Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law) flashcards

Coverage designed to protect against financial losses due to the sudden and accidental breakdown of equipment and machinery, including perils like mechanical breakdown, electrical arcing, and explosion of boilers.

• Covers sudden and accidental breakdown.
• Includes mechanical breakdown, electrical arcing, boiler explosions.
• Fills gap left by standard property policies.
• Can cover direct damage, business interruption, and spoilage.

Memory trick: Special Property: For risks beyond the 'standard' storm.

Under CGL, 'insured contracts' are specific types of agreements where the insured assumes the tort liability of another party, extending coverage for certain contractual obligations.

• Transfers liability for BI/PD to the insured.
• Common examples include sidetrack agreements, easement agreements, and agreements to indemnify a municipality.
• Exclusions may apply, so specific contract wording is crucial.

Memory trick: CGL handles 'contracts' when you 'assume' another's 'liability'.

Garage Liability Coverage, part of the Garage Coverage Form, covers the insured's legal liability for bodily injury and property damage arising from garage operations, including the use of covered autos.

• Combines auto liability and general liability for garage risks.
• Covers premises, operations, products, and completed operations.
• Includes liability from owned, non-owned, and customer autos in care, custody, or control.

Memory trick: Garage Form has 'L.K.P.' - 'Liability, Keepers, Physical'.

The Principal (or Obligor) in a surety bond is the party who has the primary obligation to perform a specified act or fulfill a contract.

• The one whose performance is guaranteed.
• Pays the premium for the bond.
• Responsible for indemnifying the surety if a loss occurs.

Memory trick: Surety bonds have a 'P.O.S.' - 'Principal, Obligee, Surety'.

Personal Auto Policy liability limits expressed as three numbers: the maximum paid per person for bodily injury, the maximum paid per accident for bodily injury, and the maximum paid per accident for property damage.

• First number: BI per person limit.
• Second number: BI per accident limit.
• Third number: PD per accident limit.
• Each limit is a maximum, not necessarily the payout.

Memory trick: PAP Limits: Split (per person, per accident, property) or Combined (one big pot).

A type of surety bond used in construction that guarantees that if the contractor's bid is accepted, the contractor will enter into the contract and provide the necessary performance and payment bonds.

• Guarantees contract acceptance.
• Guarantees provision of Performance/Payment bonds.
• Protects the project owner (obligee).
• Typically required for public works projects.

Memory trick: Contract Bonds: Bid, Perform, Pay - all the steps for a project day!

The primary insuring agreement of a Commercial General Liability policy, covering sums the insured is legally obligated to pay due to bodily injury or property damage.

• Covers premises and operations liability.
• Includes defense costs.
• Subject to per occurrence and aggregate limits.

Memory trick: CGL: A for body, B for words, C for small hurts.

The maximum amount an E&O policy will pay for a single claim (per claim limit), from which the deductible is subtracted before payment.

• Per claim limit caps individual loss payouts.
• Deductible is the insured's out-of-pocket portion.
• Aggregate limit caps total payouts over the policy period.

Memory trick: E&O pays up to the limit, after your deductible hit.

A type of crime insurance that provides coverage for losses due to employee theft or dishonesty, where a single limit applies to the total loss from all dishonest acts by an employee or group of employees, as long as the acts are part of a continuous scheme.

• Covers employee theft/embezzlement.
• Single limit applies to *all* employees.
• Covers continuous or related acts.
• Can be written as a separate policy or endorsement.

Memory trick: Crime Cover: Protect your business from inside and outside thieves.

A Self-Insured Retention (SIR) in an Umbrella policy is a deductible-like amount that the insured must pay out-of-pocket before the Umbrella policy responds, typically when there is no underlying coverage or when underlying coverage limits are exhausted but the claim falls below the Umbrella attachment point.

• Functions like a deductible.
• Applies when underlying policies don't cover a loss or are exhausted.
• Must be satisfied before Umbrella policy pays.

Memory trick: Umbrella picks up, but SIR takes its cut first.

Excludes coverage for property damage to the insured's own work arising out of that work, preventing the CGL from guaranteeing workmanship.

• Also known as the 'work performed' exclusion.
• Distinguishes between damage to the contractor's work and damage to other property.
• Aims to cover 'occurrence' based damage, not faulty workmanship itself.

