QUICK NOTES SUPPLEMENTAL STUDY GUIDE FLORIDA

Transcription

1 QUICK NOTES SUPPLEMENTAL STUDY GUIDE FLORIDA A REVIEW SUPPLEMENT FOR THE FLORIDA AGENT S GENERAL LINES (2-20) STATE INSURANCE EXAM (January, 2015 edition) What is Insurance Schools Quick Notes Supplemental Study Guide? Insurance Schools Quick Notes Study Guide is a comprehensive study guide that follows the Pearson Vue state exam content outline and covers every topic listed on the Florida Agent s General Lines Insurance Exam. This supplemental study guide is designed to be used as an adjunct learning tool along with our online practice exam simulator and is not a substitute for the required Florida prelicensing education course. Insurance Schools Quick Notes Study Guide does not meet the Florida prelicensing education course requirement. Excerpts of Florida laws and regulations cited in this study guide have been condensed to emphasize important, testable topics you will see on your state insurance exam. This study guide should not be used as a substitute for competent legal advice. QUICK NOTES - 1

2 GENERAL KNOWLEDGE 1. Types of Property Policies (17% of State Exam) A. Homeowners - Purpose and Eligibility Homeowner policies are a multi-line policy, which means they combine property and casualty coverage in the same policy. They can be written to cover up to a four family structure with no more than 4 roomers or boarders. At least one unit must be owner occupied. Farm property is not eligible. A mobile home can be covered by amending coverage with an endorsement. Coverage Forms: HO-2 (Broad Form); (broad form perils for all property) HO-3 (Special Form); (open peril for structures, broad perils for personal property. HO-4 (Contents Broad Form also known as "Tenants Form"); HO-5 (Deluxe Form-open peril coverage for buildings and contents; HO-6 (Condominium Unit-Owners Form); HO-8 (Modified Coverage Form). (limited perils and ACV on all property) Definitions: Insureds - The named insured plus their spouse who resides there (whether or not the spouse s name is shown on the policy) Relatives of the named insured or the spouse who reside in the household Other persons under age 21 in the named insured s or a resident relative s care Full-time college students who are age 24, and related to the named insured Insured Location - The residence premises, its grounds, others shown on the declaration page, those temporarily used (hotel room), cemetery plots & mausoleums, vacant land and premises rented to the insured for other than business use. Section I - Property Coverages: Coverage A - Dwelling - Covers the dwelling and attached structures (garage, porch) Coverage B - Other structures - Those not attached (garage, shed) Coverage C - Personal property - Covers personal property owned or used anywhere in the world. Coverage D - Loss of use Covers loss of rental income and additional living expenses. approximately 350 practice questions dealing with Homeowners and Dwelling coverages. QUICK NOTES - 2

3 Additional Coverages of the HO Forms at a Glance: Additional Coverage HO-2 HO-3 HO-4 HO-5 HO-6 HO-8 Debris Removal X X X X X X Reasonable Repairs X X X X X X Trees, Shrubs and Other Plants-max X X X X X X $500 per item Fire Department Service Charge-$500. X X X X X X Property Removed- 30 days X X X X X X Credit Card, Fund Transfer Card, Forgery, and X X X X X X Counterfeit Money $500 Loss Assessment by Condo. Assoc.$1,000 X X X X X X Glass or Safety Glazing Material X X X X X X Collapse - abrupt damage X X X X X Landlord s Furnishings - max of X X X X $2500-no theft Building Additions and Alterations X X Ordinance or Law X X X X X Grave markers - $5,000 X X X X X approximately 350 practice questions dealing with Homeowners and Dwelling coverages. QUICK NOTES - 3

4 Section II - Liability Coverages Coverage E - Personal Liability Minimum limit is $100,000. Provides world wide liability coverage for the personal activities of the insured and family members. Provides coverage for certain incidental business activities such as a dance or painting studio, office and daycares. An endorsement is required for some of these activities. A sail boat under 26 feet, 25 horsepower outboard motor boat, rowboat and kayak would be covered for liability. Limited coverage for certain boats rented to the insured. Coverage F - Medical Payments to Others Minimum limit is $1,000 each person per occurrence. Coverage is no-fault medical payments coverage to others. Only invitees are covered, not the insured family or tenants. Example - A neighbor helps the insured lay carpet and is injured while helping. Pays up to three years after the incident. Additional Coverages: Claims expenses Provides $250 per day for insured to attend hearings and trials Premiums on bonds to defend insured Interest on judgment that accrues after the judgment. First Aid - The insurer will pay for first aid expenses incurred by an insured for first aid to others (not an insured). Damage To Property of Others - The insurer will pay up to $1,000 for accidental damage to property of others approximately 350 practice questions dealing with Homeowners and Dwelling coverages. QUICK NOTES - 4

