RUSS FINANCIAL SCHOOLS

PROPERTY & CASUALTY

STUDY NOTES

RFS

Russ Financial Schools: 1-800-628-7666

Email:Russfinancialschools@gmail.com
Fax: 1-800-861-6303
Web www.Russfinancialschools.com
To schedule the State Exam: www.psiexams.com
1-800-733-9267

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 General Insurance & Regulation

Risk is defined as UNCERTAINTY OR CHANCE OF LOSS. When you BUY or

PURCHASE insurance, you TRANSFER the risk of Financial Liability to the
Insurer (Risk Transferred). If you do not buy Insurance you are considered to
be SELF INSURED. Since you did not transfer risk to the Insurer you are
practicing Risk Retention. Mitigation of Risk is an example of Risk Reduction.
Insurance is Based upon Pure Risk—chance of LOSS with NO chance of Gain.
With a chance of Gain it would be Speculative Risk.
Subrogation is when you Transfer your rights to the insurance company to
sue or seek recovery form a third party. One Insurer goes after another
Insurer for some if not all of the loss.
REINSURANCE is where companies SHARE RISKS between one another. It
does not affect the Insured. A company that accepts the risk of another
company is called a Reinsurance Company (Reinsurer).
When Partners Share Risk this is Risk Sharing.

Insurance is based on the Law of Large Numbers or Averages, there is an

assumption that as the number of Insured Units Increases, Predictability of
Loss will improve. To buy a policy you must have an Insurable Interest, a
valid legal purpose. You must face the Risk of Financial Loss.

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Facing the Risk of Financial Loss due to Loss of Life or Property
creates an Insurable Interest. There is a Valid Legal reason for the
contract.
The Principle of Insurance or Indemnity is that the Insured should be
restored to the same Financial Condition as they were prior to
suffering the Loss.
To sell Insurance in this state, Insurers must be approved and ADMITTED by
the Insurance Dept. Non-Admitted companies CANNOT sell because they are
not licensed to transact business in this state, except through Excess or
SURPLUS LINES BROKERS.
DOMESTIC Insurers are organized and chartered in this state. Foreign
Insurers are organized and chartered from another state. Alien Insurers are
organized and chartered in ANY other COUNTRY. ALL MUST maintain an
office in this State.
The National Association of Insurance Commissioners objective is to help
protect POLICY OWNER’S interests and encourage Uniformity in State Laws
& Regulations. The NAIC meet 3 times a year. The McCarran Ferguson Act
allows each state to regulate the Industry in their own state. States are free
to accept or reject Insurance Recommendations in their own state.
Stock Companies are owned by the Stock Holders (Share Holders). Mutual
Companies are owned by their Policy Holders, they issue Participating
Policies. The policy holders share in the profits by receiving DIVIDENDS. Both
elect Board of Directors. Fraternal Organizations are TAX Exempt and sell
only to their members. (Moose, Elks, Knights of Columbus) Fraternal
companies DO NOT issue participating policies. The difference between
participating policies and non-participating is that participating policies pay
dividends. Non-participating policies do not.

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When a Group of individuals band together and self-insure each other, this is
known as a RECIPROCAL company, which would be managed by an
ATTORNEY in FACT. Lloyds of London is a Self-Funded Syndicated Group
offering clerical services to its members. Each member can pick and
choose the Risk they want to take and are only fiscally responsible
for that risk.
All approved Insurers are periodically AUDITED by the State
Insurance Department to determine if they are solvent. They must
examine Insurers once every 5 years. The commissioner can
examine an Insurer’s records whenever they feel necessary.
Anything UNPAID would be a Liability for an Insurer as well as Policy
Reserves.
AM BEST is the Best Known Company that rates and grades Insurers
based on Financial Stability. Customer service records are not
considered when determining whether a company is solvent.
Standard & Poor’s is also well known. They are another independent
company that analyzes Insurers based on their Financial Stability.
Independent Producers can represent more than one company.
They own their Book of Business as well as their renewals and are
responsible for their own operating expenses. Captive Producers
represent only one Insurer and do not own their book of business or
renewals. Direct Writers do not use Producers, they go directly to
the Public through the Mass Media. (TV, Radio, Magazines)
Producers always represent the company that has them appointed.
A NON-Resident Producer is licensed OUTSIDE and lives OUTSIDE
this state. They may NOT maintain a business or residence in this
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state. If they move here, they would have to apply for a Residence
License within 90 days. A Non-Resident producer should get their CE
requirements in their HOME state. If they lose their License in their
Home State, they cannot continue to sell in this state. Non
Appointed Producers represent themselves or their Clients. They
only represent the Company at Issue and Delivery. Producers have
EXPRESSED AUTHORITY, through their Agent or Agency Agreement. It must
be in Writing. IMPLIED Authority would NOT be in Writing. Producers having
Company Forms, business cards, sample policies would have APPARENT
AUTHORITY. There is No such thing as Residual Authority.
When a Producer is APPOINTED with an Insurer, there is a written
agreement allowing the Producer to place, solicit, negotiate risk, make or
procure insurance policies for compensation (commission). To be able to
collect commission, a Producer must be appointed with an Insurer. If an
Insurer terminates a Producer’s appointment, the Insurer MUST notify the
Department within 30 days after the termination. If the Insurer feels the
Producer has violated an Insurance law, the company must notify the
Producer in writing referencing the law they feel was violated. This must be
done within 30 days after terminating their Appointment.
You must have a certificate of qualification and be appointed with an Insurer
to be able to collect premiums. The only exception is if you provide CLERICAL
SERVICES ONLY.
When it is said that a Producer has a FIDUCIARY responsibility with his
Company, it means that he is trusted to collect and receive premiums for and
behalf of the Insurer. He can then deposit the funds in a Separate Trust
Account and make payments to the company depending on the set terms.
He must keep accurate records. He does not receive Direct Bill premiums.

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Producers must keep records of written complaints but NOT telephone
complaints.
Errors and Omissions policies are purchased by Producers to provide them
with LIABILITY insurance in the event they are sued by their CLIENT. The E&O
Policy would not protect you from the IRS.
Underwriters are the only people that can BIND the Company to a Risk. They
choose the Effective Date as well as determine the Final Premium. They are
there to AVOID averse selection and to determine ACCEPTABLE Risks.
Underwriters cannot use RACE, RELIGION OR NATIONALITY as a rating
Criteria. A client’s level of education is also not used. The MOST important
source of Information for the Underwriter comes directly from the
Application. Once an application is filled out and the premium is paid the
Underwriting Process should begin immediately. This cannot start with an
application that has missing information. In addition the Underwriter may
order Inspection Reports as well as Medical Reports. They can pull credit but
NOT Federal Tax Returns. The Condition of your residence is a rating factor.
They CANNOT discriminate against your Geographical Area. This would be
RED LINING and is an ILLEGAL Practice. If an Underwriter or Insurer makes
unreasonable demands of an applicant this is BOYCOTTING.
The Producer is sometimes referred to as a FIELD UNDERWRITER because
you must submit to the Underwriter a Producer’s Report with each
Applicant. This would give an Opinion of the Risk (red flags). The purpose of
Field Underwriting is to AVOID NEEDLESS Costs if the Applicant does not
qualify for Insurance. The Producer should get the MAXIMUM amount of
Information from the client at the time of the Application.
Insurance is a TWO party contract between the Insured and the Insurer.
There are 4 Elements needed to have a Legal contract.

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1: AGREEMENT of OFFER & ACCEPTANCE also known as Mutual Consent or
Mutual Assent- the Application with the Initial Premium is the Offer,
without the premium it is an Invitation, POLICY ISSUANCE or DELIVERY is the
ACCEPTANCE. Coverage is Effective at the time of Application if the
Premium is paid. If the Premium does not accompany the application and
the Insurer writes the policy, the client must sign a Statement of Continuing
Good Health. 2: CONSIDERATION-Money must Exchange hands for there to
be a valid contract. You must pay the Premium to have a legal contract. Note:
In Property & Casualty payment may be deferred for 30 days. 3: Mentally
Competent Parties-Both parties must be of Sound Legal Mind or Mentally
Competent. Age 18 or above. No one in a Mental Institution, intoxicated or
under duress. Alcoholics CAN enter contracts as long as they are sober at the
time of Application. 4: VALID LEGAL PURPOSE or INSURABLE INTEREST-The
person buying Insurance must stand to incur a financial loss.

Insurance is a Unilateral Contract because only ONE party must live up to the
terms of the Contract. The COMPANY is the One Party. Once the client pays
the initial premium, only the Insurer promises to live up to their end of the
contract. Insurance Contracts are also a Contracts of Adhesion; you either
take it as presented or walk away. They are NON Negotiable. If the Insurer
and Insured go to Arbitration in an attempt to settle a claim, any ambiguous
language would go in favor of the Insured since the Company drafted the
language that was used. The Client will have a Free Look Period. This is a
Period of time to review the policy and get a full refund for any reason. Most
policies have a 10 day Free Look Period. Insurance contracts are also
Aleatory Contracts. There will be an unequal exchange of Consideration.
One party will receive more money than they give.

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Insurance contracts are considered CONDITIONAL. The company must pay a
claim under the condition the client pays the premium. Certain conditions
have to be met for the contract to be enforceable.
Statements made by the Insured (applicant) on the Application are
considered to be REPRESENTATIONS, statements based on their Best
Knowledge and Belief. These statements can only be changed by the
INSURED. A Producer can make a change by getting the Insured to INITIAL
each change. Ideally the Producer would also initial each change. This is the
procedure used by the Insurer so that in the event a dispute arises, you can
then go back to see that each party initialed the change. Statements made by
the Insurer are considered Promises or Warranties. They must be the exact
truth. They can ONLY be changed by an Officer of the Insurer (in writing,
attached to original copy) .If the warranty is in writing then it is an
EXPRESSED warranty—if NOT in Writing then it would be an IMPLIED
warranty.
The Contract consists of Application & Policy. The Entire Contact consists of
the Policy & Application, any attached papers and Riders. To see the clear
intent of each party, Courts will look at the Entire Contract. Policy conditions
can be changed by endorsement with either a Waiver or a Rider. A Rider
adds on and the Waiver takes away. Estoppel which relates to waivers,
means that once you have surrendered or given up certain rights, they
CANNOT be enforced at a later date.

The Purpose of the Fair Credit Reporting Act is to protect the CONSUMER.
Applicants are entitled to KNOW and see everything. The Law requires that
the party being Investigated must be notified at the time of the Application
that a report Might be Ordered. If a credit report was ordered the Company
must notify the Applicant within 3 business days. Applicants have the right to
challenge the Reporting agency if there are any errors. The Reporting Agency
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must correct the report within 30 days. NO LEGAL action is required.
Attorneys CANNOT use Inspection Reports for lawsuits. If a company runs an
inspection report under false pretenses they are prosecutable under the Fair
Credit Reporting Act.
There are many questions on Insurance Regulation. Please pay close
attention to this area including the Regulations Numbers to Know.
Licensing: The purpose of Licensing Producers is to prove they are
Competent, Trust Worthy and QUALIFIED. Anyone that SOLICITS,
NEGOTIATES OR PLACES RISK must have a License. They must be at least 18,
be able to Read and Write in English, pass the test, pay the fees and be able
to fill out a written application. They must maintain a business or residence
in this state. Pennsylvania would be their Home State. Those exempted from
taking the exam would include, CLU’s & CPU’s, Attorneys applying for a Title
Insurance License and Temporary License. If granted, a Temporary License is
good for 180 days. A spouse of a deceased Producer might apply for a
Temporary License to service existing contracts. They cannot sell new
policies. An Estate of a deceased Producer can also have a Temporary
License. The Penalty for transacting insurance without a License is $1,000.00.
Prior to taking the State Licensing Exam, a candidate must complete a 24
Hour Pre-Licensing course. It can be a Self-study. It must contain 3 hours of
Ethics. To maintain your License you need to do 24 Hours of Continuing
Education every two years. This can be done online or in a classroom setting.
Producers who teach CE classes get CE credits by teaching the class. You can
carry 24 Hours of excess credit hours over to the next Licensing Period. The
Commissioner will Approve the CE you are getting. Your License should be
renewed every two years by the last day of your birth month. This is a
producer’s responsibility. If you do not fill out your renewal application, pay
the renewal fees or get your CE done, your License will be terminated. This is
called a Voluntary Termination.

