Which concept refers to a defect that causes property to spoil or become defective?

The concept that refers to a defect causing property to spoil or become defective is known as inherent vice. This term describes an intrinsic characteristic of certain types of property that can lead to a natural deterioration or damage. For instance, perishable goods may spoil due to their nature, or specific materials may corrode over time without any external influence. Inherent vice is significant in insurance because it often determines whether a loss is covered. Policies typically exclude coverage for losses caused by inherent vice, as these are seen as an unavoidable aspect of the property itself rather than a result of an external event or peril.

The other concepts listed do not relate to the idea of property spoilage or defect in the same way. An insuring agreement outlines the scope of coverage and the responsibilities of both the insurer and insured but does not address defects inherent to the property itself. The loss ratio is a measure of an insurance company's claims against its earned premiums and reflects overall profitability rather than specific property issues. Liability insurance protects against claims arising from injuries or damages to others but is also unrelated to the condition of the insured's property.