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CAIB 2 Full Study Guide
The three amounts to be considered when calculating the amount of payment as outlined in the Indemnity Agreement are: - 1) the value of the lost or damaged property (ACV)
- the interest of the insured in the property (ex. financial interest, home, mortgage)
- the amount of insurance specified on the "Declarations Page" for the loss or damaged property (least amount|) Identify the four categories that buildings may fall into: - Residential (ex. home) Non-mercantile (ex. hospitals, nursing homes) Mercantile (ex. drycleaners, bakeries) Manufacturing/Industrial (ex. autobody shops) Three classes of property commercially insured are: - building, stock, equipment Identify the two bases that coverage can be provided on: - Scheduled All property Property of every description Identify and give an example of each of the five types of property contained in the definition of Building found in the IBC Commercial Property Broad Form - 1) Growing plants, trees, shrubs INSIDE the building used for decorative purposes only when insured is the owner of the building (ex. cactus)
- Materials and equipment supplies ON the premises for maintenance (ex. lumbar, glass)
- Additions and extensions IN CONTACT with the building (enclosed walk-way between buildings)
- Permanent fittings and fixtures ATTACHED and FORMING part of the building. (ex. light fixtures, carpeting)
- Fixed structures PERTAINING to building and located on the premises (ex. fence) [GMAPF] Identify the three conditions pertaining to the coverage for growing plants, trees, etc. - - such property was INSIDE the building
- was being used for decorative purposes
- insured was the owner of the building Identify and give an example of the three types of property contained in the definition of Stock found in the IBC Commercial Property Broad Form: - 1) packing, wrapping and advertising materials (ex. bubble plastic, Styrofoam)
- merchandise of every description USUAL to insureds business (ex. goods for sale for business)
- similar property belonging to others which the insured is under obligation to keep insured or for which he is legally liable for (appliance if appliance store. [PMS] Identify the three conditions that need to be present before 'similar property belonging to others' will be insured under the definition of Stock: - 1) must be similar to that insured by the policy
- the insured must have had an obligation to keep the property insured
- the insured must be legally liable for it. Identify and give an example of each of the three types of property contained in the definition of Equipment found in the IBC Commercial Property Broad Form: - 1) generally all contents USUAL to insureds business, other than building or stock (ex. furniture)
- similar property belonging to others which the insured is under obligation to keep insured or for which he is legally liable for (ex. shaw cable box)
- tenants improvements (ex. space rented out or leased, malls) [GST]
The Broad Evidence ties together the previous four methods when establishing actual cash value, and the courts will take into account many different factors. Identify any three such factors: - Market Value -assessed valuation Rental Value -use of building Location -resale success, replacement value less depreciation {any of these} Insurers can reduce their amount of exposure on large risks by the use of Reinsurance or Subscription polies. Outline three rules, or guidelines that apply when reinsurance is used to provide insurance coverages: - 1) all insurers share premiums collected and losses incurred
- the policy is controlled by the primary insurer and all claims are paid by it
- the contract is between the primary insurer and the reinsurer Identify four instances when subscription policies may be issued: - - the broker wants to spread a good large line of business among markets
- the line of business is so SPECIALIZED, its not covered by the insurers treaty with its reinsurers
- the type of risk is one which the insurer does not want to expose to its reinsurance treaties
- the limits do not exceed insurers net retention limits but are beyond what it is prepared to pay in a single claim. Identify two characteristics shared by all subscription polices: - - both share premiums and losses
- each agreement is usually required to be negotiated separately Briefly describe the role of the LEAD company in a subscription policy: - the lead company normally issues the policy and provides all policyholder services, including the handling of claims Identify from the brokers point of view which method is preferred where the insurers can reduce their amount of exposures on large risks: - Reinsurance
What is the purpose of a Minimum Retained Premium? - to ensure the costs of underwriting the policy can be recouped, at least in part. Identify the three amounts to be considered when calculating the amount of payment as outlined in the Indemnity Agreement: - - the value of the lost or damaged property (ACV)
- the interest of the insured in the property (ex. financial interest, home, mortgage)
- the amount of insurance specified on the "Declaration's Page" for the lost or damaged property (least amount) What is the purpose of the deductible? - to eliminate minor maintenance types of claims Insurers agree to 'waive' any co-insurance requirement when a loss meets either of the following conditions: - 2% or $5,000 (up to) In order to replace a Co-Insurance Clause with a Stated Amount Co-Insurance Clause, the client must comply with the following: - - files a Statement of Values with the insurer representing 100% of the value of all property insured, such as an appraisal
- maintains these values throughout the term Identify the two types of exclusions found in property policies - properties excluded perils exluded Identify five reasons why exclusions exist and give an example for each: - -some perils are uninsurable (war, nuclear energy) -potential to be catastrophic (earthquake, flood) -exclude losses for which more specialized policy forms have been developed ( such as automobiles, aircraft)
Identify three types of Property Protection Systems: - - sprinkler, or other fire extinguishing system
- fire detection system
- intrusion detection system Identify three obligations placed upon Insured who have installed any Property Protection Systems: -
- the insured shall notify the insurer "forthwith" of any INTERRUPTION, FLAW or DEFECT to the knowledge of the insured IN ANY SUCH SYSTEMS.
