9.24 Property and Liability insurance Principles An important difference between named perils and open perils coverage inwolves the burden of proof: + Wid ainamed perils policy, for coverage to apply; the insured mast prove that the loss was caused by a covered cause of loss. + Wich an open perils policy, ifa loss to covered property occurs, iti ini- tially assumed that coverage applies. However, coverage may be denied if the insurer can prove that the loss was caused by an excluded cause of loss In the first case, the burden of proof is on the insured: in the second, itis on the insurer: 1 Reality check Effect of Burden of Proot When Determining Coverage By shifting the burden of proot, an open peris policy can provide an important advantage Wo an insured who suffers @ property loss by an unknown cause. For | example, suppose that after a flood strikes a community, the insured's wrought-iron | patio tumitue is missing. Assure also that the patio funiture ts clearly covered | property tis possible thatthe furitare was swept away in the lod, but iis also |) possi that the tumitre was Stolen following the Rood. ia named perils policy | covered het but not lod, the Insured would fave to prove tat the property had been | stolen, Under as pion prs poy, the insurer would have to pay the aim feven it | the poioy enced flood losses) unless the insiwer could prove that the property was | | swept away inthe ood. creo, Personal and commercial propery insurance policies on buildings nd sonal ‘ea are available with three different levels of coverage: aD Bas a Saeed such as fire and lightning, windstorm, hail, aiferat, vehicle damage, ot and civil commotion, explosion, smoke, vandalism, sprinkler leakage, sinkhole collapse, and volea- nic action Beond fom aR scr Vs objects; weight of snow, ice, of sleet nani} acciental leakage of water froma plumbing system. thus providing broader coverage than even the broad form. For example, special form does not exclude theft by persons ather thin employees and therefore covers this cause of loss. Special form policies were once described as prowid- DO... AD--O-O--O--O--O- aUt U0 UF Ur Ur rUrUrU Ooo ing “all-risks” coverage, but this term is now less commonly used because it may be misinterpreted to mean that no causes of loss are excluded There are three types of auto physical damage coverage: colli other than collision coverage (or comprehensive coverage), and specified causes of loss coverage. coverage, 7 Reality check Cotsen cowrese Like other property, cars and trucks are subject to fire, theft, vandalism, and other perils. However, the most serious cause of loss to austos is collision. insurance against Collision costs considerably more than insurance against all other auto physical damage peris combined. Colision coverage isnot included with other than colison coverage or specified causes of lass coverage and must be purchased as a separate coverage. (Daoree Excluded Causes of Loss Property insurance policies typically exclude numerous causes of loss. Some this reason, almost all property insurance policies excl losses from catastrophes such as war and nuclear hazard. fe coverage Most policies providing coverage on buildings and personal property at fixed locations exclude coverage for earthquake and flood losses. An earth- quake can be a catastrophe affecting many different properties in the same geographic area at the same time. Flood damage can also be catasttophic. However, floods can sometimes be predicted. For property in lowelying areas near rivers, creeks, or streams, the question is not whether floods will occur, but when. Insurers are generally unwilling to provide coverage for a loss that is certain to oceur Property insurance policies also typically exclude loss from inherent vice and latent defect, as well as wear and tear and other maintenance perils. Such losses are generally uninsurable either because they are certain to occur over time or they are avoidable through regular maintenance and care. Covered Financial Consequences With regard to coverage for financial consequences, property loss lead to a reduction in property value, lost income, and extra expenses. Property Insurance Policies 9.25 Colision coverage Coverage for cect and accidental oss or damage to.a covered auto caused by colsion with anoter object orby overturn, Other than colon (00) coverage Coverage for physical damage toa covered auto resulting trom any cause floss excoptcolision o cause of ss specially excuded. ‘Specified causes of oss coverage Coverage for direct and accidental ss caused by fire, fighting, explosion, ‘hf, windstar, hal, earthquake, food, mischief, vandalism, or os resulting from te sinking, burning, colision or deraiment of a conveyance transporting the covered aut.ARIAT AAAS ARARRAAATIAARA oor $1 million and can be expressed in different ways, such as an each person limit, each occurrence it, or aggregate limit iceeeioe For example, Serene ‘auto policy may provide bodily injury liability coverage with a $100,000 limir for each person and a $300,000 limit for each occurrence, and with a separate limit of $50,000 for each - GERRI 990000 sre ini coer stay injury loss up to ),000, a property damage liability loss up to $300,000, or any combination of bodily injury and property damage arising from a single ‘occurrence up to $300,000. See the exhibit “Examples of Split Limits and Single Limit.” Examples of Split Limits and Single Limit Split Limits Jessica has a personal auto policy with te fllowing spit mits: Boil Injury: ‘= $100,000 each person ‘= $200,000 each occurrence Property Damage: '* $50,000 each océurrence Jessica is lable fora covered auto accident resulting in injuries to Richard, he diver of the other car, and Marcy, his passenger. When the case went to trial, the court awarded. $200,000 in bodily injury damages to Richard and $150,000 to Marcy. In adition, the damage to Richart's car amounted to $10,000, which Jessica was also ordered to pay. Jessica's insurer would pay $110,000 to Richard ($100,000 each person mit for bodily | injury plus $10,000 for property damage) and $100,000 to Marcy (he each person hus, the insurer would pay a total of S210,000 fortis accident (plus Jecsica’s Jessica would have to pay the remaining body Single Limit {if Jessica’s personal auto policy instead had a single imi of $300,000 in iew of ‘the split limits, her insurer would pay atta! of $300,000 to chard and Marcy for both bodily injury and property damage (plus defense costs in the accident. (A determination of exactly how much each party receives would depend on the circumstances ofthis particular claim.) z In this situation, Jessica's insurer would pay more under the single limit poicy than the split its policy, but suc isnot always the case. For example, if three people had ad bodily injury of $150,000 each plus the $10,000 property damage the insurer would | ave pid otf $810,000 under te split iis ply ($10,000 bay nr or ‘each person plus $10,000 property damage); under the single limit poi, the insurer | ‘ould pay only $300,000, the maximum payable for any one occurrence. ry darnages (paaeseo) Insurance Policies 9.35 Each person limit ‘agregate limit The maximum amount ‘an insurer wil pay or all ‘covered loses during the covered poticy period. Each occurence iit The maximum amount an insurer wil pay for all covered lasses from a single ‘occurrence, regards ofthe number of persons inured or the numberof paris claiming property damage Split its Separate iit for bodiy injury and propery damage lability coverage Single tit Asingle tito abit or {he combined total of bsily injury and prover damage ‘rom any one accident or ‘occurrence,