CALA Subrogation & Recovery 3

Question 1

What is the term for the formal demand sent by an insurer to a third party seeking reimbursement for a paid claim?

Accepted Answer

Subrogation demand letter

Answer

A subrogation demand letter formally notifies the responsible party or their insurer of the subrogating insurer's claim and the amount sought for reimbursement.

Question 2

Under the anti-subrogation rule, an insurer CANNOT subrogate against which party?

Accepted Answer

Its own insured for a covered act

Answer

The anti-subrogation rule prohibits an insurer from suing its own insured for a loss the policy was intended to cover, as this would defeat the purpose of insurance.

Question 3

In property subrogation involving a defective product that caused a fire, which legal theory is most commonly used to establish third-party liability?

Accepted Answer

Products liability / strict liability

Answer

Products liability and strict liability allow recovery against a manufacturer for a defective product that caused harm, without needing to prove the manufacturer was negligent.

Question 4

What is 'made whole' as it relates to subrogation recovery distribution?

Accepted Answer

The insured must be fully compensated for all losses before the insurer takes a share of the recovery

Answer

The make whole doctrine requires the insured to be fully compensated for all of their losses, including uninsured amounts, before the insurer can claim any portion of a recovery.

Question 5

What is 'equitable allocation' in a subrogation recovery scenario where the total recovery is less than the combined losses of the insurer and the insured?

Accepted Answer

The recovery is allocated proportionally to each party's respective loss

Answer

Equitable allocation distributes a partial recovery proportionally, ensuring neither the insurer nor the insured bears an unfair share of the shortfall.

(CALA) Certified All-Lines Adjuster Practice Test

(CALA) Certified All-Lines Adjuster Practice Test

CALA Subrogation & Recovery 3