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The Insurance Commissioner enforces the Insurance laws. The Legislators
write the laws. The Commissioner is appointed by the Governor for a 4 year
term and does not need a License. They can issue fines, call hearings, request
records from the producer, suspend or terminate a license. They CANNOT
ask a Producer to do Community Service or sentence a Producer to jail. 18 US
Code 1033- Crimes involving Interstate Commerce can have a jail sentence
of 10 years. If this crime caused physical harm or Insurer Insolvency, under
civil law can have a jail sentence of up to 15 years. Risk Managers do not
need a License nor do those who Predict Risk. Those in the industry that
Place, Solicit or Negotiate risk MUST have a license. Once Licensed, to obtain
an additional line of Insurance, you Must pass the test and Apply for a
Revised (Amended) License. You DO NOT need to do another 24 Hour Pre-
Licensing Course or more continuing education. When one Line of Insurance
gets suspended or terminated then they ALL get suspended or terminated.
Once licensed you can compare your Insurance with that of your
competitors as long as they are direct comparisons. Producers have a
primary obligation to the Insurer that has them Appointed. Producer’s
obligation to their clients is called UTMOST GOOD FAITH. You must be
ethical while conducting business. There are things that should NOT be done
while trying to sell or Replace a Policy. The State Insurance Dept. refers to
them as UNFAIR TRADE PRACTICES also known as Unfair Methods of
Competition. They are fineable offenses that could cause adverse effects on
your ability to maintain your License as well as your employment with your
company. Suspension or Termination of your license could occur. They
include:
REBATING: 0ffering you client a “discount” on the premium. ILLEGAL
INDUCEMENT: Such as guaranteeing dividends, offering Gifts or offering a
part of your commission. CONCEALMENT: Failing to disclose to the other
party an important material fact.

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COERSION: Causing duress or selling by threat, intimidation.
MISREPRESENTATION: Intentionally giving Untrue or False information (think
of this as a big word for LIE). TWISTING: Inducing the insured to lapse forfeit
or surrender his policy through misrepresentations to their detriment. Also
making incomplete comparisons for the sole purpose of replacing a client’s
policy is TWISTING.
If a producer changes his name or address they must notify the department
for both within 30 days. If they are charged with a felony they must notify
the department within 30 days of the charge. If they are convicted they must
notify the dept. within 30 days of the conviction.
Once a Policy is issued and a claim is filed, the Insurer may deny, delay and
refuse as long as they provide the Reasons, Explanations and Notices in
writing. It would be an UNFAIR CLAIM SETTLEMENT PRACTICE if the Insurer
did not. The client and the Insurer can, arbitrate, mediate, negotiate,
compromise and settle. All must be done in writing.

PROPERTY & CASUALTY BASICS

A Hazard is a situation that increases the chance of a loss (slippery floors). A
peril is the cause of the loss. A direct loss is the actual physical damage or
the loss of the property. Indirect loss, which is sometimes referred to as
consequent loss, is a loss that occurs due to a direct loss (water damage
putting out a fire).
The proximate cause is considered to be the original cause of the loss if there
is a consequential loss (fire results in water damage).
Types of hazards are physical (worn tires), moral (habits that increase chance
of loss), morale (carelessness or irresponsibility) and legal (court actions).

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Risk is the uncertain potential loss. Perils are the things that cause the loss
and hazards increase of trigger the loss.

It must be a “Pure Risk” where you face the chance of loss only with no
possibility of gain.

An individual must have an “insurable interest” – Face the risk of financial

loss.

The loss must be definable- If the loss cannot be proven, the company has
no basis for paying a claim.

The loss must be unpredictable - If a loss is inevitable or intentional, the

element of uncertainty is removed and there is no risk to the insured.

The loss must create a financial hardship – If a loss would be

insignificant, it is more appropriate to retain it rather than transfer it to an
insurer.

The loss must be calculable – Insurance companies must be able to

measure the size and the frequency of losses in order to establish rates and
pay claims.

Insuring the risk must be affordable – The risk must not be so great that
the premiums required to fund loss payments would be prohibitively high.
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Risk management is made up of 4 parts:

Avoidance – The hazard is removed

Reduction – Reduces the probability of loss (sprinkler systems)
Retention – Individual insured pays a higher deductible
Transfer – You buy insurance or you could have a hold harmless
agreement where the liability is shifted to another party or you would
reinsure the risk.

All risk or open peril insurance is written to cover all perils except for those
that are excluded. (Sometimes also referred to as comprehensive coverage)

Specified Coverage provides a specified amount for a specific property at

a specific location. Scheduled coverage is where each item to the insured is
specifically listed on a schedule in policy. It can be used to provide different
amounts of insurance for different types of property under one policy.

Blanket Coverage can be used to cover different types of property and

locations for a single face amount and premium.

Valued policy coverage requires a stated and agreed-upon amount of

coverage (antiques). A Reporting Form Policy is when the items or property
to be insured fluctuate in value. They are usually initially written to reflect

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the highest expected value. This type of policy requires timely, honest, and
full reporting of the values by the insured.

Actual cash value is defined as replacement cost less depreciation. Market

value is the value placed on real or personal property that would involve its
resale value in the market place. A valued form or policy pays a
predetermined and agreed amount at the time of loss.

All policies are subject to limits. They usually will be single or split. Sub-
limits are usually used in property policies and of course the limits would be
lower.

Deductibles are the amounts of money that the insured must pay if there is a
loss, prior to the insurer paying. In short, a deductible is that portion of a risk
that the insured retains.

Occurrence is a continuous or repeated exposure to risk. The liberalization

clause, as used in property policies, extends to the insured certain
advantageous changes that could occur later in the policy period (60 days
prior to expiration for personal policies and 45 days for commercial policies).

Liability coverage is usually referred to as third party coverage because

the insurer pays for damages resulting from the insured’s actions.

Liability claims are always filed against the insured and not the insurer.

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 In a liability policy, the insured can never assume or pay monetary
obligations on behalf of the company (out of pocket claims).

A tort is a wrongful act that the law provides remedies for and
therefore might be covered by liability insurance. Intentional acts or
omissions by employees are types of tort that insurance could be used to
defend the employer if his employees intentionally did a wrongful act (also
known as vicarious or imputed liability).

Common laws are laws that have been established by court decisions.
Statutory law is written and enacted by your legislative branch of
government.

Negligence can be defined as failure to exercise the proper degree of

care; in other words, failure to do what a reasonable person should do or
failure to act.

There are two basic forms of negligence – contributory and

comparative. Contributory is when one party in a suit was also proven
negligent in which case that party cannot recover damages. Comparative
negligence is when the damages are set in proportion to the degree of
negligence as determined by the courts. Three (3) common defenses in
negligence are intervening clause, assumption of risk, and last clear chance.

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 In strict and absolute liability, you are held liable without regard to
fault or negligence. Strict is most commonly used in product claims.
Absolute is where the hazard endangers the public.

The arbitration clause is used to reach agreement on the settlement of

a claim when coverage is disputed. The appraisal clause is when there is a
dispute as to the amount of the loss.

All policies have D.I.C.E.

Declarations (4 W & H)
Insuring agreement (promises)
Conditions (rights and obligations)
Exclusions (not covered)

The Declarations section identifies who is being insured, what is being

insured, where it is being insured, when it is being insured, and for how
much (the premium and the amount of the policy coverage).

The insuring clause contains the promises of the company and lists the
perils to be insured as well as refers to the contractual agreement.

The conditions are the obligations of each party to the contract i.e.,
notice of loss, proof of loss, the insured’s duty in the case of loss, your
obligation to assist the company in the event of loss, if requested. The

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exclusions eliminate uninsurable perils and should also prevent duplicate
coverage. Policies also have definition sections that define the important
terms referred to in the policy.

The standard fire policy is not a contract based on exposures to the

covered. Endorsements will be added to make it a contract. The contract
has D.I.C.E. The D.I.C.E. is found in the 165 lines of the policy. The insuring
clause or declarations would include the mortgagee or lien holder. It would
also list the covered perils.

The declarations, in addition to the named insured, would include the

named insured’s legal representative. It would also state the policy term or
period. The effective date is always noon standard time. Also included in
the insuring agreement is the assignment clause that states if the property is
sold, it cannot be assigned to the new owner without the permission of the
company insurer.

The 3 perils covered are fire (must produce a flame or glow-only hostile
fires are covered – a friendly fire is not covered), lightning, and removal.
Under removal, when the premises or contents are endangered by fire, if
removed to a new location, you have all risk coverage including theft
(normally excluded) at the new location for 5 days. Coverage under this
contract is on a named perils or specific perils basis. This policy only covers
direct losses caused by the named perils. Losses are settled on an ACV basis
(appraised value of loss).

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 Losses not covered are accounts owing, bills, currency, deed, etc. It will
cover bullion and manuscripts if specifically named in the contract. Under
loss settlement, the company reserves the right to repair, rebuild, or replace
the damaged property.

Note: If an individual or person should misrepresent (lie) about the

financial condition or position of an insurer and this causes the insurer to
become insolvent, the penalty could be 15 years in prison.

EXCLUDED PERILS
The standard fire policy specifically excludes several perils. These are:
1. Explosion
2. Riot
3. Actions of war
4. Order of civil authority
5. Insured’s neglect to preserve property following a loss
6. Theft
Two of the excluded perils, explosion and riot, can be covered under certain
circumstances.

Coverage under this policy can be increased by adding an extended

coverage endorsement. This will provide coverage for direct loss due to
windstorm and hail. This also covers damage to the exterior and interior if
an opening is created. If does not cover losses caused by frost, snow, or
sleet. It will cover explosion, except for those related to steam, sonic
booms, or bursting of water pipes.

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 There is a handy phrase you can learn to help you remember the perils
that are part of the extended coverage endorsement: REV.R.C.SHAW. The
perils our parson stands for are:

- Explosions
- Vehicles
- Riot Attending Strike
- Civil Commotion
- Smoke
- Hail
- Aircraft
- Windstorm
Under the extended coverage endorsement you can add coverage
to protect against contact with an aircraft or objects falling from an
aircraft.

Vandalism and malicious mischief (V&MM) can only be

purchased when extended coverage has been added to the policy.
Most of the V&MM endorsements deal with what it will not cover i.e.,
glass, signs, pilferage, explosion, etc. Also, coverage for a commercial
building under this endorsement will be suspended if the building is
vacant for 30 days or more.

The basic SFP does not have deductibles, but endorsements

added to the policy do have deductibles.

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 If endorsed onto the policy, the standard deductible is $250. The
deductible applies to only direct losses and not indirect.

By endorsement you can also change the way losses are settled
from ACV to replacement cost for commercial buildings.

In the event of a loss, your duties are many. You must provide
the insurer of notice of loss as soon as possible and provide written
proof of loss within 60 days. You must cooperate with the company in
the settlement claim. If you should make alterations to the risk and do
not notify the company, the company may deny coverage.

The mortgagee clause allows for payment of losses to a

mortgagee. It also requires that the mortgagees be given 10 days
advance notice if the policy is to be canceled. It also gives the
mortgagee the right to submit proof of loss if the insured fails to do so.
In short, whatever the named insured does not do, the mortgagee
must do.

PERSONAL PROPERTY

HOMEOWNERS
HO-1 HO-2 HO-3 HO-4 HO-5 HO-6 HO-8
Basic Broad Special Tenants Special Condo Basic
Property and Liability

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 DWELLING
DP-1 DP-2 DP-3
Basic Broad Special

STANDARD FIRE
Fire Lightning
Removal

Extended Coverages (7)

VM&M

Value of covered building at time of loss $200,000

Limit of insurance $140,000
Coinsurance percentage 80%
Amount of loss $40,000
Deductible $250

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Amount of insurance required = .80 x $200,000 = $160,000
Loss payment = 140,000 x 40,000 – 250
160,000
= 7/8 x 40,000 – 250
= 35,000 – 250 = $34,750

IF THE AMOUNT OF INSURANCE CARRIED HAD BEEN

$160,000 OR MORE, THE INSURER WOULD HAVE PAID $39,750
(THE AMOUNT OF LOSS LESS THE DEDUCTIBLE).

OR
140,000 - 2 = 7
160,000 – 2 = 8
8 – 7 = 87.5%
40,000 X 87.5% = $35,000
$35,000 MINUS $250 = $34,750

PROPERTY SYMBOLS

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 FORMS OR POLICIES

BASIC COVERAGE BROAD COVERAGE SPECIAL COVERAGES

ALL RISK
DP-1 ACV DP-2 DP-3
HO-1 Replace Cost HO-2 HO-3
HO-8 ACV HO-4 Tenant HO-5
HO-6 Condo
Mobile Home
Replace Cost 80% Replace Cost 80%

DWELLING FIRE POLICIES

Dwelling fire policies provide coverage for dwellings and the contents.
Dwellings are principally residential structures with no more than 4 apartments
or are occupied by no more than 5 roomers or boarders. Farm dwellings are not
eligible. They do not provide liability coverage, but it can be endorsed onto the
policy.

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 Certain incidental business and professional occupancies can be covered.
These operations must be conducted by the insured and must provide a service
and not sales and is limited to 2 persons working on the premises at any one
time.

There is a total of 5 insuring agreements found in the dwelling forms (see

chart) coverages for “A” through “D” and are available on all 3 policy forms:
Basic, Broad, and Special. Coverage “E” (additional living expense) is found only
in the broad and special forms.

