Chapter 9 Flashcards
What is the purpose of insurance claims?
To test the promises made in the policy and prove the quality of the insurance purchased.
How do first-party and third-party claims differ?
First-party: Made by the insured against their insurer.
Third-party: Made by someone outside the contract alleging liability against the insured.
What are direct and indirect losses?
Direct Loss: Damage to or loss of insured property itself.
Indirect Loss: Secondary losses resulting from the insured peril.
What does it mean when an insurer is “prejudiced”?
The insurer is at a disadvantage due to late reporting or actions of the insured.
How can delays in reporting automobile claims affect the insurer?
Delays can prejudice the insurer’s ability to investigate and resolve claims effectively
What is forfeiture in an insurance context?
Loss of the insured’s right to recover due to failure to meet policy conditions.
How can courts provide relief from forfeiture?
Courts may waive conditions if the failure was reasonable and justified.
What must an insurer prove to enforce forfeiture?
That the insurer’s position was prejudiced by the insured’s failure to meet conditions.
What is prescription in insurance?
A time limit within which a claim must be made to avoid legal chaos.
How are prescription periods determined?
Defined by acts and statutes, such as the Limitations Act.
What is salvage in insurance?
The remaining value of damaged property after a loss, which can reduce the overall loss.
How does salvage benefit the insurer?
The insurer can sell the property and offset the loss.
What is subrogation?
The insurer’s legal right to recover claim payments from the responsible party.
How does subrogation preserve indemnity?
It ensures the insured is not paid twice for the same loss.
What is contribution in insurance?
When multiple insurers share the payment for a single loss.
Why is contribution important?
To prevent the insured from profiting and maintain the principle of indemnity.
What is coinsurance?
A policy provision requiring the insured to carry a minimum percentage of the property’s value as coverage.
What happens if the insured fails to meet the coinsurance requirement?
A coinsurance penalty applies, reducing the claim payout.
Why is adequate insurance coverage important under coinsurance?
To ensure full reimbursement and maintain adequate premium levels for loss payments.
What is a stated amount coinsurance clause?
A clause specifying a fixed property value, avoiding penalties if met.
Who are the two main parties in an insurance contract?
The insured (first party) and the insurer (second party).
How does liability insurance differ in terms of claimants?
Liability claims involve a third party who is outside the insurance contract.
What risks are insurers trying to mitigate with coinsurance?
Underinsurance and inadequate premiums to cover losses.
Where can limitation periods for claims be found?
In provincial or territorial statutes like the Limitations Act.
How does coinsurance align with loss data?
By addressing the commonality of partial losses compared to total losses.
What sets the claims process in motion?
The occurrence of a loss.
Who does the insured party report the loss to?
The intermediary, insurer call center, or via a website or mobile application.
How does the claims intake handler gather information?
By recording preliminary details or having the insured complete a questionnaire.
What does the claims handler review when assessing a claim?
The applicable policies, policy periods, and whether the cause of loss is covered.
What happens if there are potential coverage issues?
The claims handler notifies the insured of the issues for further investigation.
Who may the broker report the loss to?
The insurer of record.
What is the role of the loss adjuster in the claims process?
Verifies policy coverage, investigates the loss, and negotiates or denies the claim.
What does the loss adjuster establish for each claim?
A loss reserve.
How does the loss adjuster investigate a claim?
By gathering factual information, assessing damage, and collecting evidence.
Who may be involved in investigating the loss?
Experts, witnesses, and specialized fraud teams if needed.
What type of documentation does a loss adjuster review during an investigation?
Written or recorded statements, physical evidence, and expert reports.
How does a loss adjuster assess damage to the property?
By evaluating damage reports and comparing them to policy coverage.
What is a key element in negotiating a claim settlement?
Fair and reasonable evaluation based on the policy’s terms.
How does the adjuster ensure transparency during negotiations?
By explaining policy terms such as depreciation, deductible, and replacement cost.
What may happen if a claim cannot be settled through negotiation?
It may go to court or be settled through alternative dispute resolution (ADR).
What is the primary responsibility of the claims department?
Providing indemnity on valid claims and rejecting fraudulent ones.
Who manages the efficient operation of the claims department?
The claims supervisor.
What is the role of the claims supervisor?
Ensuring departmental efficiency, budget compliance, resource allocation, and regulatory compliance.
What does the claims examiner do?
Directs investigations, reviews reports, and approves settlements.
How does a claims examiner contribute to litigation?
By continuing to manage the case and guiding legal decisions.
What do claims adjusters do in the claims process?
Represent the insurer, assess damage, and negotiate or settle claims.
Who handles claims for small, straightforward losses?
Telephone adjusters.
What distinguishes a staff adjuster from an independent adjuster?
Staff adjusters are salaried employees, while independent adjusters are hired on a contract basis.
What is a public adjuster?
An independent professional hired by the insured to represent their interests during a claim.
What is the primary difference between a public adjuster and other adjusters?
Public adjusters represent the insured, not the insurer, and are paid a percentage of the claim.
