Liability concepts are covered in the national Casualty Insurance Basics guide. Arizona's Casualty exam adds state rules on binders and representations, commercial liability cancellation, UM/UIM limits for umbrella policies, and the guaranty fund structure.

Contract rules

• Binders may be oral or written and last until the policy is issued, or 90 days, whichever is shorter (A.R.S. 20-1120).
• Application statements are representations, not warranties. Recovery is barred only for fraudulent or material misstatements, or ones that would have changed the insurer's decision (20-1109).
• The casualty line covers legal liability, including for death, injury, disability, or property damage (20-286(A)(4)).

Commercial liability cancellation (20-1671 and following)

• After 60 days, a commercial liability policy may be cancelled only for grounds stated in the policy and permitted by law. Examples are nonpayment, fraud, a substantial change in risk, loss of reinsurance initiated by the reinsurer, and acts that materially increase the hazard.
• Notice goes to the named insured and the agent: 45 days, or 10 days for nonpayment.
• Nonrenewal notice is 45 days.
• Renewal changes such as premium increases or reduced limits need 30 days' notice.

Umbrella and excess policies

Insurers need not offer UM/UIM coverage with umbrella, excess, or general commercial liability policies that don't provide primary auto coverage (20-259.01(L)).

Guaranty fund for liability claims (20-661 to 20-673)

• The Arizona Property and Casualty Insurance Guaranty Fund has automobile, workers' compensation, and all other accounts.
• It pays the part of a covered claim over $100 and under $300,000, except workers' compensation.
• Claimants must first exhaust their own policies.
• Surplus lines insurers are not members.

Common exam traps

• Commercial cancellation notice goes to the insured and the agent.
• Umbrella and excess policies don't require a UM/UIM offer.
• The guaranty fund has a $100 floor and a $300,000 cap.