5 Perils Insured Against The Perils of the Different Homeowner Forms Perils Covered HO 2 Dwelling HO3 Personal Property QUICK NOTES - 5 HO 4 Dwelling HO5 Personal Property Fire X Open Open X X Peril Peril Open Peril X X Lightning X X X X X Windstorm X X X X X or Hail Explosion X X X X X Riot or Civil Commotion X X X X X Aircraft X X X X X Vehicles X X X X X Smoke X X X X X Vandalism & Malicious Mischief HO 6 X X X X X Theft X X X X X Volcanic Eruption X X X X X Falling Objects Weight of Ice, Snow, or Sleet Discharge of Water or Steam Sudden, Accidental Rupture Freezing of Plumbing and Related Systems Artificially Generated Electrical Current X X X X X X X X X X X X X X X X X X X X X X X X HO 8

6 Exclusions - War, nuclear hazard, earth movement, neglect of insured, ordinance or law, flood, off-premises power shortages, and intentional acts are examples of some exclusions. Conditions: Insurable interest (must be evident at the time of loss) Insured s duties after a loss (report the claim and provide proof of loss) Loss settlement (can be either repair, or pay at ACV or replacement cost) Loss to a pair or set (Clause that stipulates that partial loss to a pair or set of items will be valued in terms of the lost item, not on the basis of reduced value of the pair or set) Glass Replacement (includes cost of safety glass) Appraisal (either party may request to determine value of claim) Other insurance (participates in the loss) Suit against insurer (must be brought within two years of the claim) Repair or replace option; right of salvage (option of insurer) Loss payment (made on basis of ACV or replacement cost) Abandonment (insured cannot have a loss and abandon property to insurer) Mortgagee Clause (covers insurable interest of mortgage) No benefit to bailee (only covers interest of the insured in property) Intentional acts (always excluded if caused by insured) Selected Endorsements: Earthquake (HO 04 54) - The earthquake endorsement defines a single earthquake as all earthquake shocks occurring within a 72-hour period. The peril of earthquake is defined to include land shock waves or tremors accompanying a volcanic eruption. The type of construction of the dwelling is a significant factor in earthquake rates. Deductibles are expressed as a percentage of the dwelling limit. Identity Fraud Expense (HO 04 55) - Provides reimbursement of expenses incurred as a result of identity theft or fraud. Covered expenses, up to the $15,000 limit, include reasonable attorney fees to defend suits brought by merchants, financial institutions, or collection agencies, costs incurred to re-apply for any loans rejected solely because of incorrect credit information, lost income for time taken to meet with law enforcement officials or complete affidavits (maximum $200 per day; $5,000 total), and charges for long distance calls to report or discuss an actual identity fraud. A $250 deductible applies. Scheduled Personal Property (HO 04 61) - This endorsement covers personal property that requires higher limits or broader coverage. Personal Property Replacement Cost (HO 04 90) - Homeowner forms provide actual cash value coverage on personal property. This endorsement provides replacement cost coverage. approximately 350 practice questions dealing with Homeowners and Dwelling coverages. QUICK NOTES - 6

7 Home Business (HO 07 01) - An endorsement used to cover the unique exposures of a home business. Covers increased contents value, loss of income and broader liability coverages. Personal Injury - This endorsement extends liability coverage to include libel, slander, wrongful eviction, and wrongful arrest and other non-bodily injury offenses. Water Back Up and Sump Discharge or Overflow (HO 23 85) - An endorsement may be attached to provide up to $5,000 of coverage for losses caused by water which backs up through sewers or drains or which overflows from a sump pump, even when caused by mechanical breakdown of the pump. B. Dwelling Policies Purpose and Eligibility - The Dwelling Policy (abbreviated as DP ) usually used to cover landlord property or property that does not qualify for a homeowner policy. No more than four families per structure and roomers and boarders are limited to five. Occupants must purchase their own contents coverage either using a DP form or an HO policy Coverage Forms - Perils Insured Against - Three different DP policies are available: DP-1 Basic, DP-2 Broad, and DP-3 Special. The covered property is the same in all of the forms; the difference is in the perils that are insured. DP-1 Basic - Provides basic perils. When a premium for Extended Coverage perils and VM&M Coverage is shown in the Declarations, these coverages become part of the perils insured against. DP-2 Broad - Covers all the named perils found in the DP-1 Basic including the Extended Coverage perils and vandalism. DP-2 adds the broad perils. DP-3 Special - This form may be called a hybrid form because it uses both perils approaches. The open-peril approach applies to Coverages A-Dwelling and B-Other Structures. The named-peril approach; however, is used for personal property using the broad perils. approximately 350 practice questions dealing with Homeowner and Dwelling Coverages. QUICK NOTES - 7

