Claims Processing & Investigation Flashcards

A Special Investigations Unit (SIU) is most likely to be activated when a claim exhibits which of the following characteristics?

Answer: Multiple prior claims for the same type of loss within a short period

A pattern of similar prior losses is a classic fraud indicator that triggers SIU referral for deeper investigation beyond routine claim handling.

Under the principle of indemnity, the maximum amount an insurer should pay for a covered loss is:

Answer: The amount sufficient to restore the insured to their pre-loss financial position

Indemnity prevents the insured from profiting from a loss; payment is capped at restoring the insured to the same financial position as before the loss occurred.

When an insurer formally denies a claim, the denial letter must typically include:

Answer: The specific policy provision and factual basis supporting the denial

Most state regulations and model unfair claims acts require denial letters to cite the exact policy language and the facts of the claim that justify the denial.

In auto liability claims, the 'omnibus clause' of an auto policy extends coverage to:

Answer: Any person using the insured vehicle with the named insured's permission

The omnibus clause broadens coverage beyond the named insured to include permissive users, ensuring victims can seek recovery from the policy regardless of which licensed driver caused the accident.

The concept of 'abandonment' in property insurance claims means the insured:

Answer: Surrenders the damaged property to the insurer in exchange for full policy limits

Abandonment occurs when the insured attempts to transfer title of damaged property to the insurer and demand total loss payment; most policies explicitly prohibit this without insurer consent.

Which litigation alternative requires both parties to select a neutral appraiser, who then works with the insurer's and insured's appraisers to resolve a property damage dispute?

Answer: Appraisal (Umpire process)

The policy appraisal process uses three appraisers—one selected by each party plus an agreed umpire—to resolve disputes over the amount of loss without litigation.

When an insurer pays a property damage claim and later discovers that a negligent contractor caused the loss, the insurer's subrogation rights are preserved only if:

Answer: The insured did not release the contractor from liability before the insurer paid the claim

If the insured releases the responsible third party before the insurer pays, the insurer loses subrogation rights because it cannot recover from someone the insured has already settled with.