Study 11

Question 1

What is first party loss?

Answer 1

• when losses occur to property insured by the policy
• often referred to as own damage/ direct damage claims
• involve only the insured and insurer or a mortgagee or assignee of the policy proceeds
• settlement is based upon the wording in the insurance policy

Question 2

What is a third party loss?

Answer 2

• refers to liability coverage - damage or injury to others
• when claims arise out of the insured’s responsibility to others at law
• losses involve someone/something that is neither a party to the insurance contract nor is it mentioned in the policy

Question 3

What are the qualities of an adjuster?

Answer 3

• have an extremely important function in securing and maintaining the goodwill of the insuring public
• often are the only representatives of the insurer that the insured will ever meet
• are judged by how the deal with claims
• demeanor can be a strong positive or negative influence on a client
• should be people-oriented, possess investigative abilities, a keen observer, a tough but fair negotiator, and scrupulously honest

Question 4

What is a telephone adjuster?

Answer 4

• salaried employees of insurer
• process a large volume of claims
• no face-to-face interview with insured
• is a fast, efficient, and economical method
• they contact the insured, obtain necessary details of loss, reassure the insured, and then call an expert to quote on the type of damage, all by telephone
• after insured and insurer agree on the settlement amount and method, the insured with authorize repairs so that the claim may be settled

Question 5

What is a staff adjuster?

Answer 5

• salaried employees of insurer
• investigate, negotiate, settle claims for employer
• will have authority to commit the insurer to a settlement, up to a specific dollar amount
• do not require licenses (except in quebec or NB)

Question 6

What is an independent adjuster?

Answer 6

• operate as independent businesspeople
• accept assignment from as many insurers that choose to use their service
• require a license in the province in which they operate
• they are compensated with a fee based on time spent on a loss at a set rate per hour, plus any expenses (long distance telephone calls, travel expenses, copies of documents made.)
• usually have less latitude in their authority to settle claims (because they work for so many diff. companies)
• are expected to report to insurer on facts they find, await their instructions and carry them out

Question 7

What are an adjusters functions?

Answer 7

• work on behalf of insurer
• appointed by insurer and paid by them
• responsible to investigate and report all facts
• treat parties involved in claims with honesty and equitability
• they interview people (insured, third parties, witnesses, police, firefighters, accountants, employers, employees)
• they listen and observe people’s reactions
• visit accident or loss scenes, ask questions and make observations
• curiosity is one of their distinguishing traits
• first priority is to establish how accident happened and what caused the loss

Question 8

What is quantum and how does it work?

Answer 8

• once the cause of the loss has been established the amount or value must be agreed upon with the insured
• its the insureds responsibility to prove the amount of loss, but if the insurer thinks the amount is incorrect must prove its case
• this is why carefully investigated and well documented files and finely honed negotiation skills are invaluable

Question 9

Explain the importance of a thorough investigation?

Answer 9

• the adjusters files become the key source of info upon which legal counsel will base their case for the insurer
• every claim should be investigated as if it were going to end up in court

Question 10

What are the adjusters qualifications?

Answer 10

• an adjusters knowledge must range from manufacture of plastics to the techniques of cleaning a floor to prevent slipping
• must keep abreast new technology and scientific advances from which new claims may arise and provide innovations for claims that have already occurred
• must also be aware of latest scams for bilking insurers
• must develop a wide range of contacts and info sources such as police, firefighters, and experts in many fields
• must study new coverages, policy forms, and endorsements to facilitate adjustment of losses
• must keep abreast with what is happening in the courts in respect to insurance cases

Question 11

What is a public adjuster?

Answer 11

• works on behalf of the insured
• independent businesspeople engaged by the insured to represent their interests during a claim
• sometimes used on large property claims when there is a disagreement with the insured and the insurer
• are paid by the insured, usually based on a % of the claim recovered
• are not permitted to work in all provinces
• must be licensed

Question 12

What are the licensing requirements?

Answer 12

• the insurance acts of each province state the requirements for licensing adjusters
• vary from province to province
• act also states what a licensed adjuster may and may not do
• licenses may be cancelled if any irregular or improper practices take place

Question 13

Who is the head of the claims department and what is their responsibility?

Answer 13

• claims manager or claims superintendent

- responsible for the smooth functioning of the entire department

Question 14

What steps are taken when INVESTIGATING A LOSS?

Answer 14

1) A LOSS REPORT
- a loss is reported by an insured/ third party to a broker/agent or directly to insurer
- as much info as possible should be obtained at the time by whoever takes initial report

2) CONFIRM COVERAGE
- coverage must then be confirmed by checking loss details against a hard copy of the policy
(an insurer could prejudice its position without first checking that the policy applies and is in force)
- once coverage has been confirmed, a claim file is opened

3) ROUTING THE CLAIM
- a decision must be made on how the claim is to be handled
- an individual will be responsible for routing the claim so it receives appropriate attention (this person should be experienced enough to evaluate each initial claim report)
- certain info should trigger a response of having a more senior employee look at the report
- if loss is a simple one, a claims clerk may ask insured to submit receipts and a completed proof of loss (usually used with own damage claims)

Question 15

Define proof of loss.

Answer 15

• a document completed and signed by the insureds making claim against their own insurer
• contains details of the policy and the loss, how much is claimed, to whom it should be paid
• also releases insurer of further obligations relating to that loss and transfers title to any useful salvage to the insurer

Question 16

What are the subtle types of fraud that have a major impact on the overall cost of insurance claims?

