Property insurance principles are covered in the national Property Insurance Basics guide: perils, direct and indirect loss, actual cash value versus replacement cost, coinsurance, and the parties to a loss. Montana's state portion of the Property exam tests how the Montana Code defines property and marine insurance and how it measures a property loss. Those rules are in Title 33, chapter 1 (definitions) and chapter 24 (property insurance).

What Montana calls property insurance

• Property insurance covers real or personal property, on land, on water or in the air, against loss or damage from any hazard. It includes consequential loss, such as lost income after a fire closes a business. It doesn't include noncontractual legal liability, which is casualty insurance (Mont. Code Ann. 33-1-210).
• Wet marine and transportation insurance covers vessels and hulls, marine builder's risks, freight, and goods in import or export (33-1-209(3)).
• Marine protection and indemnity insurance covers liability from owning or operating a vessel on ocean or inland waters (33-1-209(2)).
• Montana's Nationwide Inland Marine Definition Act (33-1-221 to 33-1-229) lists what an inland marine policy may cover.
  • Instrumentalities of transportation and communication include:
    • bridges, piers and pipelines
    • power and telephone lines
    • radio and TV towers and antennas
    • outdoor cranes
  • Personal property floaters include:
    • personal effects, furs and jewelry
    • fine arts
    • stamp and coin collections
    • musical instruments, but not radios or televisions
    • wedding presents for up to 90 days after the wedding
  • An inland marine policy may not cover:
    • furniture, fixtures and building improvements
    • merchandise being manufactured on the manufacturer's premises
    • money or securities in a safe or on premises, except in transit
• Ocean marine and foreign trade policies are exempt from Montana's form filing requirement (33-1-501(9)).

How Montana measures a property loss

• General measure (33-24-101). Unless the policy states a value or a more favorable basis, fire insurance pays the cost, when the loss is payable, to replace the property in its condition at the time of the loss. A valuation the insured gave that is fraudulent in fact lets the insurer rescind the contract.
• Valued policy law (33-24-102):
  • For a total loss of insured buildings and improvements not caused by the insured's criminal act, the amount of insurance in the policy is conclusively the property's value and the measure of damages.
  • The insurer may still raise fraud in obtaining the policy.
  • Paying the premium is prima facie evidence of ownership.
• Scheduled personal property (33-24-103). A specifically listed item at a stated value that's totally lost is paid at that stated value, minus only the deductible. Motor vehicle policies are excluded from this rule.
• Unpaid property taxes (33-24-104). The taxing entity has a lien on fire insurance proceeds for the amount owed.

Policy-level rules that apply to property policies

• Cancellation and nonrenewal (33-15-1103 to 33-15-1107):

  • Midterm cancellation only for listed reasons (after the first 60 days), with 10 days' notice.
  • Nonrenewal needs 45 days' notice, with a copy to the producer.
  • Owner-occupied homes need 45 days with specific reasons, or 20 days for nonpayment (33-23-401).

  Details are in the Montana Homeowners guide.

• Rates may not be excessive, inadequate or unfairly discriminatory (33-16-201):

  • A rate is excessive only if it's unreasonably high and the area lacks reasonable competition.
  • A rate is inadequate only if it's unreasonably low and endangers solvency or tends to destroy competition.

Common exam traps

• Montana's valued policy law makes the policy amount the measure of a total loss of a building. That's not ACV or replacement cost.
• A total loss of scheduled personal property pays the stated value. The rule doesn't apply to autos.
• Inland marine can't cover furniture and fixtures, or money on premises outside of transit.
• Property insurance includes consequential loss but not liability.