8 Dwelling Property Perils At-A-Glance: DP-1 (Basic) (Dwelling, Other Structures & Personal Property) OPTIONAL FOR DP-1 ONLY DP-2 (Broad) (Dwelling, Other Structures & Personal Property) Named peril coverage using the broad perils DP-3 (SPECIAL) A combination of open and named peril coverage Fire - Covers unfriendly fires Extended Coverage (EC Perils (listed below) Automatically includes all of the DP-1 perils, the EC perils and VMM Open Perils (Dwelling & Detached Structures) Lightning - Mother Nature s electricity Internal Explosion- a water tank explodes Vandalism & Malicious Mischief (VMM) an endorsement - no coverage if vacant for more than 60 days Plus the Broad Perils (listed below) no need for the VMM endorsement Provides broad (not open) perils for personal property EC Perils W Windstorm C Civil Commotion S Smoke H Hail A Aircraft V Vehicles (not an owners vehicle except under the DP-3) V Volcanic Eruption E Explosion R Riot Broad Perils B Burglary Damage (not stolen property - no coverage if vacant for more than 60 days I The weight of Ice, Snow or sleet (a bowed roof) G Glass Breakage (except when vacant for more than 60-days) A Accidental Discharge or overflow of water or steam (clothes washer, commode overflows, pipe breaks) F Falling Objects (a tree or other object cases loss) F Freezing of Pipes (only if water turned off & lines drained or heat left on) E Electrical Damage (from artificially generated) C Collapse (an abrupt falling down or caving in) T Tearing Apart, Cracking, Burning or Bulging (a hot water tank overheats) QUICK NOTES - 8

9 Property Coverages: Coverage A - Dwelling/residence and any attached structure plus building materials Coverage B - Other structures detached from the dwelling (a garage; storage bldg) Coverage C - Personal Property on the designated premises (optional coverage) (10% worldwide) Coverage D - Fair Rental Value (indirect loss coverage to cover lost rental income) Coverage E - Increased Living Expenses (an indirect loss coverage to pay the extra expenses to live elsewhere while repairs are being performed). This is optional for the DP-1 form for an additional premium. General Exclusions - These perils are excluded in every property loss, whether the policy uses a named-peril approach or an open-peril approach. Water Damage - Including floods from outside sources, whether runoff or overflow. Direct loss by fire or explosion which ensues or results from the water damage or earth movement is COVERED. Intentional losses from the standpoint of the insured Neglect during or after a loss (the insured must protect the property) Earth movement - Earthquakes, landslides, sinkhole collapses, and mine subsidence War - Whether declared or not Increased costs for upgrades required by ordinances when repairing buildings (changes in building codes) Nuclear damage Off-premises power outages that cause loss to an insured (power goes off down the street and the food in the freezer thaws Conditions: Policy Period - States when coverage begins and ends Mortgage Clause - Includes the insurable interest of the mortgage Liberalization Clause - If a form changes enhancing coverage with no additional premium the current policies are also broadened Concealment or Fraud - Coverage will be void before or after the loss Recovered Property - Salvage belongs to the insurer after loss is paid Duties after a Loss - Give prompt notice to insurer, protect the property and provide proof of loss and records when requested by the insurer. Settlement Considerations - Will the ACV or replacement cost apply? Other insurance and service agreements that may apply to the same loss Loss Payable Clause - Covers insurable interest of lender for chattel property Legal Action against Insurer - Provides a time limit to bring a suit against insurer approximately 350 practice questions dealing with Homeowners and Dwelling Coverages. QUICK NOTES - 9

10 Selected Endorsements: Broad Theft Endorsement (DP 04 83) - An endorsement to add theft coverage to which applies on and off the premises Dwelling under Construction (DP 11 43) - The endorsement covers a dwelling under construction with a provision that the insurer must be advised after work is completed. Occupancy of the dwelling is permitted for 30-days after completion. Personal Liability Supplement - This endorsement provides bodily injury and property damage liability coverage, including defense, for premises and personal activities of the insured on a world wide basis. Examples are falling down claims, dog bites, hunting accidents etc. Also includes $1,000 for medical payments on a no fault basis to invitees. C. Commercial Lines 1. Commercial Package Policy (CPP) Components of a Commercial Policy: Common Policy Declarations Apply to all sections of the policy. This includes the Named insured, address, and inception and expiration date of the coverages. Common Policy Conditions Also applies to all of the coverages. Each coverage expands on the conditions. First Named Insured They receive the premium and cancellation notices and are responsible for reporting and the filing of claims. Monoline versus Package Monoline is one policy. A CPP must contain at least two or more coverage parts. 2. Commercial Property Designed to cover risks that do not necessarily qualify for the businessowners policy which will be discussed later. approximately 275 practice questions dealing with Commercial Property and the Business Owners Package policy. QUICK NOTES - 10

11 Commercial Property Conditions (CP 00 90): Control of Property - States that any act of negligence on the part of a person who is beyond the insured's direction or control will not affect the insurance. Legal Action against the Insurer - An insured must have complied with all terms of the policy. The suit must begin within two years following a loss. Other Insurance - If there is other insurance written on the same basis, recovery is pro rated with the other policies. The policy is excess over other insurance when there is another policy covering the same loss. Liberalization - If the insurer provides more liberal coverage by a revision that is introduced during the policy period or in the 45 days preceding the inception date, the revision applies immediately, as long as there is no extra premium involved. Policy Period, Coverage Territory Losses must occur during the policy period and within the covered territory of US, Canada, Puerto Rico and the US territories. Transfer of Rights of Recovery against Others to Us This is also referred to as the subrogation clause where the insurer, after paying the loss, assumes the legal rights of the insured to seek retribution from the party that caused the loss. Concealment, Misrepresentation or Fraud In all the states these acts will usually void coverage. No Benefit to Bailee The policy is for the benefit of the insured and not the bailee. Example: The policy would not pay the dry cleaning fees if the insured s property were destroyed on the premises of the bailee. Cancellation and Non-renewal - Advance notice of cancellation must be sent to the first named insured listed on the declarations page as well as any mortgagees and loss payees. Coverage Forms: Building and Personal Property Form This form describes three items: Coverage A This is the building, additions, maintenance equipment, building materials on the premises, certain appliances, floor coverings etc. approximately 275 practice questions dealing with Commercial Property and the Business Owners Package policy. QUICK NOTES - 11

