Chapter 1 Claims and Law

Question 1

Misrepresentation is best demonstrated by what?

a. Policyholder falsely describing the risk when purchasing the policy

b. Insurer not mitigating its loss when a claim occurred

c. Insurer making a promise and then later revoking it

d. Changes to the risk throughout the policy period

Answer 1

a. Policyholder falsely describing the risk when purchasing the policy

Question 2

Which statement is the best example of misrepresentation?

a. The applicant gives an erroneous description of the risk when taking out the insurance.

b. The insurer did not limit the damage when a loss occurred.

c. The insurer makes a promise that it then retracts.

d. The risk changed during the insurance period.

Answer 2

a. The applicant gives an erroneous description of the risk when taking out the insurance.

Question 3

What is an example of an affirmative warranty?

a. The insured warrants that the sprinkler system is and will be maintained in operating condition.

b. The insured warrants that a watchdog is and will be used to guard the premises.

c. The insured warrants that the anti-theft camera surveillance system is and will be in operation at all times.

d. The insured has never had a loss.

Answer 3

d. The insured has never had a loss.

Question 4

What occupation is excluded from being an adjuster?

a. Public adjuster acting on behalf of the policyholder

b. Field adjuster employed directly by the insurance company

c. Person who acts as an adjuster of marine losses only

d. Independent adjuster hired by the insurer to handle a specific claim

Answer 4

c. Person who acts as an adjuster of marine losses only

Question 5

What is a void contract?

a. One that will be judged never to have existed and to have had no effect from the beginning

b. One where the injured party can choose to proceed or declare the contract void

c. A policy that has expired

d. One where the contract was canceled by the insured

Answer 5

a. One that will be judged never to have existed and to have had no effect from the beginning

Question 6

Under what rights does the insured become subrogated as soon as he pays a loss?

a. The insurer’s commitment rights

b. Replacement Value Fees

c. Rights relating to value on the day of loss

d. Rights of subrogation

Answer 6

d. Rights of subrogation

Question 7

A blank proof of loss form must be provided to a policyholder within how many days of the notice of loss as set out in the insurance acts of the common law provinces and territories?

a. 30

b. 90

c. 60

d. 120

Answer 7

c. 60

Question 8

What is a void contract?

a. A contract that is deemed never to have existed and never to have produced effects

b. A contract that allows the aggrieved party to declare the contract valid or void

c. An insurance contract that has ended

d. A contract that the insured has terminated

Answer 8

a. A contract that is deemed never to have existed and never to have produced effects

Question 9

In evaluating whether an insured has an insurable interest in an object, what must a loss adjuster determine?

a. Actual cash value of the object

b. Amount the insured paid for it and its replacement cost

c. Whether the object is the subject matter of the policy

d. Whether the object was a gift and the contractual element of consideration was met

Answer 9

c. Whether the object is the subject matter of the policy

Question 10

Which statement best describes the legal concept of a contractual relationship?

a. It limits the scope of influence of the contract to the parties to the contract.

b. It ensures the confidentiality of the information exchanged between the third party and the insurer.

c. It allows the assignment of an insurance contract to a party outside the contract.

d. It gives the insured the possibility to transfer the indemnity to any other person.

Answer 10

a. It limits the scope of influence of the contract to the parties to the contract.

Question 11

What is the task of independent adjusters?

a. Engage the liability of the insurer when the responsibility clearly lies with the insured

b. Investigate and report on claims entrusted to them

c. Pay claims and submit invoices to insurers for reimbursement

d. Take shortcuts to reduce costs when the outcome of the claim is predictable

Answer 11

b. Investigate and report on claims entrusted to them

Question 12

What is an example of an express warranty?

a. The insured warrants that the sprinkler installation is working properly and will be maintained in good working order.

b. The insured guarantees that a guard dog ensures the protection of the premises and that this form of protection will be maintained.

c. The insured warrants that an anti-theft system with surveillance cameras is and will continue to be in service at all times.

d. The insured has never suffered a loss.

Answer 12

d. The insured has never suffered a loss.

