Chapter 15 Handling the Claims Adjustment Process

Question 1

Which of the following is not an option of claims payment?

a. to pay the insured the value of the lost or damaged property
b. to pay the cost of repairing or replacing the lost or damaged property
c. to pay the cost of physical and emotional damage as deemed by comparable incidents
d. to take any and all parts of the property at an agreed or appraised value.

Answer 1

c. to pay the cost of physical and emotional damage as deemed by comparable incidents

Question 2

What are the four options an insurer has in making payment for a property loss?

Answer 2

• to pay the insured the value of the lost or damaged property
• to pay the cost of repairing or replacing the lost or damaged property
• to take any and all parts of the poverty at an greed or appraised value
• to repair, rebuild, or replace the property with other property of like kind and quality

Question 3

What is draft authority?

Answer 3

the delegation of authority to the agent to make payment on small claims

Question 4

Why should reserves (a pool of money set up by the insurance company to plan for the ultimate payment it may have to make) set up for the claims be as accurate as possible?

Answer 4

• if a reserve is set too low, the insurance company will falsely assume that it has adequate loss serves to pay its own claims
• if the reserve is too high, the losses of the insured will appear to be much higher than they really are, and the insurer may believe that it needs to raise premiums to compensate

Question 5

Which of the following is not a common error made when evaluating real estate loss exposures?

a. the firm insures against small exposures but not against catastrophic losses such as hurricanes and earthquakes.
b. the firm places too much emphasis on insurance company control loss recommendations
c. the firm fails to obtain umbrella liability insurance
d. the firm fails to obtain employee dishonesty insurance

Answer 5

b. the firm places too much emphasis on insurance company control loss recommendations

Question 6

What does a hold-harmless agreement with a contractor protect the property manager against?

Answer 6

an agreement in which one party consents to protecting the other from loss and to paying for the other party’s losses.

Question 7

What are the thirteen most common deficiencies in risk management and insurance?

Answer 7

• property and business income insurance is not provided on a blanket, replacement cost, and agreed-amount basis.
• not all named insureds or additional insureds are properly named on all policies
• the firm fails to obtain umbrella liability insurance
• the firm fails to obtain various types of professional liability insurance
• the firm fails to obtain crime insurance
• the firm fails to require that its contractors and tenants have adequate insurance and have signed hold-harmless agreements, and that contractors have provided performance bonds for large jobs
• the firm has placed its own insurance coverages, or has accepted insurance from tenants or contractors, with companies that are not A-rated in Best’s Guide.
• the firm insurers against small losses, but fails to insure adequately against catastrophic losses that can put the firm out of business.
• The firm fails to heed insurance company loss control recommendations or fails to practice prudent risk management techniques
• the loss exposures of the firm have been misclassified in its general liability, automobile, and workers’ compensation insurance
• the firm gives its attorney carte blanche to draft insurance provisions in leases or other contractual agreements
• the firm fails to report claims on a timely basis or attempts to handle claims itself, which can void any valid insurance
• commercial real estate firms tend to view insurance as just another overhead expense and to purchase coverage based solely on price.

Question 8

List some factors that must be reviewed when determining whether a claim is covered.

Answer 8

• did the loss or damage occur within the covered policy period
• is the type of loss covered by this insurance policy
• are the parties that suffered this covered by the policy
• has the insured breached the policy provisions in any material manner or prejudiced the right of the insurer to investigate or defend the claim property

Question 9

When is it most likely that an insurance company will pay a claim to an insured and not subrogate against the responsibility third party?

Answer 9

When the cost of subrogation would be more expensive than the amount that would be collected.

Question 10

What is an “other insurance clause”?

Answer 10

When a loss is covered by multiple policies, the other insurance clause specifies how much each policy will pay in the event of a loss.

Question 11

There are many lawsuits that derive from insurance adjusters:

a. not denying obvious claims in a timely manner
b. settling claims without consulting with the insured
c. approving more claims than their company can afford
d. reviewing competing claims

Answer 11

a. not denying obvious claims in a timely manner

Question 12

What are the duties of the insured during the claims process?

