Chapter 9

Question 1

What is the purpose of insurance claims?

Answer 1

To test the promises made in the policy and prove the quality of the insurance purchased.

Question 2

How do first-party and third-party claims differ?

Answer 2

First-party: Made by the insured against their insurer.
Third-party: Made by someone outside the contract alleging liability against the insured.

Question 3

What are direct and indirect losses?

Answer 3

Direct Loss: Damage to or loss of insured property itself.
Indirect Loss: Secondary losses resulting from the insured peril.

Question 4

What does it mean when an insurer is “prejudiced”?

Answer 4

The insurer is at a disadvantage due to late reporting or actions of the insured.

Question 5

How can delays in reporting automobile claims affect the insurer?

Answer 5

Delays can prejudice the insurer’s ability to investigate and resolve claims effectively

Question 6

What is forfeiture in an insurance context?

Answer 6

Loss of the insured’s right to recover due to failure to meet policy conditions.

Question 7

How can courts provide relief from forfeiture?

Answer 7

Courts may waive conditions if the failure was reasonable and justified.

Question 8

What must an insurer prove to enforce forfeiture?

Answer 8

That the insurer’s position was prejudiced by the insured’s failure to meet conditions.

Question 9

What is prescription in insurance?

Answer 9

A time limit within which a claim must be made to avoid legal chaos.

Question 10

How are prescription periods determined?

Answer 10

Defined by acts and statutes, such as the Limitations Act.

Question 11

What is salvage in insurance?

Answer 11

The remaining value of damaged property after a loss, which can reduce the overall loss.

Question 12

How does salvage benefit the insurer?

Answer 12

The insurer can sell the property and offset the loss.

Question 13

What is subrogation?

Answer 13

The insurer’s legal right to recover claim payments from the responsible party.

Question 14

How does subrogation preserve indemnity?

Answer 14

It ensures the insured is not paid twice for the same loss.

Question 15

What is contribution in insurance?

Answer 15

When multiple insurers share the payment for a single loss.

Question 16

Why is contribution important?

Answer 16

To prevent the insured from profiting and maintain the principle of indemnity.

Question 17

What is coinsurance?

Answer 17

A policy provision requiring the insured to carry a minimum percentage of the property’s value as coverage.

Question 18

What happens if the insured fails to meet the coinsurance requirement?

Answer 18

A coinsurance penalty applies, reducing the claim payout.

Question 19

Why is adequate insurance coverage important under coinsurance?

Answer 19

To ensure full reimbursement and maintain adequate premium levels for loss payments.

Question 20

What is a stated amount coinsurance clause?

Answer 20

A clause specifying a fixed property value, avoiding penalties if met.

Question 21

Who are the two main parties in an insurance contract?

Answer 21

The insured (first party) and the insurer (second party).

Question 22

How does liability insurance differ in terms of claimants?

Answer 22

Liability claims involve a third party who is outside the insurance contract.

Question 23

What risks are insurers trying to mitigate with coinsurance?

Answer 23

Underinsurance and inadequate premiums to cover losses.

Question 24

Where can limitation periods for claims be found?

Answer 24

In provincial or territorial statutes like the Limitations Act.

Question 25

How does coinsurance align with loss data?

Answer 25

By addressing the commonality of partial losses compared to total losses.

Question 26

What sets the claims process in motion?

Answer 26

The occurrence of a loss.

Question 27

Who does the insured party report the loss to?

Answer 27

The intermediary, insurer call center, or via a website or mobile application.

Question 28

How does the claims intake handler gather information?

Answer 28

By recording preliminary details or having the insured complete a questionnaire.

Question 29

What does the claims handler review when assessing a claim?

Answer 29

The applicable policies, policy periods, and whether the cause of loss is covered.

Question 30

What happens if there are potential coverage issues?

Answer 30

The claims handler notifies the insured of the issues for further investigation.

Question 31

Who may the broker report the loss to?

Answer 31

The insurer of record.

Question 32

What is the role of the loss adjuster in the claims process?

Answer 32

Verifies policy coverage, investigates the loss, and negotiates or denies the claim.

Question 33

What does the loss adjuster establish for each claim?

Answer 33

A loss reserve.

Question 34

How does the loss adjuster investigate a claim?

Answer 34

By gathering factual information, assessing damage, and collecting evidence.

Question 35

Who may be involved in investigating the loss?

Answer 35

Experts, witnesses, and specialized fraud teams if needed.

Question 36

What type of documentation does a loss adjuster review during an investigation?

Answer 36

Written or recorded statements, physical evidence, and expert reports.

Question 37

How does a loss adjuster assess damage to the property?

Answer 37

By evaluating damage reports and comparing them to policy coverage.

Question 38

What is a key element in negotiating a claim settlement?

Answer 38

Fair and reasonable evaluation based on the policy’s terms.

Question 39

How does the adjuster ensure transparency during negotiations?

Answer 39

By explaining policy terms such as depreciation, deductible, and replacement cost.

Question 40

What may happen if a claim cannot be settled through negotiation?

Answer 40

It may go to court or be settled through alternative dispute resolution (ADR).

Question 41

What is the primary responsibility of the claims department?

Answer 41

Providing indemnity on valid claims and rejecting fraudulent ones.

Question 42

Who manages the efficient operation of the claims department?

Answer 42

The claims supervisor.

Question 43

What is the role of the claims supervisor?

Answer 43

Ensuring departmental efficiency, budget compliance, resource allocation, and regulatory compliance.

Question 44

What does the claims examiner do?

Answer 44

Directs investigations, reviews reports, and approves settlements.

Question 45

How does a claims examiner contribute to litigation?

Answer 45

By continuing to manage the case and guiding legal decisions.

Question 46

What do claims adjusters do in the claims process?

Answer 46

Represent the insurer, assess damage, and negotiate or settle claims.

Question 47

Who handles claims for small, straightforward losses?

Answer 47

Telephone adjusters.

Question 48

What distinguishes a staff adjuster from an independent adjuster?

Answer 48

Staff adjusters are salaried employees, while independent adjusters are hired on a contract basis.

Question 49

What is a public adjuster?

Answer 49

An independent professional hired by the insured to represent their interests during a claim.

Question 50

What is the primary difference between a public adjuster and other adjusters?

Answer 50

Public adjusters represent the insured, not the insurer, and are paid a percentage of the claim.