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C110: Essentials of Loss Adjusting > Study 3: Policy Contract Analysis > Flashcards

Flashcards in Study 3: Policy Contract Analysis Deck (15)
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What must an adjuster do when conducting a policy analysis? (4)

-Must act in good faith when doing a policy analysis. Courts may award punitive damages against parties that deal in bad faith.

-Adjusters must allocate losses to the correct policy held by the insured, there may be circumstances where the correct policy may not be obvious, in that case they will need to investigate further to understand what policy may be involved.

-Essential elements of a contract form the underlying foundation of a legally binding policy (GLACC and CCCO). Have to determine whether any of those elements affect the policy.

-Specific rules governing insurance must also be considered. (insurable interest, indemnity, utmost good faith). During analysis, adjuster must test whether utmost good faith prevailed when contract was formed


Assessing insurable interest - what questions are applied to a property loss to determine if insurable interest exists? (3)

To determine if insurable interest exists, adjuster must ask following questions:
-What property was damaged by an insured peril?
-Is the property the subject matter of insurance?
-What is the insureds relationship to the property in law?

*Agents, mortgagees, trustees, lessees, etc. may all have a direct financial interest in property. Onus is on adjuster to prove any fraud that may exist.


Assess causation - What is proximate cause? (2)

-Immediate and effective cause of loss. It is the unbroken chain of events leading naturally and directly to a loss.

-Onus is on insured to prove their loss was a result of a proximate cause.


How to adjusters assess whether a loss is caused by a proximate cause or not?(3)

-To assess causation, adjuster applies theory of proximate cause to determine whether a loss is directly caused by an insured peril

-Another way is to examine whether a stated cause is to remote. If its to remote it wont be considered a proximate cause (Ex: Fire happens, contractor does repairs but causes damage to building beside the one that was on fire, the fire is a remote cause, proximate cause is contractor)

-Indirect damages caused by firefighters are to be treated as direct consequences of fire


What is concurrent causation? (1)

When losses occur concurrently, even if one of those losses is covered, the policy will provide coverage for the insured.


What type of language and terminology is used in insurance policies? (4)

-Use plain language wordings, allows consumers to understand policies with ease and are easy to read

-Since policies are contracts, they must precisely describe their scope and application, so certain terms must be retained

-Words and phases assigned a special meaning are distinguished by boldface type, capitalization, italics, quotation marks, or some other variation

-Not all policies are organized same way, adjuster must assess each policy with care because many policy wordings differ


What are the three types of standardized policy forms? (3) What are typical main parts of a policy? (5)

-Named perils - covers named perils only
-Broad form - all risk coverage for buildings and named perils coverage for personal contents
-Comprehensive - all risk coverage on everything

Main parts of policy include:
-Coverage summary/ declaration page
-Statutory conditions
-insuring agreements


What is included on the Coverage summary/Declarations page?(7)

Dec pages include:
-Details of who is insured
-How much insurance was purchased
-What lines of coverage (Building, contents, ALE)
-Policy period
-Description of insured property
-List of endorsements or riders that apply
-Lost payees and other important info specific to the risk


What is included on the insuring agreements pages? (5)

The insuring agreement or clause:
-Describes property covered and circumstances under which coverage will apply
-Includes pages of detailed info including details about the following:
----Limitations - limit the amount payable (Ex: limits of $2500 for theft of jewellery, watches, etc)
----Exclusions - what is not covered under a policy
----Conditions - (Ex: warranty - promise by an insured to to maintain certain conditions)
----Additional coverage - (Ex: Lock replacement, debris removal)


What are the 4 principles used to interpret insurance contracts in the common law provinces and territories? (4)

1) Contra Preferentum (against the offeror) - any ambiguity in a contract must be interpreted against the person who drew it up (Insurer). Therefore, the insurer must make policy wordings clear.

2) Coverage provisions construed broadly - provisions must be construed broadly in the insured's favour.

3) Exclusions clauses construed narrowly - exclusions in policies are to be interpreted narrowly and generally against the insurer

4) Reasonable expectations and intent of contracting parties - policy must be looked at as a whole to determine intent of parties. If wordings is ambiguous, it promotes intent of both parties and produces intended result


Rules of contract interpretation in Quebec. (articles) (7)

Civil code of Quebec has authority over contract interpretation in the province.
- In Article 1425, common intention of parties is given precedence over the literal meaning of the language

-In article 1426, the circumstances relation to the nature, formation, usage, and prior interpretation of a contract must be considered in interpreting it

-Article 1427 supports the notion of treating the contract as a whole in determining its meaning

-Articles 1428-1431 say that a contract should be read to give it effect. Policy should be interpreted to support fair result

-Articles 1432 deals with ambiguity in the contract

-Article 1436 concerns illegibility or incomprehensibility

-Article 1437 frees an insured of an abusive clause which is a clause that is excessively and unreasonable detrimental to the consumer


Evaluating coverage under property policies - What are some questions adjusters can ask to determine coverage under property policies? (7)

1) Does the loss fall within the policy period? - if adjuster can confirm policy was in force at the time of loss. than they can go onto next item or question. If its not within policy period, than there's no coverage.

2)Does the loss fall within the insuring agreement? - Insuring agreements should be reviewed to determine that the type of event and property damage are insured. Under broad form, adjusters look to exclusions to define coverage, under named perils, determine if peril that caused loss is included.

3)Do any exclusions apply?

4)Have all policy conditions been met? - statutory conditions must be satisfied and also any other conditions. The insured peril may have specific conditions limiting coverage (Ex: away for more than 4 straight days, no coverage during freezing season)

5)Does the policy offer any extensions of coverage or do any endorsements apply?

6) Is the amount claimed reasonable for damages sustained?

7) is there a deductible to be applied?


Evaluation coverage under liability policies- What are the two ways in which liability forms are written? (2)

-Occurrence basis - a happening or event. The date that the accident took place is the date to be qualified under the policy term

-Claims made basis - covers only claims made during the term of the contract. Under these policies, it is not accident date, rather date that TP makes a claim against insured that defines coverage


What are the two main forms of coverage in a liability policy? (2)

Two main forms of coverage:
- 1st form of coverage applies to the costs of the insured to defend a claim bought against them
-2nd form of coverage indemnifies the insured if the insured should owe money to a third party


What are some questions an adjuster should ask when analysing liability policies to determine coverage? (5)

*First step is determine if policy was written on occurrence basis or claims made basis. The questions an adjuster may ask include the following:

1)Does the occurrence fall within policy period?

2)Does the loss fall within the insuring agreement?

3)Are there exclusions under the policy that apply to the claim?

4)Are there limitations or conditions that affect the claim? - there may be a special limitations section that limits coverage

5)Does the insurer have a duty to defend? - liability policy includes a defence clause. It describes whether the insurer will defend an action or whether insurer will indemnify insured once claim has been resolved