Term
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Definition
A contract comes into existence when the parties to a contract have established all the elements to make it enforceable. If necessary, courts will enforce the terms of the contract.
To be considered valid by a court of law, there must be intent on the part of both parties to enter nto a legal relationship and the insurance contract must posses the following elements:
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Capacity to Contract
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Legal Purposes/Object
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Offer and Acceptance
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Consideration
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Term
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Definition
In order for the contract to be binding, all parties must have the necessary capacity to enter into the contract. Cases where capacity has been deemed insufficient includeL minors, mental incompetents and those who sign a contract while under the influence of drugs or alcohol. An exception to the status of minors and contracts exists in life insurance. For a minor to contract for life insurance, he/she needs to be at least 15 years old. |
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Term
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Definition
| An insurance contract must not be written to cover an illegal activity or immoral purposes. |
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Term
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Definition
| An applicant completes an application for coverage and the insurance company accepts it and returns a policy or binder. If the insurance company issues an altered policy, the altered policy becomes a counter-offer. |
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Term
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Definition
| Something that has value in the eyes of the law in which a promisee receives something in return for a promise. The insured (the promisee) gives the application and premium to the agent and/or company in return for their promise to pay in the future. |
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Term
Legal Interpretations affecting contracts |
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Definition
| If an insured is guilty of a breach of warranty, misrepresentation or concealment, the insurer may not ahve to perform in case of a loss. |
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Term
Ambiguities in a contract of adhesion |
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Definition
| The insurance company is the author of the contract and the insured must accept it "as is." There is unequal bargaining strength between the parties; thereof, any ambiguous language will bring a court decision in favor of the insured. When we say that insurance contracts are adhesion contracts, we mean that one party has greater power over the other party in drafting the contract. The provisions of the contract are prepared by one party, the insurer. The other party, the insured, does not take part in the preparation of the contract. Although the insured may request special provisions or coverages, it is the insurance company that ultimately draws up and issues the policy |
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Term
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Definition
| The doctrine of reasonable expectations states that a policy includes coverages that an average person would reasonably expect it to include, regardless of what the policy actually provides |
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Term
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Definition
| The contract must restore the insured to the financial position previously held before the loss. This is also know as indemnification |
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Term
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Definition
| Both parties bargain in good faith |
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Term
Representations/misrepresentations |
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Definition
| Misrepresentations are an untrue statement or statements made by the insured, usally at the time when apllication is made. For example, the insrued may state on an apllication for auto insurance that they have not been involved in any automobile accidents or moving violations when, in fact, they have. Some misrepresentations are material because the insurer may have declined the application for insurance had the information been known. Other misstatements may not be material to the acceptance or rejection of the risk |
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Term
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Definition
| Something that becomes part of the contract and is a statement that is considered to be a guarantee |
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Term
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Definition
| The failure of the insured to reveal relevant facts known to the insured when applying for insurance. Perhaps the insured is concealing a criminal record of arson and if this information is known by the insurer the coverage would be denied. |
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Term
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Definition
| An intentional act designed to deceive and induce another party to part with something of value. May occur before or after a policy has been issued. Fraud may also involve misrepresentation and/or concealment but not all acts of misrepresentation or concealment are acts of fraud. |
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Term
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Definition
| The voluntary or intentional relinquishment of a known right. An example would be an insured who fails to report a claim in a timely manner. He/she could give up their rights of coverage under the policy. Another example would be when a policy provides for the insurer's right to demand an appraisal of the damaged property within a specified period of time. If the insurer fails to demand the appraisal, the right is waived. There are 2 types of waivers; expressed and implied. An expresed waiver occurs when the insurer or its representatives purposely gives up a known right under the contract. An implied waiver may result from some kind of neglect on the part of teh agent or adjuster |
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Term
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Definition
| If someone intentionally or unintentionally creates the impression that a certain fact exists, an innocent party relies on that impression and is damaged as a result, teh guilty party may be legally prohibited (estopped) from asserting that the fact does not exist. For example, an agent has advised an insured that a certain peril is covered under their Homeowner policy when it is actually excluded. The insured suffers a loss from the excluded peril. In most cases the loss must be paid because the insured relied on the statements of the agent. |
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Term
Insurance Principles and Concepts
Insurable interest |
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Definition
| Before a person can obtain an insurance policy, they must have an insurable interest. A "person" is deemed to have an insurable interest in property when he has a lawful, substantial economic interest in the perservation of that property. Ther term "person" includes an idividual, company, insurer, association, organization, reciprocal, partnership or any other legal entity. |
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Term
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Definition
Any Condition that increases the possibility for a loss. The underlying cause of a loss may result from the physical hazards, moral hazards or morale hazards.
