Ch 8

Question 0

Type of ownership where two or more owners have a complete, indivisible interest in a property. If one owner does, ownership is not transferred; it goes to the other owner(s)

Answer 0

Joint ownership

Question 1

What is the simplest and most obvious example of interest in property?

Answer 1

Ownership

Question 2

Joint tenancy between husband and wife.

Answer 2

Tenancy by entirety

Question 3

Type of ownership where two or more owners has a fractional financial interest in the property. (Timeshare)

Answer 3

Ownership in common.

Question 4

An interest created by contractual agreement or law where the secured party is usually a creditor.

Answer 4

Security interest.

Question 5

How does the policy handle insurable interest?

Answer 5

It limits payment on a claim to the extent of the insured’s interest.

Question 6

Why is letting an insurer accumulate more than its insurable interest in the insured property a problem?

Answer 6

It would provide an incentive for fraud.

Question 7

Who are the three parties who are generally entitled to make a claim?

Answer 7

First named insured, named insured and named insured’s spouse.

Question 8

What are the questions a claim rep must answer as part of claim handling process?

Answer 8

1) who has insurable interest and who is a named insured
2) what property is insured? Where is it insured? When is it insured?
3) what are the covered causes of loss?
4) what is the dollar amount of loss?
5) what are the insured’s duties after a loss?
6) what procedures are used to conclude a claim?

Question 9

When determining what property is covered, the claim rep must understand the difference between _______ property and ________ property.

Answer 9

Real property and personal property

Question 10

Which three questions help a claim rep determine whether property is real or personal?

Answer 10

1) how permanently attached to real property is the fixture? (Furnace is fixture, window a/c is not)
2) is the fixture well adapted to the real property? (Custom window treatments are real property, non custom are not)
3) what was the intent of the owner? (Owner would expect that shelves bolted to the wall would be removed when a tenant moved, but built-ins would not be)

Question 11

Damage to property caused by a covered loss with no intervening cause.

Answer 11

Direct loss.

Question 12

What is the most important type of indirect loss?

Answer 12

Loss of use of property.

Question 14

What is necessary for an indirect loss to be covered?

Answer 14

A direct loss is necessary to tigger loss of use coverage and to determine duration of coverage.

Question 15

A loss which occurs when property can no longer be used for its intended purpose due to destruction, damage or disappearance. It is tangible.

Answer 15

Physical loss

Question 16

Intangible loss which includes loss of value not caused by physical damage or destruction. Examples include obsolescence,, loss of market, investment loss, financial fraud.

Answer 16

Nonphysical loss

Question 17

Which exclusions can complicate verification of causes of loss?

Answer 17

• Gradual causes of loss
• Ordinance or law
• Faulty design, construction, or material
• Intentional acts of the insured

Question 18

How does an adjuster review a claim when gradual causes of loss are involved?

Answer 18

Wear and tear, rush, decay, deterioration could cause damage to property. The adjuster has to separate damage caused by these causes from the damage caused by the direct loss.

Question 19

What do ordinances or laws sometimes require after a direct loss?

Answer 19

• Destruction of the structure, which could cost more than the cost to rebuild
• Construction plans, methods, or materials that are different from and more expensive than the originals. Policies only usually cover these by endorsement.

Question 20

What is the first step when determining replacement cost?

Answer 20

Identify the property.

Question 21

What are proper estimates based upon?

Answer 21

• Specifications: (what must be done … type of materials, quantity of materials, repair or replace?
• Materials: quantity of materials is determined by specifications. Price is based on material costs for similar projects.
• Labor (determine by skilled estimators or published “standard” work rates.
• Overhead (contractor’s cost of doing business (permits, office space, insurance)
• Profit

Question 22

If the policy doesn’t cover full replacement cost until after the property has been repaired or replaced, how does the adjuster pay the claim?

Answer 22

1) Release ACV settlement and pay balance after repairs/replacement is complete.
2) Parcel out a replacement cost settlement as repair or replacement is gradually accomplished.

Question 23

The reduction in value caused by the physical wear and tear or technological or economic obsolescence of property.

Answer 23

Depreciation

Question 24

Replacement Cost minus Depreciaion

Answer 24

Actual Cash Value (ACV)

Question 25

A type of depreciation where a fixed percentage of the property’s value is deducted for every year of the property’s useful life that the owner has enjoyed.

Answer 25

straight-line depreciation

Question 26

What kind of items cannot be valued using ACV because there is no ascertainable figure for replacement cost?