Answer 16

1) overstating settlement values
2) claiming for items that never existed
3) claiming for damage that was never intended to be covered by insurance

• dishonest and disreputable tradespeople
• when contractors or repair garages are asked to submit estimates for repairs or replacement of damaged property, may inflate estimates on include unnecessary items
• it is less likely to occur if an adjuster first inspects the damage
• with the use of telephone adjusters

Question 17

Describe the duties of an adjuster.

Answer 17

• all info is passed onto him/her with policy details
• must arrange an interview with insured and ensure loss was reported correctly and verify peril
• verify that damage occurred and in manner stated
• may have to check extent of damage
• may have to interview third parties (to explore possible insureds liability)
• must keep claims department informed
• adjusters reports then scrutinized by claims examiner
• if during investigation, any questions about coverage arises, the insured must be notified immediately
• establish amount of loss

Question 18

Define estoppel

Answer 18

• a doctrine of law which precludes a person from denying the truth of a statement formerly made by him or the existence of a series of facts which has caused someone to draw a certain logical conclusion
• can be created by conduct as well
• arises when a person is forbidden by law to speak against his own act/deed.
• a mans own acceptance stops or closes his mouth to prevent him from arguing the opposite

Question 19

Define prescription.

Answer 19

• in law, is a time after which a cause of action ceases

- in insurance, it is the time which a claim may not be brought

Question 20

Define statue of limitations.

Answer 20

• is a statute that sets out the time periods within which specific legal actions must be taken

Question 21

Define a statement of claim

Answer 21

• is a written statement made by plantiff detailing the facts which support the claim against the defendant and the relief sought

Question 22

What is a plaintiff?

Answer 22

• is the party who brings a legal action against another, called the defendant

Question 23

Define waiver.

Answer 23

• is the voluntary relinquishment of a known right

Question 24

Define non-waiver agreement.

Answer 24

• is an agreement between 2 parties recognizing that there is a possible right (such as to deny liability) but in the interests of both parties, a note will be made of it and the matter will be allowed to proceed without prejudice to either party
• is used when an insurer has any suspicions about a loss
• used to protect itself while it investigates the loss

Question 25

How does a reservation of rights letter work?

Answer 25

• used if a non-waiver agreement cannot be arranged
• states that the insurer is investigating a loss without prejudicing its position
• and should be sent to insurer

Question 26

What is the importance of the first report?

Answer 26

• it will include an estimate of the damages and the first indication of potential cost of claim
• this will enable insurer to set up its loss reserve for claim
• details of reserve will be entered into computer which issues reports to accounting and claims dpt of outstanding loss reserves broken down into class of business and year of occurrence
• reserve will be decreased as claim payments are made until it reaches zero, and file is closed

Question 27

Define loss reserves.

Answer 27

• consist of funds set aside to cover all of an insurers outstanding claims
• based on insurers estimate of amt it expects to pay for all reported losses and those losses not yet reported
• are required by law and closely monitored
• insufficient reserves could be an indication that there are financial problems with org

Question 28

Define proximate cause.

Answer 28

• is the immediate and effective cause of loss/damage, not necessarily the last event before the occurrence, which in a chain of circumstances leads naturally and directly in the ordinary course of events to the loss
• is the unbroken chain of cause and effect between the occurrence of an insured peril and damage to property
• aka remote cause
• the last link in events is known as immediate cause

Question 29

Loss under policy is the least of?

Answer 29

1) amt stated in policy
2) insureds interest in property
3) ACV of property

• if claim is denied the insurer must prove that there was a misrep/non disclosure by insured, or fraud has been committed

Question 30

How do you finalize the claim?

Answer 30

1) claims forms
- used to expedite loss settlements

a) proof of loss
- insured gives written particulars of the claim
- required to provide necessary info in stat declaration or proof of loss

b) release
- when settlement has been reached is signed and matter is closed

2) salvage
- always belongs to the insurer unless specific arrangements have been made
- salvage value is used to reduce insurer’s claim payouts

3) subrogation
- insurer has insured right of recovery after accepting claim

Question 31

Define a release.

Answer 31

• a document in which one party, who suffered damages/injuries, releases another party, who allegedly caused the damages/injuries or is responsible for them, from all further claims arising our of incident in return for a sum of money paid for damages/injuries suffered

Question 32

Define salvage.

Answer 32

• is what is left of property after a loss

- may be undamaged property or partially damaged property that still has some value

Question 33

Define subrogation.

Answer 33

• is the right of an insurer, after paying a loss or agreeing to pay it, to assume the rights of the insured to recover this loss from the responsible party

Question 34

What is contribution?

Answer 34

• a doctrine of law designed to prevent the insured from recovering full amounts of a loss from more than one policy

Question 35

What reports are used?

Answer 35

1) government
- must report certain claims figures to gov authorities in an annual statement
- include totals of losses paid, loss expenses paid, outstanding losses

2) fire marshal
- require reports of certain losses as they occur
- some provinces fire marshal must be notified of fire losses on a prescribed form

3) IBC investigative services
- must report specified types of losses such as suspicious fires, auto theft, and some bodily injury claums

4) other industry orgs
- have to report certain claim stats who have been designated to gather them for various purposes