12 Coverage B This covers the business personal property including property located within 100 feet of the premises. It covers stock; tenant s improvements and betterments, Labor, materials or a service furnished or arranged on personal property of others and insured s interest in leased equipment. Coverage C The insured can cover the property of others in their care, custody or control. An example would be a dry cleaners or machine repair shop. Condominium Association Form - This form covers a condominium association against direct physical loss or damage to buildings, business personal property, and onpremises personal property of others in the care of the association. Condominium Commercial Unit-Owners - This form covers the commercial condominium unit owner's contents, business personal property, and business personal property of others in the unit owner's care. Building coverage is generally excluded. Unit-owner owned fixtures and structural changes are included in the covered property description. The unit-owners coverage form is always excess over a condominium association coverage form that applies to the same property. Business Income Form - This is indirect coverage. It pays only if there is a direct loss to the insured premises. It covers loss of income including loss of rents or tuition income. Coverage does not apply until the period of restoration begins which is 72 hours after the loss. Coverage applies even after the policy expires if the loss occurs before that date. Most purchase the form that includes extra expense coverage. Extra expense coverage insures against the necessary extra expenses during the Period of Restoration that would not have been incurred had there been no underlying property loss. Legal Liability Form This form is used to cover the insured when they are held responsible or could be held legally liable for physical loss to the structure they are renting or leasing. An example is a fire or explosion loss. Extra Expense Form Some risks only purchase this coverage like a hospital. It pays any reasonable extra expenses to keep the business active. Definitions The forms provide the definitions of the covered perils within the listing of the perils. The same is true of the description of property covered. approximately 275 practice questions dealing with Commercial Property and the Business Owners Package policy. QUICK NOTES - 12

13 Causes of Loss Forms: Basic Causes of Loss Form - A named peril form covering 11 covered perils: Fire Lightning Explosion Windstorm or Hail Smoke Aircraft or Vehicles Riot or Civil Commotion Vandalism Sprinkler Leakage (Accidental leakage) Sinkhole Collapse Volcanic Action (every 168 hours is a separate event) Broad Causes of Loss Form Also a named peril form that includes: All the Basic Perils listed above Breakage of Glass as an additional coverage Falling Objects Weight of ice, sleet or snow Water Damage (Accidental discharge or leakage of water or steam as a result of cracking or breaking of a water or steam system or appliance) Collapse as an additional coverage covers collapse of a building caused by: Any perils specified in the policy Hidden decay Insect or vermin damage Weight of people or property Weight of rain on the roof Defective materials or methods used in construction or remodeling Special Causes of Loss Form - Covers against direct physical loss that is not excluded or limited elsewhere in the policy. It is called Open Perils coverage. If the loss is not excluded then it is covered. Flood, earthquake, spoilage are some of the exclusions. General Exclusions Applicable to all Commercial Property Forms - Earthquake or flood, unless fire or explosion ensues; water that runs continuously for more than 14 days (broad and special); acts of civil authority; steam boiler explosion; war; civil authority; and neglect are some general exclusions. approximately 275 practice questions dealing with Commercial Property and the Business Owners Package policy. QUICK NOTES - 13

14 Selected Endorsements: Spoilage (CP 04 40) - This endorsement provides coverage for perishable stock due to power outage, mechanical breakdown or contamination. Earthquake and Volcanic Eruption (CP 10 40) - All earthquake shocks or volcanic eruptions that occur within any 168-hour period are considered to be one occurrence. Flood Coverage (CP 10 65) - However, if the property is eligible for or has a flood policy from the National Flood Insurance Program, the coverage on this endorsement is considered to be excess over the NFIP maximum limits. Ordinance or Law (CP 04 05) - Provides an additional limit of coverage for the increase in the cost of construction following a covered loss due to ordinance or law regulations. 3. Businessowners Policy (BOP) The BOP is designed to be written on small to medium size business risks. Unless otherwise indicated, 35,000 square feet is the largest area the risk can occupy and its annual gross sales cannot exceed $6,000,000. Eligible Risks: Apartment Buildings (including residential condominium associations) Office Buildings (including office condominium associations) that are occupied principally for office purposes. The building may be no more than 6 stories high and contain no more than 100,000 square feet. Other Buildings (occupied principally for certain wholesale, mercantile, service, or processing purposes.) Unless otherwise noted, eligible risks cannot exceed 35,000 square feet in total floor area, or exceed $6,000,000 in annual gross sales at each location. Businessowners Property Coverage: Coverage An unendorsed BOP provides open peril coverage on both the structures and contents. Coverage includes property of others. It also includes loss of income for up to 12 months on a loss sustained basis. Causes of Loss Open peril coverage unless endorsed to named peril coverage approximately 275 practice questions dealing with Commercial Property and the Business Owners Package policy. QUICK NOTES - 14

