CALA Catastrophe Claims Handling 3 — Questions and Answers
Question 1: A state declares a catastrophe emergency and activates its 'file and use' regulation for rate changes. What does this mean for adjusters?
- Insurers may implement new rates immediately without prior approval, and adjusters must apply the new rates to qualifying claims (Correct answer)
- Adjusters may file claims without supervisor approval to speed processing
- Policyholders may file directly with the state instead of through the insurer
- The state assumes responsibility for paying all catastrophe claims
Correct answer: Insurers may implement new rates immediately without prior approval, and adjusters must apply the new rates to qualifying claims
Under file-and-use rules, insurers submit rate changes to the regulator simultaneously with implementing them, so adjusters must use the current approved rates.
Question 2: A catastrophe adjuster encounters an insured who also has a flood policy through the National Flood Insurance Program (NFIP). A storm surge loss is documented. Which policy covers storm surge?
- The NFIP flood policy, because storm surge is classified as flooding (Correct answer)
- The homeowners policy, because the water originated from a named storm
- Both policies share the loss equally under coordination of benefits
- Neither policy — storm surge is excluded from both standard policies
Correct answer: The NFIP flood policy, because storm surge is classified as flooding
Storm surge is considered flood under NFIP definitions, so it is covered by the NFIP flood policy, not the standard homeowners policy.
Question 3: What is the purpose of a 'reservation of rights' letter sent by an insurer during a catastrophe claim investigation?
- To notify the insured that the insurer is investigating coverage while reserving the right to deny if coverage is found to be lacking (Correct answer)
- To reserve repair contractors for the insured before materials are depleted
- To inform the insured that their rights to appeal are reserved for 60 days
- To place a lien on the property until the claim is resolved
Correct answer: To notify the insured that the insurer is investigating coverage while reserving the right to deny if coverage is found to be lacking
A reservation of rights letter protects the insurer from waiving policy defenses while still providing a good-faith investigation of the claim.
Question 4: Under the standard NFIP Write-Your-Own (WYO) program flood policy, which of the following is covered?
- Direct physical loss to the building caused by flood, including foundation damage (Correct answer)
- Loss of use or additional living expenses during repairs
- Vehicles damaged by flood on the insured premises
- Landscaping and fencing damaged by floodwater
Correct answer: Direct physical loss to the building caused by flood, including foundation damage
The NFIP building coverage pays for direct physical loss to the structure, including the foundation, from flooding, but excludes ALE, vehicles, and landscaping.
Question 5: An adjuster discovers that a homeowner made unauthorized repairs before the inspection, preventing accurate documentation of the original damage. What should the adjuster do?
- Request all receipts, photos taken before repairs, and contractor statements to reconstruct the original damage scope (Correct answer)
- Deny the claim immediately for failure to cooperate
- Accept the completed repair invoices as the full measure of loss without further investigation
- Refer the claim to the SIU without conducting any further investigation
Correct answer: Request all receipts, photos taken before repairs, and contractor statements to reconstruct the original damage scope
The adjuster should gather all available documentation to reconstruct the pre-repair damage, honoring the insured's duty to mitigate while maintaining accurate loss valuation.
Question 6: Which catastrophe-specific coverage feature allows a policyholder to receive payment for a full roof replacement even when only a portion is visibly damaged, due to matching issues?
- Matching or uniformity endorsement (Correct answer)
- Ordinance or law coverage
- Extended replacement cost endorsement
- Valued policy law
Correct answer: Matching or uniformity endorsement
A matching endorsement requires the insurer to replace undamaged sections when damaged sections cannot be matched to existing materials, ensuring a uniform appearance.
Question 7: In a multi-family apartment complex CAT loss, who has the insurable interest in the building structure versus the tenant's personal belongings?
- The building owner has insurable interest in the structure; tenants have insurable interest in their personal property (Correct answer)
- The tenants have insurable interest in both the structure and personal property since they occupy it
- The mortgage lender has exclusive insurable interest in the structure
- The homeowners association holds insurable interest for all components
Correct answer: The building owner has insurable interest in the structure; tenants have insurable interest in their personal property
Insurable interest in property follows ownership: the building owner insures the structure while tenants insure their own contents through renters policies.
CALA Catastrophe Claims Handling 3
A state declares a catastrophe emergency and activates its 'file and use' regulation for rate changes.
What does this mean for adjusters?