General property and casualty concepts are covered in the national Property and Casualty Insurance Basics guide. This guide collects the North Dakota law behind them. The property side covers insurable interest, the 1943 New York standard fire policy, the valued policy law and proximate cause. The casualty side covers North Dakota's modified comparative fault rule and its commercial cancellation law.

Insurable interest (26.1-29-04 to 26.1-29-07)

• The sole object of insurance is indemnity. If the insured has no insurable interest, the contract is void (26.1-29-05).
• For property, an insurable interest must exist when the insurance takes effect and when the loss occurs, but not in between (26.1-29-06).
• It's measured by how much the insured would be damaged by the loss (26.1-29-07).

The standard fire policy (26.1-39-06)

• Fire policies on North Dakota property must conform to the 1943 New York standard fire policy, which is filed as the state standard. This doesn't apply to inland marine, ocean marine or auto insurance.
• Policies may not limit the time to sue to less than three years.
• The standard policy is an interest policy. After a written transfer of interest, full protection continues for a five-day grace period.
• Pro rata other insurance. Each insurer pays its share in proportion to all valid insurance.
• A commercial policy with fire coverage may exclude fire caused by terrorism.
• A nonstandard form may be approved if its fire coverage is no less than the standard policy's (26.1-39-09).

Valued and open policies (26.1-30-03, 26.1-39-05)

• A valued policy states an agreed value for the property. An open policy leaves value to be determined at the time of loss.
• North Dakota's valued policy law. For a total loss of real property, the amount of insurance written in the policy is the measure of damages.
• Exceptions:
  • A loss within 60 days after the effective date, or after an insured-requested limit increase of 25% or more, pays the lesser of the policy amount or the partial-loss amount.
  • Separate structures count only if individually described with a value.
  • Personal property isn't covered by the law.
  • Builders risk is settled at the actual value of the work completed at the time of loss.

Causes of loss (26.1-32-01 to 26.1-32-05)

• The insurer is liable for a loss proximately caused by an insured peril, even if an excluded peril was a remote cause. Insurers may contract out of this efficient proximate cause rule.
• Loss caused by efforts to rescue the property from an insured peril is covered.
• The insurer isn't liable for a loss caused by the insured's willful act. It isn't excused by the negligence of the insured or others.
• A fire loss must be reported without unnecessary delay.
• Increase in risk (26.1-39-01, 26.1-39-02). The insurer may rescind if the insured, without consent, changes the property's use or condition in a way that increases the risk. A change that doesn't increase the risk has no effect.

Proof of loss and binders

• Proof-of-loss forms (26.1-32-08). The insurer furnishes forms within 20 days of notice. The insured then has 60 days to return them, or 90 days for life beneficiaries. An insurer that doesn't send the forms waives proof of loss.
• Binders (26.1-39-23):
  • They may be oral or written and include the standard fire policy terms.
  • A producer who binds coverage orally delivers a written binder within three business days if asked.
  • Lenders must accept a proper binder, but not a renewal of it.
• Policy period (26.1-30-18). Coverage starts and ends at 12:01 a.m. on the stated dates. Crop-hail insurance is the exception: it starts at the time stated on the application.

Lines of authority (26.1-26-11)

The property line covers direct and consequential loss of or damage to property of every kind.

Modified comparative fault (32-03.2-02)

• A claimant's own fault doesn't bar recovery unless it is as great as the combined fault of all others. Otherwise, damages are reduced by the claimant's percentage of fault.
• Example: $100,000 of damages with the claimant 30% at fault means a recovery of $70,000.
• Each defendant's liability is several only, limited to its own percentage of fault. People acting in concert are the exception.
• Two-party auto accidents (32-03.2-02.1). When the other driver is more than 50% at fault, direct property damage up to $5,000 and indirect up to $1,000 isn't reduced for the claimant's fault.

Commercial cancellation and nonrenewal (26.1-30.1)

Scope. The law doesn't cover:

• WSI
• private passenger auto
• inland marine
• excess and umbrella
• errors and omissions
• directors and officers liability

Midterm cancellation. After the first 90 days, it's allowed only for listed reasons, including:

• nonpayment
• fraud
• a substantial change in risk
• loss of reinsurance covering a significant part of the risk

When the reason is loss of reinsurance, the policyholder has 10 days to appeal, and the commissioner decides within 5 business days.

Notice periods

• Cancellation: 30 days for reasons other than nonpayment. 10 days' notice of the amount due for nonpayment.
• New policies in effect less than 90 days may be canceled for any reason with 10 days' notice.
• Nonrenewal: 60 days' notice with reasons, unless the insured placed coverage elsewhere or agreed.
• Renewal on worse terms. Less favorable terms, or an increase of more than 15%, take effect at renewal only with notice at least 10 days before expiration. Otherwise the insured may cancel and pay pro rata at the old rate.

Other rules

• Notices go by first-class mail to the policyholder and the agent of record.
• A policy may be canceled for unpaid membership dues, but not for members retired at 62 or older or disabled under Social Security standards.

Other casualty-related rules

• Casualty line of authority (26.1-26-11). It covers legal liability, including liability for death, injury, disability, or damage to property.
• Surety. An applicant for the surety line takes the casualty exam.
• Professional liability. For legal and medical professional liability on residential-type policies, nonrenewal needs 90 days' notice (26.1-39-16).
• Rate filings (26.1-25-03, 26.1-25-04):
  • Rates may not be excessive, inadequate or unfairly discriminatory.
  • Filings have a 60-day waiting period, which may be extended 15 days.
  • Competitive commercial filings take effect without waiting for review.
  • So does one personal auto or homeowners filing a year that averages under 5%.
• Guaranty association (26.1-42.1). It pays $300,000 per claim and $10,000 for unearned premium. It excludes punitive damages and WSI.

Common exam traps

• Insurable interest in property must exist at inception and at the time of loss.
• North Dakota uses the 1943 New York standard fire policy, and suits can't be limited to less than three years.
• The valued policy law covers real property total losses only. Watch the 60-day / 25% exception.
• An insurer that fails to send proof-of-loss forms within 20 days waives proof of loss.
• A claimant as much at fault as everyone else combined recovers nothing. At 49% against one defendant, the claimant recovers 51%.
• Liability in North Dakota is several only, not joint.
• Commercial nonrenewal needs 60 days' notice. Commercial cancellation needs 30 days', or 10 for nonpayment.
• D&O, E&O and umbrella policies fall outside the commercial cancellation law.