Subrogation and Salvage Flashcards
7 cards from real CAIA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Subrogation and Salvage flashcards as text
Which party typically handles the sale of salvage vehicles on behalf of the insurer?
Answer: A licensed salvage auction company
Insurers commonly use licensed salvage auction companies to maximize recovery from the sale of totaled vehicles.
Under what circumstance may an insurer be required to pursue subrogation on behalf of the insured even if the insurer does not want to?
Answer: When the insured demands it and state law requires the insurer to do so
Some states require insurers to pursue subrogation at the insured's request, particularly when significant unrecovered losses remain.
A vehicle has an ACV of $10,000 and repair costs of $7,800. The salvage value is $2,500. Should the adjuster declare it a total loss?
Answer: Yes, because repair costs plus salvage value exceed ACV
When repair costs ($7,800) plus salvage value ($2,500) equal or exceed ACV ($10,000), a total loss declaration is economically justified.
What is a 'keeper vehicle' in the context of automotive total loss claims?
Answer: A totaled vehicle the insured chooses to keep by accepting a reduced settlement
A keeper vehicle is one the insured elects to retain after a total loss; the settlement is reduced by the salvage value since the insured keeps the vehicle.
What happens to the insurer's subrogation rights if the statute of limitations expires before the insurer files suit against the at-fault party?
Answer: The subrogation claim is barred and the insurer loses its right to recover
If the insurer fails to file a subrogation action before the statute of limitations expires, the right to recover is permanently lost.
Which of the following best describes 'inter-company arbitration' in auto subrogation?
Answer: A process where insurers resolve subrogation disputes without litigation
Inter-company arbitration, such as through Arbitration Forums, allows insurers to resolve subrogation disputes quickly and cost-effectively without going to court.
If a vehicle is declared a total loss but the insured still owes $5,000 on an auto loan, and the ACV is $4,000, what product would have covered the $1,000 gap?
Answer: GAP insurance
GAP (Guaranteed Asset Protection) insurance covers the difference between a vehicle's ACV and the remaining loan balance when ACV is less than what is owed.