CAIA Subrogation and Salvage 3 — Questions and Answers
Question 1: Which document transfers ownership of a totaled vehicle from the insured to the insurer so it can be sold as salvage?
- Release of liability form
- Proof of loss statement
- Certificate of title endorsed over to the insurer (Correct answer)
- Salvage bid sheet
Correct answer: Certificate of title endorsed over to the insurer
The insured must sign over the certificate of title to the insurer, transferring ownership before the vehicle can be sold as salvage.
Question 2: In a subrogation claim, the term 'made whole doctrine' means:
- The insurer must be reimbursed before the insured receives any recovery
- The insured must be fully compensated for their loss before the insurer can recover from the third party (Correct answer)
- Both parties split any third-party recovery equally
- The insurer must waive its right to recover if the insured is partially at fault
Correct answer: The insured must be fully compensated for their loss before the insurer can recover from the third party
Under the made whole doctrine, the insurer cannot recover its subrogation interest until the insured has been fully indemnified for all losses.
Question 3: What is the primary purpose of requiring a salvage inspection before issuing a rebuilt title?
- To set a new market value for the repaired vehicle
- To confirm the vehicle was repaired to safe operating condition (Correct answer)
- To determine if the previous owner can reclaim the vehicle
- To assess the insurer's liability exposure going forward
Correct answer: To confirm the vehicle was repaired to safe operating condition
A salvage inspection verifies that a previously totaled vehicle has been properly repaired and is safe to return to the road.
Question 4: An insurer pays a $12,000 collision claim. It later recovers $9,000 through subrogation. If the insured paid a $500 deductible, how much of the $9,000 recovery should typically be returned to the insured?
- $0 — insurer keeps all recovery
- $500 — the deductible amount (Correct answer)
- $9,000 — full recovery to insured
- $4,500 — split equally
Correct answer: $500 — the deductible amount
When the insurer recovers through subrogation, the insured's deductible portion is typically reimbursed first from the recovery.
Question 5: Which type of subrogation arises from policy language rather than common law principles?
- Equitable subrogation
- Conventional subrogation (Correct answer)
- Statutory subrogation
- Implied subrogation
Correct answer: Conventional subrogation
Conventional subrogation is created by contract (policy language), while equitable subrogation arises automatically under common law.
Question 6: A stolen vehicle is recovered and found severely vandalized. The insurer pays the total loss claim. Who owns the damaged recovered vehicle?
- The original insured retains ownership
- The insurer, after the insured signs over the title (Correct answer)
- The state, as abandoned property
- The police department that recovered it
Correct answer: The insurer, after the insured signs over the title
Once the insurer pays a total loss claim and the insured signs over the title, the insurer owns the recovered vehicle and can sell it for salvage.
Question 7: What does 'salvage value' represent in automotive insurance claims?
- The cost to repair the vehicle to pre-loss condition
- The estimated market value of a totaled vehicle in its damaged state (Correct answer)
- The replacement cost of a new comparable vehicle
- The insured's deductible obligation
Correct answer: The estimated market value of a totaled vehicle in its damaged state
Salvage value is the amount a totaled vehicle can be sold for in its damaged or total-loss condition.
CAIA Subrogation and Salvage 3
Which document transfers ownership of a totaled vehicle from the insured to the insurer so it can be sold as salvage?