Answer 26

Antiques, old buildings, some property appreciates in value.

Question 27

Some courts have determined actual cash value to mean ____ ________ value. This approach accounts for the possibility that an item is irreplaceable.

Answer 27

fair market

Question 28

Claim representatives should not apply market valuation unless a ___-_______ secondary market exists.

Answer 28

well-functioning

Question 29

Most courts have determined ACV to mean fair market value. Others have required claim reps to consider factors such as physical wear and tear, obsolescence, market value, and other relevant factors. This approach is known as the ____ ____ ____.

Answer 29

Broad evidence rule.

Question 30

A court ruling explicitly requiring that all relevant factors be considered in determining actual cash value

Answer 30

Broad evidence rule

Question 31

What should normally be applied first? Coinsurance penalty or deductible?

Answer 31

Deductible

Question 32

A method of valuing property in which the insurer and the insured agree on the property’s value at the time the policy is written and that states the amount in the policy declarations as the amount the insurer will pay in the event of a total loss to the property. Usually covers fine arts and valuable papers.

Answer 32

Agreed amount

Question 33

In the event of a total loss where the property is insured for stated value, the insurer is entitled to receive no more than the least amount of:

Answer 33

1) ACV
2) replacement cost
3) amount of insurance

Question 34

Most claims are paid with money but some claims are settled by _____ or _______ property.

Answer 34

Replacing or repairing. (Good candidates are scheduled jewelry, cameras, guns)

Question 35

List examples of the insured being required to provide prompt notice.

Answer 35

• report claim promptly to insurer.
• report theft loss to police.
• report theft of credit card to bank.

Question 36

How is an insured required to assist with the loss adjustment process?

Answer 36

• inventory damaged and/or undamaged property
• make property available for inspection.
• allow books and records to be inspected.

Question 37

The insured’s official version of the loss which is signed and sworn to. All statements are material and, if false, coverage can be voided.

Answer 37

Proof of loss.

Question 38

What information is an insured usually required to provide in a proof of loss?

Answer 38

All info needed to settle a claim:

• time
• place
• cause of loss
• interests in property
• detailed estimates, inventories, bills.

Question 39

How are proof of loss statements treated by the insurer?

Answer 39

• must be responded to within a set number of days.

- if rejected must send letter explaining why and explaining what insurer needs to do.

Question 40

What is a danger of an insurer waiving a proof of loss?

Answer 40

An insurer might waive valuable rights if they don’t spot a nonroutine case soon enough and waive proof of loss.

Question 41

When are examinations under oath (EUO) usually used?

Answer 41

Used after proof of loss is filed when an insurer suspects fraud. Proof of loss commits the insured to a story and the EUO can clarify it.

Question 42

What are the steps in settling a claim?

Answer 42

• determine cause of loss
• determine amount of loss
• document cause and amount of loss

Question 43

a method of valuing property in which the insurer and the insured agree on the property’s value at the time the policy is written and that states the amount in the policy declarations as the amount the insurer will pay in the event of a total loss to the property

Answer 43

Agreed amount

Question 44

What are tools an adjuster will use to determine the cause of loss?

Answer 44

• experts (reconstruction)
• SIU
• personally inspecting property
• recorded statement

Question 45

How do insurers handle salvage?

Answer 45

They usually pay full value, take possession of salvage, and sell through a salvage company.

Question 46

What are the two goals of claim reps who handle losses to homes?

Answer 46

1) address the insured’s concerns

2) enforce policy provisions and protect the insurer’s rights.

Question 47

What at the three priorities of a claim rep when handling a dwelling loss?

Answer 47

• help insured keep family safe
• help insured keep home safe and secure and protect contents from further damage.
• explain coverage and the claim process

Question 48

Once the insured’s family and property are secure after a dwelling loss, what should a claim rep do?

Answer 48

Thoroughly explain coverage and the claim handling process

Tell insured if they have living expenses coverage or not.

Stress importance of insured’s good faith compliance with policy conditions s

Question 49

What does additional living espenae cover?

Answer 49

Increase in living expense to maintain the household’s normal standard of living.

Question 50

What is the process of negotiating with contractors?

Answer 50

Contractors should prepare a detailed estimate showing specifications; material costs; hours; labor; additional expenses such as overhead, permits, demolition, and debris removal.

The parties agree on quality and hours and then determine cost of materials and labor.

Question 51

Why does a claim rep usually get involved in hiring a professional cleaning or restoration service in a smoke or water claim?

