Study 1 - Claims and the Law

Question 1

What influences the term given to loss adjusters?

Answer 1

• Usage in the corporate environment
• Local usage
• Legislation
• Specific licensing regulations

Question 2

What is a public adjuster?

Answer 2

Adjuster who represents insured for a fee

Question 3

What provinces must loss adjusters be certified?

Answer 3

Quebec, New Brunswick, Newfoundland, PEI

Question 4

Define privity of contract

Answer 4

Relationship that exists between two parties or more by contract

Question 5

What are the five essential elements of a contract?

Answer 5

GLACC

Agreement
Capacity to contract
Consideration
Genuine intention
Legality of object

Question 6

What are the four elements of a contract in Quebec?

Answer 6

CCCO

Consents
Capacity to contract
Cause of contracts
Object of contracts

Question 7

What are the three unique elements to an insurance contract?

Answer 7

Indemnity
Insurable interest
Utmost good faith

Question 8

Who are some parties with insurable interest?

Answer 8

• Owner of property
• Mortgagee as a lender
• Lessee who takes possession of leases property
• Bailee who accepts custody of property
• Consignee who has purchased goods that are in transit
• Anyone else in a position to lose should the property be lost or damaged

Question 9

What are the three conditions to qualify for insurable interest

Answer 9

• Physical object destroyed by a peril
• Physical object must be the subject matter of insurance
• Insured must have relationship to property recognized by law

Question 10

What three objectives are punitive damages meant to accomplish?

Answer 10

• Punish those who act in bad faith
• Deter any similar behaviour in the future
• Publicly condemn the behaviour

Question 11

Define representation

Answer 11

Statement an applicant makes to an insurer about the risk insured

Question 12

Define promissory waranty

Answer 12

Promise that a fact is true and will continue to be true

Question 13

What may the injured party due after a breach of contract?

Answer 13

• Sue for damages that resulted from the breach and also for reimbursement of the part of the contract that the injured party already performed
• Compel performance of the terms of the contract or ask to be released from further contractual obligation
• Ask for an injunction to restrain the other party

Question 14

What are some potential remedies an insurer may choose to a breach?

Answer 14

• Refuse the contract and treat it as void
• Treat it as valid notwithstanding the breach
• Treat it as valid but cancel the policy

Question 15

What is relief from forfeiture?

Answer 15

In some circumstances, courts may grant relief to a policyholder who failed to perform an obligation within a certain time frame

Question 16

Define principle of equity

Answer 16

That cases be fair and just, as well as strictly abiding by precedent

Question 17

What was the relevance of Maracle v. Travellers Indemity Co of Canada?

Answer 17

Estoppel cannot be used to bind the insurer

They made an offer to settle, they failed to respond to offer then issued a statement of claim after the expiry

Question 18

How soon must a proof of loss be sent to the policyholder?

Answer 18

Within 60 days of the notice of loss

Question 19

What is the criteria when a proof of loss does not need to be formally signed?

Answer 19

• Amount of the loss is under a specified threshold
• There is no suspicion of fraud surrounding the claim
• There is no possibility of subrogation
• There is no threat of litigation by the insured

Question 20

Which provinces have DCPD?

Answer 20

Ontario, New Brunswick, Nova Scotia, PEI, Quebec

Question 21

. Briefly describe the role of a loss adjuster.

Answer 21

• An adjuster is one who solicits the right to negotiate the settlement of or to investigate a loss or claim under a contract or under fidelity, surety, or guaranty bond issued by an insurer or directly or indirectly negotiates, investigates, adjusts, or settles such loss or claim.
• One who investigates insurance claims, makes recommendations regarding the payment of benefits from insurance policies, and negotiates payments and settlements.
• Some loss adjusters operate as salaried employees of an insurance company, while others operate as independent adjusters, typically for independent adjusting firms that pursue contracts with licensed insurers to manage all or part of a claim.
• The adjuster represents the insurance company with respect to a claim on a policy.
• Loss adjusters must assess and evaluate the amount of damage and then apply the terms of the insurance policy—interpret the policy wording—to determine whether a loss is covered.

Question 22

Explain the legal requirements of indemnity

Answer 22

• Insurance policies are based on the principle of indemnity: Claim payments restore policyholders to the same financial position they were in immediately prior to a loss.
• This principle operates to minimize moral hazard—the situation where an insured intentionally causes a loss in order to profit from it.
• Under this principle, the insured is limited to collecting only what was lost. (The insured should not benefit from any loss.)
• If two or more policies are in effect, the insured can only recover the actual amount of the loss collectively from the insurers.
• In Quebec, the Civil Code of Québec (Article 2463) stipulates that an insurer is only obliged to compensate for damages sustained up to the amount of insurance.

Question 23

Could an insurer deny a claim based on late reporting?

Answer 23

• A court would probably not permit an insurer to use the late reporting as a reason to forfeit the contract; typically, the court would consider whether the late reporting prejudiced the insurer’s position.
• If all the evidence concerning the accident was intact and it was determined that the insurer’s position did not deteriorate as a result of the late reporting, it is likely that relief from forfeiture would be granted.
• When the law of precedent is too strictly applied, it may result in judgments that are not reasonable or fair under some circumstances.
• The common law system therefore incorporates the principle of equity, which refers to the spirit of fairness and justness, in contrast with strictly formulated rules of precedent.
• The common law system empowers judges to consider cases simultaneously bearing in mind not only the law of precedent but also the principle of equity.

Question 24

Can someone sue an insurer if they deny a claim? How does termination of obligation apply?

Answer 24

• If a policyholder is denied policy benefits, he or she is entitled to sue the insurance company.
• The insurer’s obligations under the policy terminate at a stated time. Provincial and territorial statutory conditions refer to this as termination of obligations.
• Depending on the line of insurance or the jurisdiction, the insured typically has one to three years from the date of the loss or damage to initiate a lawsuit against the insurer.
• But insurers may waive the limitation period with major loss events, as they did for claims arising out of the wildfire in Fort McMurray, Alberta, in 2016.
• Termination of obligation is the principle that the insurer’s obligations under a policy terminate at a stated point in time.