Coverage “A” protects the dwelling and all attached structures It would
also cover materials or supplies on or adjacent to the location as well as for the
construction alteration or repair of the dwelling. Coverage “B” appurtenant
structures, or other structures not attached to the dwelling, can be insured
(usually 10% of the coverage “A”). If there is a total loss, the company will pay
both “A” and “B”.

Coverage “C” (household contents and personal property) could also

include borrowed property. If property is removed to a new residence, it is
automatically covered for 30 days. It does not apply to animals, birds, fish,
aircraft, boats, or motor vehicles. This does allow for 10% of the coverage “C”
limit for your property anywhere in the world.

Coverage “D” provides up to 10% of coverage “A” for loss of rental value
whether premises are rented or not.

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 Coverage “E” (additional living expenses) is not available under the basic
form #1. It would cover the necessary increase in living expense (practical or
reasonable) following a loss under the broad and special forms.

The policy provides for $500 for fire departments’ services. Broad and
special forms provide coverage for lawns, trees, shrubs, and plants (coverage for
lawns, trees and shrubs is only provided in the broad and special forms). The
maximum is $500 or 5% of coverage “A”. Under the broad and special, you can
also get coverage for collapse (collapse is found only in broad and special).
Collapse coverage does not include settling, cracking, shrinking, bulging, or
expansion. Broad and special will also provide protection for breakage of glass
of safety glazing material. It will not apply if the building is vacant more than
30 days.
By endorsement you can add coverage for sinkhole collapse. Also by
endorsement you can add theft coverage with the Broad Form-DP2. In addition
by endorsement you can add personal liability protection up to a limit of
$100,000.00 and medical payments to others up to $1,000.00 per person.
Excluded are: War, nuclear explosion, flood, earth movement, wear and
tear and animals. Earthquake coverage can be added by endorsement.
Earthquakes could also be called tremors.
Basic Form DP1 covers fire, lightning, and internal explosions (gas stoves).
As options, the insured can purchase the extended coverage endorsement and
vandalism and malicious mischief endorsement. This would provide coverage for
windstorm and hail, explosion (outside the dwelling), riot, aircraft (falling
objects), vehicles (damage to property) and smoke not including fire places or
industrial operations. Volcanic eruption does not include earthquakes. The
Basic would NOT cover losses caused by freezing.

25
 Broad form DP2 covers all of DP1 plus automatically includes extended
coverages and vandalism & malicious mischief is added to the policy. Damage
caused by burglars, falling objects (TV towers), weight of ice, snow or sleet,
accidental tearing apart or cracking of steam or hot water system. The DP broad
and special would cover losses by freezing.

Special form DP3 provides the most complete coverage. Open Peril
usually has a $100 deductible while in the others it is $250. It contains inflation
guard that automatically increases the coverage every 3 months. Earthquake
coverage is optional.

Losses for DP1 are settled on an ACV basis. Under DP2 and SP3 dwellings,
losses are on a replacement cost basis if insured to value, at least 80%. All other
claims are on an ACV basis.

If the policy is being canceled for non-payment, it requires 10 days’ notice

to the insured. Also, if it is being canceled within the first 60 days, it requires a
30 day notice.

If the insurer decides not to renew, then they must give a 60 day notice.
Homeowners’ Policies require a 30 day notice for all cancellations.

Broad form theft coverage for on and of the premises can be endorsed
onto the policy. The following limits apply:
$200 Money, coins, gold, etc.
$1.500 Securities
26
 $1,500 Water craft (including trailers – motors)
$1,500 Trailers not used for water craft
$2,500 Firearms – theft
$2,500 Silverware, etc.
$1,500 Jewelry, watches, furs

These, plus three additional exposures, are also covered in homeowner’

policies.

NEW POLICY FORM HO 00 05

INTRODUCTION

We are introducing a new policy Form HO00 05 to provide open perils

coverage on buildings and contents (personal property) and withdrawing
endorsement HO 00 15, which provides open perils coverage on contents. This
new form replaces the combined use of Form HO 00 03 with endorsement HO
0015.

EXPLANATION OF CHANGES

We are revising the following 8 of the 11 categories of Coverage C Special

Limits of Liability for a total increase of $3,750.

27
Category Current Limit New Limit
Securities etc. $1,000 $1,500
Water craft, etc. $1,000 $1,500
Trailers, etc. $1,000 $1,500
Theft of jewelry, etc.* $1,000 $1,500
Business property $250 $500
(away from the
residence premises)
Theft of firearms* $2,000 $2,500
Electronic apparatus (in $1,000 $1,500
the motor vehicle)
Electronic apparatus $1,000 $1,500
(not in the motor
vehicle, off premises
and used for business)
*All forms except HO 00 08

In addition, we are revising optional endorsement HO 04 12 Increased

Limits on Business Property to reflect an increase in the limit for “away
from premises” coverage from 10% to 20% of the increased on premises
limit purchased by the insured.
IMPACT
This is a broadening of coverage.
FORM HO-1 BASIC HO-2 HO-3 HO-4 HO-6 CONDO
BROAD SPECIAL TENANT BROAD
BROAD
Section 1- PROPERTY – Coverage and Limits

A Dwelling $15,000 min. $15,000 min. $20,000 min. $1,000 flat

B Other 10% of A 10% of A 10% of A
Structures
C Personal 50% of A 50% of A 50% of A $6,000 min. $6,000 min.
Property

28
 D Loss of Use 10% of A 30% of A 30% of A 20% of C 40% of C
Additional Coverages

Number of 7 8 8 9 8
Coverages
Including 30 days 30 days 30 days 30 days 30 days
Removal for…
PERILS Fire Lightning Fire Lightning All Risk For Broad Form Broad Form
EC VMM Theft EC VMM Theft dwelling & Perils for Perils for
Glass Glass + 6 structures Personal Personal
others Broad Form Property Property
Perils for
Personal
Property
Recovery:

Replacement
cost for
Coverages A &
B

All other
property - ACV

Section II – LIABILITY

(ALL FORMS ARE IDENTICAL)

Primary coverages:
COVERAGE E – PERSONAL LIABILITY - $100,000 per occurrence

COVERAGE F – MEDICAL PAYMENTS TO OTHERS - $1000 EACH

Additional coverages: Insurance-related Claim Expenses - $250 per day

First Aid to Others
29
 Damage to Property of Others - $1,000 per occurrence

Loss Assessment Coverage - $1,000 per occurrence

HOMEOWNERS’ insurance is a combination policy consisting of two

sections. Section #1 provides property and theft insurance. Section #2 provides
liability and medical payments insurance.

Under Section #1, there are four coverages: “A” through “D”.

Coverage “A” – Dwelling and structures attached to the dwelling, as well

as materials and supplies for repair and construction, if located on or next to the
resident premises. Not included in H.O.4 but does have limited coverage under
H.O.6. Material must be within 100 feet of the building.
Coverage “B” – Other Structures (also known as appurtenant structures).
The coverage is 10% of coverage “A”. This pertains to structures that are
separate from but pertain to the dwelling (detached garage). It cannot be used
for business purposes (except when used for storage of business personal
property – excluded would be gas or liquid fuels, except if in a vehicle). Not
included in H.O.4 but does have limited coverage under H.O.6, also by
endorsement, you can add to coverage “B” off premises and specific structures
away from premises.

Coverage “B” – Off premises – This may be used to provide coverage

under Coverage ”B” – Other Structures for loss to other structures away from
the residence premises when it is used by the insured in connection with the
residence premises. Loss to these off-premises other structures will be settled
on an actual cash value basis.
30
 Coverage “C” – Personal Property – Provides unscheduled coverage for
personal property owned and used by the insured while it is anywhere in the
world. Coverage is 50% of Coverage “A” except property usually kept at a
residence other than that listed as Coverage ”A”. This coverage would be 10%
of the full coverage for “C” or $1,000, whichever is greater (after 30 days).

Certain classes of property also have specialized limits of coverage which

are lower than the overall limits and can apply to personal property including:
 $200 for money or related property, coins and precious metals other
than tableware. Can be increased to $1,000.
 $1.500 for securities, manuscripts, and other valuable property. Can
be increased to $2,000.
 $1,500 for water craft, including trailers and equipment no increase.
 $1,500 for trailers, no increase.
 $1,500 for jewelry, watches, fur and precious and semi-precious
stones, but only after losses. Can increased to $5,000.
 $2,500 for silverware, gold ware or pewter ware for theft losses. Can
be increased to $10,000.
 $2,500 for firearms, but only for theft losses. Can be increased to
$6,000.
 $2,500 for property on the residence premises used for business
purposes. Can be increased to $10,000.
 $500 for property away from the residence premises used for
business purposes. Can be increased to 20% of on-premises amount.
 Loss of electronic apparatus while in or on a motor vehicle. Provided
it can be operated by the vehicle’s power or other power sources
(mobile telephone) $1,500.

31
 $2,500 – landlords furnishings in an apartment on the residence
premises that is rented.
 $500 – debris removal for any single loss event.
 $500 for each tree, shrub or plant, or up to 5% of coverage “A”. On
H.O.4 and H.O.6, coverage is 10% of coverage “C”.

Optional Coverages – Earthquake, inflation guard, personal

property replacement, liability for a home day care, and motor
vehicles (snowmobiles) not subject to the motor vehicle registration
laws.

Refrigerated Property Coverage – This will provide up to $500

coverage for covered property stored in refrigerators or freezers on
the residence premises for direct loss caused by the interruption of
electrical service to the unit or mechanical failure of the unit. A
special deductible of $100 applies to property covered under this
endorsement. This would not pay for interruption of electrical service
if the loss were sustained by a loss off the premises.

Unit-Owners Coverage “C” – Special coverage – this is to provide

special contents coverage for “owner-occupied” condominiums or
cooperative units.

Special Computer Coverage – This endorsement may be used to

protect against additional risks of physical loss subject to certain
exclusions to computers and related equipment.

Coverage “C” does not provide coverage for property of boarders

(non-related).

32
 Coverage “D” – Loss of use provides two types of coverage.

Additional Living Expenses – If the property is not habitable after

a loss, the company will pay additional living expenses or the Fair
Rental Value. The amount you receive is based on the policy form
Basic, Broad, or Special.

Also, it provides for loss of fair rental income minus any expenses
that do not continue.

Coverages: H.O.1 and H.O.8 10% of “A”

H.O.2 and H.O.3 30% of “A” or H.O.5
H.O.4 20% of coverage “C”
H.O.6 50% of coverage “C”
In addition to coverage “A” through “D”, there are 9 additional coverages
available. 7 are in all forms and 2 are unique.

1. Removal – 30 days if endangered by a peril.

2. Reasonable Repairs – Made to protect against further damage.
3. Fire Department Service - $500.
4. Lawns, Plants, Shrubs and Trees, maximum for a tree, plant, etc. Is
$500. For H.O.4’s and H.O.6’s, it is limited to 10% of coverage “C” – on
all others it is 5% of coverage “A”.
5. Grave markers - $5,000.00.
6. Credit Card Forgery, Counterfeit Money, etc. - $500.
7. Debris Removal – 5% of the property coverage limit or $1,000 per loss
per tree removal that did damage.

33
 8. Loss Assessment Coverage - $1,000 of coverage for the insured’s share
of a loss charged by a corporation or association of property owners.
9. Collapse – Not included in H.O.1
10. Building Additions and Alteration – H.O.4 only coverage is 10% of
coverage “C”.
Pair and Set clauses states the insured does not have the privilege of
claiming a total loss if one part of the set is lost.

Form H.O.1, the Basic Form, provides basic coverage on the dwelling
and personal property against fire, lightning, extended coverage perils, and
vandalism and malicious mischief (VMM). In addition, it insures against
breakage of glass and theft.
Form H.O.2, the Broad form, covers against all of the H.O.1 perils, but
broadens certain perils and covers against additional perils as well. This
broad coverage applies both to the dwelling and personal property.

H.O.3, the Special form, provides open perils or all-risk coverages

for loss to the dwelling. It provides broad coverage for personal
property, which is identical to form H.O.2’s coverage of personal
property.

H.O.4, the Tenants form, is designed to insure tenants – people

who do not won the building where they reside. It provides broad
coverage for personal property only, similar to H.O.2 and H.O.3’s.

H.O.6 – the Condominium form provides broad coverage on the

personal property of condominium residents, similar to that provided
under H.O.2, H.O.3, and H.O.4. It provides no coverage for the

34
condominium building. The building must be insured by the
condominium association under a special condominium policy.

H.O.8 – the Modified Coverage form, provides similar coverage to

H.O.1, however, certain restrictions on Valuation of Losses have been
added to the form. It is designed for older homes with replacement
values that may far exceed their market values (ACV).

Eligibility – Homeowners’ eligibility rules are stricter than those of

dwelling policies.