15 Exclusions Enforcement of law or ordinance; power failure; war and military action; dishonest or criminal acts by the insured or anyone else with an interest in the property; continuous or repeated seepage or leakage of water that occurs over a period of 14 days or more; wear, tear and deterioration; rust, mold, decay, hidden or latent defect or any quality in property that causes it to damage or destroy itself; settling, shrinking, cracking; explosion of steam boilers, steam pipes, steam turbines; rain, snow, ice or sleet to property in the open; flood and earthquake; false pretense; mysterious disappearance; pollution and neglect are a list of most of the exclusions. Limits of Insurance states the maximum limits that can be paid. The building limit will automatically increase by 8% unless a different percentage amount of annual increase is shown in the declarations. The business personal property limit shown on the declarations will automatically increase by 25% for seasonal variations in stock unless another percentage amount is shown on the declarations. But this increase will only apply if the limit of insurance shown for the business property is at least 100% of the average monthly values during the last 12 months. Deductibles - The standard deductible is $500 that can be increased. Loss Conditions - Basically the same as in commercial property coverage. General Conditions: The insured can cancel the policy at any time The insurer can cancel - must be based on state law. Insurer can also cancel the policy if the building has been vacant or unoccupied 60 or more consecutive days. Buildings with 65% or more of the rental units or floor area vacant or unoccupied are considered vacant under this provision. Changes to the policy must be in writing Concealment or fraud will void the policy Examination of Books and Records - The insurer may examine and audit the insured s books and records as they relate to the policy at any time during the policy period and up to three years afterwards. Inspections and Surveys - Insurer has this right Insurance Under Two or More Coverages The insurer will not pay more than the actual amount of loss or damage. approximately 275 practice questions dealing with Commercial Property and the Business Owners Package policy. QUICK NOTES - 15

16 Liberalization Clause broaden coverage under the policy without additional premium within 45 days prior to or during the policy period Other Insurance - If there is other insurance covering the same loss or damage, the insurer, (under the BOP) will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance. Premium Notices - These are sent to the first named insured at their last known address and are responsible for the payment of all premiums. Premium Audit Some premiums are based on auditable factors Transfer of Rights of Recovery Against Others to the Insurer - This is sometimes called the subrogation clause. Insurer seeks recovery. Assignment and Transfer of Your Rights and Duties Under This Policy - The rights under the policy may not be transferred to someone else without the written consent of the insurer except in the case of the death of the insured. Optional Coverages: Outdoor Signs - A specific limit can be provided to cover outdoor signs. Money and Securities - Covers theft, meaning any act of stealing, disappearance or destruction. Employee Dishonesty - Covers loss due to the dishonest acts of employees. Mechanical Breakdown - The insured can purchase equipment breakdown coverage to cover certain types of equipment as well as boilers. Hired and Non-owned Auto Liability Endorsement - Provides either or both non-owned or hired auto coverage for the named insured. Non-owned auto liability provides coverage for any auto that is not owned, borrowed or hired by the insured. It does not cover the owner of a non-owned or hired vehicle. Hired auto liability provides coverage for autos leased, hired or borrowed by the insured. This endorsement is not available to insured s that have a policy covering other commercial automobile exposures and does not require a mandatory audit by the insurance company. Earthquake Endorsement - Covers damage caused by earthquakes. approximately 275 practice questions dealing with Commercial Property and the Business Owners Package policy. QUICK NOTES - 16

17 Utility Services Direct Damage Coverage Endorsement - Covers loss or damage to property caused by an interruption in water, communication or power supply service. Utility Services Time Element Coverage Endorsement - Is similar to the above, except it covers loss of business income and extra expense that occurs due to an interruption in utility service. The Protective Safeguards Endorsement - Requires the insured to maintain the protective devices or services listed on the endorsement on specified property as a condition of the policy. This would include maintenance of a sprinkler system. The insurer will not pay for fire damage losses if the insured failed to keep the protective safeguard in working order or did not notify the insurer that the device was not working properly. When an automatic sprinkler system is shut off due to breakage, leakage, freezing, or opening of sprinkler heads, the insurer does not have to be notified if the system can be restored within 48 hours. Additional Coverages The BOP has several enhancements: Debris Removal - This is part of the coverage limit unless the insured exceeds their building or business personal property limit. If this occurs, the policy pays an additional $10,000. The expenses are covered only if reported to the company in writing within 180 days of the loss. Preservation of Property (30 days for property removed) Covers business personal property against any direct damage for 30 days. Fire Department Service Charge - Up to $2,500. Business Income - Extra Expense (for up to 12 months) - The coverage starts after a 72 hour waiting period which is also when the period of restoration begins. Ordinary payroll expenses are only paid for 60 days. Pollution Clean Up and Removal - Provides up to $10,000 coverage for the costs to extract pollutants from land or water at the insured s premises as a result of a covered direct loss. The expenses are covered only if reported to the company in writing within 180 days of the loss. approximately 275 practice questions dealing with Commercial Property and the Business Owners Package policy. QUICK NOTES - 17

