CALA Catastrophe Claims Handling 2 — Questions and Answers
Question 1: When a catastrophe event is declared, which organization typically assigns a CAT code to track claims from that event?
- ISO (Insurance Services Office) (Correct answer)
- FEMA (Federal Emergency Management Agency)
- NAIC (National Association of Insurance Commissioners)
- NICB (National Insurance Crime Bureau)
Correct answer: ISO (Insurance Services Office)
ISO assigns catastrophe codes (CAT codes) to qualifying events so insurers can uniformly identify, track, and report losses from the same occurrence.
Question 2: A homeowner's policy has a named-storm deductible of 2% of dwelling value ($300,000). A hurricane causes $18,000 in damage. What does the insurer owe after the deductible?
- $12,000 (Correct answer)
- $18,000
- $6,000
- $0 — damage is below the deductible
Correct answer: $12,000
The named-storm deductible is 2% × $300,000 = $6,000, so the insurer pays $18,000 − $6,000 = $12,000.
Question 3: In catastrophe operations, what is the primary purpose of a 'loss run' report?
- To summarize open and closed claims, reserves, and paid losses for a given event or account (Correct answer)
- To document the route taken by field adjusters between inspection sites
- To record daily weather conditions during the catastrophe
- To list contractors approved by the insurer for emergency repairs
Correct answer: To summarize open and closed claims, reserves, and paid losses for a given event or account
A loss run provides a summary of claim activity—counts, reserves, and payments—used by management to monitor CAT event performance.
Question 4: Which type of additional living expense (ALE) is NOT typically covered under a standard homeowners policy following a covered catastrophe?
- Mortgage payments on the damaged home (Correct answer)
- Hotel costs while the home is being repaired
- Restaurant meals exceeding normal food expenditures
- Pet boarding fees if the temporary housing does not allow pets
Correct answer: Mortgage payments on the damaged home
ALE covers increased costs of living above normal expenses; mortgage payments are a pre-existing obligation, not an increased living cost caused by the loss.
Question 5: During a hurricane CAT deployment, an adjuster is assigned a zip-code territory. What is the main reason claims are assigned by geography?
- To minimize drive time and maximize the number of inspections completed per day (Correct answer)
- To ensure adjusters only handle claims from their home state
- To comply with state licensing requirements for each county
- To allow adjusters to purchase materials locally at lower prices
Correct answer: To minimize drive time and maximize the number of inspections completed per day
Geographic territory assignment reduces travel time between inspections, enabling adjusters to handle more claims efficiently during a high-volume event.
Question 6: A roof covered with 20-year architectural shingles that are 10 years old is destroyed in a tornado. The replacement cost is $10,000. Using straight-line depreciation, what is the actual cash value (ACV) of the roof?
- $5,000 (Correct answer)
- $10,000
- $8,000
- $2,000
Correct answer: $5,000
With 10 of 20 years used (50% depreciation), ACV = $10,000 × (1 − 0.50) = $5,000.
Question 7: Which doctrine holds that an insurer who pays a property claim can pursue recovery against the negligent third party who caused the loss?
- Subrogation (Correct answer)
- Indemnification
- Abandonment
- Estoppel
Correct answer: Subrogation
Subrogation gives the insurer the right to stand in the insured's shoes and recover the amount paid from the responsible third party.
CALA Catastrophe Claims Handling 2
When a catastrophe event is declared, which organization typically assigns a CAT code to track claims from that event?