CALA Catastrophe Claims Handling 4

Question 1

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?

Accepted Answer

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

Answer

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.

Question 2

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?

Accepted Answer

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

Answer

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

Question 3

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

Accepted Answer

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

Answer

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.

Question 4

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?

Accepted Answer

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

Answer

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

Question 5

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?

Accepted Answer

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

Answer

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.

(CALA) Certified All-Lines Adjuster Practice Test

(CALA) Certified All-Lines Adjuster Practice Test

CALA Catastrophe Claims Handling 4