Study guide
2.5 Common Property Policy Conditions and Clauses
Alaska Property & Casualty Insurance State
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1 Standalone Coverage Map
Standalone Coverage Map
2 Introduction: Alaska Property & Casualty Insurance Exam Overview
Alaska Property & Casualty Exam Overview
3 National Portion: Insurance Fundamentals
1.1 Risk, Hazards, Perils, and the Law of Large Numbers 1.2 Insurable Interest, Indemnity, and Other Insurance Principles 1.3 Insurance Contract Law and Elements 1.4 Policy Structure: Declarations, Insuring Agreement, Conditions, Exclusions 1.5 Parties, Agents vs. Brokers, and Authority
4 National Portion: Property Insurance Concepts
2.1 Causes of Loss / Named-Peril vs. Open-Peril 2.2 Valuation: ACV, Replacement Cost, and Functional Value 2.3 Coinsurance and the Coinsurance Formula 2.4 Deductibles, Limits, and Loss Settlement 2.5 Common Property Policy Conditions and Clauses
5 National Portion: Dwelling Policies (DP)
3.1 Dwelling Policy Forms DP-1, DP-2, DP-3 3.2 Dwelling Coverages A-E and Other Coverages 3.3 Dwelling Perils, Conditions, and Endorsements 3.4 Mobile Home and Specialized Dwelling Coverage
6 National Portion: Homeowners Policies - Forms & Section I
Homeowners Forms HO-2 through HO-8 and Eligibility Section I Coverages A-D and Additional Coverages Section I Perils Insured Against and Exclusions Replacement Cost vs. ACV and Loss Settlement in Homeowners
7 National Portion: Homeowners Policies - Section II & Endorsements
Section II Coverages E (Liability) and F (Medical Payments) Homeowners Conditions and Duties After Loss Common Homeowners Endorsements
8 National Portion: Personal Auto Policy - Liability & Injury
6.1 Personal Auto Policy Structure and Eligibility 6.2 Part A Liability and Supplementary Payments 6.3 Part B Medical Payments 6.4 Part C Uninsured/Underinsured Motorists
9 National Portion: Personal Auto Policy - Physical Damage & Duties
7.1 Part D Coverage for Damage to Your Auto 7.2 Exclusions and Part E Duties After an Accident 7.3 Part F General Provisions, Endorsements, and No-Fault Concepts
10 National Portion: Liability Insurance Concepts
8.1 Negligence, Torts, and Legal Liability 8.2 Defenses, Damages, and Vicarious Liability 8.3 Occurrence vs. Claims-Made Triggers 8.4 Bodily Injury, Property Damage, and Personal/Advertising Injury
11 National Portion: Commercial Property Insurance
9.1 Commercial Package Policy Structure and Common Policy Conditions 9.2 Building and Personal Property Coverage Form (BPP) 9.3 Causes of Loss Forms (Basic, Broad, Special) 9.4 Business Income and Extra Expense 9.5 Commercial Property Endorsements and the BOP
12 National Portion: Commercial General Liability - Coverages
10.1 CGL Coverage A: Bodily Injury and Property Damage Liability 10.2 CGL Coverage B: Personal and Advertising Injury, Coverage C: Medical Payments 10.3 Who Is an Insured and Supplementary Payments
13 National Portion: Commercial General Liability - Limits, Triggers & Exclusions
11.1 CGL Limits of Insurance and Aggregates 11.2 Occurrence vs. Claims-Made CGL and Retroactive Dates 11.3 Key CGL Exclusions and Endorsements
14 National Portion: Commercial Auto Insurance
12.1 Business Auto Coverage Form and Covered Auto Symbols 12.2 Commercial Auto Liability and Physical Damage 12.3 Motor Carrier / Trucking and MCS-90 12.4 Garage Coverage Form and Garagekeepers 12.5 Commercial Auto Endorsements
15 National Portion: Workers Compensation
13.1 Workers Compensation Statutory Background and Benefits 13.2 Part One (Workers Comp) and Part Two (Employers Liability) 13.3 Premium Basis, Experience Modification, and Classification 13.4 Other States, USL&H, and Federal Acts 13.5 Workers Comp Exclusions and Endorsements