- the insured shall notify the insurer forthwith when any contract providing MONITORING or MAINTENANCE SERVICES TO SYSTMS HAS BEEN CANCELED OR NOT RENEWED.
- the insured shall notify the insurer forthwith when provided with NOTIFICATION OF THE SUSPENSION OF POLICY SERVICE N RESPONSE TO ANY OF THE ABOVE SYSTEMS Identify the class of property to which the Premium Adjustment clause will apply: - Stock Identify two guidelines before a premium adjustment will be permitted: - - claims for return of premium must be submitted no later than 6 months after the policy expiry date
- claims must be presented on a Premium Adjustment Form, showing actual cash value of stock on the last day of each month. Identify three things the Verification of Values clause allows the |Insurer to do: - 1) allows the insurer THE RIGHT TO CONFIRM THE VALUES INSURED UNDER THE POLICY ARE REASONAABLE AND ACTUALLY EXIST
- permits the insurer THE OPPORTUNITY TO DETERMINE VALUES ON HAND AT THE TIME OF A PREVIOUS LOSS
- enables the insurer to DETERMINE THE EXISTENCE OF ANY OTHER POLICIES OF INSURANCE WHICH MIGHT BE CALLED UPON TO SHARE IN THE PAYMENT OF A LOSS. Identify under Basis of Valuations how losses will be paid on items of stock: UNSOLD & SOLD: - UNSOLD: restricted to its "actual cash value at the time of a loss"
SOLD: the selling price charged to the purchaser, less any discounts allowed. Identify three types of discounts that will be considered when adjusting loss on sold stock: - 1) picked up by purchaser
- trade-ins
- any reduction in selling price because of negotiation between seller and buyer Identify two types of property which are subject to a 'special basis of settlement': - - tenants improvements
- records Identify the liability of the Insurer when there is loss to tenants improvements: - - if repaired or replaced with due diligence and dispatch
- if not repaired with due diligence and dispatch, the insurer will pay according to the un-expiry of the LEASE. Identify the liability of the Insurer when there is loss to: a) Books of account kept on a manual system: b) Books of account stored electronically: - a) Books of account kept on a manual system: the cost of blank materials for reproducing records and cost of labour to transcribe or copy records where there is no duplicate b) Books of account stored electronically: the cost of media plus cost of reproduction of data Identify to which parties the insurer may settle a claim when there has been loss to the 'property of others': - - bailee or insured
Explain the effect of Misrepresentation on an application for insurance: - if misrepresentation is proved, the insurer is entitled to void the contract Explain the effect of a 'reported' material change during the term of the policy: - - cancel the policy and return the unearned premium
- continue to insure the risk and advise insured of additional premium required and allowed 15 days to make payment Explain the effect of an 'unreported' material change during the term of the policy: - When a loss arises out of an unreported material change, there is no coverage provided by the policy Identify five Additional Conditions contained in a number of commercial property forms: - 1) notice to authorities
- sue and labour
- no benefit to bailee
- pair and set
- parts Briefly explain the effect of any three of the additional conditions contained in the commercial property forms: - PAIR & SET: if loss or damage to only one item does not constitute loss or damage to entire pair or set. PARTS: if loss or damage to any part of property, the insured is not liable for more than the insured value of the part lost or damaged, including cost of installation. NOTICE TO AUTHORITIES: when loss is due to malicious acts, theft or burglary, robbery, or attempt thereat, the insurer shall give immediate notice to police or other authorities having jurisdiction. An application and a submission are not the same thing. Identify three items that a submission may include: - -an application -additional verbal information
-additional written information, including previous policy premium, loss history and details of loses, financial statements, photographs Identify five steps of the broker's role in the underwriting process: - -completion of survey -search for interested insurer -meet with client, discuss quotes and select insurer -request binding coverage from the selected insurer -review policy and deliver to client [MR. CSR] Identify three things that a Survey does * - -assist in identification of loss exposures -helps to determine the coverages needed -develops other underwriting information needed by the insurer Identify three reasons for a broker to use a Commercial Property Check list - -alerts brokers to possible loss exposures -ensures that needed coverages are not forgotten or ignored -helps to reduce the potential for an errors and omissions claims Identify five classes of Building Construction as identified by the IAO and briefly explain any three. -
