverage placed with an insurer not licensed in Tennessee after licensed carriers decline the risk. It must be placed through a specially licensed surplus lines broker, and the policyholder gets no protection from the state guaranty association.

The state-issued credential an individual or business must hold to solicit, negotiate, or sell insurance in Tennessee. It requires prelicensing education, a passing exam, and continuing education to renew.

Offering a buyer any part of the premium or commission, or anything of value not stated in the policy, to induce a purchase. Tennessee treats it as a prohibited unfair trade practice.

A statutory entity that pays covered claims of policyholders when a licensed Tennessee insurer becomes insolvent. Surplus lines insurers are not covered, and benefits are subject to statutory caps.

A producer's legal obligation to hold premiums and other client money in trust and account for it properly. Mixing premium funds with the producer's own money is prohibited.

A financial stake in the person or property insured such that the insured suffers a genuine economic loss if a loss occurs. In property insurance it must exist when the policy begins.

The idea that insurance should restore the insured to roughly the same financial position as before the loss, no better and no worse. It caps recovery and underlies valuation methods such as actual cash value.

The mutual duty of applicant and insurer to deal honestly and disclose material facts. A breach, such as hiding a fact that would change underwriting, can give the other party grounds to void the contract.

A statement in the policy that the insured promises is true. A material breach can let the insurer deny a claim, though modern policies usually require the breach to be material and related to the loss.

A statement the applicant makes during underwriting that is believed true to the best of their knowledge, not guaranteed. A material misrepresentation can allow the insurer to rescind the policy.

Intentionally withholding a material fact from the insurer during underwriting. If the hidden fact would have affected the insurer's decision to issue or price the policy, the insurer may void it.

The voluntary surrender of a known right under the policy. For example, an insurer that keeps accepting late premiums may waive its right to cancel for nonpayment.

A legal bar that prevents a party from asserting a right after its earlier conduct led another party to reasonably rely on that conduct and change position. It is often argued together with waiver.

The insurer's right, after paying a claim, to step into the insured's shoes and pursue the party that caused the loss. It prevents double recovery and reinforces the indemnity principle.

A contract in which the amounts exchanged are unequal and depend on chance, so a small premium may buy a large claim payment or the insured may collect nothing at all.

A policy drafted by the insurer and offered to the insured on a take-it-or-leave-it basis. Because the insurer writes the wording, ambiguous language is generally construed against the insurer.

A dispute-resolution method for property claims in which each side selects a competent appraiser and an umpire settles differences over the amount of loss. It decides value only, not coverage.

A specific cause of loss, such as fire, windstorm, or theft. Policies either list covered perils or cover risks of direct physical loss, while exclusions remove particular perils from coverage.

A condition that increases the chance or severity of a loss. Physical hazards are tangible conditions, moral hazards involve dishonesty, and morale hazards involve carelessness or indifference.

The dominant, unbroken cause that sets a loss in motion and without which the loss would not have happened. It decides coverage when several events combine to produce damage.

A property policy that covers only the perils specifically listed in the form. The insured generally must show that the loss resulted from one of those listed perils.

A property form that covers risks of direct physical loss except those expressly excluded. The insurer carries the burden of proving that an exclusion applies to the loss.

A property valuation equal to replacement cost minus depreciation. It reflects the used value of the damaged property at the time of loss and supports the principle of indemnity.

A valuation that pays what it costs today to repair or rebuild with new materials of like kind and quality, without deducting depreciation. It often requires insuring to a stated percentage of replacement cost.

A commercial property condition requiring the insured to carry insurance equal to a stated percentage of the property's value. Insuring below that percentage reduces the claim payment proportionally.

Pays a business's lost net income and continuing normal expenses while operations are shut down by a covered property loss, usually during a defined period of restoration.

Excludes the extra cost of rebuilding to current building codes, such as upgraded wiring or accessibility features. Limited amounts of this coverage can be added back by endorsement.

A policy provision protecting a lender's interest in insured property. The lender receives loss payments to the extent of its interest and is entitled to notice of cancellation or nonrenewal.

The most widely used homeowners form. It covers the dwelling and other structures on an open peril basis while covering personal property for named perils only.

Failure to use the degree of care a reasonable person would use, resulting in unintended harm. A liability claim requires a duty, a breach of that duty, causation, and damages.

A rule that reduces a claimant's recovery by their own share of fault and bars recovery entirely when that share reaches a set threshold. Tennessee bars the claim at 50% or more fault.

Legal responsibility for another person's negligent acts, such as an employer's liability for an employee who is acting within the scope of employment.

The most an insurer will pay for all covered claims during a policy period, in addition to any per-occurrence limit. Once the aggregate is used up, no further claims are paid.

A person or organization added by endorsement to another party's liability policy, gaining protection for claims arising out of the named insured's operations or premises.

The standard personal automobile form covering liability, medical payments, uninsured motorists, and physical damage for a personal vehicle. It defines covered autos, covered drivers, and key exclusions.

Pays a policyholder's damages from an accident caused by a driver with no insurance, too little insurance, or a hit-and-run driver. Tennessee requires it unless the insured rejects it in writing.

Pays reasonable medical and funeral expenses for the insured and passengers injured in an auto accident, regardless of who was at fault, up to the stated limit.

The standard liability form for businesses, covering bodily injury, property damage, personal and advertising injury, and medical payments. It may be written on an occurrence or claims-made basis.

A no-fault statutory system that pays medical and disability benefits to employees injured on the job in exchange for the employer's immunity from most injury lawsuits. Tennessee requires most employers to carry it.