16 National Portion: Other Commercial Lines - BOP, Crime & Marine
14.1 Businessowners Policy (BOP) in Depth 14.2 Crime and Fidelity Coverage 14.3 Inland Marine and Nationwide Marine Definition 14.4 Ocean Marine Coverages (Hull, Cargo, Freight, P&I)
17 National Portion: Other Commercial Lines - Specialty & Professional
15.1 Farm and Agricultural Coverage 15.2 Commercial Umbrella and Excess Liability 15.3 Professional Liability and Errors & Omissions 15.4 Directors & Officers and Employment Practices Liability
18 National Portion: Other Commercial Lines - Surety, Flood & Specialty
16.1 Surety and Fidelity Bonds 16.2 National Flood Insurance Program (NFIP) 16.3 Cyber, Aviation, and Other Specialty Lines
19 National Portion: Insurance Regulation & Market Conduct
17.1 State Regulation, Licensing, and the McCarran-Ferguson Act 17.2 Rates, Forms, Solvency, and Guaranty Associations 17.3 Producer Authority, Fiduciary Duty, and Company Operations
20 National Portion: Ethics & Unfair Trade Practices
18.1 Unfair Trade Practices and Unfair Claims Settlement 18.2 Producer Ethics, Errors & Omissions Exposure, and Fiduciary Conduct 18.3 Privacy, Fraud, and Consumer Protection
21 Chapter 1: Alaska P&C Insurance Regulation & Licensing
1.1 Alaska Division of Insurance 1.2 Alaska P&C Producer Licensing Requirements 1.3 Alaska Producer Duties and Responsibilities
22 Chapter 2: Alaska Property Insurance
2.1 Alaska Homeowners Insurance 2.2 Alaska Property Insurance Policy Provisions
23 Chapter 3: Alaska Auto & Casualty Insurance
3.1 Alaska Auto Insurance Requirements 3.2 Alaska Commercial Liability Insurance
24 Chapter 4: Alaska Ethics & Professional Conduct
4.1 Alaska Ethical Standards for Insurance Producers 4.2 Alaska Privacy Laws and Regulatory Compliance
2.5 Common Property Policy Conditions and Clauses
Key Takeaways Explain This Topic AI
After a loss the insured must give prompt notice, protect property, submit a sworn proof of loss (typically within 60 days), and cooperate.
Subrogation lets the insurer recover from the at-fault third party after paying, and the insured must not impair that right.
Appraisal resolves disputes over the amount of loss only — never coverage disputes.
The mortgagee clause protects the lender even when the insured's own act voids coverage; the insured cannot abandon property to the insurer.
Vacancy beyond 60 consecutive days bars several perils and reduces other covered payments by 15%.
Last updated: June 2026
Conditions Govern the Bargain
Conditions are the rules that govern how the policy operates — the duties, rights, and limitations binding both parties. They are neither the insuring agreement nor the exclusions; they are the operational "fine print" that determines whether and how a valid claim gets paid. The national exam tests insured duties after a loss, valuation and payment options, subrogation, and the major clauses found in the ISO Commercial Property Conditions (CP 00 90) and the homeowners forms.
Duties of the Insured After a Loss
The insured must, after a loss:
Give prompt notice to the insurer (and to police for theft).
Protect property from further damage (mitigate) and keep records of those expenses.
Provide a sworn proof of loss , usually within 60 days of the insurer's request.
Cooperate , exhibit the damaged property, produce records, and submit to an examination under oath if requested.
Failure to perform these duties can void coverage for that claim. The insurer in turn must investigate, then pay or deny within the statutory timeframes set by each state's claims-practices laws.