Answer 51

Quick cleaning can save property, minimize additional living expense, reduce repair cost.

Question 52

a policy provision that imposes smaller limits for certain kinds of property or lines of insurance

Answer 52

Sublimit

Question 53

Why can’t claim reps with only residential experience handle commercial structure losses?

Answer 53

Construction principles, methods, materials, and available contractors differ for commercial and residential structures. Architects are sometimes used to help develop estimates.

Question 54

With a commercial structure loss, why can’t the claim rep always hire the lowest bidder?

Answer 54

Low bid night be due to lack of expertise or a faulty estimate.

Question 55

Who enters into contracts with contractors to repair damaged property? The claim rep or the insured.

Answer 55

Only the insured. The claim rep might solicit bids to help.

Question 56

How does the value of commercial structures differ from residences?

Answer 56

Supply and demand is mainly determines the value of a commercial structure. Wear-and-tear isn’t as much a factor with commercial structures. Commercial structures are more prone to economic and technological obsolescence. (ex. old warehouse may have poor lighting and poor ventilation)

Question 57

Who can help a claim rep determine the rental rates for commercial property?

Answer 57

Realtors.

Question 58

Why is extent of depreciation taken by an insured in its financial records irrelevant?

Answer 58

It is a tax deduction so insureds may over depreciate it for their records.

Question 59

What is a difficulty a commercial insured with a mortgage may run into when their building is destroyed?

Answer 59

The mortgage is due in full upon destruction of the property. Even though the insured may want to rebuild, the mortgageholder may require full payment.

Question 60

What are the three reasons a claim rep should be concerned about contamination and pollution losses?

Answer 60

1) Claim rep’s own healthy and safety could be at risk.
2) Coverage for pollution cleanup is extremely limited on most policies. This must be communicated to the insured.
3) The claim rep should have contacts with specialized technical services to help an insured decontaminate a site. Should be careful not to lead insured to believe it will all be covered if that is not the case. (usually cheaper and faster than EPA)

Question 61

Which 3 things does a claim rep have to prove to establish arson?

Answer 61

1) incendiary fire (expert)
2) motive (main focus - determined by SIU)
3) opportunity (SIU)

Question 62

When handling a business income claim, which issues should a claim rep focus on?

Answer 62

• Identify best settlement approach
• Determine business income loss
• Determine the period of restoration
• Determining the extra expense amounts
• Consulting accountants to determine amounts

Question 63

settlements made before property has been repaired. Useful when insured doesn’t intend to repair or replace property.

Answer 63

prospective settlements

Question 64

settlements made after property has been repaired and the policyholder has resumed operations

Answer 64

retrospective settlements

Question 65

sum of (1) net profit or loss that would have been earned or incurred if the suspension has not occurred and (2) normal operating expenses, including payroll, that continue during the suspension

Answer 65

Business income

Question 66

Why are disagreements between the insurer and the insured common with retrospective settlements?

Answer 66

Insurance covers only the time in which repairs should be made, not necessarily the amount of time taken to complete the repairs.

Question 67

What are two formulas for business income?

Answer 67

1) revenue - cost of goods sold - discontinued operating expenses. (easier approach)
2) net profit (or loss) + operating expenses that continue

Question 68

the period during which business income loss is covered under the BIC forms, it begins 72 hours after the physical loss occurs and ends when the property is (or should have been) restored to use with reasonable speed (with regard to extra expense coverage, it begins immediately after the physical loss occurs)

Answer 68

Period of restoration

Question 69

How can the time in which repairs should be made (for purposes of BIC or extra expense)?

Answer 69

By consulting with the contractors hired to do the work.

Question 70

Coverage for extra expense can only be settled ______.

Answer 70

Retrospectively

Question 71

A claim rep authorizing expedited construction methods to speed up construction and a retailer leasing a temporary location to maintain sales are examples of this?

Answer 71

Extra expense

Question 72

Which type of claim requires extensive accounting assistance?

Answer 72

Extra expense. Accountants have to determine normal business expenses.

Question 73

Which issues are unique to merchandise claims?

Answer 73

Salvage and salvor services.

Question 74

What are some things to consider when valuating merchandise?

Answer 74

Shop wear

Depreciation caused by obsolescence

Question 75

How are claims handled when merchandise is covered under a reporting form?

Answer 75

• determine value of inventory as of the date of the last report. (If total loss)
• if under reported, insured cannot recover full amount; they recover did/should times loss amount.
• if failed to submit report when due, payment won’t be more than last report.
• if insured doesn’t even submit first report, 75% is paid.

