AINS 21 (page 3 of 4)

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Property and Liability Insurance Principles (5th ed.): one of several courses in the Associate in General Insurance (AINS®) designation program

Assignment 7: Risk Management

Question Answer
Pure riskA chance of loss or no loss, but no chance of gain.
Speculative riskA chance of loss, no loss, or gain.
AvoidanceA risk control technique that involves ceasing or never undertaking an activity so that the possibility of a future loss occuring from that activity is eliminated.
RetentionA risk financing technique by which losses are retained by generating funds within the organization to pay for the losses.

Assignment 8: Loss Exposures

Question Answer
FixtureAny personal property affixed to real property in such a way as to become part of the real property.
MoneyCurrency, coins, bank notes, and sometimes traveler's checks, credit card slips, and money orders held for sale to the public.
SecuritiesWritten instruments representing either money or other property, such as stocks and bonds.
AutoAs defined in commercial general liability and auto forms, a land motor vehicle, trailer, or semitrailer designed for travel on public roads, including attached machinery or equipment; or any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged.
Mobile equipmentVarious types of vehicles designed for use principally off public roads, such as bulldozers and cranes.
Recreational vehicleA vehicle used for sports and recreational activities, such as a dune buggy, all-terrain vehicle, or dirt bike.
PerilThe cause of a loss.


Question Answer
MortgageeA lender in a mortgage arrangement, such as a bank or another financing institution.
MortgagorThe person or organization that borrows money from a mortgagee to finance the purchase of real property.
BaileeThe party temporarily possessing the personal property in a bailment.
Legal liabilityThe legally enforceable obligation of a person or an organization to pay a sum of money (called damages) to another person or organization
Constitutional lawThe Constitution itself and all the decisions of the Supreme Court that involve the Constitution.
StatuteA written law passed by a legislative body at either the federal or state level.
Statutory lawThe formal laws, or statutes, enacted by federal, state, or local legislative bodies.


Question Answer
Common law (case law)Laws that develop out of court decisions in particular cases and establish precedents for future cases.
Criminal lawThe branch of the law that imposes penalties for wrongs against society.
Civil lawA classification of law that applies to legal matters not governed by criminal law and that protects rights and provides remedies for breaches of duties owed to others.
TortA wrongful act or an omission, other than a crime or a breach of contract, that invades a legally protected right.
Tort lawThe branch of civil law that deals with civil wrongs other than breaches of contract.
NegligenceThe failure to exercise the degree of care that a reasonable person in a similar situation would exercise to avoid harming others.


Question Answer
Proximate causeA cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would not have happened.
TortfeasorA person or an organization that has committed a tort.
Vicarious liabilityA legal responsibility that occurs when one party is held liable for the actions of a subordinate or an associate because of the relationship between the two parties.
Intentional tortA tort committed by a person who foresees (or should be able to foresee) that his or her act will harm another person.
AssaultThe threat of force against another person that creates a well-founded fear of imminent harmful or offensive contact.
BatteryIntentional harmful or offensive physical contact with another person without legal justification.


Question Answer
DefamationA false written or oral statement that harms another’s reputation.
SlanderA defamatory statement expressed by speech.
LibelA defamatory statement expressed in a writing.
False arrestThe seizure or forcible restraint of a person without legal authority.
Invasion of privacyAn encroachment on another person’s right to be left alone.
Strict liability (absolute liability)Liability imposed by a court or by a statute in the absence of fault when harm results from activities or conditions that are extremely dangerous, unnatural, ultrahazardous, extraordinary, abnormal, or inappropriate.


Question Answer
Hold-harmless agreement (or indemnity agreement)A contractual provision that obligates one of the parties to assume the legal liability of another party.
WarrantyA written or an oral statement in a contract that certain facts are true.
Statutory liabilityLegal liability imposed by a specific statute or law.
Personnel loss exposureA condition that presents the possibility of loss caused by a person's death, disability, retirement, or resignation that deprives an organization of the person's special skill or knowledge that the organization cannot readily replace.
Key employeeAn employee whose loss to a firm through death or disability before retirement would have economic effects on the company.
DisabilityThe inability (because of impairment) of a person to meet his or her personal, social, or occupational demands; other activities of daily living; or statutory or other legal requirements.