Study 5-7: Key terms

Question 1

Third party

Answer 1

A claimant under a liability policy, so called because that party is not one of the two parties (insured and insurer) who has entered into the insurance contract that pays the claim.

Question 2

Intermediary

Answer 2

(1) The agent/broker negotiating insurance or reinsurance contracts for another. (2) Any party representing another party, in negotiation with a third party.

Question 3

Non-waiver agreement

Answer 3

An agreement signed by the policyholder after a loss, agreeing that the investigation and determination of the amount of damage by the insurance company shall not be construed as an admission of liability. It is used when the insured is in violation of a policy condition and there is a question as to whether or not the company is liable for a loss but it wishes to investigate the loss and determine the amount of damage.

Question 4

Reservation of rights letter

Answer 4

An insurer’s notification to an insured that coverage for a claim may not apply. Such notification allows an insurer to investigate (or even defend) a claim to determine whether coverage applies (in whole or in part) without waiving its right to later deny coverage based on information revealed by the investigation.

Question 5

Spoliation

Answer 5

(1)The destruction of evidence. (2) The alteration of a policy by a party other than the insurer or the insured without consent.

Question 6

Forensic expert

Answer 6

Someone connected to a court of law who can be hired by an insurer or an insured to appear in court as a witness. This expert combines knowledge of legal cases with the principles of a profession. The expert can help to prove or contradict the cause of a claim.

Question 7

Pair and set clause

Answer 7

Establishes that loss or damage to one of a pair or set of individual items does not represent the loss of the entire pair or set.

Question 8

Parts clause

Answer 8

Establishes that loss or damage to one part of an item does not represent the loss of the entire item.

Question 9

Replacement clause

Answer 9

A clause found in the conditions of property and automobile policies. Instead of making payment, the insurer has the option to repair, rebuild, or replace the property damaged.

Question 10

Mediation

Answer 10

An alternative method of dispute resolution in which representatives of each party meet in private with an impartial mediator to try to reach a settlement.

Question 11

Arbitration

Answer 11

A method of resolving disputes between parties whereby impartial, neutral persons are chosen by the parties in dispute to determine their rights and/or obligations. The parties agree in advance to abide by the arbitrament. Each party has a chance to be heard, issues are examined, and a settlement is developed. The settlement can be final and binding.