Question 76

Demonstrate how negotiation can benefit the insured and insurer when settling merchandise losses.

Answer 76

If insured keeps salvage, they are already set up to sell the merchandise. They can sell it for a higher price than the insurer, who might only be able to sell it for a small percentage of the value.

Question 77

Policies for carriers and bailees typically protect the interests of both the _______ and the _______. A claim rep must usually settle two claims resulting from the same loss: the ________’s and the _______/_______’s.

Answer 77

Owner Carrier/bailee’s

Same

Question 78

Who do claim reps usually deal directly with on a Bailee/carrier policy?

Answer 78

The property owner.

Question 79

a document acknowledging receipt of goods from the shipper, given by the carrier which includes terms of contract of carriage for the goods

Answer 79

bill of lading

Question 80

a bill of lading that limits the carrier’s liability for cargo loss in return for charging a lower freight rate than would be charged for carrying the cargo subject to full valuation

Answer 80

released bill of lading

Question 81

What are exceptions to common carriers being held liable for damages to an owner’s goods?

Answer 81

Acts of god, war, negligence of the shipper, exercise of public authority, inherent vice of the goods.

Question 82

Liability claim reps spend less time evaluating policy _______ and most of their time and effort investigating and evaluating the ________ aspects of liability and damages.

Answer 82

Terms / legal

Question 83

What are the four steps in handling a liability claim?

Answer 83

1) determining coverage (ex. bi or pd caused by certain individuals driving certain vehicles)
2) determining legal liability
3) determining damages
4) negotiating and settling the claim.

Question 84

What must a claim rep do when coverage for a liability claim is doubtful?

Answer 84

Must explain to the insured clearly, in writing, why coverage is doubtful, and what each party must do.

Question 85

What should a claim rep do if part of a liability claim is not covered?

Answer 85

Explain why, referencing policy provisions. Tell insured they will keep handling claim but that insured may have to contribute. Invite insured to contact a private lawyer.

Question 86

What does a claim rep have to do when coverage for an entire liability claim is doubtful?

Answer 86

Explain in writing
Investigate further
Reserve rights
Pay claim or send denial

Question 87

What is an lengthy and expensive way to settle coverage questions in a liability claim which may also complicate defense of the underlying action?

Answer 87

Declaratory judgment.

Question 88

When might a lawsuit seeking injunctive relief instead of money be honored?

Answer 88

Claims for interference of use of property could be a legitimate loss of use claim, which is considered property damage.

Question 89

Which of the following is covered under a liability policy? (With pd and bi)
Breach of contract resulting only in financial harm
Lawsuits alleging financial fraud
Collision with another auto

Answer 89

Collision with auto

Question 90

Are claims for emotional injury only covered?

Answer 90

It depends on the jurisdiction. If they allow tort based claim for emotional injury only then they can make a claim.

Question 91

Why is applying the intentional acts exclusion difficult?

Answer 91

Two questions need to be answered.
1) did the insured intend the result or just to commit the action?
2) can intentional acts be excluded when the claimant also alleges negligence or strict liability?
(Also can insured be liable for acts of an agent or servant?)

Question 92

Why do claim reps have to know the state law defining intentional acts when trying to apply the intentional act exclusion?

Answer 92

In the case of an assault, in some states you need to prove intent to cause the resulting injuries. In others you just have to prove that they intended to commit the assault.

Question 93

If a claimant wants to increase chance of winning a settlement when there is an intentional act, what could he/she do?

Answer 93

Allege negligence or strict liability. When part of the claim is covered and part is not, the insurer has to defend the insured and the insurer may have to settle.

Question 94

What is the dilemma when litigating a claim with an intentional act?

Answer 94

Litigating to deny the claim is not in the best interest of the insurer. The attorney defending the insurer cannot be the same as the attorney litigating to deny the claim.

Question 95

Scenario: insured breaches insurance contract. Insured does work negligently when building a wall. Wall collapses and injures someone. What is covered?

Answer 95

Cost of rebuilding wall is not covered but injuries are.

Question 96

What purposes does prompt contact with a claimant serve?

Answer 96

Preserve evidence, reassure about insurers responsiveness, greatly reduce chance they will hire a lawyer.

Question 97

If a witness is available to testify and they previously gave a statement, what is the only thing it can be used for?

Answer 97

Impeachment.

Question 98

What is the most important aspect of any investigation?