Memory trick: CGL won't fix your own poor work, just the ripple effect.

A no-fault system providing benefits to employees for work-related injuries or illnesses, covering medical care, lost wages, and rehabilitation, but generally excluding pain and suffering.

• No-fault system.
• Covers medical, wage loss, and rehab.
• Excludes pain and suffering.
• Employer's exclusive remedy for employees.

Memory trick: WC: Work-related Care covers Economic Costs, not Emotional.

Part One (Coverage A) of a Workers' Compensation policy covers the insurer's statutory obligation to pay benefits required by the applicable workers' compensation law for work-related injuries or illnesses.

• Covers medical costs, lost wages, and rehabilitation.
• No dollar limit (statutory limits apply).
• Applies to employees covered by the state's Workers' Compensation Act.

Memory trick: Workers' Comp has 'E.S.V.' - 'Employer, Statutory, Voluntary' parts.

Professional Liability insurance, or Errors and Omissions (E&O), covers financial losses to third parties due to professional negligence, errors, or omissions in services rendered.

• Specific to professional services (e.g., architects, lawyers, consultants).
• Excludes bodily injury and property damage typically covered by CGL.
• Often written on a claims-made basis.

Memory trick: Liability types: 'C.P.W.U.' for 'Commercial, Professional, Workers, Umbrella'.

A type of liability insurance policy trigger where coverage is activated only if the claim is made (reported to the insurer) during the policy period or an agreed-upon extended reporting period, regardless of when the incident occurred.

• Claim must be reported during policy period.
• Incident can occur before or during policy period.
• Extended Reporting Period (ERP) is crucial for late-reported claims.
• Different from 'occurrence' trigger policies.

Memory trick: Triggers: 'Occur' when it happens, 'Claims' when it's reported.

Covers all necessary and reasonable medical treatment for work-related injuries or illnesses, without deductibles or co-pays.

• Includes doctor visits, hospital care, prescriptions.
• Also covers rehabilitation and durable medical equipment.
• Distinct from lost wage (indemnity) benefits.

Memory trick: Workers' Comp heals and helps you earn.

An insuring agreement in a Crime Insurance policy that covers losses due to the forgery or alteration of checks, drafts, or other financial instruments.

• Specifically targets check fraud and alteration.
• Applies to instruments made or drawn by the insured.
• Can cover both employee and non-employee acts, depending on specific policy wording.

Memory trick: Crime covers theft, inside, outside, and forgery.

Personal Auto Policy (PAP) split limits specify separate maximum payments for bodily injury per person, bodily injury per accident, and property damage per accident.

• Format: BI per person / BI per accident / PD per accident.
• Per person limit is the absolute maximum for one individual's BI.
• Per accident BI limit is the total maximum for all individuals' BI in one incident.

Memory trick: Split limits are 'P.A.P.' - 'Per-person, Accident, Property' damage.

A Contract Bond guarantees the fulfillment of obligations under a contract, commonly used in construction to assure project completion and payment to subcontractors.

• Includes Performance Bonds (guarantee work completion).
• Includes Payment Bonds (guarantee payment to subs/suppliers).
• Required for many public works projects.

Memory trick: Surety bonds are 'C.J.F.L.' - 'Contract, Judicial, Fidelity, License'.

Insurance that protects professionals and companies from claims of negligence, errors, or omissions in the performance of their professional services.

• Covers financial losses due to professional mistakes.
• Includes defense costs, even if the claim is baseless.
• Different from General Liability, which covers bodily injury/property damage.

Memory trick: E&O defends your professional 'oops'.

Boiler and Machinery (Equipment Breakdown) insurance covers direct damage to equipment and resulting losses (e.g., business interruption) due to sudden and accidental breakdown.

• Covers mechanical, electrical, and pressure systems.
• Often includes business interruption and spoilage coverage.
• Excludes wear and tear, rust, and calibration errors.

Memory trick: Specialized property is 'B.I.C.' for 'Boiler, Inland, Commercial'.

A single dollar amount that represents the maximum the insurer will pay for all damages (bodily injury and property damage) resulting from any one auto accident.

• Does not differentiate between bodily injury and property damage.
• Does not have per-person or per-occurrence sub-limits within the total.
• Simplifies coverage application for complex claims.

Memory trick: CSL: One big limit for all accident harms.

