PNC License Exam Chapter 3

Loss Settlement

This condition specifies which loss valuation method will apply to the property insured under the policy.

Loss Payment

This condition specifies how the insurer will make payment for the loss and what applicable time frames must be honored when submitting claim documents.

Right of Salvage

The right of salvage is the right of the insurer to take possession of damaged property after paying for its loss. The salvage belongs to the insurer.

Abandonment of Property

Abandonment is when the insured surrenders damaged property to the insurer for repair or disposal. Property policies prohibit the abandonment of property, and the insurer will not accept it. Arranging for repair or disposal is the insured responsibility.

Mortgage Clause

Specifies how the policy protects a mortgagee’s financial interest. It must pay any premium due under the policy ion demand if the insured fails to do so. It must notifies the insurer of any change in ownership or occupancy or any substantial change in risk of which the mortgagee is aware. It must submit a proof of loss to the insurer if the insured fails to do so. Typically within 60 days after receiving notice that the insured failed to do so.

The requirements mortgagee wishes to collect if the insured claim is denied and the mortgagee wishes to collect on the policy

• It must pay any premium due under the policy ion demand if the insured fails to do so.

  It must notify the insurer of any change in ownership or occupancy or any substantial change in risk of which the mortgagee is aware.

• It must submit a proof of loss to the insurer if the insured fails to do so. Typically within 60 days after receiving notice that the insured failed to do so.

What does the mortgage clause on property insurance NOT allow?

For the mortgagee to add coverages or remove coverages for a policy

Loss Payable Clause

Designates a loss payee as a beneficiary of the policy. A loss payee is a party that is paid first in the event of a property loss in which it has insurable interest, such as a creditor or lienholder.

No Benefit to Bailee

Coverage does not apply if the loss payment benefits a bailee.

What can Bailee’s do if they want to insure a property in their control?

They can insure the property of others in their care using commercial property coverages available to them.

Pair or Set Clause

A condition that describes how the insurer will cover a partial loss to property that comes as a pair of set (ex china, earrings). It recognizes that the value comes from the set as a whole and not each individual piece

What can the insurer do in the event of a loss of a pair or set?

• Repair or replace any part of the pair or set to its original value

• Pay the difference between the actual cash value of the property before and after the loss

Appraisal

Address disputes about the amount of property loss and it may be requested by either insurer or the insured. Agreement by any two parties settles the loss. Each party covers the cost of their own appraiser. It is NOT used to determine whether the police provide coverage for the loss or not.

Recovered Property

If the property is recovered AFTER the insurer has made payment under the policy, the party that finds it must notify the other of the recovery. The INSURER may keep the claim payment (and not get to keep the property) OR keep the property and the insured keeps the claim money.

What is the SFP?

Standard Fire Policy set by New York is the foundation of almost all property fire insurance today. States that use the Standard Fire Policy enforce the requirement that insurers cannot write a property policy that is more restrictive than the 165 lines.

What does the SFP provide direct coverage from?

Direct Loss resulting from Fire, Lightening and the removal of property from premises endangered by fire or lightening.

In the event of a loss under SFP the insurer pays the lesser of:

• The actual cash value of the property at all times

• The amount actually necessary to repair or replace property with material of like kind and quality. This does not include increased costs due to an ordinance or law.

• An amount equal to the interest of the insured.

Pro Rata Liability

A method of sharing losses by the proportion of insurance eachb policy bears to the the total of all limits available

What does a Basic Form provide?

Limited coverage, meaning only a few named perils will be covered