Answer 98

Obtaining all of the relevant evidence.

Question 99

A civil wrong not arising out of breach of contract.

Answer 99

Tort.

Question 100

What does a cause of action in negligence require?

Answer 100

Duty owed to claimant, a breach of that duty (must be proximate cause) that causes harm, and actual bodily injury or damage.

Question 101

If the insured could have ________ ________ an accident, he/she is probably negligent.

Answer 101

Reasonably avoided

Question 102

A cause that, in a natural and continuously sequence unbroken by any new and independent cause, produces an event and without which the event would not have happened.

Answer 102

Proximate cause.

Question 103

What other behaviors besides negligence can result in tort liability?

Answer 103

Intentional torts (assault, trespass, false imprisonment, defamation)

Strict liability (regardless of negligence) (product liability, zoo, fireworks store)

Question 104

How does a claim rep handle criminal liability?

Answer 104

Convicted criminals don’t usually cooperate. The claim rep may have to concede liability, but not always coverage. The claim rep will usually wait until criminal proceedings have concluded.

Question 105

a contractual provision that obligates one of the parties to assume the legal liability of another party

Answer 105

Hold harmless agreement

Question 106

A defense to negligence that bars a plaintiff’s recovery for harm caused by the defendant’s negligence if the plaintiff voluntarily incurred the risk of harm.

Answer 106

Assumption of risk

Question 107

A common-law principle that requires both parties to a loss to share the financial burden of the bodily injury or property damage according to their respective degrees of fault.

Answer 107

Comparative negligence

Question 108

A common-law principle that prevents a person who has been harmed from recovering damages if that person’s own negligence contributed in any way to the harm.

Answer 108

Contributory negligence

Question 109

Liability imposed on a party because of that person’s relationship to a wrongdoer.

Answer 109

Vicarious liability.

Question 110

What is the most important issue regarding vicarious liability for claim reps?

Answer 110

Scope of employment or agency. If act committed while not at work, not covered.

Question 111

What are two difficult situations when trying to determine the scope of employment?

Answer 111

Employees often make deviations from their employer’s business to attend to personal matter.

Employees attempt to conduct the employer’s business by prohibited means. (Speeding to next appointment)

Question 112

What are the most useful defenses to liability claims?

Answer 112

Comparative negligence 
Contributory negligence 
Assumption of risk  (skiing)
Statute of limitations 
Absence of negligence

Question 113

What is the difference between pure and modified comparative negligence?

Answer 113

Pure: as long as claimant isn’t 100% responsible, he/she may still recover an amount reduced by his/her own negligence.

Modified: 50% and 49% rule. 50% can recover if liability isn’t more than the other party. 49% may not recover if 50% or more at-fault.

Question 114

Damages that can be quantified, such as medical bills and list wages.

Answer 114

Special damages

Question 115

Intangible damages such as pain and suffering.

Answer 115

General damages.

Question 116

To be compensated, what do medical expenses have to be?

Answer 116

Related to the loss, necessary, reasonable.

Question 117

What resource does a claim rep have to evaluate necessity and frequency of treatment after the fact?

Answer 117

Review services.

Question 118

Commendable injuries that are difficult to measure, such as physical and mental distress and inconvenience associated with a physical injury.

Answer 118

Pain and suffering.

Question 119

What does consortium traditionally consist of?

Answer 119

Sex, society and services.

Question 120

What is an important difference between first-party and third-party pd claims?

Answer 120

Property owner’s own negligence is irrelevant in first-party claims but can be a major factor in settling third-party claims.

Question 121

What is the most valuable activity a claim rep performs for insureds, claimants, insurers, and society and why?

Answer 121

Settling liability claims. If claims went to court the courts would be overwhelmed and insurers would pay more in legal fees and verdict amounts.

Question 122

A claim that implies or involves actual or constructive fraud, a design to mislead or deceive another, or a neglect or refusal to fulfill some good-faith duty or some contractual good-faith obligation.

Answer 122

Bad-faith claim

Question 123

An agreement in settlement of a claim involving specific payments made over a period of time.

Answer 123

Structured settlement

Question 124

A payment made to a claimant following a loss to cover the immediate expenses resulting from that loss. A partial payment to a third-party claimant that is issued before obtaining a signed release.

Answer 124

Advance payment

Question 125

A settlement that involves lump-sum payments made by insurers to settle claims and that does not require a release from the claimant.

Answer 125

Walk-away settlement

Question 126

Provide an example of a bad-faith claim with regard to negotiating a settlement.

