640 Class 3 Outline

640 Class 3 Outline - Class 3 Outline Business Finance 640...

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Class 3 Outline Business Finance 640 - Insurance and Risk Winter Quarter, 2008 1 At the outset of this class, we will conclude our discussion of important legal principles that are reflected in insurance contracts. For ease of reference, material contained in the second half of the Class 2 outline is repeated at the beginning of this outline as well. Following this, we will look at the construction of the insurance contract. We will discuss the basic parts of the insurance contract: declaration page, definitions, insuring agreement, exclusions, conditions and miscellaneous provisions. In our discussion of the insuring agreement, we will review the important difference between a named-perils policy and an “all risks” policy in property insurance. We will also discuss the definition of an insured, endorsements and riders to policies, different types of deductibles, coinsurance and other insurance provisions. In examining coinsurance, we will see how coinsurance differs in property insurance from coinsurance in health insurance. Our discussion of other insurance provisions will include a look at pro-rata liability, contribution by equal shares, and primary and excess insurance. I. Fundamental Legal Principles A. Principle of Indemnity 1. Insurer agrees to pay no more than the actual amount of loss; the insured should not profit if a loss occurs 2. Actual cash value rule a. Replacement cost less depreciation b. Fair market value c. Broad evidence rule 3. Exceptions to the principle of indemnity a. Valued policy b. Valued policy laws c. Replacement cost insurance d. Life insurance B. Principle of Insurable Interest 1. Insured stands to lose financially if a loss occurs. 2. Purposes of an insurable interest To prevent gambling To reduce moral hazard To measure the amount of the insured’s loss in property insurance 3. Examples of an insurable interest 4. Time that an insurable interest must be met C. Principle of Subrogation 1. Insurer is entitled to recover from a negligent third party any loss payments made to the
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This note was uploaded on 07/17/2008 for the course BUSFIN 640 taught by Professor Krempley during the Winter '08 term at Ohio State.

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640 Class 3 Outline - Class 3 Outline Business Finance 640...

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