Physical Hazard- Any hazard arising frmo the material, structural, or operation features of the risk itself apart from the persons owning or managing it.
Moral Hazard- a condition of morals or habits that increases the probability of a loss from a peril.
Morale Hazard- Hazard arising out of an insured's indifference to loss because of teh existence of insurance |
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Term
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Definition
For a liability policy to respond the insured must be guilty of "negligence" and coverage must be granted by the policy. Intentional acts are never covered by liability policies.
Negligence is defined as teh lack of reasonable care that is required to protect others and/or their property from the unreasonable chance of harm. This could also be a failure to act or not to act as a reasonable person unde3r teh same set of circumstances.
Note: Gross negligence is defined as willfull and wanton negligence or misconduct without the slightest degree of care. |
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Term
Defense Against Negligence
Contributory Negligence |
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Definition
| Common Law defense against negligence that states that if an individual contributes to his or her own loss in any way, then another connot be held liable for the loss. |
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Term
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Definition
| Law that allows an injured party to collect from another party for a loss, even when the injured party contributed to his or her own loss. Damages are reduced to the extent of the injured party's negligence. This is the defense used in most states. |
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Term
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Definition
| In some states, a doctrine known as assumption of risk may apply. Assumption of risk applies when a person knowingly exposes himself or herself to danger or injury. When a person assumes this risk, he or she may be prevented from recovering from a negligent party. This doctrine is frequently associated with injuries incurred by spectators at sporting events. |
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Term
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Definition
| An independent action that breaks teh chain of causation and sets in motion a new chain of events. When this occurs, the intervening cause becoms the proximate cause of loss. This can serve as common law defense. |
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Term
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Definition
| States have enacted laws as to when certain types of lawsuits must be filed. |
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Term
Damages
Compensatory- Special vs. General |
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Definition
Special damages are intended to reimburse the insured for all their expenses incurred as a result of an incident, such as funeral and medical expenses, lost income, and property repair or replacement costs.
Special damages are usually awarded in suits when property damage has been caused since that damage is material and can be measured.
In comparison, general damages are sometimes awarded to indemnify the injured party for some losses that cannot be measured in a material way, such as pain and suffering.
If the claimant has sustained bodily injury, general damages can also be awarded to financially compensate the injured person for his or her pain and suffering.
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Term
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Definition
| Often awarded by the court and intended to punish the defendant. An example would be "gross misconduct" and the court wants to make an example of the defendant to discourage others from behaving in a like manner. In some states, the insurance company is prevented from paying punitive damages because payment by the insurance company would fail to penalize the defendant and defeats the purpose of the penalty imposed by the court. |
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Term
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Definition
Imposed by law on those participating in certain activities that are considered especially hazardous. Individuals involved in such operations may be held liable for the damages of another, even though the individual was not negligent. Absolute liability is the most frequently applied to activities involving:
- Dangerous Materials
- Hazardous operations
- Dangerous animals
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Term
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Definition
| Absolute liability is aka strict liability. SL is usually used in reference to products liability |
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Term
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Definition
Times when a person may be held responsible for the negligent acts of another person. Aka imputed liability.
A common form of VL involves the relationship between an employer and an employee. Often, the negligence of an employee can be imputed (charged) to an employer because the employer has control over the employee. For example, a pizza delivery driver negligently causes an accident that injures a pedestrian. The employer becomes responsible for the negligence because the employee was drivnig a company vehicle and the accident occurred on company time. |
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Term
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Definition
| State the perils that are to be insured against |
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Term
Named Peril vs. Open Peril |
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Definition
| A named peril form lists the specific perils to be covered in the policy. The open peril form does not list the perils, but provides broader coverage. This means that all perils are coverd except the perils listed in the exclusions section of the policy |
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Term
Direct Loss vs. Indirect Loss |
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Definition
A direct loss is a loss that is a direct consequence of a particular peril. Fire damage to an apartment building is an example of a direct loss.
