Unit 5 - Basics of Claim Handling

Question 1

When is the insurer NOT obligated to pay

Answer 1

• Insurer is only obligated to pay claims for which the insured is legally liable to pay damages and to which the policy applies (i.e. insured is negligent and has coverage).

Question 2

What is one way an adjuster can prevent a lawsuit?

Answer 2

PROMPT contact with the insured and with the claimant.

Question 3

Proof of Loss (Claim Form)

Answer 3

• To be completed by INSURED (not adjuster)
• Helps determine if insured…1) … has other insurance that may cover loss
  2) … whether insured has insurable interest in the property
  3) … time & origin of loss
  4) … Value of loss

Question 4

When must the sworn proof of loss statement be returned to insurer?

Answer 4

Within 91 days of RECEIPT BY THE INSURED (or from the date the adjuster mails out the form).

Question 5

Depreciation

Answer 5

A decrease in value of property as a result of use, age, obsolescence, wear and tear, deterioration, and so forth.

Question 6

Total Loss

Answer 6

Occurs when cost to repair is greater than the value of the property pre-loss value.

Question 7

Salvage

Answer 7

Occurs when the insurer takes title to the property of the insured under a covered loss and becomes the new owner of the property.

Question 8

4 Claim settlement options

Answer 8

Dictated by policy itself (under “conditions” section).

1) Replacement cost… provides a settlement to the insured to replace property with property of like kind and quality (without subtracting depreciation).
2) Actual cash value (ACV)… Replacement Cost - Depreciation
3) Valued Policy… pays the face amount of the policy in the event of a total loss (reserved for certain high-value items). Insured must pay for appraisal items covered under this policy.

Question 9

When can the adjuster issue settlement of loss?

Answer 9

After he/she…

1) Verify’s coverage
2) Determines liability
3) Completes thorough investigation

Question 10

Intangible damages

Answer 10

• aka non-economic damages, general damages

- pain, suffering, emotional loss, and loss of future earnings

Question 11

Subrogation

Answer 11

• The transfer by the insured to the insurance company of the insured’s right of recovery against others
• Only applies when insured isn’t at fault.
• 1st party will eventually recover cost of deductibles.

Question 12

Appraisal

Answer 12

• Alternative dispute resolution
• Method of solving disputes regarding the VALUE (or DOLLAR AMOUNT) of a claim
• If insured and insurer can’t agree on the AMOUNT OF THE LOSS or the ACV, either may hire their own appraisers by making a written demand on the other.
• Each party has 20 days to select a competent appraiser.
• When neither appraiser comes to an agreement, both parties hire an “UMPIRE” (aka a retired judge). His word is final.

Question 13

Arbitration

Answer 13

• Alternative dispute resolution
• Occurs to determine whether or not there is a valid claim and/or dispute over specifics of coverage.
• 3rd party, chosen by the participants or appointed by court, intervenes between the conflicting parties to hear their claims and render a decision.
• Arbitration is NOT required in the state of Texas before filing a lawsuit in court.

Question 14

Negotiation

Answer 14

Critical factor in meeting company goals

• Fulfill contractual and legal obligations
• Manage expenses
• Cultivate good customer relations