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Policy Provisions - 6 Categories
- declarations: unique information on the insured; list of forms
- definitions: words with special meaning in policy
- insuring agreements: promise to make payment
- conditions: qualifications on promise to make payment
- exclusions: limitations on promise to make payment
- miscellaneous provisions: wide variety of provisions that may alter policy
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Policy Provisions - Declarations
- provides specific details about the insured and the subject of the insurance
- important facts include policy number, dates, name of insurer, agent, insured, ...
- endorsements may contain info similar to declarations
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Policy Provisions - Definitions
- usually mark those words in boldface or quotations marks on the policy body
- definitions aim to remove ambiguity
- undefined words rules: (1) everyday words are given ordinary meaning (2) technical words = technical meaning (3) legal meaning = legal (4) consideration given to local, cultural, trade-usage meaning
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Policy Provisions - Insuring Agreements
- one per coverage provided
- eg: personal auto includes 4 agreements (liability, medical payments, uninsured motorist, damage to your auto)
- comprehensive insuring agreement: provide broad grant of unrestricted coverage clarified and narrowed by exclusions, definitions, provisions. Called special-form coverage in commercial property insurance. Covers against all cause of loss not excluded
- limited insuring agreement: restrict coverage to certain causes of loss or certain situations. Called named peril in commercial property insurance
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Policy Provisions - Exclusions
- state what the insurer does not intend to cover
- can be limiting or clarifying coverage
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6 purposes of exclusions
- eliminate coverage for uninsurable loss exposures (war, criminal acts by insured, wear and tear)
- assist in managing moral and morale hazards
- reduce likelihood of coverage duplications
- eliminate coverages not needed by the typical insured
- eliminate coverages requiring special treatment
- assist in keeping premiums reasonable (mechanical breakdown, tire damage)
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Policy Provisions - Conditions
- paying premium
- reporting losses promptly
- provide appropriate documentation for losses
- cooperate in any legal proceedings
- refrain from jeopardizing an insurer's rights to recover from third party
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