An indirect loss is one that is a result of a covered peril but is not caused directly and immediately by that peril. Loss of an apartment building by fire is a direct loss. The loss of rental income as a result of the fire is an indirect loss. |
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Term
Blanket vs. Specific insurance |
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Definition
Blanket is one limit that applies to both building and contents. With this, usually more than one location is insured under a single limit. Blanket insurance is more often written on contents coverage with one blanket limit applying to more than one building or location. This assists the insured in avoiding underinsurance at a particular location in case of loss.
Specific insurance is a separate limit per insured item applies. Example: A separate limit on teh building and/or one for the contents. |
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Term
Basic Types of Construction |
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Definition
| Refers frame, masonry, metal, brick veneer, fire resistive, etc. The better the construction the lower the fire rate. |
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Term
Loss Evaluation Methods
Actual Cash Value |
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Definition
Methods used to determine the value of the loss
ACV: the cost of replacement minus depreciation |
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Term
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Definition
| the current cost to purchase new, the item that was lost, without depreciation. |
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Term
Functional replacement cost |
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Definition
| As reasonably close to the replacement of the lost or damaged item as possible |
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Term
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Definition
| Usually antiques claims are adjusted on the basis of market value- the price that the market will support. |
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Term
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Definition
| The value to be insured is agreed to by the insured and the insurer. This method is used when the true value cannot accurately be determined. |
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Term
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Definition
| An agreed amount of insurance which is shown on the policy and that will be paid in the event of a total loss regardless of the actual value of the property. |
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Term
Policy Structure
Declarations |
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Definition
| Includes the identity and address of the named insured, the policy term or period, the amount of insurance or limits of liability, the policy premium, and any applicable deductables. The declarations will also include either a property description or a schedule of coverage parts, and a list of any endorsements. |
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Term
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Definition
| Describes teh covered perils, or risks assumed, or nature of coverage, or makes some reference to the contractual agreement between insurer and insured. In package policies each different coverage form includes its own insuring agreement. |
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Term
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Definition
| Set provisions, rules of conduct, duties, and obligations for the parties. A number of common insurance conditions describe such things as the policy period and territory, the insured's obligation to provide proof of loss, how settlements are handled when other insurance is involved, and the right of each party to cancel the policy. Depending on the kind of policy, conditions may be found in a "conditions" section or scattered throughout the policy forms. |
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Term
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Definition
| May describe property, perils, hazards, or losses arising from specific causes that are not coved by the policy. Exclusions may be found in an "Exclusions" section of a policy or may be scattered throughout the policy. In some cases, exclusions are built into the wording of insuring agreements and the definitions of perils |
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Term
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Definition
| Define important terms used in the policy language. Some policies list definitions in a distinct section having that title. Some policies include definitions in the "Conditions" section, while others spread definitons throughout policy sections. |
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Term
Additional/Supplementary Coverage |
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Definition
| Time element property insurance that pays for expenses in excess of normal operating expenses that an organization incurs to continue operations while its property is being repaired or replaced after having been damaged by a covered cause of loss. Extra expense coverage can be purchased in addition to or instead of business income coverage, depending on the needs of the organization. |
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Term
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Definition
| Some policies also contain endorsements that are used to add, delete, or change any of the policy parts Endorsements may alter the content of the declarations and insuring agreement, and they may contain conditions, exclusions, and definitions. |
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Term
Common Policy Provisions
Insureds- named, first named, additional |
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Definition
The person(s) protected under an insurance contract.
Named:
Any person, firm, or organization, or any of its members specifically designated by name as an insured(s) in an insurance policy, as distinguished from others who, although unnamed, fall within the policy definition of an "insured."
First Named:
The person or entity listed first on the policy declarations page as an insured. This primary or first named insured is granted certain rights and responsibilities that do not apply to the policy's other named insureds. Examples of additional rights of first named insureds are the receipt of cancellation notice and return premiums. Unique responsibilities include the notice of loss requirements and premium payment obligations.