Answer 126

When an insurer rejects a settlement within the policy limits and the court rules in excess of policy limits.

Question 127

When are structured settlements appropriate?

Answer 127

When a claimant is likely to experience regular damages into the future, such as loss of income, or when the claim rep thinks the claimant can’t manage a lump sum.

Question 128

Why are structured settlements attractive to insurers?

Answer 128

They can offer a larger total settlement at a lower present cost. Insurers can fund the future obligations with annuities purchased from another insurer.

Question 129

Why is the duty to defend important?

Answer 129

Without the insurer’s defense, a plaintiff would be in a strong position to coerce settlements from defendants who lack the resources or ability to resist lawsuits.

Question 130

Explain the insurer’s right to defend.

Answer 130

The insurer can select the defense lawyer and the insured has to cooperate with the chosen lawyer. The insurer can dictate defense strategy and decide whether to settle or continue defense.

Question 131

What can skid marks tell you about an accident?

Answer 131

Indicate speed. Can disprove a party’s statement or establish liability. The place where the marks begin show where the driver first reacted to a hazard.

Question 132

Why are UM claims difficult to defend with respect to liability or on the basis of comparative negligence?

Answer 132

The insured is usually attorney represented. There are no favorable witness because the other party is usually unavailable or uncooperative. If available they often do not make a good witness. If an agreement over settlement exists, the insured can require arbitration.Arbitrators give the insured the benefit of the doubt.

Question 133

What is a major point of contention with UIM coverage?

Answer 133

The definition of an underinsured motor vehicle. Some states have a limits trigger (limits lower than injured party’s limits), while other states apply a damages trigger (negligent driver has limits lower than injured party’s damages).

Question 134

Ann has UIM with a $50k limit. Randy has a $100k BI limit. Anne is injured and incurred $150k in damages. How does this work with a limits trigger … and with a damages trigger?

Answer 134

Limits trigger: Randy has a higher limit than ANN so Anne’s UIM doesn’t apply.

Damages trigger: Anne’s damages are higher than Randy’s limit so Randy’s UIM will apply. (if Ann’s damages were only $75k then UIM wouldn’t apply because Randy’s limit is sufficient)

Question 135

When does stacking of UIM limits occur?

Answer 135

When two or more limits apply to a single accident. It occur when more than one policy (interpolicy) or more than one vehicle on one policy (intrapolicy) covers the loss.

Question 136

A total loss that occurs when the cost to repair damaged property plus its remaining salvage value equals or exceeds the property’s pre-loss value

Answer 136

Constructive total loss.

Question 137

What is the bases got legal liability in premises liability claims?

Answer 137

Failure to maintain premises in reasonably safe condition. Determined by negligence theories.

Question 138

How is a premise liability claim investigated?

Answer 138

• witness and claimant statements
• photos of the scene
• examine cleaning or maintenance records
• determine scope of contractors duties, get copies of the contracts, determine what role a contractor might have played in the accident.

Question 139

What are the three common reasons claimants provide for the cause of their accident?

Answer 139

• no idea what caused (no negligence)
• they knew of the causes but failed to observe and avoid them. (Comp neg)
• well aware of and observed the causes but encountered then anyway. (Voluntarily walk across icy sidewalk) (assumed risk, no negligence)

Question 140

What is the primary difference between premise and operations liability?

Answer 140

Premises is unsafe condition, operations is unsafe act.

Question 141

What is the difference between assuming contractual liability and liability due failure to supervise?

Answer 141

Contractual liability is assuming liability for another and failure to supervise is based on contractor’s own failure.

Question 142

A written or oral statement in a contract that certain facts are true.

Answer 142

Warranty.

Question 143

An explicit statement about a product by the seller that the buyer or other user may rely on and that provides a remedy in the event the product does not perform as claimed. Advertising material.

Answer 143

Express warranty.

Question 144

Who handles product liability claims?

Answer 144

The manufacturers insurer for products sold in the same condition they left the manufacturer in. If the manufacturer is out of business or cannot be identified, the vendor is responsible.

Question 145

How is liability determined in product liability claims?

Answer 145

Ask if product could have been made safe an still perform intense function. (Except for tools etc.) engineers often have to provide opinions. We’re warnings adequate and would they have prevented the accident? Did claimant read instructions? did the claimant use the product properly?

Question 146

What does part 1 of a workers comp policy cover?

