1-I Interest, Subrogation, and Claims Flashcards
Claim:
A demand for payment in accordance with the terms of an insurance policy (doesn’t always result in indemnification)
First Party Claim
A claim filed by the policyholder against insurance policy.
Must be paid by policyholder’s own insurer.
Third Party Claim
A claim filed against an insurance policy by anyone other than the person named on that policy.
EX. if jake runs a red light and runs into kelly, kelly can file a third party claim with jakes insurer to recover the damages that jake cause to her and her car.
Filing a claim:
-Filing claim doesn’t grant immediate indemnification.
-When insured parties file a claim, it means they believe they are owed payment by insurer,
-Policyholders file claims by calling their insurer
After receiving a claim, an insurer must:
-Acknowledge receipt of the claim
-Begin investigating all pertinent facts and issues surrounding the claim.
Insurance adjusters represent the insurer. Responsible for evaluating the circumstances of a claim.
Investigation includes:
-Finding Proximate cause of loss
-Examining all damages
-Noting all circumstances surrounding the loss
-Taking witness statements and reviewing police reports when necessary.
-Determining liability, when relevant to the claim.
-Deciding whether the claim is valid or not.
Evaluation:
If the claim is valid, the Adjuster evaluates it, which includes:
- Considering Policy limits and deductibles.
-Calculating lender interest
-Determining the value of the loss.
-Applying all financial provisions of the policy.
Adjustment?
The final disposition of a claim:
If claim is accepted, the insurer must pay promptly after notifying that the claim will be paid.
If claim is denied, insurer must explicitly state it’s reasons for denial.
Insurable Interest:
Direct financial interest in protecting something or someone.
- Only parties with insurable interest can insure a property or person.
-You cannot insure a house you do not own or have some financial interest in.
-You can only insure someones life if that persons death would cause economic hardship.
Lender interest:
A lenders financial stake in an insured item.
Lenders interest:
-Protects a lender who loans money to a buyer
-Allows insurers to compensate a lender if a property, in which the lender has financial interest, is damaged.
Lender Interest Provisions
- Allow the lender to be listed as a payee on the policy.
-Ensure that the lender is notified if the policy is canceled , reduced, or expires.
-Provide compensation for the lender in the event of an act or an omission by insured party.
-Permit the lender to pay policy premiums to maintain coverage, if they insured fails to do so.
Limits on lender interest provisions:
-Lender may only collect up to its financial interest in a property.
-Lender may never change of cancel an insurance policy.
Subrogation:
The transfer of right that allows the insurer to recover it’s losses after it has indemnified a policyholder.
When a policyholder is indemnified for a loss, she may no longer collect payment for that loss from anyone else. She has transferred this right to the insurer.
STEP BY STEP:
- Ed damages sues property
- Sue is indemnified for the loss by her insurer.
- Sue’s insurer can now demand payment from Ed to recover the funds it paid to sue.
- Sue may not demand payment from ed.
Limits to subrogation:
- Subrogation only applies to the amount that the insurer pays.
-The policyholder still has the right to demand payment from the guilty party for any damages that exceed the indemnity.
EX. If beth suffered a 25k loss, but insurer only paid her 20k, she would be allowed to demand the 5k from guilty party.
Waiver of Subrogation:
- Included in certain types of policies and contracts
-Takes away the insurer’s right to recover it’s losses after paying a claim
-Usually involves a higher premium