Answer 12

1) notify the policy if a law may have been broken
2) Give prompt notice of the loss or damage
3) As soon as possible, give us a description of how, when and where the loss or damage occurred
4) take steps top prevent further damage
5) give complete inventories of the damaged and undamaged property
6) allow insurance company to inspect the property
7) send insurance company sworn proof of loss containing any requested information
8) cooperate with insurance company during investigation or settlement of the claim

Question 13

What term describes the situation when the insurance company pays for the loss and then seeks reimbursement from the third party responsible for causing the loss loss?

a. idemnifictaion
b. subrogation
c. reimbursement submission protocol
d. multiple policy conflict

Answer 13

b. subrogation

Question 14

After a claim has been made to the insurance company, the amount of money set aside to be paid for the loss is called the:

a. insured reserve
b. claims reserve
c. paid reserve
d. recurrent reserve

Answer 14

b. claims reserve

Question 15

Your insurance claim was adjusted by an independent adjuster probably because:

a. the insurer did not have enough claims activity in your geographical area to have its own adjuster
b. you do not trust the company with whom you are insured
c. the insurance company needed to acquire a less expensive adjuster solution
d. the insurer needed an adjuster who knew how to file the claim

Answer 15

a. the insurer did not have enough claims activity in your geographical area to have its own adjuster

Question 16

Who are independent claims adjusters?

Answer 16

They are independent contractors who adjust claims for different insurance companies.

Question 17

Jennifer insured her $500,000 property under two policies, one for $300,000 and the second for $200,000. When she suffered $100,000 of property damage, each paid a portion that, when combined, covered the total loss. This was because of the ________ in each policy.

a. mutual insurance clause
b. other insurance clause
c. warranty clause
d. limitations on recovery clause

Answer 17

b. other insurance clause

Question 18

Third-party claims are usually:

a. workers’ compensation claims
b. property claims
c. liability claims
d. expedited claims

Answer 18

c. liability claims

Question 19

Which of the following is a kind of case where an insurer would pay for an unmeritorious claim?

a. if the claim has made it to the press
b. if the insured had previously been covered but the policy changed before the claim
c. if the claim would be covered by competitors
d. if it would cost far more to fight the case than to settle it

Answer 19

d. if it would cost far more to fight the case than to settle it

Question 20

What is subrogation?

Answer 20

It is the process in which an insurance company seeks reimbursement from the party responsible for the loss.

Question 21

Who are public claims adjusters?

Answer 21

They are adjusters who are paid by the insured to help submit a claim properly, to provide advice on achieving the most equitable settlements, and to represent the insured’s interest as an intermediary with the insurance company

Question 22

The purpose of an insurance company granting draft authority to their agents is to:

a. maximize the amount paid to the insured
b. expedite payment to the insured
c. keep sensitive information secure
d. reach more customers

Answer 22

b. expedite payment to the insured

Question 23

What is considered a nuisance claim?

Answer 23

A claim that is settled even though it is without merit because it would cost more to fight the claim than to settle it.

Question 24

Requiring contractors and tenants to have adequate insurance, to sign hold-harmless agreements, and to provide performance bonds for large jobs all protect a company from:

a. losses caused by persons not under its control
b. liability for injury of guests on the site
c. losses that affect the employment of contractors
d. liability for environmental hazards affecting contractors or tenants

Answer 24

a. losses caused by persons not under its control

Question 25

__________ are sometime hired to assist with the handling of particularly large, complex, or difficult claims.

a. National adjusting firms
b. Independent claims adjuster
c. Public adjusters
d. Insurance company staff adjusters

Answer 25

c. Public adjusters

Question 26

In general when dealing with first-party claims, after giving notice of a loss, the insured must submit ______ and help the insurance company too determine the amount and valuation basis of the claim.

a. a proof-of-insurance form
b. the insurance of all involved parties
c. all previous insurance records
d. a proof-of-loss form

Answer 26

d. a proof-of-loss form