Answer 146

Coverage for BI. (Caused or aggravated by conditions of employment)

Question 147

What is part 2 of a worker comp policy?

Answer 147

Employer’s liability. (Must prove negligence) covers those not covered by wc law.

Question 148

What does employers liability cover?

Answer 148

Covers employees not subject to wc law.

Covers care and loss of services to spouse and family member of an injured employee.

Covers third party over claims. (Employee sues manufacturer and manufacturer sues the employer)

Cover dual capacity claims (sues employer in capacity other than employer while also asserting a wc claim (ex. Products liability)

Question 149

Why do wc policies have no limit?

Answer 149

Law requires employer to pay all necessary and reasonable medical expenses related to the BI sustained on the job.

Question 150

Why can WC claims be extremely large? (Leading to premiums increasing rapidly)

Answer 150

• no policy limit
• claimant doesn’t pay a copay
• wc insurers don’t have same bargaining power as health insurers.
• many states have no fee schedule or other control over medical expenses.

Question 151

Managed care plan that contracts with healthcare providers for medical services provided to plan members at discounted fees; (in exchange for referrals) members’ choice of healthcare providers is not restricted, but members have a financial incentive to choose contracted providers.

Another definition:

An administrative organization that meets the common needs of healthcare providers and clients and that identifies networks of providers and contracts for their medical services at discounted rates.

Answer 151

PPO

Question 152

How do wc insurers control medical expenses?

Answer 152

PPOs, medical bill audits,utilization review services (determine which treatment is necessary), medical management

Question 153

A medical expense control measure that involves directing and coordinating efforts of healthcare providers to meet patient and insurer needs.

Answer 153

Medical management

Question 154

When is medical management generally used?

Answer 154

Claims with permanent bodily injury requirements payments for the rest of a person’s life.

Question 155

What is the benefit of medical management for the claimant?

Answer 155

Allows claimant to live independently rather than in an institution.

Question 156

When can a wc insurer end disability payments?

Answer 156

When claimant agrees or the compensation commission orders payments stopped.

Question 157

How can a wc insurer control disability expenses?

Answer 157

By insisting that the treating physician explain why the claimant cannot perform his or her job.

Work with the employer to modify the job.

Encourage claimants to think in terms of returning to work constantly.

Question 158

What question should a claim rep handling a medical malpractice claim ask?

Answer 158

What could have and should have been done differently at every point?

Question 159

What is the basis of most malpractice lawsuits?

Answer 159

Failure to obtain informed consent.

Question 160

How are damages determined in medical malpractice cases?

Answer 160

What would the claimant’s condition have been if proper professional services had been rendered?

Question 161

When the claim rep determines the answer to “what is the dollar amount of the loss?” What issues must they consider?

Answer 161

• valuation basis (ACV, replacement cost, stated amount, agreed value)
• how appropriate amount is calculated
• deductible? And how should it apply?
• should repair/replace option be applied?
• if appraisal clause is invoked? Claim rep must understand the appraisal process

Question 162

How does insure have to assist with the loss adjustment process to meet his or her duties after a loss?

Answer 162

• inventory all damaged and (sometimes) undamaged property
• show property to claim rep
• provide books and records
• cooperate

Question 163

In the conclusion activity for a property claim, what procedure can help minimize the insurer’s loss after the payment is made?

Answer 163

Determining salvage value, subrogation rights and related activities.

Question 164

How is the obligation to provide an inventory met by the insurer when written records are unavailable?

Answer 164

Claim rep can review checklist of types of property listing items that are usually in each room.

Question 165

Why does claim rep have more flexibility with scheduled property when settling a claim?

Answer 165

Property is identified precisely. Appraisers can determine it it can be repaired, replaced through secondary market, how much value ha decreased, and whether the insurer can buy replacements as a discount.

Question 166

How does claim handling under a carrier/Bailee policy differ from most property coverage claims?

Answer 166

Two claims are settled; owners and carrier/Bailee’s (earned fees, liability for the property’s return)

Question 167

What are pre-loss and post-loss activities that can assist insurers when catastrophes occur?

Answer 167

Pre:

• sufficient claim reps in potential disaster area e
• claim offices in these areas should have disaster kits for visiting claim reps (forms, maps, directories, clipboards, calculators)
• administrative departments must be prepared to rent office space and furnishings and prepare living quarters and rental cars.

Post:

• modify claim procedures
• claims paid with less documentation
• reimburse insured for labor
• claims normally needing inspection are handled over phone.

Question 168

What are determinations that need to be made in business income claims?