1. The Named Insured must be an owner-occupant of the

property insured, a condominium owner, or a tenant
residing in the location.
2. The dwelling may house no more than two families and no
more than two additional boarders per family.
3. An owner-occupant may not purchase only H.O.4 (property
only) coverage.
4. VMM increased to 60 days from 30 days.
5. The property must be occupied exclusively as a residence,
except for certain incidental uses such as offices or studios.
6. Farms or mobile homes are not eligible for homeowners’
coverage.
All homeowner policies have deductibles that apply to Section1,
property only. The basic amount is $250, but you can buy higher
deductibles.

The loss settlement condition in the policy states, that if the

dollar amount for the loss is beyond the actual cost to repair or

35
 replace due to additional costs incurred to bring the premises
into compliance with code provision, the coverage afforded
would be 10% of the coverage on the dwelling, or coverage ”A”..

Example: Actual loss of $6,000 with $500 deductible, Coverage

“A: is $50,000
$6,000 Actual cost to repair
$1,000 To comply with electrical code
$700
$500 Deductible
$6,500 Since 10% of $50,000 = $5000, company
Would pay total claim after deductible.
Section II Liability provides two coverages:
Coverage “E” – personal liability and Coverage “F” – medical payments to
others.

Under coverage “E”, the basic limit is $100,000 for bodily damage or
Property damage for any one occurrence. This would include prejudgment
interest.

Under coverage “F”, Medical payments to others (up to 3 years)

(Guest) not yours, the basic limit is $1,000 per person per accident.

Section II does not have a deductible.

36
Additional coverages under Section II:
 First Aid
 Claim Expenses incurred at the request of the company, including up
to $250 a day for loss of earnings.
 Damage to Property of Others (moral) without regard to legal liability
up to $1,000.
 Loss assessment, up to $1,000 each accident or act for losses assessed
to the insured by an associate while the insured is acting as an officer,
trustee, etc.
 Exclusions – Vicarious ability for acts of the insured’s children using
excluded vehicles, aircraft, or watercraft.
 Communicable Diseases transmitted by the insured.
 Controlled substances (drugs)
 Sexual Molestation – corporal punishment, or physical, or mental
abuse.

Mobile Home Policy endorsement (MH200) may be covered by an H.O.2 or

H.O.3 policy with this endorsement:

The mobile home must be at least 10 feet wide, 40 feet long and cost $4,000
when new. It must be capable of being towed on its own chassis or designed
for year-round living. It must be owner occupied. It has a flat $100
deductible for each loss. They have mandatory coverages and minimum
limits. It is similar to an H.O.2, but can be written as H.O.4 to cover tenant
non-owner.

37
 MINIMUM LIMITS
“A” MOBILE HOME – ACTUAL CASH VALUE
“B” UNSCHEDULED PERSONAL PROPERTY - $2,000
“D” ADDITIONAL LIVING EXPENSE - $15 PER DAY UP TO 45 DAYS CAN BE
INCREASED
“E” PERSONAL LIABILITY - $5,000 EACH OCCURRENCE
“F” MEDICAL PAYMENTS TO OTHERS - $500 EACH PERSON, $25,000 EACH
ACCIDENT

COVERAGE “C” IS COMPLETLEY OPTIONAL – AWNINGS, PORCHES, ETC.,

MUST BE DESCRIBED IN THE DECLARATION PAGE AND THE PREMIUM AND
LIMIT FOR EACH LISTED.

GRAVE MARKERS COVERED - $5,000

Mobile Home Policy Coverage “E” personal liability $5,000 per
occurrence. Medical payments to others $500 each person, $25,000 each
accident.

PERSONAL INJURY – Since the homeowners’ policy does not cover

personal injuries such as libel slander, or invasion of privacy, this
endorsement may be added to provide such coverage. The endorsement
modifies the definition of bodily injury to include personal injury with some
exclusion such as: injury caused by violation of criminal law: contractual

38
liability: injury resulting from an offense related to the injured party’s
employment: or business pursuits of an insured.

HOME DAY CARE – There are two endorsements available pertaining

to a home day care business on the residence premises. HO-322 clarifies the
homeowners’ policy to exclude home day care with respect to section ll
(bodily injury and medical payments). It also stipulates that the Coverage C
business property limitations (i.e., $2,500 on premises and $250 off
premises) are applied to home day care options. The HO-323 endorsement
extends the homeowner coverage to include home day care business
conducted on the premises but not subject to the aforementioned business
property limitations. It also specifically excludes liability arising out of”
sexual molestation or abuse; the maintenance or use of saddle animals,
motorized land vehicles or watercraft; or injury to any employee of an
insured other than a residence employee arising out of the day care
business.

WATER CRAFT/PLEASURE CRAFT – This endorsement provides

liability
(section ll) coverage with respect to scheduled and described water craft
powered by one or more outboard motors of more than 25 horsepower, any
sailboats over 26 feet in length, or inboard motors over 50 horsepower. This
coverage does not apply when the pleasure craft is used to carry fee-paying
passengers or while it is rented to others.

BUSINESS PURSUITS – This endorsement applies the homeowners’

policy liability (section ll) and medical payment limits to the insured’s

39
business pursuits (essentially sales, clerical, and instructional) that are
incidental to the premises. Bodily injury to a fellow employee of the insured
occurring during the course of employment is not covered.

ADDITIONAL INSURED LOCATIONS (COVERED PREMISES)

…As mentioned previously, regarding the comprehensive personal
liability policy, and insured is also covered for bodily injury or property
damage to others at additional locations. Some of these include, but are not
limited to, cemetery plots, a home under construction (a builder’s risk
exposure), vacant land owned by the insured, and any non-business property
acquired by the insured during the policy period. In addition, coverage may
also be extended to a secondary residence or vacation property for an
additional premium. No coverage is provided for business property or
farmland.
 Exclusions – Vicarious Liability for acts of the insured’s children using
excluded vehicles, aircraft, or water craft. Note: If age 13 or over.

Exclusions:
 Communicable Diseases transmitted by the insured.
 Controlled Substances (drugs)
 Sexual Molestation, corporal punishment or physical or mental abuse.

PENNSYLVANIA NOTICE (HO-291)

 Dwelling Policy
 Homeowners – Sections l and ll Policies
 Commercial Property Coverage Part

40
  Business Owners Policy

An insurance company, its producers, employees, or service contractors

acting on behalf of the company, may provide services to reduce the
likelihood of injury, death, or loss. These services may include surveys,
consultation, advice, or inspections.

The “Insurance Consultation Services Exemption Act” of Pennsylvania

provides that the insurance company, its producers, employees, or service
contractors are not liable for damages from injury, death, or loss occurring
as a result of any act or omission by any person in the furnishing of or
failure to furnish the services listed above.

The ACT does not apply:

 If the injury, or death, or loss occurred during the actual
performance of the services and was caused by the negligence of
the insurance company, its producers, employees, or service
contractors.
 To consultation services required to be performed under a written
service contract not related to a policy of insurance; or
 If any acts or omissions of the insurance company, its producers,
employees, or service contractors are judicially determined to
constitute a crime, actual malice, or gross negligence.
SPECIAL PROVISIONS
Paragraph b. (1) of the Loss Settlement condition has an addition. The
replacement cost will not exceed the necessary cost for like construction and

41
use on the same premises, regardless of whether the replacement building
or repaired building is located on the same or different premises.
A provision regarding death is added. Insurance provided under the
policy will continue:
 180 days after the insured’s death regardless of the policy period
shown in the Declarations, unless the insured’s property, covered
under the policy at the time of death is sold prior to the date; or
 Until the end of the policy period shown in the Declarations, unless the
covered property is sold prior to that date.

HOMEOWNERS COVERAGE (A DWELLING)

AND
COVERAGE B (OTHER STRUCTURES)

PERILS INSURED HO-1 & HO-8 HO-2,4,&6 HO-3

AGAINST
Fire or Lightning Yes Yes Yes
Windstorm or Yes Yes Yes
hail
Explosion Yes Yes Yes
Riot or civil Yes Yes Yes
commotion

42
 Aircraft Yes Yes Yes
Vehicles Yes Yes Yes
Smoke Yes Yes Yes
Vandalism Yes Yes Yes
Theft Yes Yes Yes
Falling objects No Yes Yes

HOMEOWNERS COVERAGE (A DWELLING)

AND
COVERAGE B (OTHER STRUCTURES)
(cont.)

PERILS INSURED HO-1 & HO-8 HO-2,4,&6 HO-3

AGAINST
Weight of ice, sleet, or No Yes Yes
snow
Accidental discharge or No Yes Yes
overflow of water or
steam
Sudden & accidental No Yes Yes
damage from
artificially-generated
electrical current
Damage to glass or Yes Yes Yes
safety glazing material

43
 Volcanic Eruption No Yes Yes
Risks of direct loss No No Yes
except:
Collapse, except under No No No
additional coverage
Freezing, subject to No Yes Yes
limitations
Theft to dwelling under No No No
construction
V&MM and breakage of No No No
glass if vacant more
than 30 days
Repeated seepage No No No

Wear & tear, inherent No No No

vice, mechanical
breakdown, rust, rot,
agricultural or industrial
smoke, pollution,
setting, birds, vermin,
rodents, insects,
domestic animals, etc.

PERSONAL AUTO
PART “B” – MEDICAL
PART “A” – LIABILITY – SUE PAYMENTS TO YOUR NOT THE
THIRD PARTY. FIRST PARTY
YOU- IF YOU DAMAGE SOMEONE’S
BENEFITS.
BODY OR PROPERTY, YOU GET
SUED, BY THE FIRST PARTY AND
YOU THE THIRD PARY ARE
PART”C” - UNINSURED
PROTECTED BY YOUR LIABILITY. MOTORIST OR
THE VEHECLE THAT CAUSES, OR
UNDERINSURED. MOST BE
DOES, THE DAMAGE IS AWAYS
INCLUDED BUT CAN BE
PRIMARY. WAIVED.

44
 PART “D” – COVERAGE
FOR DAMAGE TO YOUR COMPREHENSIVE-
AUTO.
DEDUCTIBE

COLLISION –
FIRE
DEDUCTIBLE.
THEFT
WINDSTRORM, ETC.
UPSET OR STRIKING
ANOTHER OBJECT

NO DEDUCTIBLE FOR “A” – “B” – “C”

The Personal Auto Policy (PAP) combines liability insurance

for causing injury or damage to others and property insurance for
damage to one’s own car. There are four basic coverage parts in
the policy.
Part “A” – Liability
Part “B” – Medical Payments
Part “C” – Uninsured and Underinsured Motorist
Part “D” – Physical Damage – Collision and Other than
Collision C

45
 (Comprehensive)

A definition of a private passenger auto would include

pickups, panel trucks and vans provided they are not used for
business. Trailers of a certain size, and temporary substitute auto,
would also be considered private passenger auto.

PART “A”
Minimum financial responsibility-Pennsylvania Financial
Responsibility Law – requires that you carry or prove your ability
to pay damages for which you are liable. The minimum
requirements per accident are $15,000 for injury of any one
person; $30,000 for injury to 2 or more persons; $5,000 for
damages to property of others or a combined single limit of
$35,000 and first party benefits, $5,000.

Your liability insurance is written to defend you if you do

injury to anyone’s body or property. Your liability insurance goes
with you no matter what auto you are operating.

In short, Part “A” provides protection against amounts an

insured may became liable to pay as a result of causing bodily
injury or property damage to another person in an auto accident.
In addition, the policy will make the following supplementary
payments:
1. Up to $250 for bail bonds

46
 2. Premiums on appeal bonds or bonds to release
attachments.
3. Interest occurring after a judgment is entered, but before
payment prejudgment interest is included under the
insuring agreement.
4. Up to $200 per day for earnings lost to attend court
proceedings at the company’s request.
5. Reasonable expenses incurred at the company’s request.

PART ‘B – MEDICAL PAYMENTS TO YOURS NOT OTHERS

First Party Benefits - $5,000

Optional Additional
$100,000 for medical benefits
$2,500 up to $50,000 for loss of income
$2,500 funeral expenses (normally $1,500)
$25,000 accidental death (if death occurs within 24 months)

A combined single limit of $177,500 with inside limits of $25,000 for

accidental death and $2,500 for funeral expenses.

$100,000 to $1,100,000 of extraordinary medical benefits in $100,000

increments.

47
 Loss of income benefits can cover 80% of actual loss of gross
income ($5,000 not to exceed $1,000 per month) as well as reasonable
expenses for hiring help to reduce the loss of income. Coverage begins
after 5 days of work has been lost.

First Party Benefits – priority for recovering first pry benefits.

1. A policy that you are the named insured.

2. If not the named insured, but is covered by the policy, you collect
from that policy.
3. If not covered by any policy, you collect from the policy for the
auto that you are in at the time of the accident.
4. If you are not in an auto (pedestrian), you collect from the policy
of any auto in the accident.