18 Civil Authority - Pays loss of income that the insured sustains due to actions of civil authorities that prohibit access to the insured premises because property other than at the insured premises was damaged by an insured peril. Coverage begins 72 hours after the action by the civil authority and is available for up to four consecutive weeks. Extra expense is not subject to the waiting period and ends after four weeks or when the civil authority business income ends, whichever is later. Limited Coverage for Fungi, Wet Rot, Dry Rot and Bacteria from other than fire or lightning for certain specified perils. This coverage is limited to $15,000. Note: If the loss is caused by fire or lightning, then coverage is provided without this limitation. Collapse Applies to specified causes of loss resulting in an abrupt falling down or caving in of the structure or a part of the structure. Fire Extinguisher Systems Recharge Expense - Pays up to $5,000. Electronic Data - Pays up to $10,000 as a result of a covered cause of loss. Business Income From Dependent Properties - Pays up to $5,000 due to a direct loss to a dependent property that causes a business income loss to the insured. A supplier or major customer of the insured would be an example of a dependent property. Money Orders and Counterfeit Currency - Pays up to $1,000. Forgery or Alteration - Pays up to $2,500. Increased Cost of Construction pays up to a maximum of $10,000. Extensions of Coverage These are in addition to other covered property. 1. Newly Acquired or Constructed Buildings - 30 days of coverage subject to limitations. The maximum limit is $250,000 at each building. 2. Newly Acquired Business Personal Property - If the insured carries contents coverage, newly acquired personal property at another location is covered for $100,000 for a period of 30 days. 3. Personal Property Off Premises - Provides up to $10,000 coverage for business personal property anywhere in the coverage territory in transit or at premises not owned, leased or operated by the insured. approximately 275 practice questions dealing with Commercial Property and the Business Owners Package policy. QUICK NOTES - 18

19 4. Outdoor Property - Covers outdoor fences, radio and television antennas (including satellite dishes), signs, (other than signs attached to buildings), trees, shrubs and plants subject to the specified perils of fire, lightning, explosion, riot or civil commotion or aircraft. The most the policy will pay for loss or damage under this extension is $2,500, but not more than $1,000 for any one tree, shrub or plant. This does not include trees, shrubs or plants that are part of a vegetated roof as these are already considered to be covered property. 5. Personal Effects - Covers personal effects of the insured and employees including temporary or leased workers. Does not cover loss or damage by theft. The limit is $2, Valuable Papers and Records - Provides $10,000 in coverage to replace valuable papers and records as a result of a covered direct loss and $5,000 for loss to valuable papers not at the described premises. Additionally, the coverage includes the cost to replace or restore as well as research lost information. The definition of valuable papers and records includes those on electronic media. 7. Accounts Receivable Coverage - Provides $10,000 for this coverage for on-premises and $5,000 off the insured s premises. Coverage is triggered when a covered peril destroys the insured s accounts receivable records. The insurer pays those amounts that are uncollectible due to the destruction of records by a covered peril. 8. Business Personal Property Temporarily in Portable Storage Units A limit of $10,000 of coverage is provided for business personal property temporarily in storage units (including detached trailers) for a period of 90 consecutive days. Coverage does not apply under this extension if the storage unit itself has been in use at the described location for more than 90 consecutive days. In this case, permanent coverage would need to be purchased. Coverage applies if the storage unit or detached trailer containing the business personal property is within 100 feet of the buildings or structures or the premises described in the Declarations. Definitions These are imbedded in the terms used in the various sections of the policy. Businessowners Liability Coverage Form: Coverages Provides the same coverages as the CGL policy. Exclusions Lists basically the same exclusions as the CGL policy. Who is an insured Follows the CGL form. approximately 275 practice questions dealing with Commercial Property and the Business Owners Package policy. QUICK NOTES - 19

20 Limits of Insurance - The policy includes a minimum of $300,000 of coverage per occurrence. Higher limits are available for additional premium subject to company specific underwriting guidelines and premiums. A separate limit applies to Medical Payments to Others as well as Damage to Premises Rented to You (previously known as Fire Damage Legal Liability ). The BOP also has two separates sets of aggregate limits. One applies to Products and Completed Operations and the other to all bodily injury and property damage (not including Products/Completed Operations) or Damage to Premises Rented to You losses. The aggregate limits are twice the per occurrence and medical payment limits. General Conditions Follows the CGL form Definitions Follows the CGL form Businessowners Common Policy Conditions Form: Refer to common conditions discussed above. Selected Endorsements: Hired Auto and Non-Owned Auto Liability - New York (BP 04 36) - Provides either or both non-owned or hired auto coverage for the named insured. Non-owned auto liability provides coverage for any auto that is not owned, borrowed or hired by the insured. It does not cover the owner of a non-owned or hired vehicle. Hired auto liability provides coverage for autos leased, hired or borrowed by the insured. Named Perils (BP 10 09) This endorsement is used to convert the property coverages from open peril coverage to named peril coverage. Fire Lightning Volcanic action Windstorm Civil commotion Smoke Hail Aircraft Sprinkler leakage Sinkhole collapse Vandalism & malicious mischief Vehicles Volcanic Eruption Explosion Riot Transportation Covers damage, while insured property is in transit, by: Collision, derailment or overturn of a vehicle; Stranding or sinking of vessels; or Collapse of bridges, wharfs, docks, etc. approximately 275 practice questions dealing with Commercial Property and the Business Owners Package policy. QUICK NOTES - 20

