Dec Page

The question of the month deals with reinsurance. Reinsurance is an integral part of the property/casualty insurance industry, but its principles may be confusing to those who do not work directly in this area. However complex reinsurance may appear, it is basically a means by which the exposures of insurers are redistributed to other insurers. An insurer (the primary or ceding company) transfers some or all of its exposures and premium to a reinsurer. The reinsurer, in turn, then agrees to indemnify the ceding company for a predetermined type and amount of loss sustained.

But regardless of its use, reinsurance can raise many questions. For examples, what are the principles behind reinsurance? What do the terms “utmost good faith” and “follow the fortunes” mean? What is the role of the reinsurer if the primary insurer declares insolvency?

And, how do the courts view the relationships between the insured, the primary insurer, and the reinsurer?

For answers to these questions and a thorough examination of reinsurance, link onto the designated article in the Bulletins.

Court cases this month are from Kansas, Nebraska, and Washington . The Kansas case discusses an auto liability case and turns on whether or not the driver of the auto was engaged in garage operations at the time of the accident. The Nebraska case pertains to the effect on underinsured motorist coverage of the insured's failure to give the insurer required notice of a lawsuit that the insured filed against the tortfeasor; questions pertaining to reasonable and prompt notice and any subsequent prejudice to the insurer are addressed by the court. The last case is from an appeals court in Washington State and deals with self-insured retentions (SIRs). Here, the question was whether the insured, who was responsible for SIRs under two separate policies, needed to pay one or both in order to satisfy the SIR requirements.

Questions and Answers

An insured's failure to comply with duties under the policy may result in the voiding of coverage if prejudice is shown. See Failure to Comply with Duties under Policy. A fallen tree limb was likely due to a wind event under the policy. See Tree Limb Fall due to Wind or Other Cause.

Legal representatives of a deceased insured are not required to notify the carrier of the death of the insured. Any mold growing in a hidden area in the insured's home would be covered. See Death of Insured, Mold Damage, and Unoccupancy Question. The insured must take reasonable steps to protect property and prevent further damage after a loss. See Duties of Insured under Farm Policy.

Riggers' Coverage

A new article on the AAIS Riggers' Coverage, IM 7150 06 08 was added this month. The form provides special perils coverage for property of others that contractors agree to lift or move. The coverage is not restricted to a specific job site or location. The property must be in the insured's care, custody, or control for the purpose of rigging or work done in connection with lifting the property. See Riggers Coverage.

Workers Compensation Rules of Monopolistic State Funds

This article outlines, in summary form and on a state-by-state basis, some of the necessary procedures for determining whether workers compensation needs to be purchased in a monopolistic state and how to go about purchasing it. See Workers Compensation Rules of Monopolistic State Funds.

Workers Compensation and Employed Minors

This article discusses the various types of state workers compensation provisions dealing with the employment of underage persons. See Workers Compensation and Employed Minors.