Coverage Analysis & Policy Interpretation Flashcards

What is the primary purpose of the declarations page in an insurance policy?

Answer: To summarize key policy information such as named insured, coverage limits, and effective dates

The declarations page (also called the 'dec page') summarizes the essential facts of the policy, including the named insured, property covered, coverage limits, deductibles, and policy period.

Under the 'efficient proximate cause' doctrine, coverage is determined by which cause?

Answer: The cause that set the chain of events in motion and was the predominant cause of the loss

The efficient proximate cause doctrine holds that coverage is determined by the dominant cause that initiated the unbroken chain of events leading to the loss.

What distinguishes 'replacement cost value' (RCV) from 'actual cash value' (ACV) in property insurance?

Answer: RCV pays the cost to replace damaged property without deducting depreciation, while ACV subtracts depreciation

RCV pays the full cost to repair or replace damaged property with new materials without depreciation, whereas ACV deducts depreciation (age and wear) from the replacement cost.

What is an 'endorsement' in the context of an insurance policy?

Answer: A written document that modifies or adds to the terms of the original policy

An endorsement (also called a rider) is a written form attached to the policy that changes, adds, or removes coverage, and takes precedence over conflicting standard policy language.

Which type of property insurance policy covers only perils specifically named within the policy?

Answer: Named perils policy

A named perils policy only provides coverage for losses caused by perils explicitly listed in the policy, placing the burden on the insured to prove the loss was caused by a covered peril.

In insurance coverage analysis, what does 'concurrent causation' refer to?

Answer: A loss caused by two or more perils acting simultaneously or in sequence, where one is covered and one is excluded

Concurrent causation occurs when a loss results from two or more causes acting together, one of which is covered and one excluded, creating a coverage dispute about whether the loss should be paid.

What is the 'duty to defend' obligation an insurer owes to its policyholder?

Answer: The insurer must provide a legal defense against any claim that potentially falls within policy coverage, even if the claim is ultimately groundless

The duty to defend is broader than the duty to indemnify; the insurer must defend any lawsuit alleging facts that could potentially fall within coverage, regardless of whether the claim has merit.