Chapter 2:
Let’s Make a Deal... Legally
Let’s Make a Deal... Legally
Statement in an application that are believed to be true to the best of the applicant’s knowledge.
What is representation?
This principle restores the insured to the original financial position.
What is indemnity?
Insurance contracts are described this way because only the insurer writes the contract.
What is a contract of adhesion?
This federal program provides subsidized flood insurance for properties in flood-prone communities.
What is the National Flood Insurance Program (NFIP)?
This type of loss valuation is often used for collectible items under scheduled floaters.
What is agreed value or appraised value?
An insurer issues a nonrenewal notice 10 days before a policy expires. The insured receives it, and the policy lapses. The insured files a claim two days later. The insurer denies it, but the insured disputes the lapse. Under most state laws, what procedural failure may allow the insured to challenge the lapse?
What is failure to provide sufficient written notice of nonrenewal (60 days)
This prevents a party from denying a fact if their conduct previously implied it.
What is waiver?
This element of a contract means both parties must agree to the contract's terms.
What is agreement (offer and acceptance)?
A statement that is guaranteed to be true.
What is a warranty?
Because there's an unequal exchange of value, insurance contracts are known as this type.
What is an aleatory contract?
A 72-hour rule applies to this peril, treating multiple events as a single occurrence.
What is an earthquake?
The coverage you use to insure you retain the value of a collection of items that value more together than the individual pieces
What is the Loss to a Pair?
A misrepresentation that is intentional and material is known as this.
What is fraud?
Your insurer updates its policies to include coverage for volcanic smog, and doesn’t charge anyone more. Without even updating your paperwork, you suddenly get that new protection too. This automatic upgrade is thanks to which clause?
What is the liberalization clause?
The party who makes the offer in an insurance contract.
Who is the applicant/Customer/1st Party?
You sign a commercial policy on Monday and cancel it Tuesday before coverage ever begins. This cancellation is known as what?
What is flat cancellation?
Insurance contracts are this type, meaning only one party makes a legally enforceable promise.
What is a unilateral contract?
This policy provides open perils coverage for boats under 26 feet and may include hull and trailer coverage.
What is a Boatowners policy?
This type of policy protects movable property on an open perils basis—jewelry, cameras, or even a stamp collection might float under it.
What is a Personal Inland Marine policy?
After a guest slips at your property, your property policy and your personal umbrella policy both potentially provide liability coverage. However, your umbrella insurer refuses to pay until the full underlying liability limits are exhausted. This is because your umbrella policy is designed to kick in only after the limits of which type of policy have been used up?
What is the primary/underlying/Dwelling insurance policy?
You own two policies that both potentially cover a claim — one homeowner's policy and one personal liability umbrella policy. But the umbrella policy only applies after the homeowner’s limits are exhausted. This sequencing structure is known as what kind of liability coverage layering?
What is primary and excess insurance?
This principle assumes both parties are relying on each other's honesty.
What is utmost good faith?
After repeatedly ignoring that policy condition, the insurer can’t suddenly enforce it now. The court doctrine kicking in to stop him is
What is estoppel?
If ambiguity exists in a policy, courts generally interpret it in favor of this party.
Who is the insured?
The NFIP defines this event as inundation involving two or more acres or affecting both the insured's property and adjacent land.
What is a flood?
When an umbrella policy covers a loss not handled by any underlying policy, this out-of-pocket cost must be paid before coverage kicks in.
What is self-insured retention?
Your base policy excludes theft coverage. Your insurer adds a legal form modifying just that part of coverage is called a what?
What is an endorsement?
This legal concept is used when the insured reasonably believes coverage exists due to insurer actions.
What is estoppel?
This contract legal element involves a "promise for an act."
What is consideration?
This payout distributes claim payments based on the proportion of total coverage provided by the policy for the total properties
What is the pro rata Distribution?
Both parties have responsibilities to make this type of insurance contract enforceable. If the insured upholds their end, the insurer must pay claims.
What is a conditional contract?
This federal agency administers the NFIP and sets eligibility rules for participating communities.
What is FEMA (Federal Emergency Management Agency)?
While in storage, your boat might enjoy a premium discount thanks to this low-risk seasonal insurance period.
What is a lay-up period?
A commercial building is covered by three concurrent fire insurance policies:
Policy X: $200,000 limit
Policy Y: $300,000 limit
Policy Z: $500,000 limit
The building suffers a $100,000 fire loss. If all three policies have pro rata liability clauses, how much does Policy Y pay toward the claim?
What is $30,000?
Though it sounds like policyholders can design their own insurance, this federal program actually allows private insurers to issue and service flood policies — but all claims are still backed and paid by the federal government. What is this public-private arrangement called?
What is the Write Your Own (WYO) Program?