Catastrophe Claims Handling Flashcards

A wildfire CAT event results in a total loss of a dwelling. The insured has a guaranteed replacement cost (GRC) policy with a dwelling limit of $400,000, but rebuilding costs $520,000 due to post-disaster demand surge. How much does the insurer owe for the dwelling?

Answer: $520,000, because the GRC endorsement pays the full cost to rebuild regardless of the policy limit

A guaranteed replacement cost endorsement obligates the insurer to pay the actual cost to rebuild the home to its pre-loss condition, even if that exceeds the policy limit.

During a hurricane CAT, a temporary tarping company charges $4,000 to tarp a roof. The adjuster believes a reasonable tarping cost is $1,500. How should the adjuster handle this?

Answer: Pay the reasonable and customary amount of $1,500 and document why the charged amount is excessive

Insurers pay reasonable and customary charges for emergency mitigation; the adjuster should document the market rate and pay accordingly, not the inflated amount.

What does 'concurrent causation' mean in the context of catastrophe property claims?

Answer: Two or more perils contribute simultaneously or sequentially to a single loss, raising coverage questions when one peril is excluded

Concurrent causation arises when an excluded peril (e.g., flood) acts together with a covered peril (e.g., wind) to produce a loss, and policy language determines how coverage applies.

A business suffers a covered hurricane loss and must close for three months. Under a business interruption (BI) policy, what is the standard measure of the BI loss?

Answer: Net income that would have been earned plus continuing operating expenses during the period of restoration

Business interruption coverage replaces net income (profit) the business would have earned plus necessary continuing expenses during the time needed to restore operations.

An adjuster inspects hail damage to a metal roof and finds dents but no penetration. The insurer's position is that the roof is functionally unimpaired. Which principle supports the insurer's argument for paying minimal or no damages?

Answer: The cosmetic damage exclusion or functional damage standard, which limits coverage to losses that impair the roof's function

Many policies include cosmetic damage exclusions or apply a functional damage standard, meaning purely aesthetic dents that do not affect the roof's performance may not be covered.

Which FEMA program provides federally backed flood insurance to property owners in participating communities?

Answer: National Flood Insurance Program (NFIP)

The NFIP, administered by FEMA, provides flood insurance to property owners in communities that adopt and enforce FEMA-approved floodplain management regulations.

A hurricane causes a tree from a neighboring property to fall and damage an insured's fence. The neighbor has homeowners insurance. Which policy should the adjuster look to first for the fence damage?

Answer: The insured's own homeowners policy, because the tree fall is a covered peril regardless of the tree's origin

Falling objects (including neighbor's trees) are a covered peril under standard HO policies; the insured first looks to their own policy, and the insurer may subrogate if the neighbor was negligent.