Property And Casualty Insurance License Claims and Loss Settlement 1 — Questions and Answers
Question 1: What is the insured's 'duty to cooperate' after a loss?
- The insured must accept any settlement the insurer offers
- The insured must assist the insurer in investigating, settling, and defending a claim (Correct answer)
- The insured must hire an attorney before reporting a loss
- The insured must mitigate losses even if it costs more than the damage
Correct answer: The insured must assist the insurer in investigating, settling, and defending a claim
The cooperation clause requires the insured to assist the insurer by providing information, submitting to examinations, and helping with claim investigation and defense.
Question 2: What is a 'proof of loss' in the claims process?
- A police report filed after a theft
- A formal sworn statement submitted by the insured detailing the circumstances and amount of a loss (Correct answer)
- Photographs taken at the scene of the damage
- The insurer's internal claim file notes
Correct answer: A formal sworn statement submitted by the insured detailing the circumstances and amount of a loss
A proof of loss is a sworn, written statement that details the nature and extent of the loss, submitted by the insured within the time frame required by the policy.
Question 3: What does it mean when an insurer 'reserves the right to deny coverage' in a reservation of rights letter?
- The insurer refuses to pay the claim immediately
- The insurer will investigate and potentially defend the claim while preserving its right to contest coverage later (Correct answer)
- The insurer is canceling the policy
- The insurer has determined the claim is fraudulent
Correct answer: The insurer will investigate and potentially defend the claim while preserving its right to contest coverage later
A reservation of rights letter notifies the insured that the insurer will handle the claim but has not waived any policy defenses and may deny coverage if a coverage issue is confirmed.
Question 4: What is the role of a 'public adjuster'?
- A state employee who regulates insurance companies
- A licensed professional hired by the insured to negotiate the claim settlement on their behalf (Correct answer)
- An independent adjuster hired by the insurer
- An arbitrator who resolves coverage disputes
Correct answer: A licensed professional hired by the insured to negotiate the claim settlement on their behalf
A public adjuster represents the policyholder — not the insurer — in preparing, filing, and negotiating property insurance claims, typically charging a percentage of the settlement.
Question 5: What does 'subrogation waiver' mean?
- The insurer agrees not to pursue recovery from a negligent third party (Correct answer)
- The insured waives the right to receive any claim proceeds
- The insurer cancels the policy after paying a claim
- The insured gives up the right to sue the insurer
Correct answer: The insurer agrees not to pursue recovery from a negligent third party
A subrogation waiver is an agreement by the insurer to give up its right to recover from a third party after paying a claim, often requested when the insured has a contractual obligation not to sue a certain party.
Question 6: What is 'bad faith' in insurance claims handling?
- Filing a fraudulent claim
- The insurer's unreasonable refusal to pay a valid claim or failure to properly investigate a claim (Correct answer)
- The insured's failure to report a loss promptly
- An insurer denying a claim based on a valid policy exclusion
Correct answer: The insurer's unreasonable refusal to pay a valid claim or failure to properly investigate a claim
Bad faith occurs when an insurer unreasonably delays, denies, or underpays a valid claim; policyholders can sue for bad faith and may recover damages beyond the policy limits.
Property And Casualty Insurance License Claims and Loss Settlement 1
What is the insured's 'duty to cooperate' after a loss?