Additional:
A person or organization not automatically included as an insured under an insurance policy, but for whom insured status is arranged, usually by endorsement. A named insured's impetus for providing additional insured status to others may be a desire to protect the other party because of a close relationship with that party (e.g., employees or members of an insured club) or to comply with a contractual agreement requiring the named insured to do so (e.g., customers or owners of property leased by the named insured). |
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Term
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Definition
| The term of duration of the policy. The policy period encompasses the time between the exact hour and date of policy inception and the hour and date of expiration. |
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Term
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Definition
| Specifies the geographic area in which the property must be damaged (inland marine policies) or where injury or damage must occur (liability policies) for coverage to apply. |
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Term
Cancelation and Nonrenewal |
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Definition
All property and casualty policies contain cancellation and nonrenewal provisions. A cancellation occurs before a policy has expired, in otehr words "mid-term." A nonrenewal notice is sent prior to the expiration date of the policy advising the insured that the policy will not be renewed. Most states have insurance laws that govern the permissible reason for both cancellation and nonrenewal and the time-frame in which notice must be given to the insured in advance of these actions.
If the insurer cancels a policy, the unearned policy premium will be returned to the insured on a pro-rata basis. If the insured cancels the policy, the premium is returned on a short-rate basis. There is a small penalty when the policy is cancelled by the insured. The insured can cancel a policy at any time whereas the insurer is bound by the legal cancellation provisions in any given state and by the policy provisions. |
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Term
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Definition
| The self-insured part of an insured loss. Usually applies to first party claims such as property claims or auto physical damage claims. The insured must bear this loss. |
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Term
Other Insurance
Nonconcurrency |
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Definition
| Situation that existes when the same property is covered by more than one policy, but the policies are not idenctical as to the extent of the coverage provided. |
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Term
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Definition
Primary: in cases where more than one policy is in force, the primary policy pays first.
Excess: An insurance policy that pays benefits only when coverage under other applicable insurance policies have become exhausted. |
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Term
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Definition
| A term describing all forms of "proportional" reinsurance. Under pro rata reinsurance, the reinsurer shares losses in the same proportion as it shares premiums and policy amounts. Quota share and surplus share are the two major types of pro rata reinsurance. |
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Term
Contribution by Equal Shares |
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Definition
| Type of "other insurance" condition found in liability policies. It calls for all insurers to contribute equally up to the limit of the policy having the smallest limit, whereupon that company stops paying. The other companies share in teh remainder of the loss until teh loss is paid in full or until all policy limits are exhausted. |
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Term
Limits of Liability
Per Occurence and per Person |
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Definition
The most that will be paid by the insurer in the event of a covered loss under an insurance policy.
In NH, Minimum limits are:
$25,000 for bodily injury or death to any one person
$50,000 for bodily injury or death to two ore more persons in any one accident
$25,000 for damage to the property of others in any one accident.
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Term
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Definition
the limit stated in the policy represents the total amount for all claims paid during the policy period. the aggregate limit provision is found in the general liability and garage liability policies. One the aggregate has been met the insured is without coverage.