Garage Liability covers the garage's legal liability for bodily injury or property damage to others arising from garage operations. Garagekeepers Coverage covers physical damage to customers' autos while they are in the insured's care, custody, or control.

• Garage Liability: BI/PD to *others* from operations.
• Garagekeepers: Physical damage to *customers' autos* in care.
• Both are part of the Garage Coverage Form.
• Crucial distinction for auto service businesses.

Memory trick: Garage Form: Liability for others, Keepers for their cars.

An Umbrella Liability policy provides excess coverage over underlying policies. A Self-Insured Retention (SIR) functions like a deductible, but typically only applies when the umbrella policy is primary (no underlying coverage) or when underlying coverage is exhausted, not as a 'gap' between underlying coverage and the umbrella's activation.

• Provides excess liability coverage.
• Sits above primary (underlying) policies.
• SIR applies when umbrella is primary or underlying doesn't cover.
• SIR generally does NOT apply if underlying policy exhausts its limit.

Memory trick: Umbrella: Covers the 'excess' above your primary, the SIR is for when you're 'bare'.

Employee Theft coverage protects businesses against direct financial loss resulting from theft of money, securities, or other property by an employee.

• Covers dishonest acts by employees.
• Often includes discovery or loss sustained forms.
• Can be written as a separate policy or part of a package.

Memory trick: Crime insurance handles 'E.F.I.O.C.' for 'Employee, Forgery, Inside, Outside, Computer'.

BAP Liability Coverage pays for bodily injury and property damage to others for which the insured is legally responsible due to an auto accident.

• Covers legal obligations to third parties.
• Includes defense costs.
• Applies to owned, hired, and non-owned autos.

Memory trick: BAP covers the business's 'L.M.P.U.' for 'Liability, Med, Physical, Uninsured' needs.

A type of surety bond that guarantees a contractor will complete a project according to the terms and conditions of the contract.

• Protects the project owner (obligee) from contractor default.
• Ensures satisfactory completion of work.
• Often required for public and large private construction projects.

Memory trick: Contract bonds: Bid to perform and pay.

A surety bond that guarantees a contractor will pay all subcontractors, laborers, and material suppliers for a project.

• Protects the project owner from liens.
• Ensures sub-contractors and suppliers receive payment.
• Often required alongside a Performance Bond.

Memory trick: Contract bonds: Bid, Perform, Pay.

Covers damage to the garage business's own vehicles, including loaners, service vehicles, and vehicles held for sale.

• Similar to PAP physical damage for owned vehicles.
• Distinct from Garagekeepers, which covers customers' vehicles.
• Includes collision and comprehensive perils.

Memory trick: Garage: Custody for theirs, Physical for ours.

Covers damage to another person's property caused by the insured's vehicle in an accident for which the insured is legally responsible.

• Covers third-party property damage.
• Does not cover damage to the insured's own vehicle.
• Is a mandatory coverage in many states.

Memory trick: PAP covers your car and what it harms.

An arrangement where multiple insurance companies collectively share in underwriting large or catastrophic risks by pooling their resources and premiums.

• Handles risks too large for one insurer
• Spreads risk among several companies
• Common for catastrophic events like hurricanes or earthquakes

Memory trick: Pools are for sharing BIG risks.

The legal remedy that voids an insurance contract from its inception, treating it as if it never existed, typically due to material misrepresentation, concealment, or fraud by the applicant.

• Voids the policy from the start
• Usually involves return of premiums
• Requires proof of material misrepresentation or fraud

Memory trick: Misrepresentation means the contract is RESCINDED, like a bad decision erased.

The process by which an insurance company evaluates, classifies, and ultimately decides whether to accept or reject applications for insurance and at what price.

• Determines insurability and appropriate premium.
• Aims to select risks that meet the insurer's criteria.
• Uses various sources of information, including claims history.

Memory trick: Underwriting is like a risk detective, finding clues to set the premium correctly.

Replacement Cost (RC) minus depreciation. It represents the current market value of the property at the time of loss.

• Common valuation method in property insurance.
• Accounts for wear and tear.
• Often results in a lower payout than Replacement Cost.

Memory trick: ACV minus the deductible is what you'll collect, don't forget the depreciation effect.

The financial stake an individual has in the property or person being insured, such that they would suffer a financial loss if the insured event occurs.