Not eligible for first party benefits, vehicle owners who do not meet
financial responsibility requirements, occupants of a recreational
vehicle, not intended for highway use, and motorcycles and mopeds.

PART “C” UNINSURED AND UNDERINSURED MOTORIST

Under these programs, the insured collects from his own

company if struck by someone classified as either of the above.
Insurer must make higher limits available up to at least
$100,000/$300,000. In your exam, this plan will be called the
Pennsylvania Automobile Insurance Plan (Assigned Risk Plan).

48
Cancellation and Non-Renewal – Non-renewal - 30 days and
cancellation, except for non-payment of premium – 10 days.

PART “D” – PHYSICAL DAMAGE

This covers collision and comprehensive. Collision is defined as

striking another object or upset. Comprehensive provides coverage
for any direct or accidental damage to your auto. Comprehensive is
also known as other than collision.
Insured under the policy for part “D” are the named insured,
household residents, and family members as well as anyone using
the auto with permission. This is referred to as the Omnibus Clause.

Part ”D” is subject to deductibles. The standard for collision is

$500. Policies pay $25.00 for towing and labor charges at the scene.
Substitute auto’s (rentals) usually pay $20.00 per day up to a
maximum of $600.00.

Physical damage Part “D” of the policy covers the automobile, yours.
In auto insurance under physical damage, you insure the auto and
not the drivers.

If you someone owns a car with someone who is not their spouse,
BOTH names must be on the title. This is JOINT ownership.

49
 PERSONAL AUTO ENDORSEMENTS

A. TOWING AND LABOR COSTS – Various levels of coverage may be

purchased.
B. RENTAL REIMBURSEMENT – Covers the cost of renting a
substitute vehicle when the insured vehicle is out of service.
Transportation expenses coverage in the policy covers loss of use
only in the event of theft.
C. MISCELLANEOUS VEHICLES – Covers mopeds, motorcycles, motor
homes, golf carts, etc.
D. EXTENDED NON-OWNERSHIP LIABILITY – Expands coverage when
insured’s are using autos other than covered autos – Regular use.
E. COVERAGE FOR DAMAGE TO YOUR AUTO - Reimburses at stated
value rather that ACV; used for restored vehicles, etc.
F. NAMED NON-OWNER – Covers someone who does not own n
automobile, such as a person whose employer furnishes a
company-owned vehicle for his or her use.
G. COVERAGE FOR TAPES, RECORDS, OR OTHER DEVICES – Covers
certain items otherwise excluded from coverage.

MISCELLANEOUS COVERAGES AND

PERSNAL INLAND MARINE INSURANCE

Homeowner’s policies can cover many of the risks to which an

average household is exposed, but there are certain risks for which the
insured will require additional coverage outside of a homeowner’s
policy. The homeowner’s forms contain exclusions and limitations for
certain types of property which are particularly susceptible to loss,
50
difficult to value, or of extremely high value. In some cases, an
individual who has no homeowners insurance may need coverage for
personal property. Will not cover property used for business.

Broader coverage for personal property can be obtained through

personal inland marine forms or floaters as they are sometimes called.

Inland marine insurance provides the same type of broad, flexible

coverage for portable personal property “worldwide”.

The broad personal inland marine floaters provide open peril

coverage (coverage against “Risk of Physical Loss”).

There are three personal inland marine floaters:

1. Personal articles form – listed, scheduled, and appraised.
2. Personal property form – unscheduled.
3. Personal effects form – unscheduled.
Personal Articles Form is a policy that provides coverage on nine
optional classes of personal property. The same nine categories
covered under the homeowners scheduled personal property
endorsement; jewelry, furs, cameras, musical instruments, silverware,
golf equipment, fine arts, stamp collections, and coin collections.
Generally, an appraisal is required when the personal articles floater is
issued to aid in developing and accurate description of covered
property and to arrive at the proper value for which the property
should be insured. Coverage for fine arts is not worldwide.

51
 Remember, however, that the personal articles form is not a
valued contract. For purposes of loss settlement, the value is
determined at the time of loss. In general, the company agrees to
reimburse the insured for the lesser of:
 Actual cash value
 Cost to repair
 Cost to replace with an item substantially identical
 Amount of insurance specified in the policy

Another important feature of the personal articles form is that it

provides automatic coverage on newly acquired property of the
same categories insured. This coverage applies for 30 days during
which the insured must notify the insurance company or coverage
ceases after the 30 days. Coverage is for a maximum of 25% of
the applicable limit or $10,000.

Coverage for jewelry is on an ACV basis or replace with like

kind or quality (pair and set). Exclusions are wear and tear,
deterioration, inherent vice, etc.

The Personal Property form provides all risk coverage on a

blanket basis for most kinds of personal property found in a
typical home. This would be similar to the coverage provided for
personal property under Coverage “C” in a homeowners policy.
The personal property floater is most frequently issued by condo

52
or apartment dwellers who cannot obtain this all risk coverage for
personal property under the H.O.4 or H.O. 6.

Property is divided into 13 basic categories (including and

“All Other Personal Property Category), and a separate limit of
insurance is assigned to each. Particularly valuable property can
be scheduled separately.

Personal Effects Floater used by tourist. There is no

coverage while the effects are on your premises. It has limitations
for furs and jewelry 10% but not to exceed $100, and theft from
unattended auto 10% not to exceed $250. Personal effects are
not listed in the policy.

Personal Umbrella policies cover liability. This type of policy

has underlying coverage to protect you against law suits that are
in excess of your primary policy limits. The scheduled coverages
or policies would be the underlying coverage.

These policies usually have retention amounts. You, the

insured, always pay the retention amount prior to the company
paying a loss for non-scheduled coverage. Fair Plan coverage is
for fire and allied lines, both personal and commercial. The
purpose is to provide insurance coverage in economic depressed
areas or areas subject to high risks in which commercial insurance
companies will not write risks. This is a pooling arrangement.

53
 All companies participate in this plan. Companies cannot
reject risks because of environmental hazards. They can add
surcharges. In some cases companies can insist on improvements
before they assume or cover the risk.

Vacant Buildings are not eligible for coverage.

National Flood insurance program is an insurance plan

subsidized by the Federal Government. To be eligible, a
community must be on a flood plain map. It would not provide
coverage for water damage for a well on the insured’s property,
or back up of sewers. There are two plans – Regular and
Emergency. Coverage for a single family dwelling under the
emergency program is $35,000 for the dwelling and $10,000 for
the contents. Under the regular program, it is $250,000 for the
dwelling and $100,000 for contents.

PERSONAL UMBERELLA POLICY

THIS PROVIDES EXCESS COVERAGE OVER UNDERLYING LIMITS.

UNDERLYING LIMITS EXCESS UMBRELLA OF

$1,000,000

Auto: 100/300/25 + Difference = $1,000,000

Homeowners: $100,000 + Difference = $1,000,000

54
Water craft (over 26’) + Difference = $1,000,000
($100,000)
1. Auto injury awarded to Mr. Brown of $95,000. The umbrella
will pay Mr. Brown $0
2. A home owner’s claimant was awarded a judgment of
$107,000.00. The umbrella will pay $7,000.00.
3. The Insured ran a red light and hit a brand new Mercedes
sports car. The damage to the auto was $75,000.00. The auto
insurance company paid the maximum under the property
damage liability. The umbrella will pay $50,000.00

COMMERCIAL PACKAGE POLICY (CCP)

The Commercial Package Policy allows the insured to tailor

several separate lines of insurance under one package policy.
In a contract, a monocline policy would provide coverage for
only one line of insurance. Under the package plan, you could
write up to a maximum of seven types of coverages under one
policy.
You must buy two of the coverages to get a package policy.
1. Commercial Property
2. Commercial General Liability
3. Commercial Inland Marine
4. Commercial Crime
5. Boiler and Machinery
6. Commercial Auto
7. Farm Coverages (Property & Liability)
The policy itself is composed of four components:

55
1. Common Declarations
2. Common Conditions
3. Interline Endorsements
4. Two or More Coverage Parts
The Common Declarations would have the- who, what, where,
when, how, policy number, schedule of coverage parts and
premium. That would be applicable to all policies that make up
the package.

The Common Conditions would spell out the rights

and obligations of both the insured and the insurer. It states that
if more than one insured is named in the package, the first named
insured is responsible for the obligations. The six common
conditions are:

1. Cancellations- If the insurer cancels, they must give the first

named insured a 60 day notice in advance except for non-
payment. That would be a 15 day notice.
2. Policy Changes-First named insured can make changes to the
policy if authorized by the insurer.
3. Examination of Records-States the insurer may examine the
insured’s records during the policy period and up to three
years after expiration.
4. Inspections and Surveys- Determines the insurability of the
property. It will not warrant that the property or operations
mare safe, healthful or in compliance with any law.
5. Premiums- First named insured is responsible for paying the
premiums.

56
6. Transfer of Rights-If the named insured dies, the insured’s
rights and duties under the policy are automatically
transferred to his legal representative or to anyone having
temporary custody of the insured’s property.

Interline Endorsements-May apply to some or all coverage

parts of the policy.
Coverage Parts-States each policy within the package will
have it down declarations.

Commercial Property Policies include three basic core

coverages:
1. Buildings
2. Insured’s business personal property
3. Personal property of others located at the business
premises.

Commercial Property is used for business purposes for

structures of more than 4 units. Building coverage is provided
for new buildings, if under construction for 30 days. Business
personal property is covered when it is located in or on the
building within 100 feet. The commercial property policy
contains as one of the forms causes of loss.
In the open, but on the premises, personal property of others
is covered when it is in the care, custody or control of the
insured. Exclusions would be accounts, bills etc. Covered are

57
animals or autos being held for auction or sale; if not held for
sale, it’s not covered.
The policy would have four causes of loss forms:
1. Basic
2. Broad
3. Special
4. Earthquake

Losses are usually settled on an actual cash value basis, but

can be written on a replacement basis.

Business Income provides coverage for actual loss of

business, which in the past was protected by business
interruption insurance. This policy will pay for direct or
indirect losses at the insured’s place of business or location.
The income covered is net income-this is determined by
profit/loss prior to taxes and continuing normal operations
expenses, i.e. payroll, etc. Optional coverage in settlement is
agreed value, which waives the co-insurance. You ca also
obtain extra expense coverage which will help a business
that cannot afford to suspend business operations during an
interruption or they will lose customers and sales. This type
of contract covers expenses only-it does not provide loss of
income.

Business Income-Pays for actual loss of income up to 12

months.

Extra Expenses-Pays to avoid suspension of business.

58
A Builders Risk Form protects buildings in the course of
construction including foundations and fixtures. It would
also cover material and supplies used in the construction.
These policies have NO co-insurance requirements and
losses are settled on a completed value basis; it could also
be referred to as an installation floater.

Legal Liability Insurance provides coverage for the legal

liability of an insured for damage to other people’s property
while it is in the insured’s care, custody and control (Bailee).

The Cancellation Changes Endorsement allows the company

to cancel a policy within 5 days notice if they become aware
of certain adverse conditions, i.e., unoccupied for more than
60 days, if the insured fails to repair damaged property, if
the building is ordered to be demolished. Normally a
company must give a 60 day notice to cancel a policy.

Pollutant clean up-Must be reported within 180 days of the

direct loss, limited to $10,000.00 per location for each 12
month period.

COMMERCIAL PROPERTY COVERAGE PART CAUSES

OF LOSS FORMS-PERILS COVERED

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Basic covers; fire, lightning, BC Perils: wind, civil commotion,
smoke, hail, aircraft, vehicle, explosion, riot, vandalism,
sprinkler leakage, sinkhole collapse, volcanic action.

Broad covers; All Basic Form Perils plus: glass breakage

($100 per plate/$500 per occurrence), falling objects, weight
of ice, sleet, snow, accidental discharge of water, collapse of
building(as additional coverage)

Special covers ALL RISKS

Earthquake (must be used with one other Cause of loss

form) Covers earthquake and volcanic eruption.

CLAIMS MADE FORM (BEFORE)

PRFESSIONAL LIABILITY

Policy period 1/01/1992 to 12/31/1992, the insured incurs a

loss on 12/02/1991, reported it to the Company on
04/01/1992, it would be covered if the policy has a 2-year
retroactive date back to 01/01/1990. The Insured incurs a
loss on 07/01/1990, reports it to the Company on
03/01/1992, it would be covered. The policy also has a 2-
year tail to 12/31/1994. Insured incurs a loss 01/26/1992,
reports it to the Insurer 07/01/1993, it would be covered.

OCCURRENCE FORM (AFTER)

GENERAL LIABILITY

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Policy period 01/01/1992 to 12/31/1992, the insured incurs
a loss 10/25/1992, reports it to the Insurer on 03/15/1993,
it would be Covered.

COMMERCIAL GENERAL LIABILITY

The Policy Offers 3 Coverages:

Coverage “A”- Under this policy, B1 and PD will provide

coverage on the premises or for operations and would also
include completed operations coverage. Part “A” does NOT
cover bodily injury or property damage coverage for the
insured or his employees or his property.