Question 13

Who is not considered an adjuster?

a. An adjuster acting on behalf of the policyholder

b. An external adjuster who works directly for the insurance company

c. A person who acts only as a dispatcher in the event of maritime disasters

d. An independent adjuster hired by the insurer to handle a particular claim

Answer 13

c. A person who acts only as a dispatcher in the event of maritime disasters

Question 14

What statutory requirement applies to insurance contracts?

a. Surety

b. Oral evidence

c. Utmost good faith

d. Negotiation

Answer 14

c. Utmost good faith

Question 15

What best describes the legal concept of privity of contract?

a. Limiting the scope of influence of a contract to the parties to the contract

b. The information between the third party and insurer will remain confidential

c. Allowing the assignment of a policy to a party outside of the contract

d. Freedom of the insured to assign the claim payment to anyone

Answer 15

a. Limiting the scope of influence of a contract to the parties to the contract

Question 16

An insurance claims adjuster representing an insured on a fee basis in a claims settlement.

Answer 16

What is a public adjuster

Question 17

A claims person involved in any aspect of the claims adjusting process. May work for brokers, agents, or insurers. Can perform any duty in the adjusting process including taking the initial report of a loss, adjusting the loss, or handling the salvage or subrogation aspects of claims.

Answer 17

What is claims handler

Question 18

An employee of an insurance company who directs the investigations of staff adjusters and independent adjusters, reviews their reports, and approves claim settlements.

Answer 18

What is a Claims examiner

Question 19

A contract that can be affirmed or rejected at the option of the aggrieved party.

Answer 19

what is voidable contract

Question 20

An illegal contract. In the law, a contract that was never made or never existed. For example, one cannot enter into a contract to commit an illegal act like theft and have it stand up in court. Such a contract is considered a void contract.

Answer 20

What is a void contract

Question 21

A statement or conduct made to influence an insurer to decide on a risk. The decision includes declining or accepting the risk and deciding the rate and premium to be charged. In insurance, these statements are said to be “material to the risk” and are enough to void a policy ab initio (Latin term meaning “from the beginning”).

Answer 21

what is representation

Question 22

A contract of insurance is based on utmost good faith. An applicant for insurance is required to disclose to the company all material facts that are necessary to underwrite a policy. If the applicant does not disclose all these facts, the applicant is guilty of non-disclosure and may risk having coverage voided from inception.

Answer 22

What is non-disclosure

Question 23

Statement or stipulation or promise in an insurance contract, the breach of which may nullify the contract.

Answer 23

What is warranty

Question 24

A promise not only that a fact is presently true but that it will continue to be true during the policy period.

Answer 24

promissory warranty

Question 25

Failure to meet the conditions or warranties contained in a specific policy of insurance.

Answer 25

breach

Question 26

Liability associated with very dangerous actions. Often found in cases involving explosives and in many automobile laws. Negligence does not have to be proven.

Answer 26

absolute liability

Question 27

The loss of a right as a result of the non-performance of some obligation or condition.

Answer 27

forfeiture

Question 28

The principle that cases be considered in the spirit of fairness and justness, as well as the strictly formulated rules of precedent.

Answer 28

principle of equity

Question 29

The principle that the insurer’s obligations under a policy terminate at a stated point in time.

Answer 29

termination of obligations

Question 30

The intentional and voluntary relinquishment of a known right. A waiver under a policy is required to be clearly expressed and in writing.

Answer 30

waiver

Question 31

The fair market value of property, taking into account factors that might augment or reduce the value of the property in question. Actual cash value (ACV) is usually calculated in one of three ways: (1) cost to repair or replace less depreciation; (2) fair market value; or (3) consideration of all relevant evidence of the value of the damaged property.

Answer 31

actual cash value (ACV)

Question 32

Briefly describe the role of a loss adjuster

Answer 32

An adjuster investigates the loss, makes recommendations regarding payments, and negotiates and settles claims or losses based on the policy contract.
Evaluate damages and determine if the loss is covered under an insurable peril in the policy
Check for exclusions and Endorsements and apply the terms of the contract
Assess and evaluate the amount of damage
Communicate with the insured to negotiate a settlement or deny the claim if not covered
Sets up loss reserves based on an average or individual claim
Try to detect fraud when it exists
Settle and pay claims

The different types of adjusters are a salaried adjuster who works for one company on a salary basis, a public adjuster who works on a fee basis for the insured and an independent adjuster who may work for several insurance companies.

Question 33

Under Common Law list the 5 elements of any contract and the three that are specific to insurance

Answer 33

Agreement
Genuine intent
Legality of object
Consideration
Capacity to contract

Insurable Interest
Utmost good faith
Principle Indemnity

Question 34

Explain the principle of indemnity that applies to insurance contracts.

