AIC Core Principles & Fundamentals 2

Question 1

An insured's home suffers $40,000 in damage, and the insured holds two property policies covering the same loss. Which principle prevents the insured from collecting $80,000?

Accepted Answer

Principle of indemnity

Answer

Indemnity limits recovery to restoring the insured to the pre-loss financial position, not a profit.

Question 2

Because insurers draft the policy wording and insureds cannot negotiate it, courts generally resolve ambiguities in favor of the insured. This is because an insurance policy is a contract of:

Accepted Answer

Adhesion

Answer

Insurance policies are contracts of adhesion, so ambiguous language is construed against the drafter (the insurer).

Question 3

After paying a collision claim, an auto insurer sues the at-fault driver to recover what it paid. What right is the insurer exercising?

Accepted Answer

Subrogation

Answer

Subrogation transfers the insured's right of recovery against a responsible third party to the insurer after payment.

Question 4

Which element must a claimant prove, in addition to duty, breach, and damages, to establish negligence?

Accepted Answer

Proximate cause

Answer

Negligence requires duty, breach of duty, proximate cause, and actual damages.

Question 5

A claim representative sends the insured a letter saying the insurer will investigate the loss but keeps the right to deny coverage later. This letter is called a:

Accepted Answer

Reservation of rights letter

Answer

A reservation of rights letter tells the insured the insurer may later deny coverage while it continues investigating.

AIC - Associate in Claims Practice Test

AIC - Associate in Claims Practice Test

AIC Core Principles & Fundamentals 2