Coverage "B"-provides coverage for liable and slander suits

(personal injury).

Coverage “C”-provides medical expenses up to 1 year for

bodily to others. Under this, your legal liability need not be
proved. It would not provide coverage for the employer or
his employees.

COMMERCIALCRIME POLICY CONSTRUCTION

Whether crime coverages are issued as a monoline policy or

as part of a package, a crime coverage part must be
attached to the COMMON CONDITIONS of the commercial
lines programs. The COMMON DECLARATIONS page is to be
used if a package policy is written, but if a monoline crime
policy is written, a crime declarations page may be used as
61
the only declaration. In either case, the crime coverage part
will consist of:

 Crime declarations page (Form A or B)

 Crime general provisions form and or the safe depository

provisions form

 One or more crime coverage forms

 Any applicable endorsements

CRIME DECLARATIONS-TWO VARIATIONS

The crime declarations show the policy number, applicable

coverage forms, limits of insurance, deductible amounts and
the endorsements that are attached to the coverage part.
There are two variations of the crime declarations page.

Declarations Form A is to be used when crime coverages are

being issued as a monoline policy. In addition to the other
information, it has a place for the named insured's name
and address, the policy period and the identity of the
insurance company and the producer. This the only
difference between forms A and B. When crime coverage is
issued as a monoline policy with Declarations Form A, it is
not necessary to attach the Common Policy Declarations.

62
Declarations Form B is used when crime coverages are being
issued as part of a package policy. It does not identify the
named insured, insurer or producer. That information will be
found on the Common Policy Declarations.

DEFINTIONS OF CRIMES & OCCURENCES

BURGLARY means the taking of property from inside the

premises by a person unlawfully entering or leaving the
premises as evidenced by marks of forcible entry or exit.
Visible marks or damage at the point of entry or exit are
needed to confirm the burglary.

EXTORTION means the surrender of property away from the

premises as a result of a threat communicated to the
insured to do bodily harm to an insured or an employee, or
to a relative or invitee of either, who is allegedly is being
held captive.

MYSTERIOUS DISAPPEARANCE means any unexplained

absence of covered property, even though it might not have
been caused by a criminal act.

ROBBERY means taking property from the care and custody

of a person by someone whom has caused or threatened to
cause bodily harm, or who has committed an obviously
unlawful act which the victim witnessed.

SAFE BURGLARY means the taking of property from within a

locked safe or vault by a person unlawfully entering the safe

63
 or vault as evidenced by visible marks of forced entry upon
its exterior. This includes the removal of a safe from the
premises.

THEFT (larceny) means any act of stealing. Theft is a broad

category. It includes all of the more narrowly defined acts of
stealing, such as burglary and robbery, and goes beyond
them in scope.

OCCURRENCE means all loss whether caused by one of more

persons, or involving a single act or a series of related acts.

COMMERCIAL CRIME COVERAGES

Title Covered Property Losses Covered

Employee Theft All property Employee theft
Forgery & Alterations Money Forgery or alteration of checks,
drafts, etc.

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 Inside the Premises- theft Money and securities inside the premises or at a Theft, disappearance &
of money and securities banking premises, damage to the premises or its destruction
exterior resulting from actual or attempted theft
of money and securities, loss or damage to a
locked safe, vault, cash register, cash box, or cash
drawer located inside the premises resulting from
any actual or attempted theft.
Inside the premises- Damage to property inside the premises resulting Robbery & safe burglary
robbery or safe burglary from an actual or attempted robbery of a
of other property custodian or inside the premises in a safe or vault
resulting from an actual or attempted safe
burglary, damage to the premises or its exterior
resulting from an actual or attempted robbery,
safe burglary of other property & loss or damage
to a locked safe or vault located inside the
premises resulting from actual or attempted
robbery or safe burglary
Outside the premises Loss of money & securities outside the premises in Theft, disappearance, and
the care and custody or a messenger or an destruction
armored motor vehicle company resulting directly
from theft, disappearance or destruction, loss or
damage to other property outside the premises in
the care or custody of a messenger or an armored
motor vehicle company resulting directly from an
actual or attempted robbery
Computer Fraud All property Computer fraud
Money orders & Money Acceptance or fraudulent money
counterfeit paper orders or counterfeit paper
currency currency
Funds Transfer Fraud Money Fraud
Extortion All property Extortion
Securities Deposited with Securities Theft, disappearance, &
Others destruction
Guest's property All property, except vehicles & articles for sale Negligence
Safe depository 1) Property 1) Negligence
2) Property other than money 2) Destruction, robbery, &
vandalism
Lessees of safe Deposit 1) Securities 1) Theft, disappearance &
Boxes 2)Property other than money & securities destruction
2) Burglary, robbery, & vandalism

Commercial Inland Marie provides coverage for goods being transported

other than by sea, ocean, and water. Usually the losses are settled on an ACV
basis. Excluded risks are: nuclear reaction, wear and tear, inherent vice, war,

65
confiscation by government authorities, riot, or strikes. All policies have insurance
and deductibles.

Commercial Inland Marine Coverage Forms filed - accounts receivable -

all risk for accounts due, camera, and musical instruments - all risk at premises
property. In transit, or property away in the custody of the insured or employees
or property located elsewhere.

Equipment Dealer - Covers stock of dealers if mobile i. e., agricultural and

construction equipment, coverage is provided while equipment is out of doors,
stored away from the premises, and frequently used away from the premises.
Jewelers block - All risk coverage is provided for the inventory and contents of a
jewelry store. No coverage is provided for mysterious disappearance.

Commercial Inland Marine Coverage (non-filed) - Premiums and rates are

based on the underwriter's judgment. Trip transit is available for single
shipments. Bailee coverage is used by those who temporarily hold or have
custody of the property of others.

FARM PROPERTY COVERAGE FORMS

COVERED PROPERTY

66
 Farm Owners, eligible risks are owner/tenant occupied dwellings, or one
or two family dwellings used for residential purposes. You can also have up to 2
roomers or boarders per family. The usual deductible is $250. Contains 2 sections:
property and liability. Does not provide coverage for vacant farms. Also would
not cover escape by animals.

The Farm Property Coverage Form provides coverage for direct physical
loss to a variety of property. The first four coverages are similar to Section 1 of
the Homeowners contract:

 Coverage A - Dwellings
 Coverage B - Other private structures appurtenant to the dwelling
 Coverage C - Household personal property
 Coverage D- Loss of use

Coverage D - Loss of Use includes coverage for:

 Additional Living Expense - which covers the increase in cost to
maintain the insured's normal standard of living if a covered loss
causes the living quarters to become uninhabitable; and

 Fair Rental Value - which covers the loss of rents or rental value the
insured sustains because a covered loss renders any portion of a
residence premises rented or held for rental uninhabitable

The Farm Property Coverage Form also includes coverages for the
farmer's business property, including:

67
  Coverage E - Scheduled Farm Personal Property which covers
property for the limit shown in the Declarations. Examples of
property that can be covered under Coverage E include grain, farm
product, poultry, livestock, machinery, and vehicles and equipment
incidental to farm use.

 Coverage F - Unscheduled Farm Personal Property which covers

farm personal property on a blanket basis both on and off the
insured premises.

 Coverage G - Other Farm Structures which covers farm buildings and

structures other than dwellings such as barns and other farm
buildings, silos, fences, and radio equipment.

In general, growing crops, trees, plants, shrubs, and lawns are excluded.
However, a Coverage Extension applicable to Coverages A, B, and C does provide
limited coverage for trees, plants, shrubs, or lawns within 250 feet of the covered
residence, but only against loss by specifies perils.

Causes of Loss

68
 The Farm Property Coverage Form offers three separate levels of coverage
within the same form: Basic, Broad, or Special. The Declarations indicates what
level of coverage the insured has selected for each individual coverage. The
insured may obtain coverage against earthquakes separately by purchasing the
Earthquake Causes of Loss Form.

Perils covered under the Covered Causes of Loss - Basic Selection are
similar to those covered by the Commercial Property Causes of Loss - Basic Form:
- Fire - Vehicles
- Lightning - Smoke
- Windstorm or hail - Vandalism
- Explosion - Theft
- Riot or civil commotion - Volcanic action
- Aircraft - Sinkhole collapse

Property covered under Coverage E - Scheduled Farm Personal Property

and Coverage F - Unscheduled Farm Personal Property is also covered for the
addition perils of:

 Collision resulting in damage to covered arm machinery or death of covered

livestock - but not if a vehicle is operated by insured.
 Damage in the course of transit - but not if by a common carrier.

69
The Covered Causes of Loss - Broad Section adds additional perils
similar to those of the Commercial Property Causes of Loss - Broad
Form. Some perils unique to the farm risk are also included:
 Electrocution of covered livestock
 Attacks on covered livestock by dogs or wild animals
 Drowning of covered livestock
 Accidents involving loading or unloading

The Covered Causes of Loss - Special Section provides open peril

coverage. Excluded are losses caused by:
 Dishonest or criminal acts
 Pollutants or contaminants
 Transfer or property due to unauthorized instructions
 Voluntary parting with property

ADDITIONAL FORMS

A separate form called the Mobile Agricultural Machinery and

Equipment Coverage Form is available to the farmer who wants to
insure mobile agricultural equipment and machinery separately from
the other property. The Livestock Coverage Form is used to cover
livestock separately.

FARM LIABILITY COVERAGE FORM

70
The Farm Liability Coverage Form provides these coverages for liability arising out
of farming operations or personal activities:
 Coverage H - Bodily injury and Property damage liability
 Coverage I - Personal and Advertising Injury liability
 Coverage J - Medical Payments to Others
They are similar to Part II of the homeowners Policy.

Custom Farming - Provides Liability for farming non-owned property

Named Insureds - Includes residence employees

COMMERCIAL AUTO - Coverage for autos used primarily for business purposes
may also be added to the CPP. Again, the common conditions and declarations
apply to commercial auto coverage. In addition, if this coverage is desired, a
commercial auto coverage part is attached to indicate that coverage exists. A
specific commercial auto declarations page (including a schedule of all the
covered autos owned by the insured) will be added and then the appropriate
coverage from (which includes specific commercial auto conditions) will be
attached depending upon the type of coverage the insured needs and desires.

GARAGE COVERAGE FORM - This type of insurance is basically a package of

coverages suited for firms such as automobile dealers, repair shops, and parking
lot operators. It consists of premises and operations coverages including
71
coverage for the operation of service hoists and elevators, contractual liability
coverage for insured (incidental) contracts, products and complete operations
coverages, premises and medical payments insurance (added by endorsement),
physical damage, and some auto liability coverage depending upon the nature of
the operation.

SECTION II - GARAGE LIABILITY - The premises and operations coverages of a

garage liability policy is very similar to coverage provided under commercial
liability. These coverages apply when bodily injury or property damage arises out
of "garage operations". Garage operations include the ownership, maintenance,
or use of the premises for purposes of a garage and all operations necessary or
incidental to it.

Premises is defined as meaning the premises where the names insured conducts
garage operations including the ways (areas) immediately adjoining. for example,
if a service station decides to sell household appliances, these operations are not
likely to be considered as necessary or incidental operations, and this may not be
covered by this contract.

Garage liability does not provide Bailee Insurance for customers' automobiles.

SECTION III - GARAGEKEEPERS COVERAGE - Garagekeepers is a type of bailee

coverage available to automobile repair shops, service stations, and parking lots
or storage garages. Garagekeepers insurance provides coverage for damage to

72
automobiles of others while in the custody of business for the purpose of repair,
servicing, storage, or safekeeping.

The need for garage keepers insurance arises from the fact that garage
liability insurance does not cover property damage losses to automobiles in an
insured's care, custody or control.

Specified peril coverage (an alternative to comprehensive) is available for,

but not limited to, loss by fire, explosion, theft of the entire automobile,
vandalism, and malicious mischief. In addition, comprehensive and collision
coverage is also available. All are subject to a deductible.

**If collision coverage is added, the insured will be protected against losses
arising out of the use of elevators and to customers' autos on an automobile
servicing hoist.

Losses Not Covered - The garage keepers' coverage does not cover losses
stemming from the following conditions or circumstances:

 Theft by an insider (by the named insured, employee, or shareholders…

employee dishonestly)
 Contractual liability
 Products or work loss
 Sound reproducing or receiving equipment (unless permanently installed in
the auto) although radar detectors are covered.
 Other losses not covered include, but are not limited to, those caused by
war, rebellion, racing, etc.
COMMERCAIL CARRIER REGULATION
Common Carriers- A carrier is a commercial organization that transports
good or passengers. A carrier is classified as a common carrier when is dedicates

73
its property to public use in such a manner that its services are available to the
public on a regular basis.
Common Carriers hold themselves out to the public as engaged in the
business of transporting persons or property from site to site for compensation or
a fee. Examples or common carriers include, but are not limited to, Railroads, bus
companies, trucking firms, taxicab companies, airlines, ferries, and so forth.
Liability for Passenger Injuries - The right of a passenger to recover for
injuries suffered usually depends upon the demonstration of negligence on the
part of the carrier or the carrier's employee. This would include boarding, or
alighting, the common carrier's vehicle. If negligence is proven, the common
carrier will be responsible for bodily injury or property damage suffered by the
passenger.