For example: if the insured had an aggregate limit of $1 Million, and a per accident limit of $500K, after two claims of $500K are paid, the insured has exhausted the coverage until the policy is renewed. |
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Term
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Definition
| expressed by two figures. There may be a limit representing the maximum payable for each person injered per occurrence for bodily injury and another limit applicable to teh claims of all persons injured in the accident for occurence |
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Term
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Definition
| Bodily injury liability and property damage liability expressed as a single sum of coverage. |
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Term
Restoration/Nonreduction of limits |
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Definition
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Term
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Definition
| A property insurance provision that penalizes the insured's loss recovery if the limit of insurance purchased by the insured is not at least equal to a specified percentage (commonly 80 percent) of the value of the insured property. A business income coverage coinsurance provision penalizes the insured's loss recovery if the business income limit of insurance is not at least equal to a specified percentage of the business income that would have been earned during the 12 month policy period. The coinsurance provision specifies that the insured will recover no more than the following: the amount of the loss multiplied by the ratio of the amount of insurance purchased (the limit of insurance) to the amount of insurance required (the value of the property on the date of loss multiplied by the coinsurance percentage), less the deductible. |
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Term
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Definition
| Property insurance policy provision found in most commercial property policies that severely restrict coverage in connection with buildings that have been vacant for a specified number of days (typically, 60 days). Some forms also restrict coverage in connection with buildings that have been unoccupied for a specified number of days. |
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Term
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Definition
| A transfer of legal rights under, or interest in, an insurance policy to another party. In most instances, the assignment of such rights can only be effected with the written consent of the insurer. |
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Term
Insurer Provisions
Liberalization |
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Definition
| A provision that extends to persons already insured under a particular policy the broadened coverage features that may be introduced in subsequent editions of that policy form. In umbrella liability insurance, a clause specifying that coverage will be as broad as that provided by the primary liability policies. |
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Term
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Definition
A term used to describe an insurer's obligation to provide an insured with defense to claims made under a liability insurance policy. As a general rule, an insured need only establish that there is potential for coverage under a policy to give rise to the insurer's duty to defend. Therefore, the duty to defend may exist even where coverage is in doubt and ultimately does not apply. Implicit in this rule is the principle that an insurer's duty to defend an insured is broader than its duty to indemnify. Moreover, an insurer may owe a duty to defend its insured against a claim in which ultimately no damages are awarded, and any doubt as to whether the facts support a duty to defend is usually resolved in the insured's favor.
With respect to directors and officers and employment practices liability insurance policies, policies containing explicit duty to defend wording obligate an insurer to assume control of the claim defense process, including selecting counsel and paying legal bills. In contrast, non-duty to defend (or duty to pay) policies require only that the insurer reimburse the insured for funds expended by the insured in defending a claim. |
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Term
Third Party Provisions
Standard Mortgage Clause |
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Definition
| A property insurance provision granting special protection for the interest of a mortgagee named in the policy, in effect setting up a separate contract between the insurer and the mortgagee. It establishes that loss to mortgaged property is payable to the mortgagee named in the policy and promises advance written notice to the mortgagee of policy cancellation. It also grants continuing coverage for the benefit of the mortgagee in the event that the policy is voided by some act of the insured. Without the protection of the mortgagee clause, financial institutions would be unlikely to loan the large amounts of money necessary to purchase homes, office buildings, or factories. |
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Term
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Definition
| An insurance provision authorizing payment in the event of loss to a person or entity other than the named insured having an insurable interest in the covered property. Under a typical loss payable clause, the insurer is under no obligation to make payment to the loss payee if payment for a loss can be denied to the insured. |
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Term
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Definition
| A provision in an inland marine form that states that any insurance a person has on property in the possession of a bailee will not be for the direct or indirect benefit of any carrier or other bailee for hire. A bailee is someone who has been entrusted with someone else's property, usually for the purpose of service, repair or storage (e.g., dry cleaners, television repair shops, garages and public parking lots). |
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Term
NH Laws, Regulations, and required provisions
NH Valued Policy Law |
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Definition
If a building insured for a specific amount, whether under a separate policy or under a policy also covering other buildings, is totally destroyed by fire or lightning without criminal fault on the part of the insured, the full sum for which such building is insured must be taken as the value of the insured's interest in the building and be paid as a loss claim, unless overinsurance was fraudulently obtained.
If an insured building is only partially destroyed by fire or lightning, the insured will be entitled to the actual loss sustained, up to but not exceeding the applicable limit of insurance written. These rules do not prohibit the use of coinsurance. |
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Term
NH Insurance Guaranty Association |
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Definition
Protects policyholders and claimants against financial loss and excessive delays in payment in the event of insurer insolvencies. It applies to all kinds of direct insurance except life, health, title, surety, credit, mortgage guaranty, and ocean marine insurance.
The Association performs its functions under a plan of operations and exercises its powers through a board of directors. All insurers authorized to transact any of the kidns of insurance in NH coverd by the association must be member insurers. Assessments are made against member insurers to cover the cost of claims paid and expenses incurred by the Association. For the purpose of administration and assessments, the Association is divided into the following three accounts:
- Worker's Compensation account
- Automobile insurance account
- Account for all other types of insurance covered by the Association
The Association is obligated to pay covered claims, but the onligations of the Association are limited by law. A covered claims means a net unpaid claim of an inslovent insurer which is in excess of $50 and which arises out of and is within the coverage provided by the policy of the insolvent insurer. The maximum obligations of the Association are subject to the following rules:
- Workers compensation claims, which require statutory benefits, are covered in full; and
- The Association's obligation is limited to $300,000 for all other covered claims
With regards to the Association, the commissioner shall:
- forward to the association a copy of any complaint seeking an order of liquidation with a finding of insolvency against a member company at the same time such complaint is filed with a court of competent jurisdiction.
