Free ME Property & Casualty Exam Flashcards

HO-3 insures the dwelling and other structures on an open-peril basis but personal property on a named-peril basis. HO-5 insures both on an open-peril basis. Consequence: on a contents claim the HO-5 insurer must prove an exclusion applies, while the HO-3 insured must prove a named peril caused the loss.

HO-4 is the tenants form: personal property plus liability, with no Coverage A on the building. HO-6 is the unit-owners form: it adds a limited Coverage A for the alterations, appliances, fixtures and improvements the unit owner is responsible for under the condominium documents.

Written for older homes whose replacement cost far exceeds market value. Losses settle on a functional replacement cost or actual cash value basis rather than full replacement cost, which is why an HO-8 is offered when a home cannot meet insurance-to-value underwriting on an HO-3.

DP-1 is basic named perils and normally settles at actual cash value; DP-2 is broad named perils at replacement cost; DP-3 is open peril on the dwelling. Key distinction from homeowners forms: dwelling policies carry no automatic liability or theft coverage, both of which must be added by endorsement.

Flood is excluded by every HO and DP form, so it must be bought as a separate NFIP or private flood policy. Standard NFIP Regular Program residential limits are $250,000 on the building and $100,000 on contents, and a new policy carries a 30-day waiting period unless it is tied to a loan closing.

A CPP is modular: the insured combines two or more separately rated coverage parts with common declarations and conditions. A BOP is a prepackaged property-plus-liability contract for eligible small and medium risks that already includes business income coverage. Consequence: a risk that fails BOP eligibility must be written as a CPP.

Basic lists the fewest named perils; Broad adds falling objects, weight of ice/snow/sleet, water damage and collapse; Special is open peril. Consequence: under Special the insurer must prove an exclusion, while under Basic and Broad the insured must prove a listed peril caused the loss.

Business income pays lost net income plus continuing normal operating expenses during the period of restoration. Extra expense pays the additional costs incurred to avoid or shorten a suspension. Consequence: a business that keeps operating from a temporary location may collect little business income but large extra expense.

ACV is replacement cost minus depreciation; replacement cost pays to repair or replace with like kind and quality without a depreciation deduction. Consequence: replacement cost forms usually pay ACV first and release the withheld depreciation ('recoverable depreciation') only after the repair or replacement is actually completed.

Recovery equals (limit carried divided by limit required) times the loss, minus the deductible. The required limit is the stated coinsurance percentage of the property value at the time of loss. Consequence: underinsuring makes the insured a coinsurer on every partial loss, not just on a total loss.

The unbroken chain of events between an occurrence and the resulting damage. Coverage follows the proximate cause, not the last event in the sequence, which is why anti-concurrent-causation wording can bar an entire claim when an excluded peril such as flood or earth movement sets a covered peril in motion.

Moral hazard is dishonesty or intent, such as arson for profit. Morale hazard is carelessness or indifference because insurance exists, such as leaving a door unlocked. Physical hazard is a tangible condition, such as oily rags in a basement. Only physical hazard is visible on an inspection report.

Vacant means no occupants and no contents or business personal property; unoccupied means still furnished but with nobody living or working there. Consequence: property forms suspend perils such as vandalism, glass breakage, water damage, theft and sprinkler leakage after 60 consecutive days of vacancy, and commercial forms cut other loss payments by 15%.

The mortgagee is paid for its interest even when the insured's own act, neglect or misrepresentation voids the insured's recovery. In exchange the mortgagee must pay any premium the insured fails to pay, submit proof of loss if the insured does not, and receive its own notice of cancellation or nonrenewal.

Settles disputes about the amount of a loss only, never about whether the loss is covered. Each party selects a competent appraiser, the two appraisers select an umpire, and agreement by any two of the three sets the amount. Coverage disputes remain a matter for the courts.

When more than one policy covers the same property, each insurer pays the share of the loss that its limit bears to the total limits available. Consequence: buying a second policy on the same building does not double the recovery, because indemnity caps total payment at the amount of the loss.

After paying a loss the insurer succeeds to the insured's right to recover from the responsible party. Consequence: the insured may waive recovery rights in writing before a loss (common in construction contracts) but a waiver signed after the loss impairs subrogation and can void coverage for that claim.