Motor carrier Act of 1980 - This legislation mandated that trucking operators
must file proof of pollution liability insurance. New financial responsibility

74
requirements were imposed in "for hire" and private transporters of certain
hazardous cargoes in interstate or interstate commerce.

Financial responsibility requirements of the Act apply separately to three

types of freight transport.
1. Type 1 - For hire transportation of non-hazardous property in interstate of
foreign commerce must carry at least $750,000.
2. Type 2 - For hire or private transportation (inter or intrastate) of hazardous
substances (i.e., compressed gas, explosives, poison gas, radioactive
materials, etc.) with a minimum limit of $5,000,000.
3. Type 3 - For hire and private transportation of oil listed as a hazardous
substance or any hazardous waste or substance not included in Type 2 with
a minimum limit of $1,000,000.

Endorsement for Motor Carrier Policies of insurance for Public Liability -

This endorsement, Form MCS-90, may be attached to a policy under which the
motor carrier is insured against auto liability claims (typically a trucker's policy
with respect to "for hire" carriers or a BAP with respect to private carriers).

75
 The endorsement amends the policy to assure compliance of the act by the
insured as a motor carrier of property.

Unless canceled with appropriate notice, or replaced by a new policy,

coverage under MCS-90 remains continuously in effect (35 day notice to the
other party is required for cancellation of coverage under Form MCS-90 on the
part of wither the insurer or insured). If an insured is under I.C.C jurisdiction, then
30 day notice must be given to the Commissioner (Interstate Commerce
Commission = I.C.C.)

Business Owner's policies were developed for small business, i.e., office,
apartment houses, residential, or office condominiums, mercantile or certain
service or processing categories.

It is used to provide a package for property and liability coverage.

Eligibility is determined by size. There are height restrictions for buildings.

Businesses with gross sales up to $6,000,000 are eligible.

The policy must include the following: Declaration, eleven common policy
conditions, a Standard or Special Coverage Form, Liability Form and
endorsements as required.

There are 11 common policy conditions that are attached to every

business owners policy. The form includes the same six common conditions that
apply to a commercial package policy, plus five additional conditions.

76
Other applicable conditions will be found separately in the property and liability
forms that are part of the complete policy. A sample of the Business owners
Common Policy Conditions is included in the Sample Policy Section of this manual
for you to review.

The first condition addresses cancellation. The "first named insured" shown
in the declarations may cancel at any time by giving advance written notice to the
insurer. If the insurer cancels, it must give written notice to the first named
insured at least five days in advance (if special circumstances apply), or 10 days in
advance if the reason is non-payment of premium, and at least 30 days in
advance if canceling for any other reason. The provisions allowing for only five
day notice in special circumstances are built in to the business owners form (these
are attached to other commercial property coverages by endorsement). The
shorter notice time is permitted if the building has been vacant or unoccupied for
60 or more consecutive days, or if repairs for insured damages have not been
started or contracted within 30 days, or if the building has been declared unsafe
or has an outstanding order to be vacated or demolished. Reduced notice is also
allowed when property taxes are more than one year overdue (unless the taxes
are in dispute), or certain items are being removed, or if heat, water, sew service
or electricity have not been furnished for 30 days. These cancellation provisions
may be amended by endorsement in certain states to satisfy regulations.

77
 The second condition concerns policy changes. All agreements between the
parties to the contract are contains in the policy. The first named insured shown
in the declarations in authorized to make changes in the policy terms only with
the insurer's consent. Terms can be changes or waived only by endorsement
issued by the insurer and attached to the policy.

Concealment, misrepresentation, and fraud are addressed by the next

condition. The policy will be void in the case of fraud by the named insured. It will
also be void if any insured intentionally conceals or misrepresents a material fact
concerning the policy, the covered property, insurable interest in the covered
property, or a claim under the policy.

A brief condition mentions that the insurer may, to the extent that it relates
to insurance, examine the books and records of the named insured, and may
make an audit during the policy period and up to three years afterward.

The next condition establishes the right of the insurer and rating
organizations to make inspections and surveys to report on findings, and make
recommendations for the purpose of establishing insurability and determining
premium charges. An inspection will not constitute a warrants that the property
or operations are safe, healthful or in compliance with any law.

If two or more coverages of the policy apply to the same loss or damage,
the insurer will not pay more than the actual loss or damage.

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 A liberalization condition states that the insurer will automatically and
immediately apply to the policy any revisions made during the policy period or
within 45 days prior to the effective date, if those revisions broaden the coverage
without additional premium.

In the event of other insurance covering the same loss or damage as this
policy, the insurer will only pay the amount of covered loss or damage in excess of
the amount due from the other insurer, whether collectible or not. Liability
coverage will always be excess over any coverage that insured for direct loss or
damage. When the insurance is excess, the insurer has no duty to defend any
claim or suit that any other insurer has a duty to defend, but will undertake to do
so if no other insurer defends.

A condition on premiums specifies that the first named insured shown in

the declarations is responsible for all the premium payments and will be paid any
return premiums. The premium shown in the declarations is based on rates in
effect and exposures known at the time of the policy was issued. At each renewal
or anniversary date, the insurer will compute the premium due based on rates
and rules them in effect. Any undeclared exposures or change in business
operations may require an additional premium, which will also be determined in
accordance with rules and rates then in effect.

The next condition involves transfer of rights of recovery that is the

standard subrogation clause.

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If any persons or organization to or for whom payments is made under the policy
has rights of recovery against another, those rights must be transferred to the
insurer to the extent of the payment made. That person must do everything
necessary to secure those rights and do nothing after a loss to impair them.
However, an insured may waive rights against another party in writing prior to a
loss, or after a loss, if that other party is an insured under the policy, or a business
owned or controlled by the insured, or a tenant of the insured.

The final condition prohibits a transfer of rights under the policy without
the insurers consent, except in the case of death of a named insured. In earlier
policies this provision was known as an "assignment clause". If a named insured
dies, the insured's rights and duties under the policy are automatically transferred
to his or her legal representative, or to anyone having temporary custody of the
insured's property until a legal representative is appointed.

Losses are settled on a replacement cost basis.

The standard deductible is $500.

Eligible risks include contractors and restaurants that seat less than 75
customers, and less than 7,500 square feet and do no deep fat frying.

Convenience stores with gasoline pumps - gasoline sales cannot exceed

75% of the total gross sales.

Laundries and dry cleaners

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Debris removal is 25% of direct loss.

30-day all risk for preservation of property.

Fire department service charges are $1,000.

For exterior glass coverage of $100,000 per premises.

$5,000 for destruction of valuable papers and records.

Employee dishonesty limit options are $5,000 - $10,000, $25,000 and $50,000.

There are two property forms - standard or special. Under both, coverage
is provided for buildings, including landlords' personal property and building
personal property, including property of others. Standard is written as named
perils and special is written on open peril basis. Loss valuations are usually
written on a replacement cost basis; however, certain losses are settled on an
ACV basis.

ENDORSEMENTS

The Businessowners Policy may be endorsed as follows:

Protective safeguards (BO 04 30) endorsement adds a policy condition

requiring the insured to maintain protective safeguards (e.g., automatic sprinkler
system, automatic fire alarm system) as a condition for coverage.

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If an automatic sprinkler system is shut down due to breakage, leakage, freezing,
or opening of sprinkler heads, the insured has 48 hours to restore the system
before they must notify the insurer.

Utility Services - Direct Damage (BP 04 56) endorsement covers the

insured's property in the event of a direct physical loss to a utility service. The
insured's covered property and utility service must be indicated in the
endorsement. Utility services include water services, communication services and
power supply services.

Hired Auto and Non-owned Auto (BP 04 04) provides liability coverage for
business auto exposures. Hired auto means any auto that is hired, rented,
leased, or borrowed by the business. For example, a rented vehicle would be
considered a hired auto. Non-owned auto means any auto not owned, hired,
leased, or borrowed that is used in conjunction with the insured's business. For
example, if an employee uses his personal endorsement. This endorsement is
typically added when the business owner does not have a Business Auto Policy.

The Liability section covers the business owners' liability for bodily injury
to others, property damage of others, advertising and personal injury and
medical expenses and fire legal liability.

The Standard limit for liability and medical expenses is for any one
occurrence limited to $2,000,000 for B1 and PD and advertising liability.

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The medical expenses limit per person is $5,000 and the limit for fire legal liability
is $50,000.

Worker's Compensation Policies provide two coverages for

employers. Section #1 benefits would provide for bodily injury and diseases.
Section #2 provides coverage for employer's liability.

Every employer must provide this insurance for his/her employees. You do
not have to buy from a private or commercial carrier. The State sells this type of
insurance through the State Worker's Compensation Fund. Benefits paid under a
Worker’s Comp claim are established by Pennsylvania State Law.

Under Section #1, the four coverages are:

1. Disability - Loss of income due to injury - could be total or partial. If you

were hospitalized or unable to work at all it would be Total Disability.
Benefit payments for partial disability cannot exceed 500 weeks. If you can
return to work but not be able to do as much or make as much money then
you would have a Partial Disability. Plans have a waiting period of 7 days to
receive benefits. 66 2/3% of average weekly wages.
2. Survivor or Death - Provides two benefits - burial and income for a
surviving spouse or children. Fixed burial expense is currently $3,000.
Income benefits:
a. Family plus children - 66 2/3%
b. Spouse plus one child - 60%
c. Spouse only - 51%

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 d. Child only - 32% up to age 18 or 23 if in school
3. Medical - Unlimited injuries and diseases.
4. Rehabilitation - Usually will have limits

Worker's Compensation polices can only be canceled for non-payment of

premium; however, companies of course may choose to not renew a policy. Not
eligible for the coverage would be domestic servants, industrial home workers,
and casual workers. Agricultural workers (farm) must be covered if they earn
$1,200 a year or work more than 30 days.

Other states' insurance coverage applies only if listed in the declarations.

Premium is based on each $100 of remuneration, gross wages, i.e., clerical

40 cents per $100 of income; logging $45 per $100 of income.

Under section #2 Liability, the employee gives up his right to sue the
employer, but the employee's spouse or next of kin does not.

Coverages under Section #2

1. Damages claimed by a third party.

2. Care and loss of service.

3. Consequential injury to a spouse or relative of the injured worker.

4. Actions brought against the insured in a capacity other than as employer.

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 The basic limits are $100,000 per accident for bodily injury, $100,000 for
disease per accident and $500,000 aggregate annually for disease. Higher limits
may be purchased.

Long Shore and Harbor Workers compensation plan pays benefits for
employees injured while loading or unloading vessels. It does not pay for injuries
to the captain or crew members.

FELA - Federal Employers Liability Act is for railroad workers.

Jones Act - For captain and crew members.

FECA - Federal Employees Compensation Act - For civilian employees of the

U.S. Government.

Workers Compensation Second Injury Fund is to encourage employers to

hire handicapped individuals. The employer is the insured.

There are Mandatory Postings for PA Employers. Employers must post certain
notices at the work site so employees have access to information about
applicable Labor Laws. You should get on www.DLI.PA.GOV. Click on Mandatory

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Notices. There have been questions on the exam concerning what postings are
required. These Notices which include Workers’ Compensation Insurance
Postings should be posted where all employees are able to easily read them

Workers’ Compensation Benefits:

Medical Benefits Unlimited benefits - no dollar limit or time

limit on covered expenses.
Income Benefits: Benefits begin after a 7-day waiting period.
Total Disability Retroactive benefits are paid if the disability
continues beyond 2 weeks. The benefit
amount is 66 2/3% of the average weekly
wages, subject to maximum and minimum
weekly limits.
Partial Disability Benefits restore a percentage of lost wages,
Scheduled Injury Schedule benefits are provided for specific
permanent partial disabilities (loss of limb,
sight, etc.) in addition to any temporary total
disability benefits. The scheduled benefit is a
percentage of the statewide average weekly
wage, and it is guaranteed for a fixed number
of weeks.
Death Benefits Up to $3,000 is provided as a burial allowance.
Income benefits are provided for surviving
spouse and/or children. The benefit for a
spouse plus children is 66 2/3% of the
decreased worker's wages - for a spouse, only
it is 51%, and for one child, it is 32% subject to
weekly maximum and minimum limits. A
spouse is payment upon remarriage. Children
receive benefits until age 8 (age 23 if in
school)

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 Rehabilitation Benefits Necessary vocational rehabilitation benefits
are provided. The state Board of
Rehabilitation may pay living expenses and
may provide rehabilitation, training, and
services.