- Notify the associatino of the existence of an inslovent insurer not later than 3 days after he receives notice of the determination of the inslovency
- Upon request of the board of directors, provide the association with a statement of the net direct written premiums of each member insurer.
With regards to theh Association, the commissiner may:
- Require that the association notify the insureds of the insolvent insurer and any other interested parties of the determination of insolvency and of their rights under this chapter. Such notification shall be by mail at their last known address, where available, but if sufficient info for notification by mail is not available, notice by publication in a newspaper of general circulation shall be sufficient
- Suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in the state of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the commissioner may levy a fine on any member insurer which fails to pay an assessment and shall not exceed 5 percent of the unpaid assessment per month, except that no fine shall be less than $100 per month.
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Term
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Definition
| Except as otherwise provided, no policy or contract of fire insurance, except reinsurance policies, may be made, issued or delivered by any insurer or by any agent or representative, on any property in NH unless it conforms to all the provisions of the NH Standard Fire Policy. The Commissioner may, after a hearing, revoke or suspend the license of any insurer using any other form of fire policy. |
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Term
Cancellation and Nonrenewal
Residential Risks |
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Definition
This chapter shall apply to policies of insurance other than automobile insurance, workers' compensation insurance, and excess insurance on risks located or residents in this state which insure any of the following contingencies:
- Loss of or damage to real property which is used solely for residential purposes, which is owner occupied, and which consists of not more than 4 dwelling units.
- Loss of or damage to personal property owned by natural persons except personal property used in the conduct of a commercial or industrial enterprise.
- Legal liability of a natural person or persons for loss of, damage to, or injury to, persons or property, but not including policies primarily insuring risks arising from the conduct of a commercial or industrial enterprise.
Prohibited Reasons for Cancellation
No insurer shall cancel or refuse to write or renew a policy of insurance insuring against any of the contingencies set forth in RSA 417-B:1 solely because of the age, residence, race, color, creed, national origin, ancestry, marital status, or lawful occupation, including the military service, of anyone who is or seeks to become insured or solely because another insurer has refused to write a policy, or has cancelled or has refused to renew an existing policy in which that person was the named insured.
Permitted Grounds for Cancellation
No insurer, after a policy has been in effect for 90 days, or if a policy is a renewal, effective immediately, shall cancel a policy except for one or more of the following reasons:
- Nonpayment of premium, including nonpayment of any additional premiums, calculated in accordance with the current rating manual of the insurer, justified by a physical change in the insured property or a change in its occupancy or use.
- Conviction of the named insured of a crime having as one of its necessary elements an act increasing any hazard insured against.
- Discovery of fraud or material misrepresentation by the named insured in pursuing a claim under the policy.
Discovery of grossly negligent acts or omissions by the insured substantially increasing any of the hazards insured against.
- Physical changes in the insured property which result in the property becoming uninsurable.
- Specific request of the insured.
Nonrenewal Based on Single Claim Prohibited
The nonrenewal of a homeowner's insurance policy is prohibited if the nonrenewal is based solely on the insured having filed a single valid claim within any one previous or current policy term. For policies that contain no fixed expiration date or that are issued for other than annual periods a term shall be considered each 12 month anniversary from the date of policy issuance.
Notice of Cancellation or Nonrenewal
No cancellation or refusal to renew by an insurer of a policy of insurance insuring against any of the contingencies set forth in RSA 417-B:1 shall be effective unless the insurer physically (not electronically) delivers or mails, to the named insured at the address shown in the policy a written notice of the cancellation or refusal to renew. Such notice shall:
- State the date, not less than 45 days after the date of such mailing or delivery on which such cancellation or refusal to renew shall become effective, except that such effective date may be 10 days from the date of mailing or delivery:
- When the policy is being cancelled or not renewed for nonpayment of premium; or
- When the policy is being cancelled within 90 days of its effective date provided such policy is not a renewal.