- fire resistive - building is one which has met minimum standards in terms of hours it will withstand a specific, carefully controlled test fire. (blocked doors)
- non-combustive - is when all structural members, including floors, roofs, and their supports are CONSTRUCTED of STEEL, IRON, concrete or other non-combustible materials. Falls just short of fire resistive. (bricks)
- heavy timber - is quite rare and only found in existing old buildings. Floor and roof construction is wood such as a log house. (log house)
Identify the two types of Protection available for insured property: - 1) PRIVATE - ex. (customer) as simple as purchasing a fire extinguisher, or installing automatic sprinkler system.
- PUBLIC - ex. (fire dept) public protection provided to insured property. Main concern is the availability of fire fighting services, and distance from fire hydrant. Identify two examples of Private Protection: - 1) fire extinguisher
- automatic sprinkler system What is meant by the term 'unprotected'? - no external protection provided to insured property within a reasonable distance, is the risk said to be unprotected, almost always requires higher rate. Identify three businesses that may contain 'special hazards' - 1) churches
- garage/service station
- bakeries, hotels, restaurants
- butcher shops also Identify four activities that are common to all underwriter" - - risk selection
- risk classification
- rating and rate making
- policy holders service Identify two possible effects if an application is improperly classified b an underwriter - 1) premium charged is in excess of that required
- premium charged is insufficient Identify two factors which normally affect the premiums charged by insurers - -inflation -changes in interest rates being paid on investments identify six types of physical hazards: - type of building construction occupancy
housekeeping external exposures geography protection [phgote] briefly explain how the hazards of occupancy, or housekeeping can affect two buildings of identical construction - two identical constructed buildings will represent a different level of hazard when one is used to house the local public library and the other, a welding and metal fabrication shop identify three types of external exposures that can affect an otherwise 'good risk' - forestry area bakery gas station (close to restaurants) identify three types of moral hazard and explain - financial condition - if profits reduce due to economy for ex. many insurdes consider the benefits of a fire. associates - friends circle moral character - personality identify two types of morale hazard - indifference to loss poor management identify four 'external sources of information' available to an underwriter - the broker government records financial rating services consumer investigation reports
Identify what information is required by law to appear on all insurance policies - names of parties to the contract policy period\loss payable or payee summary of insurance coverage rate and premium charged subject matter of insurance identify the 'policy period' shown on the declarations page - the policy takes effect 1201 am local time at the insureds address what could happen if an insurer paid the entire amount of a claim to the client when a 'loss payable' was indicated on the policy? - the insurer would be called upon to pay the claim twice how could your answer differ if the loss payable was not indicated on the policy? - when the payee is not stated on the policy and payment of a loss is paid in full to the insured, there is no obligation upon the insurer to indemnify the payee The IFC 10010 is designed to meet the requirements of the insurance acts of the common law provinces. identify the three perils to be included by law in any contract of fire insurance - fire lightning explosion of natural, coral or manufactured gas does the peril of lightning under this form cover DIRECT losses to electrical appliances? - no identify the losses that insurers are NOT liable for by law - loss or damage to electrical devices, appliances or wiring caused by artificially generated electrical currents. loss or damage by the application of heat. loss or damage caused by war trade losses are NOT required to be insured by law. identify three types of businesses that may suffer a trade loss - bakeries\laundaries\machinging and fabricating shops, garages