21 4. Builders Risk Builders Risk Form (CP 11 21) Usually written on a completed value basis where the insured is required to choose a limit equal to 100% of the value of the anticipated cost of the structure. Coverage is written for one year, but ends when: the property is accepted by the buyer; 90 days has elapsed since construction was completed; the building is occupied or put to its intended use; the insured's interest in the property ceases; or the insured abandons the construction with no plans to complete it. D. Inland Marine 1. Personal Articles floaters The inland marine policies were developed from the ocean marine policies, which provided broad coverage for property transported over water. The inland marine policies, also called "floaters", give open peril coverage for "portable" property with a worldwide territory (except for fine arts). Fine arts are limited to the United States, its territories or possessions, Puerto Rico and Canada. Although homeowner policies cover a broad range of personal property exposures of individuals and families, there are limitations for many items of personal property. Homeowner policies place dollar limits on certain categories of property. Insurers often will provide the scheduled personal property endorsement to better cover these exposures. However, an insurer may use a separate, stand-alone personal inland marine form. This endorsement provides coverage for nine categories: Jewelry Furs and garments trimmed principally with fur Cameras Musical Instruments Silverware Golfer s Equipment Fine Arts Postage Stamps Rare and Current Coins approximately 100 practice questions dealing with Personal and Commercial Inland Marine. QUICK NOTES - 21

22 Personal Property Floaters: There are three personal property floaters used as stand-alone coverage policies: 1. Personal Articles Floater The personal articles floater is virtually identical to the scheduled personal property endorsement that can be added to a homeowner policy. It does, however, add a few additional categories of property. This is the most popular of the three personal property floaters. Most companies require an appraisal in order to develop an accurate description and proper value for the property. Newly acquired property of the same category currently on the policy is automatically covered for 30 days from the time of acquisition. The automatic limit is 25% of the amount of insurance for the class of property involved or $10,000, whichever is less. There are two personal article floater coverage forms: The ACV form covers these items at the time of loss on an actual cash value basis. For example, a person has insured a silverware collection for $10,000 but suppose the price of silver has declined by 30%. At the time of loss, the total collection would be worth $7,000. The agreed amount form covers these items for the agreed amount limit indicated on each scheduled item. Using the example above, the agreed amount is $10,000 and the insured will receive this amount in case of a loss. If values increase or decrease due to market changes, the insured s limit stays the same The personal articles floater, whether in the form of an endorsement or a separate policy, covers property against direct damage. The property that is eligible for coverage includes the types of valuable property associated with family and home life, specifically: Jewelry Furs and garments trimmed principally with fur Cameras Musical Instruments Silverware Golfer s Equipment Fine Arts Postage Stamps Rare and Current Coins Bicycles Wine The above classes of property are those most frequently insured on a schedule. Scheduling allows for property to be covered for its full value, based upon relevant documentation such as a current appraisal or sales receipt. approximately 100 practice questions dealing with Personal and Commercial Inland Marine. QUICK NOTES - 22

23 2. Personal Property Floater The personal property floater provides open peril coverage on an unscheduled basis for basic categories of personal property with a separate limit of insurance for each category. This form is commonly used when the insured, for whatever reason, does not carry a homeowner policy. Any particularly valuable property can be scheduled separately. 3. Personal Effects Floater - This form is designed to insure personal effects (items usually worn or carried) while traveling or vacationing Pair and Set Clause - The pair and set clause that is contained in most property policies is also in all of the personal property floaters. The insurer is not liable for the entire value of a set when only part of it is damaged. There are two settlement options the insurer may use: Repair, replace or restore the set; or Pay the difference between the actual cash value of the set before and after the loss. Loss Settlement Options: Loss Settlement - Without the Agreed Amount Form Except for fine arts, stamp collections, wine and coin collections, covered property losses under a personal articles floater policy or scheduled personal property endorsement are settled on the basis of the least expensive of the following options: The actual cash value of the property at the time of loss or damage The reasonable cost to repair or restore the property to its pre-loss condition The reasonable cost to replace the lost or damaged article with a substantially identical piece The applicable insurance limit In light of the above settlement option, property values are determined at time of loss or damage rather than upon any agreed value. Fine Arts Fine arts losses are settled according to the insurance limit shown for each scheduled article; in other words, an agreed value. In case of loss to a pair or set, the insurer agrees to pay the full amount of the set as shown in the schedule. When full value has been paid on a damaged set, the insured must surrender the remaining article or articles of the set to the insurer. Loss Settlement - With the Agreed Amount Form On scheduled property the insurer will pay the agreed amount shown for each item indicated when the agreed amount clause applies. This is the amount agreed to as the value of the article or item. approximately 100 practice questions dealing with Personal and Commercial Inland Marine. QUICK NOTES - 23

