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
An insured's vehicle is totaled after being struck by an uninsured driver. The insurer pays the claim. Which subrogation option is available?
Answer: Insurer can pursue a civil judgment against the at-fault uninsured driver
Even when the at-fault party is uninsured, the insurer retains the right to pursue a civil judgment to recover paid losses.
When a salvage vehicle is sold at auction, how are the proceeds typically applied?
Answer: Applied to reduce the insurer's net loss on the claim
Salvage proceeds reduce the insurer's net loss, effectively lowering the overall cost of the claim.
What is 'waiver of subrogation' in the context of an auto insurance policy?
Answer: A policy provision where the insurer gives up its right to recover from a specified third party
A waiver of subrogation is a policy endorsement where the insurer agrees not to seek recovery from a named third party after paying a claim.
A salvage title is typically issued when a vehicle's repair cost exceeds what threshold compared to its ACV?
Answer: 75% or more
Most states issue a salvage title when repair costs reach 75% or more of the vehicle's actual cash value, though thresholds vary by state.
Which principle prevents the insured from collecting more than their actual loss through both insurance payment and third-party recovery combined?
Answer: Subrogation
Subrogation prevents unjust enrichment by transferring the insured's recovery rights to the insurer after the insurer pays the loss.
If an insured settles directly with the at-fault party without the insurer's consent after the insurer has already paid the claim, what consequence may follow?
Answer: The insured may be required to reimburse the insurer for the amount recovered
If the insured prejudices the insurer's subrogation rights by settling without consent, the insured may be liable to reimburse the insurer.
A vehicle deemed a total loss is sold to a salvage yard for $2,500. The insurer paid the insured $18,000 ACV. What is the insurer's net loss?
Answer: $15,500
The insurer's net loss is the claim paid minus salvage proceeds: $18,000 − $2,500 = $15,500.