Miscellaneous commercial insurance covers a number of different type policies

or coverages.

Medical Professional Liability provides coverage for malpractice due to

bodily injuries arising out of the rendering or failure to render professional
services.

Lawyer Professional Liability Policies are usually written as errors and omissions
policies. Lawyers could be sued for losing a court case, giving bad financial advice,
writing bad contracts, or when they serve in a fiduciary capacity to handle trusts
and estates. These policies afford coverage only when they are performing their
profession.

Ocean Marine provides hull coverage for various vessels and may also
cover another vessel - this is known as the running down clause. It would also
provide coverage to protect and indemnify for injuries to passengers, visitors,
crew members, and damage to its cargo. Perils covered are windstorm, running
aground. Jettison is covered when you voluntarily throw cargo overboard. When
cargo is jettisoned, the loss will be apportioned to all property owners on a
general average basis.

Inchmaree Clause as used in ocean marine holds crew members liable for
negligence. Barratry refers to illegal acts committed willfully by the ship's master
or crew members.
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 Perils OF the Sea - Losses to the ship caused by windstorms, waves, running
aground, sinking, etc.

Perils ON the Sea - Losses that occur on board the ship during a voyage -
fire, etc.

Aviation Insurance is usually written in pools or associations. Most common

coverages are: bodily injury, liability, property damage liability, and medical
payments.

Also, hull coverage and physical damage. Bodily injury is usually written on 2
forms:

Passengers and excluding passengers.

Fidelity Bonds guarantee the honesty of employees. Surety Bonds

guarantee that specific obligations will be performed. There are 3 parties to a
surety bond.

1. Principal - The one who performs the guaranteed obligation.

2. Obligee - The party for whom the obligations is undertaken.
3. Surety -The company providing the bond and guaranteeing the obligations
of the principal to the obligee.

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 SUPPLEMENT PROPERTY AND CASUALTY

Speculative Risk is where you could gain or lose. Insurance is written as pure risk.

All admitted or authorized insurers make up the Pennsylvania Guarantee

Association.

Its purpose is to protect the public against insurance companies' insolvencies.

Insurers that pool their underwriting are known as associations.

McCarran Ferguson Act assures state regulation of the insurance industry.

Lloyds of London is a self-funded syndicated group.

An insurer located in Europe is an alien insurer.

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When reinsurance is ceded on a case by case basis, this is known as facultative

reinsurance.

When both parties agree to all aspects of a contract, it is a contract of utmost

good faith.

When a policy is terminated, both the insured and mortgagee must be notified.

You may carry 24 hours of excess continuing education credits into the next

licensing period.

If a non-resident producer can write a policy in this state, he must pay a local

producer a countersignature fee. These fees are regulated by the State Insurance

Department. A Producer who is licensed, resides and has a business outside of

this State is a Non-Resident Producer.

Redlining is a discriminatory underwriting practice.

When risk is reduced, it is known as a mitigation of risk.

Insurers that can transact directly with no public, without producers, are direct

writers.

A hold harmless agreement is an example of risk sharing.

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Punitive damages are sued to punish the defendant as they are a form of gross

negligence. Willfully committing a tort is also gross negligence.

Joisted Masonry is where the walls are non-combustible and the roof and floor

are combustible.

To have coverage for pipes freezing while unoccupied, the dwelling must have

been heated.

Increased cost of construction endorsement would provide coverage to bring a

dwelling up to code specifications.

The National Flood Program does not provide unlimited coverage.

An automobile towing another automobile would not fit the description of an

auto.

Permanently installed telephones in an auto would provide theft coverage under

other than collision.

Commercial auto policies would provide coverage for pollutants that spill out of
the auto during maintenance.

Hired auto under a commercial auto policy would be identified by a symbol 8.

A released bill of lading would state the maximum amount of liability that a
common carrier could be held liable for.

Motor Carrier Act of 1980 would not apply to injured employees.

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Liability policies do not cover communicable diseases passed on by the insured.

General liability policies do not cover communicable diseases passed on by the

insured.

Boiler and machinery policies do not provide coverage if damaged while testing.

Glass policies do not cover neon glass tubing.

The Pennsylvania Insurance Services Consultation Exemption Act is part of the risk
management process. It exempts producers and employees from liability for
their inspection and loss control services.

When an underwriter uses his/her past experiences to determine the rate, this is
judgment rating.

Contract bonds are written for several years.

Fine arts policies would not cover pewter ware.

The discovery period in a commercial crime policy is one year.

Burglary and robbery would not be covered under Form 1 leases of Safe Deposit
Boxes.

Farm Personal Property, Coverage C would include contents of the farm dwelling,
i.e., clothing, refrigerator, furniture, etc. In addition, the personal auto would be
farm personal property.

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Coverage E Scheduled Farm Personal Property would include livestock, grain, and
feed, etc. It would not cover growing crops. Also ducks are not considered as
livestock.

The Mobile Agriculture and Equipment Form would provide coverage for farm
equipment that must be carried by another vehicle to a job site. It would provide
protection if damage is caused to the equipment by another vehicle or aircraft.
Animals being transported to an auction would not be covered if carried by a
common carrier.

Collision with farm animals on the farm is covered if the insured is not operating
the vehicle that does the damage.

Workers Compensation - the employer is the insured. If the employer does not
maintain a safe work place, or hires someone in violation of the law, the
employer must pay if the employees are injured.

An employer may purchase a miscellaneous surety bond in lieu of Workers

Compensation.

Bankruptcy never affects insurance and all policies would remain in effect.

The Insurance Commissioner is appointed by the Governor with approval from

the Senate. It is a 4 year position.

The State Legislators write and change insurance laws.

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If you have a formal work place safety committee in your place, your Workers
Compensation policy could receive a reduced rate (5% credit).

The Protective Safeguards Endorsement, when added to a business owner's

policy, requires that the insured notify the insurer within 48 hours if the sprinkler
system is not working.

To restore an individual to where the individual was prior to the loss is the
principal of indemnity.

A counteroffer voids the original offer.

Agency contracts are between the insurer and the licensed producer. The insurer
is also considered to be the principal.

A-Frames are the least desirable structure for an Insurer to insure.

The producer and applicant must both sign the replacement authorization when
policies are replaced.

If a client does not fully understand the entire transaction when replacing a
policy, this could offer the potential for an Errors and Omission (E&O) Liability
Claim.

To be classified as fire proof material, the material must be fire proof for two
hours.

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When additional livestock are purchased, they would be covered and would not
have to be reported to the insurer for 30 days.

A new employee's Workers Compensation Benefits, if disabled prior to having

worked one quarter (13 weeks), would be based on the gross weekly salary the
employer is paying the employees.

A property is considered Vacant when there are no inhabitants.

Discrimination is allowed as long as it is applied equally and not based on Race or

Religion.

IMPORTANT THINGS TO REMEMBER CONCERNING INSURANCE REGULATION

Regulations Numbers to Know

18 Years-Producers must be at least 18 years old, be able to read and write in

English, pass the test, pay the fees, fill out a written application, maintain a
business or residence in this state. Pennsylvania would be their HOME STATE.

24 HOURS- Of Pre-Licensing containing 3 hours of Ethics to obtain an initial

Resident Producer License. No Pre-Licensing is required to add an additional Line
of Authority. Pre-Licensing certificates are good for one year. Once the certificate
is issued you have one year to take the State Exam using that certificate.

1 Year- Passing examination results are valid for one year. Once you pass the
State Exam, you have one year to apply for a License.

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24 Hours- 24 Hours of Continuing Education is required every two years. 24
excess credit hours and be forwarded to the next Licensing Period. To obtain the
CE, you can do an online course, attend a class or teach a class.

2 Years- Producers License will be renewed every two years.

180 Days - A Temporary License can be grated for 180 days. No examination
needed. Individuals cannot sell new policies but CAN service existing contracts.
An Estate of a deceased Producer or a Spouse of a deceased Producer can apply
for a Temporary License.

1 Year- If a Producer does not complete their CE or pay Renewal Fees, their
License will be terminated. It is a Voluntary Termination. If the License Lapses,
they have ONE Year to reinstate without having to test as a New Candidate.
Deployed Active Military have longer. There is a $165.00 lapse license fee.

90 Days-A Non-Resident Producer has 90 days to apply for a Resident License

after moving to Pennsylvania or opening an office in this state.

30 days-An Insurer must notify the Department within 30 days after terminating a
Producer’s Appointment.

PRODUCER’S REGULATIONS:

30 Days- Producers should report an address change, felony charge, felony

conviction or any action taken against a Producer, including judgements within
30 days.

30 Days- Producers have 30 days to respond to a Department’s Inquiry.

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15 Days- Producers have 15 days to correct a violation if they fail to respond to
the Department’s Inquiry within 30 days.

INSURANCE DEPARTMENT’S REGULATIONS:

5 Years-The Commissioner Must examine the records of each Insurer once every
5 years. They CAN examine the records as often as they deem necessary.

10 Days- The Department must give a 10 day notice of a hearing for anyone
suspected of prohibited acts.

30 Days-There is a 30 day waiting period before any Premium Rates filed by an

Insurer go into effect. If the Rates have not been approved, a hearing will be held
within 10 days of the Insurer being notified. The Commissioner has 30 days to
approve or disapprove any changes to a form.

FINES, PENALTIES AND FEES

$55.00-There is a $55.00 License fee for a Resident Insurance Producer and a

$110.00 fee for a Non Resident Producer. The Non-Resident Producer MUST be
Licensed in their HOME State and complete their CE requirement in their Home
State.

$1,000.00- There is a $1,000.00 civil penalty for each Unintentional violation

concerning Unfair Methods of Competition. This is not exceed $10,000.00 in 6
months.

$5,000.00-There is a $5,000.00 civil penalty for each Intentional violation

concerning Unfair Methods of Competition not to exceed $50,000.00 in 6 months.

$100.00-There is a $100.00 a day fine for failure to correct any violation.

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3 TIMES A YEAR-The National Association of Insurance Commissioners is the U.S.
standard-setting and regulatory support organization created and governed by
the chief insurance regulators for the 50 States, the District of Columbia and the
five U.S. territories. The NAIC meet 3 times a year. To organize the efforts of the
NAIC, the U.S. has been divided into 4 zones.

The Pennsylvania Insurance Commissioner is appointed by the Governor with

approval from the Senate for a 4 Year Term. The Commissioner is responsible for
overseeing the Licensing of Companies, Agencies, Agents/Producers and Brokers.
This includes approving the Pre-Licensing and Continuing Education. The
Commissioner monitors and regulates claim handling, approves or disapproves
Premium rates, form changes and enforces the Insurance Laws. They MUST
examine each Insurer every 5 Years. They can also request to see a Producer’s
business records.

The Commissioner can issue fines, suspend or revoke a license. They can deny
renewal. They CANNOT sentence a Producer to Jail or ask them to do Community
Service. They Cannot Prosecute a Producer or ask them to Post a Bond. They can
contact the Attorney General. They cannot ask an Insurer to fire a Producer.

DO Not Call List-The Federal Trade Commission oversees the National Do Not Call
Registry. The National Do Not Call Registry does NOT expire. The PA Office of the
Attorney General oversees the State Do Not Call List. You may still receive calls
from Charities, Debt Collectors, Political Organizations, Informational calls and
Telephone Surveys.

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GRAMM-LEACH-BILEY ACT (GLBA) also known as the Financial Services
Modernization Act of 1999. This Act repealed part of the Glass-Steagall Act of
1993, removing barriers in the market among banking, security & insurance
companies that prohibited any one institution acting as any combination of an
investment bank, commercial bank and an insurance company.

With the passage of the GLBA, commercial banks, investment banks, securities
firms and insurance companies were allowed to consolidate. It failed to give the
SEC or any other agency the authority to regulate large investment bank holdings.

This was signed into Law by President Clinton.

Terrorism Risk Insurance Program: On November 26 2002, the President signed

into law the Terrorism Risk Insurance Act of 2002. TRIA created a temporary
federal program that provides for a transparent system of shared public and
private compensation for certain insured losses resulting from a certified act of
terrorism. The Secretary of the Treasury administers the program with the
assistance of the Federal Insurance Office.

On December 22, 2005, the President signed into law the Terrorism Risk
Insurance Extension Act of 2005. TRIEA extended TRIP through December 31,
2007.

On December 26, 2007, the President signed into law the Terrorism Risk
Insurance Program Reauthorization Act of 2007 (TRIPRA) which further extended
TRIP through December 31, 2014.

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On January 12, 2015, the President signed into law the Terrorism Risk Insurance
Program Reauthorization Act of 2015, which amends the expiration date of TRIP
to December 21, 2020.

On December 7, 2016, Treasury published an interim final rule regarding the

process of certifying an act of terrorism. On December 21, 2016, an additional
final rule was published as part of Treasury’s implementation of changes to the
Program required by TRIPRA 2015.

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