Ch 11

Question 1

First Party

Answer 1

Losses occur to the property insured by the policy. They are often referred to as own damage or direct damage claims and involve only the insured and the insurer and perhaps, a mortgagee or assignee of the policy proceeds. Settlement is based upon the wording of the insurance contract.

Question 2

Third Party

Answer 2

Third party insurance is known as liability coverage. Claims arise out of the insured’s responsibility to others at law. Losses involve someone or something that is neither a party to the insurance contract nor is it mentioned in the policy.

Question 3

Telephone adjusters

Answer 3

Salaried employees of insurers. They process a large volume of claims that do not seem to require a face-to-face interview with the insured. This is fast, efficient and economical. However there are drawbacks.

Question 4

Staff Adjusters

Answer 4

Salaried employees of insurers who investigate, negotiate and settle claims for their employers. Staff adjusters have authority to commit the insurer to a settlement, generally up to a specific dollar amount. They don’t require licenses except in Quebec and New Brunswick.

Question 5

Independent adjusters

Answer 5

Operate as independent businesspeople. They accept assignments of claims from as many insurers as choose to use their services. They require a license in the province in which they operate. Their compensation is fee based on the amount of time spent on a particular loss at a set rate per hour plus any other expenses such as reimbursement for long distance phone calls, copies of documents and travel expenses. Many work for difference companies, thus procedures may differ, they usually have less latitude in their authority to settle claims. They’re expected to report to insurer on the facts they find and await instructions and then carry them out.

Question 6

Public Adjusters

Answer 6

Independent businesspeople engaged by insured’s to represent their interests during a claim. They’re sometimes used on large property claims when insured’s can’t agree with own insurers and feel and experienced adjuster who is not answerable to the insurer would be able to help them interpret their policy and negotiate a more favorable settlement. Public adjusters are paid by the insured, usually based on a % of the claim recovered. They’re not permitted to operate in all provinces. Where they do operate, they usually must be licensed just as any other adjuster.

Question 7

Proof of loss

Answer 7

Document completed and signed by insured’s making claim against their own insurer. It contains details of the policy and the loss, how much is claimed and to whom it should be paid. It also releases the insurer of further obligations relating to that loss and transfers title to any useful salvage to the insurer.

Question 8

Telephone adjusters

Answer 8

Claims that appear straightforward and uncomplicated may be assigned to the telephone adjusters who will deal with all aspects of settlement over the phone and by fax or mail.

Question 9

Fraud: honest individuals will inflate the cost of their claim by:

Answer 9

• overstating settlement values
• claiming for items that never existed
• claiming for damage that was never intended to be covered by insurance.

Question 10

Claims examiner

Answer 10

Will direct the investigation of the loss, scrutinize the adjuster’s reports, research the insurer’s position and direct the adjusting work to a satisfactory conclusion.

Question 11

Estoppel

Answer 11

Doctrine of law which precludes a person from denying the truth of a statement formerly made by him or the existence of a series of facts which has caused someone to draw a certain logical conclusion. It can be created by conduct as well.
Estoppel arises when a person is forbidden by law to speak against his own act or deed. A man’s own act or acceptance stops or closes his mouth to prevent him from arguing the opposite.

Question 12

Prescription

Answer 12

Is a time after which a cause of action ceases. In insurance it’s the time after which a claim may not be brought.

Question 13

Statute of limitations

Answer 13

Statute that sets out the time periods within which specific legal actions must be taken.

Question 14

Statement of claim

Answer 14

Written statement by a plaintiff detailing the facts which support the claim against the defendant and the relief sought.

Question 15

Plaintiff

Answer 15

Party who brings a legal action against another, called the defendant.

Question 16

Waiver

Answer 16

Voluntary relinquishment of a known right.

Question 17

Non waiver agreement

Answer 17

Agreement between two parties recognizing that there is a possible right (such as to deny liability) but in the interests of both parties, a note will be made of it and the matter will be allowed to proceed without prejudice to either party.

Question 18

Reservation of rights letter:

Answer 18

If a non-waiver agreement can’t be arranged, a reservation of rights letter - which states that the insurer is investigating the loss without prejudicing its position, should be sent to the insured.

Question 19

Loss Reserves

Answer 19

Consists of funds set aside to cover all of an insurer’s outstanding claims. They are based on the insurer’s estimate of the amount it expects to pay for all reported losses plus those losses not yet reported. These reserves are required by law and are closely monitored. Insufficient reserves could be an indication of financial problems within the insurer’s organization.

Question 20

Onus of proof

Answer 20

Responsibility of proof

Question 21

Proximate cause

Answer 21

Immediate and effective cause of the loss or damage, not necessarily the last event before the occurrence, which in a chain of circumstances leads naturally and directly in the ordinary course of events to the loss. It’s the unbroken chain of cause and effect between the occurrence of an insured peril and damage to property.

Question 22

Remote cause:

Answer 22

A cause which is not the proximate cause, and the last link in the chain of events is known as immediate cause.

Question 23

Release

Answer 23

Document in which one party, who has suffered damages or injuries, releases another party, who allegedly caused the damages or injuries or is responsible for them, from all further claims arising out of the incident in return for a sum of money paid for the damages or injuries suffered.

Question 24

Salvage

Answer 24

What is left of property after a loss. It may be undamaged property or partially damaged property that still has some value.

Question 25

Subrogation

Answer 25

The right of an insurer, after paying a loss or agreeing to pay it, to assume the rights of the insured to recover this loss from the responsible party.