Study 8: Claims Settlement - Summary Flashcards
1
Q
Adjuster authority in the settlement process
A
- Loss adjusters are granted a limited settlement authority on certain types of claims.
- On claims over the limit amount, adjusters must get explicit authority or permission to act on the claim. Generally, this would entail documenting the claims file appropriately for review by a supervisor and recommending a course of action or a settlement amount.
- Depending on the complexity of the claim, the file might be transferred to a more senior employee.
2
Q
Submission of Proof of Loss
A
- In a proof of loss, the insured details all the information to establish the claim.
- The statutory conditions require that a proof of loss be verified by a statutory declaration (an oath declaring the statement is true)
- Proof of loss is not required on third-party claims and may be waived on minor first-party claims.
- Once the insured submits a completed proof of loss, the insurer has 60 days to pay the claim. After 60 days the insured has the right to sue the insurer for payment.
3
Q
Basis of a claims settlement for first and third party losses
A
- In a first-party loss, a contract such as a property policy stipulates the principles on which the settlement for the insured’s loss or damage will be based. The adjuster must look to the policy wording.
- In a third-party loss (also known as a liability claim), a settlement generally must compensate a third party for injuries to the extent that the law finds the insured liable for them.
4
Q
Replacement cost clause
A
- Very common in property policies, especially personal lines
- Under building coverage, repairs carried out with materials of similar kind and quality—or the cost of new articles of similar kind, quality, and usefulness—qualify for recovery without deduction for depreciation.
- To qualify for replacement cost, repair or replacement must generally take place as soon as is reasonably possible.
- Repair or replacement must occur at the same location and occupancy must be the same.
5
Q
The functional approach to the principle of indemnity
A
- Replacement cost clause appears to be at odds with principle of indemnity
- Functional approach - a family who lived in a comfortable house should be returned to the same functional level after a claim
6
Q
Exaggerated claims
A
- Example: an insured who owns 2,000 CDs claims to have lost 7,000 CDs in a fire. This is considered opportunistic fraud.
- Fraud perpetrated by the insured in relation to a claim disqualifies the entire claim.
7
Q
How to Apply Deductibles
A
- The most common application of a deductible is to reduce the agreed settlement amount by the amount of the deductible
- Some policies have deductibles which don’t apply to losses that exceed a certain threshold
- Aggregate deductibles are common for larger commercial risks
- Franchise deductibles are less common
8
Q
Valued policies
A
A valued basis policy defines how much an insurer will pay upon the total loss of the insured property. No further proof of value is needed when a loss occurs; the insured collects the total amount of insurance.
9
Q
Adjuster should consider the following when additional costs are submitted by body shops or contractors
A
- Did the contractor underprice the job at the estimate stage, perhaps in order to secure the job?
- Was there a change in the scope of the damage? Was there hidden damage that was not initially seen? Should the hidden damage have been anticipated?
- Did some items not respond to repairs or cleaning, with the result that replacements were required?
10
Q
Overlapping Property Insurance
A
- When two or more policies cover the same property, the principle of indemnity applies. The insured cannot collect twice for the same loss.
- More specific coverage is primary over the general insurance.
- When both coverages are specific or both coverages are general, each insurer will pay its rateable proportion.
11
Q
Settlement cheque payees
A
- When the policy has named an additional loss payee or includes a mortgagee under a mortgage clause, their names should be included on the cheque with the name of the insured.
- A mortgage clause or endorsement protects the mortgagee when the insured breaches a policy condition.
- When the insured has breached a policy condition, the insurer is entitled to subrogate against the insured for any sums paid to the mortgagee.
12
Q
Settlement Offers Without Prejudice
A
- Where possible, parties to a dispute should try to settle their differences without litigation.
- To encourage this, settlement discussions are privililged and not admissible in court
13
Q
Subrogation opportunities during the settlement process
A
- Whenever recovery is possible, the loss adjuster provides notice and sends a demand letter to the liable party.
- When the liable party has no insurance, a payment plan may be negotiated.
- If the police arrest a party for the damages claimed, the insurer can arrange a criminal compensation order under the Criminal Code.
- Everyone concerned in subrogation should be sensitive to keeping information confidential.
14
Q
Salvage considerations during settlement
A
- Damaged items that have been replaced for the insured may still have some usefulness and residual value
- Ownership of the property must be established and control of property discussed with the insured and with loss payees.
15
Q
Denying a claim
A
- The decision to deny a claim should only be made after a fair and thorough analysis and then delivered to the insured promptly and professionally.
- In third-party claims, the insurer will ask a claimant to sign a release when a settlement has been reached.
- Once the settlement has been reached and the release signed, the claim is closed.
16
Q
Releases
A
In third-party claims, the insurer will ask a claimant to sign a release when a settlement has been reached. This legally binding contract signals the settlement of a third-party claim.
17
Q
Limitation periods
A
- Limitation periods are created by statute, regulation, and contract.
- After a limitation period passes, a lawsuit will not usually be permitted to proceed.
18
Q
The laws of civil procedure and how they affect claims settlement
A
- A wronged party initiates a lawsuit to enforce a right or seek a remedy in court
- Any claim can potentially lead to a lawsuit, which can involve the issue of liability or amount of damages
- In claims agains the Crown, a municipality, or other public authority, the notice of the claim must be made to the right parties within a set number of days.
19
Q
Overview of the litigation process
A
- Provide notice to insurer as soon as possible. Claim has likely already been reported
- Adjuster obtains a waiver of defense or assigns counsel
- Adjuster may be required to close file and let defense counsel report to examiner
20
Q
Pleadings
A
- Pleadings inform both parties to the action about the fact situation and set the boundaries for the litigation.
- Pleadings include the plaintiff’s statement of claim and the defendant’s statement of defence.
21
Q
Statement of defence
A
- A plea in reply to a statement of claim
- Defendant admits or denies the allegations in the statement of claim using factual and legal arguments
- Ontario – anything not specifically denied is admitted
22
Q
Cross claim
A
Demand made against another party on the same side of a lawsuit
23
Q
Default judgement
A
Claim is not contested; rendered in favour of the plaintiff for amount of damages pled in original complaint
24
Q
Lawsuits and the Loss Adjuster
A
- Loss adjusters can negotiate settlements, and most insurance companies expect adjusters to settle cases themselves whenever possible.
- The loss adjuster may deal directly with a third-party lawyer. Most lawsuits are initiated to protect against a limitation period.
25
Q
Pre trial procedures and the discovery process
A
- The discovery process ensures full disclosure of all evidence before trial.
- Lawyers file certificates of readiness to signal courts to set a date for trial.
- Lawyer must file a defence within the deadline to avoid a default judgement. The limitation period runs from the day the statement of claim is served on the defendant.
- At any time during litigation, either party may formally offer to settle.
- Judgments concern liability and damage issues raised at trial. Either side may appeal the judgment.
26
Q
The court systems
A
- The jurisdictions of the provincial, territorial, and federal governments are set out in the federal Constitution Act.
- Two court systems are established: (1) Provincial and territorial court system (2) Federal court system
- The Court of Appeal is the highest level of court within most provinces and territories
- The Supreme Court is the highest level of federal court