- State the specific reason or reasons of the insurer for cancellation or refusal to renew or be accompanied by a statement that upon written request of the named insured, mailed or delivered to the insurer not less than 10 days prior to the effective date of cancellation or refusal to renew, the insurer will specify the reason or reasons for such cancellation, or refusal to renew. The insurer shall supply such information within 5 days of receipt by it of such request.
- Any policy written for a term of less than one year shall be considered as if written for a term of one year. Any policy written for a term longer than one year, or any policy with no fixed expiration date, shall be considered as if written for successive policy periods or terms of one year.
Penalties and Records
- Failure by an insurer to comply with any section of this chapter, or rules, regulations and orders issued pursuant thereto shall subject an insurer to a fine not exceeding $500 in the discretion of the insurance commissioner, or suspension or revocation of such insurer's license, or both.
- If any provisions or clause of this chapter or application thereof to any person or situation is held invalid, such invalidity shall not affect other provisions or applications of the chapter which can be given effect without the invalid provisions or applications, and to this end the provisions of this chapter are declared to be severable.
- The insurance commissioner may require that each insurer shall maintain records of the numbers of cancellations and refusals to write or renew policies and the reasons therefor and shall supply to the insurance commissioner such information as he may request.
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Term
Cancellation and Nonrenewal
Commerical Risks |
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Definition
Grounds for Cancellation
- A notice of cancellation of a policy, to which RSA 417-C:2 applies, shall be effective only if it is based on one or more of the following reasons:
- Nonpayment of a premium; or
- Fraud or material misrepresentation affecting the policy or in the presentation of a claim thereunder, or violation of any of the terms or conditions of the policy; or
- Substantial increase in hazard; provided that cancellation for this reason shall be effective only after prior approval of the commissioner.
- This section shall not apply to any policy or coverage which has been in effect less than 60 days at the time notice of cancellation is mailed or delivered by the insurer unless it is a renewal policy.
- This section shall not apply to nonrenewal.
Notice of Cancellation
- No notice of cancellation shall be effective unless mailed or physically (not electronically) delivered by the insurer to the named insureds at least 60 days prior to the effective date of cancellation; provided, however, that where cancellation is for nonpayment of premium or substantial increase in hazard, at least 10 days' notice of cancellation shall be given. In all instances, the reason or reasons for cancellation shall accompany or be included in the notice of cancellation. An insurer shall not be held liable in any claim or suit for damages arising solely from the insurer's compliance with the requirement that the reason for cancellation be specified.
- Notice of cancellation under this section shall be by certified mail, except that in the case of cancellation for nonpayment of premium, notice shall be by certified mail or certificate of mailing.
- The commissioner shall have the authority to waive any provision of paragraph I upon the written request of an insurer specifying the reasons therefor.
- This section shall not apply to nonrenewal.
Notice of Nonrenwal or Major Premium Increase
No insurer shall increase renewal premiums more than 25 percent for a 12-month renewal term or refuse to renew a policy at its expiration or anniversary if written for a term of more than one year unless such insurer or its agent shall mail or physically (not electronically) deliver to the named insureds at the address shown in the policy, advance notice of the proposed renewal premium or its intention not to renew. The notice shall be at least 60 days in advance of the policy's scheduled expiration or anniversary date. This section shall not apply if the insurer has manifested its willingness to renew with a premium increase of no more than 25 percent, or in case of nonpayment of premium, or if the insured fails to pay any advance premium required by the insurer for renewal. However, notwithstanding the failure of an insurer to comply with this section, any coverage shall terminate on the effective date of any other coverage acquired by the insured to the extent the acquired coverage substantially duplicates coverages of the renewal. Renewal of a policy shall not constitute a waiver or estoppel with respect to grounds for cancellation which existed before the effective date of such renewal.
Renewal and Premium Notice
- Any renewal premium increase in excess of 25 percent is considered a nonrenewal and controlled by the provisions of RSA 417-C:3.