Concealment is silence about a material fact the applicant knew; misrepresentation is a false statement of material fact; a warranty is a promise that must be literally true. Consequence: a material concealment or misrepresentation lets the insurer rescind the contract from inception, not merely deny the single claim.

Coverage A pays bodily injury and property damage liability; Coverage B pays personal and advertising injury such as libel, slander, false arrest and wrongful eviction; Coverage C pays medical payments to others without any finding of fault. Consequence: Coverage C settles small injuries quickly and helps prevent a Coverage A suit.

An occurrence form responds to injury or damage that happens during the policy period no matter when the claim is reported. A claims-made form responds to claims first made during the policy period for events on or after the retroactive date. Consequence: advancing the retroactive date creates an uninsured gap for prior acts.

The occurrence limit caps what is paid for any one occurrence; the general aggregate caps total payments for Coverage A, B and C during the policy period; products-completed operations has its own separate aggregate. Consequence: once an aggregate is exhausted the insurer pays nothing more that period even though the occurrence limit is untouched.

Defense costs, bail bonds, reasonable expenses at the insurer's request, loss of earnings for attending trial, and post-judgment interest are paid in addition to the limit of insurance. Contrast with most professional liability and cyber forms, where defense is inside the limit and every dollar of defense reduces what is left to settle the claim.

Split limits state three separate caps: bodily injury per person, bodily injury per accident, and property damage per accident. A combined single limit gives one amount per accident for bodily injury and property damage together. Consequence: a CSL avoids the per-person cap when one claimant has catastrophic injuries.

Non-owned autos are vehicles the insured does not own but that are used in the business, including employee cars. Hired autos are rented, leased or borrowed. A temporary substitute replaces an owned auto that is out of service. Consequence: symbol selection on the declarations, not the vehicle schedule, decides which of these classes is covered.

Part One pays the statutory benefits the state law requires and carries no dollar limit. Part Two, employers liability, covers suits that fall outside the compensation act, such as third-party-over actions, loss of consortium and dual-capacity claims, and it does carry limits.

A surety bond is a three-party guarantee that the principal will perform for the obligee, and the surety expects reimbursement from the principal after paying. A fidelity bond protects an employer against loss from employee dishonesty and is true insurance, so the insurer does not seek repayment from the insured.

Duty owed, breach of that duty, proximate cause, and actual damages. Consequence: all four must be present. A careless act that injures nobody creates no liability claim, because damages are the element that converts a breach into a recoverable loss.

Special damages are measurable economic losses such as medical bills and lost wages. General damages are non-economic, such as pain and suffering or disfigurement. Punitive damages punish egregious conduct, are not compensatory, and are frequently uninsurable as a matter of public policy.

Absolute liability attaches regardless of fault or precautions, as with statutory or ultrahazardous exposures. Strict liability holds a seller or manufacturer responsible for a defective product without proof of negligence. Vicarious liability holds one party responsible for another's acts, such as an employer for an employee.

Evidence that a policy existed on the date issued. It does not amend, extend or alter the policy and confers no rights on the holder. Consequence: being listed as a certificate holder is not the same as being an additional insured; only an endorsement to the policy grants that status.

Commercial liability and workers compensation premiums are charged at inception on estimated exposure such as payroll or sales, then audited at expiration against actual exposure. Consequence: the audit produces either an additional premium billing or a return premium; the deposit is not the final cost of the policy.

Give prompt notice, protect property from further damage, cooperate in the investigation and defense, forward legal papers, and make no voluntary payment or assumption of obligation except at the insured's own cost. Consequence: settling with a claimant before the insurer is notified breaches the condition and can forfeit coverage.

Professional liability forms often require the insured's consent before the insurer settles. If the insured refuses a settlement the insurer recommends, a hammer clause caps the insurer's liability at the refused settlement amount plus defense costs incurred to that date, leaving the insured to fund any excess.

Liability coverage on an owned auto is primary; coverage that applies to a non-owned, hired or borrowed auto is excess over the owner's policy. Consequence: an employee's personal auto policy responds first to a crash in the employee's own car, and the employer's hired and non-owned coverage sits above it.

A federal backstop for insured losses from acts certified by the federal government. Insurers must disclose the premium charged for terrorism coverage and make the coverage available, and the insured may reject it in writing. Consequence: an uncertified attack is not a TRIA loss no matter how much damage it causes.