24 2. Commercial Property Floaters Inland Marine coverages may be categorized as controlled or non-controlled. A controlled line is written using a standardized form that is filed for uniform use. Rates are filed as well. A non-controlled line is one that can be written by individual companies using their own form and varying it for the individual risk. Some of the more commonly used forms are as follows: Annual Transit Policy It is a non-controlled form of protection for the frequent shipper of goods. It can be written a named peril or open form basis to cover the perils of transportation. Trip Transit Policy It is a non-controlled form designed to protect single shipments of specifically described property from one point to another. Motor Truck Cargo Policy It is a non-controlled form which covers cargo while it is being transported in a truck. It protects the carrier, instead of the shipper, for liability for loss to domestic shipments in transit. There are only a few things, such as acts of God (floods, tornadoes) or the shipper s own neglect (poor packing), for which the carrier is not liable. Free on Board (FOB) shipping point - Means that the title to property in transit transfers to the buyer the moment it leaves the shipper. Free on Board (FOB) destination point - Means that the title to property in transit remains with the shipper until it arrives at the buyer s destination point and has been accepted by the buyer. These clauses in the cargo policy will determine where the responsibility lies for damage to cargo in transit. Coverage for Instrumentalities of Transportation & Communication - This coverage is non-controlled and provides for damage to bridges, tunnels, dams, pipelines, piers, docks, radio, TV towers, and satellite dishes. While this property is not portable, it does have a direct connection with transportation or communication, and is subject to many of the same perils. Contractor s Equipment Coverage Form A non-controlled form designed to insure various types of construction equipment used by contractors. Commercial Articles Coverage Form may be used to insure the interests of the owner of commercial cameras, musical instruments and related equipment. approximately 100 practice questions dealing with Personal and Commercial Inland Marine. QUICK NOTES - 24

25 Accounts Receivable Coverage Form A controlled form which covers sums due the insured from customers that are not collectible due to loss, damage, or destruction of accounts receivable records. The coverage also applies to expenses to reestablish the records, if possible, and collection expenses that are in excess of normal. Valuable Papers and Records Form A controlled form which provides coverage for inscribed, written, or printed documents, manuscripts or records, including abstracts, books, deeds, drawings, films, maps or mortgages. It does not cover money and securities. Installation Coverage Form A controlled form which covers property sold by the insured that must be transported to another location and installed before the purchaser accepts it. Sign Coverage Form - A controlled form exists for insuring the value of signs, including neon, fluorescent, automatic or mechanical signs. Electronic Data Processing (EDP) Forms - An increasingly important coverage today is insurance for electronic data processing equipment and media. This coverage can be very important since it covers both hardware and software. Bailees Forms - A bailment is the delivery of property, by the owner, to someone else to be held by the bailee for some special purpose, and then returned to the owner. If the property is damaged while in the custody of the bailee, the bailee will be held liable for damages. An example would be a dry cleaner. Jewelers Block Coverage Form A bailee form which covers the insured's merchandise held for sale and customers' property. But it has some additional features as well, such as multiple types of transit coverage and coverage for property in showcases. An extension of coverage is provided for theft damage to buildings. The form is designed for the jeweler which maintains an average inventory of $250,000 or less. The form does not cover property: Sold under a deferred sales payment agreement after it leaves the insured ' s premises; At an exhibition promoted or financially assisted by a trade association or public authority; Exhibited in showcases or show windows away from the premises; or While being worn by the insured, an employee or a family member of either (does not apply to watches worn solely for purposes of adjustment). approximately 100 practice questions dealing with Personal and Commercial Inland Marine. QUICK NOTES - 25

26 Other Dealers Forms policies written for specific types of dealers include: furriers, art, coin and stamp, musical instrument and equipment dealers. These policies cover merchandise on an all risk basis, both on and off the premises, while in transit, and in the custody of employees. Coverage may extend to the insured s property as well as to property of others. 3. Nationwide Definition The definition lists six categories of eligible risks under Marine insurance: 1. Imports; 2. Exports; 3. Domestic shipments; 4. Instrumentalities of Transportation or Communication; 5. Personal Property Floater Risks; 6. Commercial Property Floater Risks E. National Flood Insurance Program Flood insurance may be purchased for a one year period. The normal waiting period for coverage is 30 days from the date the application and premium are sent to the NFIP. The exception to this 30 day rule is when an insured is closing on a loan and flood coverage is required. The coverage can be bound as of the date of the closing. Both building and contents coverages have deductibles. The standard deductible is $2,000 under the emergency program and $1,000 under the regular program. The $2,000 deductible under the emergency program can be reduced to $1,000 by paying an additional premium. The two programs are discussed later. The deductibles apply separately to each building loss and to each contents loss. Higher deductibles are available. Definition of Flood - Flood, as used under the NFIP, means: 1. A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from: Overflow of inland or tidal waters; Unusual and rapid accumulation or runoff of surface waters from any source; Mudflow which is defined as a river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water. approximately 30 practice questions dealing with Flood Coverage. This is out of nearly 2,500 total questions. QUICK NOTES - 26