• Must exist at the time of loss for P&C insurance.
• Prevents gambling and moral hazard.
• Examples: ownership, mortgage holder, bailee.

Memory trick: P&C: At the time of loss, your interest must be boss.

The discipline that applies mathematical and statistical methods to assess risk in the insurance and finance industries, primarily for calculating premium rates, reserves, and dividends.

• Uses statistics and probability
• Calculates appropriate premium rates
• Essential for insurer solvency and profitability

Memory trick: Actuaries ACT on data to calculate rates.

A fundamental principle of insurance stating that in the event of loss, an insured is entitled to no more than the amount of the loss, or to be restored to the same financial position that existed prior to the loss, without profiting from insurance.

• Prevents profiting from a loss
• Basis for property and casualty insurance
• Policy limits and deductibles support this principle

Memory trick: Indemnity: Imagine No Loss, only money to make you whole.

An insurance policy is a personal contract, meaning it insures the individual's insurable interest in the property, not the property itself, and cannot be assigned without the insurer's consent.

• Insures the named insured's interest
• Requires insurer consent for assignment
• Risk assessment is tied to the individual insured

Memory trick: P.A.C.U.L.A.C.S. - Personal, Adhesion, Conditional, Unilateral, Aleatory, Competent Parties, Legal Purpose, Offer/Acceptance, Consideration, Good Faith.

An insurer's ability to meet its long-term obligations, particularly to pay claims when they become due.

• Crucial for policyholder confidence.
• Monitored by state regulatory bodies.
• Often rated by independent agencies (e.g., A.M. Best, Standard & Poor's).

Memory trick: Solvency is the 'soul' of an insurer, ensuring it can pay.

A rating method where the premium for an individual risk is determined by an underwriter's professional judgment and experience, typically for unique or complex exposures.

• Used when standard rating methods are not suitable.
• Relies heavily on underwriter expertise.
• Common for unusual or very large risks.

Memory trick: Manual is by the book, Experience is by history, Schedule is by features, and Judgment is by the expert.

One of the essential elements of a valid contract, signifying a mutual agreement between parties where one party makes an offer and the other party accepts it.

• The applicant typically makes the offer by submitting an application and premium.
• The insurer accepts the offer by issuing the policy.
• Acceptance must be unconditional.

Memory trick: CALO: Competent, Agreement, Legal, and Consideration for a valid contract.

A legal principle in insurance contracts requiring both the insured and the insurer to act with complete honesty and to disclose all material facts.

• Higher standard than ordinary commercial contracts.
• Requires full and fair disclosure of all information relevant to the risk.
• Breach by the insured can lead to policy voidance or denial of claims.

Memory trick: Utmost good faith is 'trust' between both parties, like a secret handshake.

A type of risk where there is only the possibility of loss or no loss, with no chance of financial gain.

• Insurable, as losses are predictable.
• No potential for profit.
• Examples include natural disasters, accidents, death.

Memory trick: Pure risk means 'purely' a chance of loss, never a gain.

A standard insurance policy that provides broad coverage for business risks, primarily for claims of bodily injury and property damage caused to third parties.

• Covers premises, operations, products, and completed operations.
• Protects against legal liability to others.
• Does not cover employee injuries or property damage to the insured's own property.

Memory trick: CGL protects from claims by others, while property protects your own coffers.

A provision in property insurance that requires the insured to carry insurance equal to a specified percentage of the property's value. If underinsured, the insured shares in the loss.

• Encourages adequate insurance coverage
• Applies to partial losses
• Formula: (Amount of Insurance Carried / Amount of Insurance Required) x Loss = Payout

Memory trick: Co-insurance: Cover OR Share.

An insurance contract is conditional because the insurer's promise to pay benefits is dependent upon the occurrence of a specified event and the insured fulfilling certain conditions.

• Insured must comply with policy terms (e.g., pay premiums, report losses promptly).
• Failure to meet conditions can void the insurer's obligation.
• Ensures fairness and prevents abuse of the contract.

Memory trick: Conditional contracts have 'conditions' for payout, like a treasure map with steps.

An insurance marketing system where independent agents represent multiple insurance companies and are paid commissions on the policies they sell.

• Agents own policy expirations.
• Offer clients a choice of insurers.
• Provide personalized service.

Memory trick: Independent agents are free to choose, unlike exclusive who are tied to one.

