Illinois Casualty Insurance Exam Review

Practice flashcards covering definitions, liability principles, auto insurance, and commercial liability from the Illinois Casualty Insurance Exam review.

What is the definition of Premium according to the review?

Money paid by the insured to the insurance company in exchange for the insurance policy.

What occurs when a policy is terminated due to non-payment of premiums?

Lapse.

What is a First Party Claimant?

An insured making a claim under their own policy for damage to their insured property.

How is a Third Party Claimant defined?

A person or organization other than the insured making a claim against an insured for the insured to submit to their insurance company for insurance coverage.

When does Legal Liability occur?

When an insured is involved in an accident or an occurrence in which a third party claimant is injured or incurs property damage.

What is the definition of Peril?

An actual cost of loss that can be insured against - legal liability.

What is a hazard in insurance?

A condition or operation in property which either creates or increases the chance of loss by a covered peril.

Define Risk as per the transcript.

Likelihood or degree of uncertainty that a covered peril will cause a loss.

What is Insurable Interest?

Financial risk which the insured must possess at the time of loss.

What are the Limits of Liability?

Maximum amounts which the insurance company will pay under each coverage - aka Face amount or Amount carried.

What is an Aggregate Limit?

Maximum limit of liability that the policy will pay to all persons who are injured or who incur property damage in an occurrence.

Distinguish between Additional coverages and Supplemental Payments.

Additional coverages are specified in homeowner policies; Supplemental Payments are specified in auto policies, and both are paid in addition to limits of liability.

What is a Certificate of Insurance?

A document issued by an insurance company to someone other than a named insured as official documentation of coverage.

What information is found on the Declaration Page?

The information page, including effective date and expiration date.

Define Moral hazard as it appears in the study notes.

Risk of loss caused by the insured acting in an indifferent, careless, or irresponsible manner.

According to the transcript, what is Morale Hazard?

When there is risk of loss due to legal action - a loss caused by order of civil authority (also called legal authority).

What is a Physical Hazard?

When there is a risk of loss due to condition or use of the property, such as wear, tear, rot, settling, insects, rodents, vermin, or mold.

What are the three reasons people buy Liability Insurance?

1- Required by law, 2- protects assets and income, 3- provides the insured's defense if a claim is covered.

When will an insurance company pay an injured claimant on a liability claim?

Only if the company determines a court would find the insured legally liable and order the insured to pay the claimant.

Define Negligence-related Omission and Commission.

Omission is failing to do something that should have been done; commission is doing something that should not have been done.

What are special damages?

Damages that are easily determined such as medical bills, lost wages, repair costs, and replacement value.

What are general damages?

Damages that cannot be calculated precisely and are subject to judgment, including pain and suffering, permanent disabilities, and scarring/disfigurement.

Are court orders for punitive damages generally covered by liability insurance?

No.

What are the four necessary elements to persuade a court that an insured is legally liable?

1- Negligence, 2- Damages, 3- Proximate Cause, 4- Comparative Negligence.

Define Proximate Cause and Comparative Negligence.

Proximate Cause is the direct or immediate cause; Comparative Negligence allows a claimant to collect from an insured the percentage of damages for which the insured is responsible.

What is the Law of Torts?

Legal proceeding through which claims for money for bodily injuries and/or property damage are made (aka civil liability).

What is the difference between an Accident and an Occurrence?

An accident is a sudden event; an occurrence includes continuous or repeated exposure to conditions.

What are the key reporting periods for a Claims Made Policy?

A $60\,day$ reporting period (mini tail) and a $5\,year$ claim reporting period (midi tail).

Define deposit premium and audit premium.

A deposit premium is an estimated premium charged at the beginning; an audit premium is an additional premium charged at the end if risks increased during the term.

What makes an insured a 'competent party' for a contract?

They are not a minor, not mentally incompetent, and not on drugs or alcohol at the time of purchase.

In Offer and Acceptance, who makes the offer?

The insured makes the offer by completing the application and paying the premium.

What is an oral binder?

When the agent orally assures the insured they are covered after the insured provides application info and promises to pay.

