C12 - Chapter 4 - Quiz Fire Insurance Contracts - Clauses; Limitations.pdf View
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C12 - Chapter 4 Fire Insurance Contracts - Clauses, Limitations.pdf View
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Terms | Definitions |
|---|---|
 How is time of loss relevant to assessing actual cash value? | time of loss is essential as values fluctuate. the cost of placing destroyed property after a loss may be different from the cost at time of loss. |
| Describe the different kinds of depreciation. | physical - wear and tear marketing - the value an automobile, rate of depreciation is negotiable |
| What is the practical purpose of a fair basis for indemnity? | it can prevent a moral hazard of an insured recovery than the actual value of damged or destroyed goods. |
| In commercial insurance, what are the five conditions for replacement cost? | 1. replacement must be made promptly 2. replacement must be on the same site or an adjacent site 3. payment will be limited to the cost of replacing, repairing, constructing or reconstructing on the same site 4. settlement will be made only when the work is completed and no more than the actual cost of the work 5. all other insurance covering the same perils must have the same replacement cost provisions |
| What is the outcome when an insured fails to meet any of the conditions for replacement cost? | a loss will be settled at actual cash value |
| Describe the evolution of automatic reinstatement. | insured had multiple losses in a policy term, the earlier losses led to the insured being unprotected against future losses. insurers had to charge higher premium. many insurers agreed to reinstate insurance automatically at no additional premium. |
| What are the two important features of the IBC wording of the Automatic Reinstatement clause? | 1. amount of insurance unchanged throughout policy period even if losses are paid 2. if insured cancels policy after a loss, the insurer must return premium for unexpired part |
| Define stock. | understood as goods and merchandise that the insured manufactures or acquires that is usual to the insured's business. |
| What is the purpose of a declarations form? | ensures that stock will be fully covered at peak values stated in the form. |
| How does an insurer calculate the deposit premium for a business with distribution warehouses in scattered locations throughout the country? | if the total earned premium is greater than the deposit, the insured is charged additional premium for the difference. vice-versa a refund is given. |
| How does an insurer calculate the average value at each location for a business with distribution warehouses in scattered locations throughout the country? | the sum of reported values is divided by the number of locations to determine the average value of each location. |
| What six additional perils are commonly included in the property policies issued by most insurers? | - explosion, impact by aircraft and land vehicles, riot/vandalism, smoke, leakage from fire protective equipment and windstorm/hail |
| How do additional perils affect premiums? Explain. | insurers charge additional premium for added perils |
| Why is the explosion of natural, coal, or manufactured gas exempted from the exclusions in the Explosion peril? | such losses are part of the fire coverage under the Insurance Acts of common law provinces |
| Why are chemical recovery boilers and smelt-dissolving tanks typically excluded from coverage? | excluded because they present a greater than average explosion hazard. |
| Is it possible to include them in a policy? | may be added by an endorsement. |
| How do owners of commercial buildings secure insurance for a domestic water heater when they often don't have boiler and machinery insurance? | common for insurers to make exclusions for domestic water heaters having a diameter not exceeding 610mm. |
| What types of occurrence are identified by the second set of exclusions under the Explosion peril? | refers to direct damage caused by the explosion, rupture or bursting. |
| The Impact by Aircraft, Spacecraft, or Land Vehicle peril expands coverage to include what additional source of damage? | expands to include "buildings" |
| Define riot. | an act or threat of violence by one or more persons who are a part of an assembly of 3 or more person that might give rise to damage to property or injury to persons. |
| How are insurers affected by the fact that courts have ruled theft a malicious act? | it has forced insurers to pay theft claims under policies that did not cover theft but covered malicious acts. insurers now exclude theft from the peril of vandalism or malicious acts. |
| What three elements trigger coverage for damage from smoke? | sudden, unusual and faulty operation will trigger the coverage |
| Define leakage from fire protective equipment. | leakage or discharge of water or other substances from within the equipment used for fire protection purposes for the "premises" described. |
| Describe the two exclusions that establish the scope of the Windstorm or Hail exclusion. | damage to the interior of the building or to contents is covered only if damage occurs at the same time as and results from an opening caused by the windstorm or hail. |
| What is the purpose of the extension of policy coverage applicable to windstorm damage? | it relates to the cost of removing windstorm debris. will apply to the cost to remove debris of insured property that results from loss or damage by the insured peril. |
| What three endorsements are generally used to extend fire policies to cover water damage? | water escape, sewer backup and flood. |
| What cause of damage is excluded from coverage of building collapse? | earth movement of any kind. |
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