Appointed by the Governor subject to legislative review and confirmation, serves a 5-year term, and heads the Bureau of Insurance (24-A M.R.S. section 201). The Superintendent's powers include examination, rulemaking, and adjudicatory hearings on notice, so exam answers name the Superintendent rather than the Governor as the regulator who acts.

After an adjudicatory hearing the Superintendent may impose a civil penalty of up to $500 per violation against an individual and up to $10,000 per violation against a corporation or other entity (24-A M.R.S. section 12-A). Penalties are per violation, so repeated conduct multiplies the exposure, and they are in addition to license suspension or revocation.

Pays covered claims of insolvent property and casualty insurers up to $300,000 per claim, pays workers compensation benefits in full without that cap, and refunds unearned premium only to the extent it exceeds $50 (24-A M.R.S. section 4438). Consequence: the association is a safety net, not a substitute for insurer solvency review.

Resident producers and consultants must complete 24 credit hours every 2 years, including at least 3 hours of ethics (24-A M.R.S. section 1482 and Bureau Rule 542). The compliance date is the end of the licensee's birth month in odd or even years matching the birth year, and licensees in good standing are continued automatically.

A producer may not act as an agent of an insurer until appointed by that insurer, and the insurer must file the appointment notice within 15 days of executing the agency contract or submitting the first application (24-A M.R.S. section 1420-M). Consequence: holding a license alone does not authorize a producer to bind or represent a particular company.

The Superintendent may issue a temporary license for up to 180 days without an examination, typically to a surviving spouse or court-appointed representative of a deceased or disabled producer, to an employee of a licensed agency, or to a designee of a producer entering military service. The Superintendent may limit its authority, require a sponsor, or revoke it.

No person may offer any rebate, discount, abatement, credit, reduction of premium, special favor, or other valuable inducement not specified in the policy (24-A M.R.S. section 2162). Consequence: an offer that is not filed with the Superintendent is unlawful even when the producer pays it out of personal commission and the client benefits.

A claim is payable within 30 days after the insurer receives proof of loss, and any undisputed claim or undisputed part of a claim that is overdue bears interest at 1.5% per month (24-A M.R.S. section 2436). Consequence: an insurer cannot delay the undisputed portion while it investigates the disputed portion.

Notice of cancellation must be received at least 20 days before the effective date, or 10 days when the reason is nonpayment of premium; notice of intention not to renew must be received at least 30 days before expiration (24-A M.R.S. sections 2915, 2917, 3050, 3051). Cancellation restrictions attach after an auto policy has been in effect 60 days and a property policy 90 days.

Cancellation of commercial property and casualty coverage is not effective earlier than 10 days after the insured receives notice, and nonrenewal is not effective earlier than 30 days after receipt of written notice (24-A M.R.S. section 2908). For a never-renewed policy in effect less than 60 days, only the grounds restrictions and hearing rights fall away; the subsection 5 cancellation notice requirements still apply (24-A M.R.S. section 2908, sub-section 8).

Maine fire policies must be at least as favorable as the standard form in 24-A M.R.S. section 3002: the insured files a signed, sworn proof of loss within 60 days of the loss, and suit against the insurer must be started within 2 years after inception of the loss. Coverage is also suspended while a building stands vacant beyond 60 consecutive days.

Every vehicle registered in Maine must carry at least $50,000 bodily injury per person, $100,000 per accident, $25,000 property damage, and $2,000 in medical payments coverage (29-A M.R.S. sections 1605 and 1605-A). Maine is one of the few states that mandates medical payments coverage rather than only offering it.

UM/UIM coverage must be written at limits at least equal to the policy's bodily injury liability limits. A buyer may take lower limits only on a signed, dated selection form the insurer receives before the policy effective date, and never below the 50/100 statutory minimum (24-A M.R.S. section 2902). Without that signed form the higher limits apply by law.

An auto liability policy may not exclude coverage for bodily injury to a family or household member of the insured (24-A M.R.S. section 2902-D). Contrast with section 2916-B, which lets the named insured request in writing that a specific covered person, such as a high-risk driver in the household, be excluded from the policy.

For injuries on or after January 1, 2013 total incapacity benefits are 2/3 of the employee's gross average weekly wage, subject to the statutory maximum (39-A M.R.S. section 212). An employer that secures payment of compensation is exempt from civil actions by the employee, which is the exclusive remedy rule (39-A M.R.S. section 104).