Answer 34

Claim payments restore the insured to the same financial position they were prior to the loss
This principle operated to minimize moral hazards, without this principle an insured may intentionally cause a loss for financial gain.
If the insured has more than one policy they can only recover up to the amount of loss collectively from all insurers.
In Quebec, under the civil code of Quebec, the insured will only be paid up to the amount of insurance.

Question 35

In what provinces are adjusters required to be licensed?

Answer 35

Quebec, NB, PEI, NFL and Labrador.

Question 36

An injured person can recover from any one of the liable parties

Answer 36

Joint and Several Liability

Question 37

What is the intent of punitive damages?

Answer 37

to punish those who take advantage of policyholders
to deter similar behavior in the future
to publicly condemn the behavior

Question 38

A fact is true when the insurance policy is purchased. such as the Insured has never had a claim or the insured was in good health when the policy was purchased.

Answer 38

Affirmative Warranty

Question 39

Courts may grant relief to a policyholder who files to preform or oblige in a set time.

Answer 39

Relief from perfect compliance

Question 40

We can forgo a formal sworn POL when what conditions excist

Answer 40

The amount is less than the specified threshold
There is no suspicion of fraud
No possibility of subrogation
No threat of litigation

Question 41

Knowledge and skills of an adjuster

Answer 41

Legal knowledge
knowledge of company protocol
Skills and characteristics
Professionalism
High standards of conduct

Question 42

What is the task of an adjuster

Answer 42

One who investigates insurance claims makes recommendations regarding the payment of benefits from insurance policies, and negotiates payments and settlements.

Question 43

What type of adjuster works for the insured?

a. Public Adjuster
b. Claims handler
c. Staff adjuster
d. independent Adjuster

Answer 43

a. Public Adjuster

Question 44

What are the two civil law systems in Canada

Answer 44

Civil code Quebec
Common Law all other provinces

Question 45

contrast the difference between Civil code of Quebec and Common Law

Answer 45

law of

Question 46

What are the 5 elements of a common law contract?

Answer 46

agreement
capacity to contract
Consideration
Genuine Intention
Legality of Object

Question 47

What are the Elements of a contact under the Quebec civil code

Answer 47

Consent
Capacity to contract
Cause of Contract
Object of contracts

Question 48

What influences the term given to loss adjusters?

Answer 48

Usage in the corporate environment
Local usage
Legislation
Specific licensing regulations

Question 49

What provinces must loss adjusters be certified?

Answer 49

Quebec, New Brunswick, Newfoundland, PEI

Question 50

What are the five essential elements of a contract?

Answer 50

GLACC

Agreement
Capacity to contract
Consideration
Genuine intention
Legality of object

Question 51

What are the four elements of a contract in Quebec?

Answer 51

CCCO

Consents
Capacity to contract
Cause of contracts
Object of contracts

Question 52

Who are some parties with insurable interest?

Answer 52

Owner of property
Mortgagee as a lender
Lessee who takes possession of leases property
Bailee who accepts custody of property
Consignee who has purchased goods that are in transit
Anyone else in a position to lose should the property be lost or damaged

Question 53

What are the three conditions to qualify for insurable interest

Answer 53

Physical object destroyed by a peril
Physical object must be the subject matter of insurance
Insured must have relationship to property recognized by law

Question 54

Define promissory warranty

Answer 54

Promise that a fact is true and will continue to be true

Question 55

What is the criteria when a proof of loss does not need to be formally signed?

Answer 55

Amount of the loss is under a specified threshold
There is no suspicion of fraud surrounding the claim
There is no possibility of subrogation
There is no threat of litigation by the insured

Question 56

Briefly describe the role of a loss adjuster.

Answer 56

An adjuster is one who solicits the right to negotiate the settlement of or to investigate a loss or claim under a contract or under fidelity, surety, or guaranty bond issued by an insurer or directly or indirectly negotiates, investigates, adjusts, or settles such loss or claim.
One who investigates insurance claims, makes recommendations regarding the payment of benefits from insurance policies, and negotiates payments and settlements.
Some loss adjusters operate as salaried employees of an insurance company, while others operate as independent adjusters, typically for independent adjusting firms that pursue contracts with licensed insurers to manage all or part of a claim.
The adjuster represents the insurance company with respect to a claim on a policy.
Loss adjusters must assess and evaluate the amount of damage and then apply the terms of the insurance policy—interpret the policy wording—to determine whether a loss is covered.