University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

377

Pages:

2
Author:

bratrochanter

This section addresses further aspects of property insurance, including specific clauses, types of policies, and the Affordable Care Act’s impact on insurance. Key points include: 1. Exclusions and Causation in Property Insurance:  Property insurance policies may exclude certain causes, like mold, regardless of the underlying event. For example, mold resulting from frozen pipes may not be covered if the policy explicitly excludes it, as seen in Shelter Mutual Insurance Co. v. Maples. Courts must often determine which cause—covered or excluded—was the primary cause of damage. 2. Types of Policies: Valued vs. Open:   Valued Policies: Pay the insured the face amount of the policy upon loss, regardless of the property’s market value at the time. Open Policies: Limit payouts to the fair market value of the property at the time of loss, up to the policy limit. This ensures that payouts reflect actual property value. 3. Coinsurance and Pro Rata Clauses:   Coinsurance Clause: Requires insureds to carry coverage equal to a specific percentage (typically 80%) of the property’s value to receive full payment for partial losses. If underinsured, the insurer reduces the payout. Pro Rata Clause: If multiple insurers cover the same property, this clause apportions liability among them to prevent overcompensation to the insured. 4. Insurer’s Right of Subrogation:  After paying for a covered loss, an insurer gains the insured’s right to pursue compensation from third parties responsible for the damage. If the insured releases a liable third party from responsibility, the insurer may be released from its payment obligation to the insured. 5. Duration and Cancellation:  Property insurance policies typically renew automatically but can be canceled by either party. Insurers may face legal limitations on their cancellation rights, requiring notification or specific grounds for termination. 6. Affordable Care Act (ACA):  The ACA introduced reforms like prohibiting denial of coverage for preexisting conditions, banning lifetime benefit caps, and extending dependent coverage to age 26. Its “insurance mandate” requires individuals to have health insurance or face a penalty, aimed at reducing uninsured rates. Legal challenges based on the Commerce Clause questioned Congress’s authority to impose this mandate, leading to significant constitutional debates. Overall, this section highlights the complexities of policy provisions in property insurance, the balancing of insurer and insured interests, and the broader implications of national health insurance reforms like the ACA.