Key Operating Clauses
- Clause What it does
- Insuring agreement Core promise to pay covered loss
- Subrogation Insurer takes insured's rights vs. wrongdoer
- Salvage Insurer takes title to paid-for property
- No abandonment Insured cannot abandon property to insurer
- Appraisal Settles disputes over loss amount
- Pair-or-set Pays the loss in value to the whole set
- Mortgagee clause Protects lender even if insured voids cover
The appraisal condition deserves detail: when the parties agree a loss is covered but disagree on the amount , each hires a competent, impartial appraiser; the two appraisers select an umpire ; and agreement by any two of the three sets the loss amount. Appraisal never decides whether coverage exists.
Cancellation and Nonrenewal
Most states require advance written notice — commonly 10 days for nonpayment of premium and 30 days for other reasons (state law controls exact figures). If the insurer cancels mid-term, the unearned premium is returned pro rata . If the insured cancels, older forms used a short-rate return (a small penalty), though most modern policies now refund pro rata. Nonrenewal ends coverage at the natural expiration and likewise requires advance notice.
Vacancy and Occupancy
The vacancy clause is a frequent trap. Under commercial property, if a building is vacant beyond 60 consecutive days before a loss, the insurer (1) will not pay for vandalism, sprinkler leakage, glass breakage, water damage, theft, or attempted theft, and (2) reduces all other covered loss payments by 15% . A building under active construction is not considered vacant.
Assignment, Liberalization, and Other Insurance
Assignment — the policy cannot be transferred to another party without the insurer's written consent (the carrier underwrote this insured).
Liberalization — if the insurer broadens coverage at no extra premium during the policy term, the broader terms apply automatically to in-force policies.
Other insurance — apportions overlapping coverage (pro rata, excess, or equal shares; see 2.4) to preserve indemnity.
Common Traps
Subrogation lets the insurer recover from the at-fault party after paying — the insured must not impair that right (no post-loss waivers).
Appraisal resolves disputes over amount , never over whether coverage exists.
The insured may not abandon damaged property to the insurer.
The mortgagee is protected even when the insured's act (e.g., arson) voids the insured's own recovery.
Vacancy beyond 60 days cuts payment 15% and bars several perils entirely.
Concealment, Misrepresentation, and Fraud
A final condition voids the entire policy if the insured, before or after a loss , intentionally conceals or misrepresents a material fact, engages in fraudulent conduct , or makes false statements about the insurance or a claim. "Material" means the fact would have changed the insurer's decision to issue the policy or its terms.
Unlike a missed post-loss duty, which may void only that claim, proven fraud or material misrepresentation can rescind coverage altogether. This is why honest, complete applications and claims documentation protect the insured's own recovery — and why producers must accurately record the information a client provides on the application.
The Mortgage Clause and Loss Payable
Property policies contain conditions protecting lenders. The standard (union) mortgage clause gives the mortgagee independent rights: it is paid to the extent of its interest even if the insured's own act voids coverage (e.g., the owner commits arson), it receives separate notice of cancellation (commonly 10 days ), and it may pay overdue premium to keep coverage in force. A weaker open (simple) loss-payable clause gives the lender no greater rights than the insured — if the insured's act voids the policy, the lender collects nothing.
Trap: under the standard mortgage clause, the innocent mortgagee is protected from the insured's misconduct; under an open loss-payable clause it is not.
Other-Insurance, Appraisal, and Subrogation Conditions
Several conditions resolve disputes and overlaps:
- Condition What it does
- Pro-rata other insurance Each policy pays its share of a loss in proportion to its limit
Appraisal When insurer and insured agree a loss is covered but disagree on amount , each names an appraiser; the two pick an umpire; any two agreeing set the value
- Subrogation The insurer assumes the insured's recovery rights against a third party after payment
- Abandonment The insured may not abandon damaged property to the insurer
- Vacancy Coverage for certain perils is suspended/reduced once a building is vacant beyond a set period
Worked example: after a fire, the insurer agrees the kitchen is covered but offers $30,000 while the insured demands $50,000. This is a dispute over amount , not coverage, so the appraisal condition — not a lawsuit — is the proper mechanism. Trap: appraisal resolves amount , never coverage .