CAA Insurance Policies and Regulations 2 — Questions and Answers
Question 1: Under a standard personal auto policy appraisal clause, if the two appraisers cannot agree on the amount of loss, what happens next?
- The insurer's appraiser decides
- The differences are submitted to an umpire (Correct answer)
- The claim is automatically sent to court
- The policyholder's appraiser decides
Correct answer: The differences are submitted to an umpire
The appraisal clause has each party pick an appraiser, and any disagreements go to a neutral umpire; a decision agreed by any two of the three is binding.
Question 2: Who typically pays for the umpire in an auto policy appraisal process?
- The insurer pays the entire cost
- The policyholder pays the entire cost
- The state insurance department
- The insured and the insurer share the cost equally (Correct answer)
Correct answer: The insured and the insurer share the cost equally
Each party pays its own appraiser and the umpire's cost is usually split equally.
Question 3: What does the appraisal clause in an auto policy generally resolve?
- Disputes over the amount of loss (Correct answer)
- Disputes over whether coverage applies
- Allegations of fraud
- Disputes over who was at fault
Correct answer: Disputes over the amount of loss
Appraisal settles disagreements about the value or amount of the loss, not coverage or liability questions.
Question 4: Which first-party coverage pays for damage to the insured's vehicle from hail, theft, or hitting a deer?
- Collision
- Comprehensive (other than collision) (Correct answer)
- Bodily injury liability
- Medical payments
Correct answer: Comprehensive (other than collision)
Comprehensive (other than collision) covers non-collision losses such as hail, theft, fire, vandalism, and animal strikes.
Question 5: In most states, contact with an animal such as a deer is classified under which coverage?
- Collision
- Property damage liability
- Comprehensive (Correct answer)
- Uninsured motorist property damage
Correct answer: Comprehensive
Standard personal auto policies list contact with a bird or animal as a comprehensive loss.
Question 6: What is the term for an insurer's right to recover what it paid on a claim from the at-fault third party?
- Contribution
- Indemnity
- Betterment
- Subrogation (Correct answer)
Correct answer: Subrogation
Subrogation lets the insurer step into the insured's shoes and recover what it paid from the party responsible.
Question 7: When a lender is listed as loss payee on an auto policy, how is a total loss settlement usually paid?
- Only to the insured
- Jointly to the insured and the lienholder, or to the lienholder up to the loan balance (Correct answer)
- Only to the repair shop
- To the state DMV
Correct answer: Jointly to the insured and the lienholder, or to the lienholder up to the loan balance
A loss payee clause protects the lienholder's interest, so payment goes to the lender up to the payoff amount or is made jointly.
CAA Insurance Policies and Regulations 2
Under a standard personal auto policy appraisal clause, if the two appraisers cannot agree on the amount of loss, what happens next?