RPLU 2: Module 1: Fundamentals of Liability Insurance Exam Study Guide.
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Course
RPLU
Institution
RPLU
RPLU 2: Module 1: Fundamentals of
Liability Insurance Exam Study Guide.
Absolute Liability (Strict Liability) - answerA type of liability that is imposed when a person or entity is
held accountable for a loss without regard to fault
Accident Year - answerA twelve-month accounting period (usuall...
RPLU 2: Module 1: Fundamentals of
Liability Insurance Exam Study Guide.
Absolute Liability (Strict Liability) - answer✔A type of liability that is imposed when a person or entity is
held accountable for a loss without regard to fault
Accident Year - answer✔A twelve-month accounting period (usually a calendar year) in which losses are
allocated back to the accounting period in which the losses occurred, regardless of when the losses were
actually reported, booked, or paid
Actuarial Science - answer✔A field of study that uses mathematical and statistical models and tools to
assess risk and develop rates
Actuary - answer✔A professional statistician who has specialized academic training and who calculates
the risks and probabilities of future events, estimates claim costs based on past experience, and uses
projections to establish insurance rates
Admitted Market - answer✔The insurance market that offers coverage from insurance companies
licensed by the state to conduct business. Subject to state regulation, unlike a non-admitted market.
Agent - answer✔An insurance professional who sells insurance on behalf of the insurance company the
agent represents. Typically authorized to bind coverage.
Alien Insurer - answer✔An insurance company that is chartered by a foreign, non-U.S. company and that
must meet certain state requirements to conduct business within the state.
Assumed Liability - answer✔A type of liability that arises from a contractual agreement as opposed to
liability that arises from common or statutory law.
Bind - answer✔The authority to make insurance temporarily effective until the insurer can issue the
policy
Breach - answer✔A violation of a legal duty that is one of four criteria for proving negligence
Broker - answer✔An insurance professional who solicits and negotiates insurance on the insured's
behalf and who typically is not authorized to bind coverage.
Calendar Year - answer✔A calendar year accounting period in which losses are allocated back to the
accounting period in which the losses occurred, regardless of when the losses were actually reported,
booked, or paid.
Capacity - answer✔The largest amount that an insurer is willing and able to underwrite, either on an
individual account or in the aggregate.
Captive Organization - answer✔An organization that is formed as a subsidiary of a parent organization
to serve the parent organization's insurance needs and that is an alternative form of risk retention
Carrier - answer✔An insurance company
Case Law - answer✔The body of court decisions (federal and state) that has shaped insurance law and
policies.
Case Reserve - answer✔An amount that the claims professional estimates is needed to cover the loss
and corresponding loss adjustment expenses for a specific claim.
Cash Flow Underwriting - answer✔A practice in which an insurance company continues to put new
business on the books despite incurring an operating loss because it believes that it still may make an
overall profit through investment income
Cause - answer✔An act that directly results in an injury and that is one of four criteria required to prove
negligence
Ceding Company - answer✔An insurance company that writes the insurance policy that being reinsured
Claims Professional - answer✔An insurance professional who investigates claims and determines if
losses are covered by an insurer's policy and, if covered, who establishes case reserves, manages
litigation, and settles claims.
Combined Ratio - answer✔Loss ratio + expense ratio = combined ratio
Commercial General Liability Insurance (CGL) - answer✔A type of insurance that provides coverage for
commercial risks resulting in losses arising out of business operations involving bodily injury and
property damage, except those specifically excluded, including professional services.
Compensatory Damages - answer✔The costs for losses that are awarded to claimants and that include
both special damages (specific, out-of-pocket costs) and general damages (costs for pain and suffering).
Conditions - answer✔A section of an insurance policy that establishes the responsibilities the insured
must meet for coverage to apply that may limit or quality an insurer's promises.
Contract Law - answer✔The type of law that protects the rights of those who have entered into oral of
written legal agreements and that addresses contractual breaches, which are considered civil wrongs.
Coverage - answer✔The protection against loss as defined in the policy
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