- Any renewal premium increase of 25 percent or less shall not be implemented until the insured has had a minimum of 30 days' notice of the renewal premium. If all or any part of the 30 day notice is not in advance of the expiration or anniversary date, renewal coverage shall be provided, on a pro rata basis, at the rates or premiums in effect under the expiring policy until the 30 days' notice requirement has been fulfilled. This paragraph shall not apply if the insured accepts the renewal policy.
- Development of renewal premium for the purpose of determining the percentage of change from expiring premium shall be based on the same coverages, conditions, and ratable exposures as those contained in the expiring policy.
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Term
Concealment, Misrepresentation or Fraud |
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Definition
A person is guilty of insurance fraud, if, such person knowingly and with intent to injure, defraud or deceive any insurer, conceals or causes to be concealed from any insurer a material statement, or presents or causes to be presented to any insurer, or prepares with knowledge or belief that it will be so presented to any insurer, or prepares with knowledge or belief that it will be so presented, any written or oral statement including computer-generated documents, knowing that such statement contains any false, incomplete, or misleading information which is material to:
- An application for the issuance of any insurance policy
- The rating of any insurance policy
- a claim for payment or benefit pursuant to any insurance policy
- Premiums on any insurance policy
- Payments made in accordance with the terms of any insurance policy
A person is guildy as an accomplice to insurance fraud, if, with a purpose to injure, defraud pr deceive any insurer, the person assists, abets, solicits or conspires with another to commit insurance fraud
Insurance fraud is:
- A Class A felony if the Value of the fraudulent portion of the claim for payment or other benefit pursuant to an insurance policy is more than $1000
- A class B felony if the value of the fraudulent portion of the claim for the payment or other benefit pursuant to an insurance policy is more than $500, but no more than $1000
- A misdemeanor in all other cases
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Term
Terrorism Risk Insurance Act of 2002 and Extension act of 2005 |
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Definition
Prior to 9/11, terrorism coverage was routinely included in coverages. Losses from 9/11 attacks estimated at $40-$50 billion with insurers covering most of these losses. As a result, primary insurers drastically raised their premiums or eliminated terrorism coverage completely; often in both pre-existing and new policies, and reinsurance companies stopped providing terrorism insurance to primary insurers. More than $15 Billion in real estate transactions were put on hold or cancelled because owners and investors could not obtain terrorism insurance.
In response to said problem, Congress passed the TRIA of 2002. This establishes a temporary fed. program through which the fed. gov. shares the insurance industry losses resulting from acts of terrorism. The act effectively ensures that terrorism insurance will be available, permitting construction projects, property acquisitions, and other real estate transactions to move forward.
The act originally established a program that expired Dec. 31, 2005, however the TRIA Extension act passed in late 2005., which extended the program to Dec. 31, 2007. In essence the program compels insurers to offer terrorism coverage and, in the event of an attack, will provide fed. funds to assist insurers in paying claims. When offering coverage, insurers are required to notify policyholders of the additional premium that will be required for terrorism coverage.
TRIA covers the following lines of insurance:
- Commerical property insurance
- Commercial casualty insurance (including excess lines)
- Workers compensation insurance; and
- Surety Coverages
TRIA excludes the following lines of Insurance:
- Crop-hail
- Livestock
- Private Mortgage guaranty
- Financial Guaranty
- Medical malpractice
- Life and health
- flood
- reinsurance and retrocession Insurance
"Act of Terrorism: means any act that is Certified by the Secretary of the Treasury, in concurrence with the Secretary of State, and the Attorney General of the US:
- To be an act of terrorism;
- To be a violent act or an act that is dangerous to:
- Human Life
- Property, or
- Infrastructure
- To have resulted in damage within the US, or outside the US in teh case of:
- An air carrier or a US flag vessel on which US income tax is paid and whose insurance coverage is subject to regulation in the US, regardless of where the loss occurs, or at the premises of any US mission;
- The premises of a US mission; and
- To have been committed by an individual or individuals acting on behalf of any foreign person or foreign interest, as part of an effort to influence the policy or affect the conduct of the US government by coercion
No act shall be certified by the Secretary as an act of terrorism if:
- The act is committed as part of teh course of a war declared by the Congress. except that this clause shall not apply with respect to any coverage for workes compensation; or
- Property and casualty insurance losses resulting from the act, in the aggregate, do not exceed $5 million.
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