certain property losses are NOT required to be nsured by law. identify the four groups of property exluded - money, securities, stamps automobiles, watercraft, aircraft property at locations which the knowledge of the insured are vacant, unoccupied, or shut down for more than 30 consecutive days any additional costs as a result of a by-law, incurred by the insured is NOT covered under the policy. identify any three such costs that may be incurred by the insured. - use of improved construction materials installation of automatic fire estinguishing systems installation of wheelchair, ramps, and improved accessibility features for the handicapped identify two extensions of coverage required by law to be in a fire policy - removal debris removal identify three provisions of the removal clause - coverage provided for 7 days to unnamed location of until unexpired term of policy coverage is provided the insured is ABLE to show that such property was 'necessarily' removed to prevent loss remaining amount of policy be paid if loss occurs briefly explain the purpose of the debris removal extension - to clean the site, condition paid if any money left in the policy. shall not exceed 25% of total amount payable all fire and extended forms used by insurance companies are identical, true or false? - false identify the perils insured by the fire and extended coverages form In the text - fire and lightning explosion impact by aircraft, space ship or land vehicle riot, vandalism or malicious acts smoke leakage from fire protective equipment
identify two examples of losses that would be covered under this peril (impact by aircraft, spacecraft or land vehicle) - impact of spacecraft preparing for future coverage included for articles dropped from aircraft or spacecrafts identify three coverage exclusions found under the peril of riot, vandalism, or malicious acts - interruption to business due to cessation of work (strike) due to any explosion in respect of which there is insurance under clause 5 due to theft or attempted theft would smoke damage tot he contents in any insureds building from a fireplace be covered under the peril of smoke? - yes what type of 'smoke' damage would be covered? - would have to be sudden, unusual and faulty operation of any stationary furnace would water damage from an overflowing sink on the premises be covered under the peril of leakage from fire protective equipment? - yes what types of damage would be covered under the peril of leakage from fire protective equipment?
- accidental leakage of water ify two situations where there would be liability for loss under the peril of windstorm or hail - an opening was caused to the building by the windstorm or hail -that the loss being claimed occurred concurrently with and is directly attributable tot he entrance of the wind or hail through such opening is it safe to assume that 'all risks' means lost however caused? - no in the event of a claim, what determines whether coverage is afforded under the broad form - exclusions why are the exclusions so lengthy? - if the loss is not excluded, its covered
identify the property items generally excluded or limited in the scope of coverage provided in the broad form wording - -sewers, drains or watermains located outside berring walls or foundations of building -property at locations which tot he knowledge of insured are vacant unoccupied or shut down for more than 30 consecutive days -electrical devices, appliances or wiring caused by artificially generated electrical currents, including arcing -growing plants, trees, shrubs, or flowers, all while outside the 'building' except as provided in clause 7 (e) -animals, fish or birds -money, 'cash cards' bullion, platinum and other precious metals, securities, tickets, except lotto tx -automobiles, watercraft, aircraft, spacecraft, trailers, unless for sale or uninsured -furs, jewels, watches, pearls, costume jewellery. This exclusion, does not apply to the first $1,000 of any loss/loss or damage caused directly by 'named perils' -property insured under the terms of any marine insurance or property while waterborne, except while on a regular ferry or railway car transfer in connection with land transportation -property from the time of leaving the insureds custody if it is loaned rented leased to others, or sold by the insured under conditional sale -property in the custody of a sales representative outside the 'premises' unless an amount of insurance is shown on the 'dec page' for sales representative -property illegally acquired, kept, stored or transported, property seized or confenstated -any pressure vessel having normal, internal working pressure greater than 103 kilopascals ( pounds per square inch) above atmospheric pressure [under 103 kilopascals (15 pounds) is covered boiler with internal diameter of 610 millimeters or (24 inches) if over not covered -equipment or stock, while actually being worked upon and directly resulting from such work -roadways, walkways, parking lots or other exterior paved surfaces. This exclusion does not ap fire damage to satellite dish-Covered or Not Covered? - covered collapse of satellite dish by snow load-Covered or Not Covered? - not covered fire damage to contents when the insured knowingly vacates the property for more than 30 consecutive days - not covered theft of two pure bred dog from pet store-Covered or Not Covered? - covered