A type of insurance that provides periodic payments to an insured individual who is unable to work due to illness or injury.

• Replaces a portion of lost income.
• Can be short-term or long-term.
• Benefits typically cease when the insured recovers or reaches retirement age.

Memory trick: Life, Health, Property, and Disability keep you from financial instability.

The active and efficient cause that sets in motion a train of events that brings about a result, without the intervention of any force started and working actively from a new and independent source.

• Directly responsible for the loss.
• Important for determining coverage.
• Can be multiple proximate causes for different losses.

Memory trick: Don't get lost in the details; find the proximate cause of the loss.

A risk where there is only the possibility of loss or no loss, with no chance of gain.

• Must be pure risk, not speculative.
• Must be accidental and unintentional.
• Must be measurable and predictable.

Memory trick: Pure risks are safe bets for insurers, not speculative regrets.

A rating method where risks with similar characteristics are grouped together, and each risk in the group is charged the same rate.

• Most common method for personal lines insurance.
• Relies on statistical data for large groups.
• Simplifies the underwriting process for homogeneous risks.

Memory trick: Class rating means 'classifying' similar risks for a 'standard' price.

Insurance purchased by insurance companies to protect themselves from large losses or catastrophic events.

• Allows insurers to underwrite larger risks.
• Spreads risk across multiple companies.
• Can be facultative (individual risks) or treaty (groups of risks).

Memory trick: Reaching out for Reinsurance helps keep the company sound.

An insurance rating method where a single rate is applied to all insureds within a specified class or group that share similar characteristics and loss exposures.

• Also known as manual rating
• Common for personal auto, homeowners, small businesses
• Assumes homogeneity within the class

Memory trick: Class Rating: ALL in the same CLASS get the same rate.

A reinsurance agreement under which the primary insurer agrees to cede and the reinsurer agrees to accept all risks of a certain class or type.

• Automatic transfer of risk for a defined portfolio.
• Often used for high-volume or catastrophic risks.
• Provides stability and capacity for the primary insurer.

Memory trick: Treaty reinsurance is like a 'treaty' for a whole group of risks, not just one.

The act of shifting the financial consequences of a potential loss from one party (the insured) to another (the insurer) through an insurance contract.

• Fundamental principle of insurance
• Achieved through payment of premiums
• Allows individuals/businesses to manage uncertainty

Memory trick: TRAC: Transfer, Retention, Avoidance, Control (Reduction).

An insurance contract is a 'take it or leave it' agreement, drafted by the insurer, which the insured must accept or reject in its entirety.

• No negotiation of terms by the insured.
• Any ambiguities are resolved in favor of the insured by courts.
• Reflects the unequal bargaining power between insurer and insured.

Memory trick: Adhesion sticks to the rule: if it's unclear, it's for the insured.

The tendency of individuals with a higher-than-average risk of loss to seek and obtain insurance coverage, leading to a disproportionate concentration of high-risk individuals in an insured group.

• Occurs when information asymmetry exists
• Leads to higher-than-expected claims for insurers
• Underwriting and risk classification are used to combat it

Memory trick: Adverse Selection: A for AVOID (the good risks), A for ATTRACT (the bad risks).

A valuation method where the insurer and insured agree on a specific value for insured property at the time the policy is written. In case of a total loss, this agreed amount is paid.

• Pre-determined value agreed upon by insurer and insured.
• Often used for unique, antique, or hard-to-value property.
• Eliminates disputes over property value at time of loss.

Memory trick: Always Value Genuine Homes with Agreed methods.

Extra Expense coverage pays for necessary expenses incurred during the period of restoration that are over and above normal operating costs, incurred to continue operations or minimize the suspension of business.

• Covers expenses to avoid or minimize business suspension.
• Examples include temporary relocation, equipment rental, overtime wages.
• Distinct from Business Income, which covers lost profits.

Memory trick: Income covers lost sales, Extra Expense covers temporary fails.

The Dwelling Policy (DP-1 Basic Form) is a named perils policy, typically covering Fire, Lightning, and Internal Explosion. Extended Coverage perils can be added by endorsement.

• Named perils coverage.
• Covers Fire, Lightning, Internal Explosion.
• Deductible applies per occurrence.

Memory trick: Fire, Lightning, Explosion - subtract the deductible, no confusion.