Answer 168

• settle prospectively or retrospectively
• determine the business income loss; Business Income Report/Worksheet can help
• consider period of restoration and how soon regular operations can resume.
• determine extra expenses insured incurred to avoid or minimize the suspension of business?

Question 169

What are unique problems and elements of premises liability claims?

Answer 169

Injury to the visiting sales reps should be investigated as premises liability claims. Claim reps who handle premises liability claims must establish good rapport with the claimant, both to establish the cause of the accident and to determine comparative negligence.

Usually the claimant asserts that premises weren’t maintained in reasonably safe condition. Standard of care is determined by claimant’s status on the property. A high level of care is due to business invitees. Claim reps have to get statements from the claimant and all witnesses to trying about the accident or the condition of the accident scene. Photos should be taken if scene hasn’t changed.

Question 170

Thomas is a surgeon who routinely performs surgery on patients with nasal problems. People suffering from sinus headaches often consult with him to see if he can provide them with relief from symptoms. Thomas arranges a consultative appointment with each of his patients before scheduling treatment to discuss treatment options, chances of success, and risks associated with surgery. If one of Thomas’ patients should experience a negative outcome from surgery, Thomas is likely to be found at fault in a malpractice suit if it is determined that he

A. Failed to provide leading-edge expertise in nasal surgery to the patient.

B. Failed to exercise the standard of care accepted in the profession of nasal surgeon.

C. Failed to provide the patient with full relief from his/her symptoms.

D. Failed to provide an exhaustive written explanation of the risks of treatment and the treatment options.

Answer 170

B. Failed to exercise the standard of care accepted in the profession of nasal surgeon.

Question 171

Why do many professional malpractice insurance policies require the policyholder’s consent to settlement?

A. Many malpractice policies have a high deductible that is the responsibility of the policyholder.

B. The outcome of malpractice claims affects the policyholder’s professional reputation.

C. Many malpractice policies require the policyholder who rejects a proposed settlement to be responsible for any verdict in excess of the proposed settlement.

D. Malpractice claims are litigated by the most sophisticated plaintiff and defense attorneys.

Answer 171

B. The outcome of malpractice claims affects the policyholder’s professional reputation.

Question 172

Which one of the following statements is correct?

Choose one answer.

A. The values that attorneys and adjusters place on liability claims are derived from actual results of claims litigated to conclusion.

B. For most liability claims, resolving the issue in court is relatively fast and inexpensive, and results are reasonably predictable.

C. In liability claims, selection of the defense attorney and the defense strategy rests with the insured defendant.

D. Generally, an insurer need only defend that part of the claimant’s allegations that are covered by the liability policy.

Answer 172

A. The values that attorneys and adjusters place on liability claims are derived from actual results of claims litigated to conclusion.

Question 173

Antonia and Philip have their home insured with ABC Insurance under a standard homeowners policy. During a storm, a lightning strike resulted in a fire in the home’s kitchen, and the high winds caused a tree to fall on the roof leaving a large hole. Quite a few shingles were blown off the remainder of the roof. The homeowners report the claim to ABC and make emergency repairs to protect the property from further damage. The claim is assigned to Trevor at ABC. Because the home is uninhabitable, Antonia and Philip incur additional living expenses for meals and lodging while the home is being repaired. In investigating the loss, Trevor determines that the roof tiles are worn and deteriorated and that the entire roof should be replaced. In addition, the wiring in the house in not in compliance with the local ordinance and should be upgraded when any significant repair or renovation is done. Using the framework for coverage analysis and activities in the claim handling process, which one of the following best describes how Trevor will determine the dollar amount of this loss?

Choose one answer.

A. He will include the cost to repair damage caused by fire in the kitchen and the hole in the roof, and will offer to reimburse the cost of emergency repairs and additional living expenses.

B. He will include the cost to repair damage caused by fire in the kitchen and the hole in the roof, and will offer to reimburse the additional living expenses as well as upgrades to the wiring due to local ordinance.

C. He will include the cost to repair damage caused by fire in the kitchen and the hole in the roof, but will not reimburse the emergency repairs or additional living expenses because these expenses are generally not covered.

D. He will include the cost to repair damage caused by fire in the kitchen, to replace the roof on the entire home, and will reimburse the cost of emergency repairs and additional living expenses.

Answer 173

A. He will include the cost to repair damage caused by fire in the kitchen and the hole in the roof, and will offer to reimburse the cost of emergency repairs and additional living expenses.