What is Consideration in an insurance contract?

The legal requirement for an exchange of something of material value by both parties.

What is the definition of Legal Subject?

It means legal purpose; the policy is not against public policy and the insured has insurable interest at the time of loss.

What vehicles qualify for a Personal Auto Policy?

Four-wheeled autos owned by an individual/spouse, or pickups/vans with a load capacity of less than $10,000\,pounds$ not used for delivering goods (except for farming or repair services).

What is Vicarious Liability?

When one person (like an employer) is held legally liable for the actions or accidents caused by another (like an employee).

What are the state mandatory minimum liability limits?

$25/50/20$. ($25k$ per person bodily injury, $50k$ total aggregate bodily injuries per occurrence, $20k$ property damage per occurrence).

What are three differences between property insurance and liability insurance?

1- Property is first party, liability is third party; 2- Property usually has deductibles, liability does not; 3- Property reimburses while liability assumes the insured's role in the claim.

What is covered under Supplemental Payments in an auto policy?

Up to $250$ for bail bonds, defense costs, appeal bonds, and up to $50$ per day for loss of earnings due to hearings.

What is the primary exclusion to comprehensive (all risk) auto coverage?

Damage caused by collision or upset, except for collision with a bird or animal.

What is covered by Auto Medical Payments coverage?

Medical bills incurred by the insured/household members in any auto, or passengers in the insured auto, within $3\,years$ of an accident regardless of fault.

What is the difference between Hired Auto coverage and Employers non-ownership liability?

Hired Auto covers vehicles rented/leased for less than $12\,months$; Employers non-ownership protects an employer against liability while an employee drives a non-owned auto.

Define Drive Other Car coverage.

Protects scheduled business individuals/executives (who may not own a personal vehicle) while driving non-owned autos like rentals or borrowed cars.

What does Uninsured Motorist Coverage protect against?

Bodily injuries caused by a hit-and-run motorist or an uninsured motorist.

What is subrogation?

When the insurance company acquires the insured's rights to make a claim against another party to recover the loss the company has paid.

What does Coverage A of a Commercial General Liability (CGL) policy cover?

Bodily Injury and Property Damage Liability (including premises, operations, and products liability).

Describe Strict Liability in the context of CGL.

A high level of responsibility for businesses that manufacture or sell products to ensure they are safe for consumers.

What is covered under CGL Coverage B?

Personal and Advertising Injury Liability (false arrest, libel, slander, or copyright infringement).

What are the requirements for CGL Coverage C (Medical Payments)?

Pays for medical expenses incurred within $1\,year$ of an accident on the premises regardless of legal liability.

What is the purpose of Errors and Omissions (E&O) coverage?

Protects professionals (doctors, lawyers, insurance agents) against claims due to professional mistakes; also called malpractice or Professional Liability.

What does Employment Practice Liability insurance cover?

Protects businesses against claims by employees alleging their rights were violated by the employer.

What are the three optional coverages in a Garage policy?

1- Garage liability, 2- Garagekeepers (damage to customer autos), 3- Garage physical damage (owned autos).

Under the Terrorism Risk Insurance Act (TRIA), what qualifies as an act of terrorism?

An act committed on behalf of foreign interests that causes damage within the U.S., its embassies, or flagged vessels, certified by the Secretary of Treasury.

Define Absolute Liability.

A high duty to take care to avoid accidents in high-risk activities (like working with chemicals), where the insured is liable without proof of negligence.

What is the difference between Robbery and Burglary?

Burglary is taking property with forced entry/exit; Robbery is taking property from a person by force or threat of force.

What are the three parties in a bond contract?

Principal (obligor who makes the promise), Obligee (person promise is made to), and Surety (insurance company that guarantees the promise).

What is the difference between a Bid bond and a Performance bond?

A Bid bond guarantees a contractor will enter a contract if awarded; a Performance bond guarantees completion on time and according to specs.

What does a Fiduciary bond guarantee?

That an executor, administrator, or guardian will manage and distribute an estate properly.

What is mysterious disappearance?

Any unexplained vanishing of property under circumstances suggesting a wrongful taking.