Damage Evaluation and Settlement Procedures Flashcards

What is 'subrogation' in the context of claims settlement, and when does the insurer's right typically arise?

Answer: The insurer's right to pursue a negligent third party after paying the insured's claim

Subrogation allows the insurer to step into the insured's shoes and recover claim payments from the negligent third party who caused the loss.

An adjuster evaluating a business interruption claim must calculate the 'period of restoration.' What does this period represent?

Answer: The time required to repair or replace damaged property and resume normal business operations

The period of restoration is the time needed to repair or replace damaged property with reasonable speed, defining the window during which business interruption losses are covered.

Under a 'replacement cost value' (RCV) policy, when is the holdback (recoverable depreciation) typically released to the insured?

Answer: After the insured completes repairs or replaces the damaged property

RCV policies withhold the depreciation amount until the insured actually completes repairs or replacement, at which point the holdback is released as recoverable depreciation.

When adjusting a water damage claim, an adjuster discovers mold resulting from the original water intrusion. Under most homeowner's policies, how is mold damage typically treated?

Answer: Subject to a sublimit or exclusion, requiring review of the specific policy language

Most homeowner's policies either exclude mold entirely or cover it with a sublimit, making review of the specific policy language essential before including it in the settlement.

What is a 'proof of loss' document, and why is it important in the claims process?

Answer: A sworn statement by the insured documenting the nature, extent, and value of a loss as required by the policy

A proof of loss is a formal sworn statement required by the policy in which the insured details the loss, providing the insurer with verified information to evaluate the claim.

In evaluating a commercial liability claim for a slip-and-fall injury, which legal doctrine could reduce or eliminate the insured's liability if the claimant knew of the hazard and voluntarily assumed the risk?

Answer: Assumption of risk

Assumption of risk is a defense that reduces or eliminates liability when a claimant voluntarily exposed themselves to a known and understood risk.

An adjuster settles a property claim and later discovers the insured committed material misrepresentation on the original application. What option is typically available to the insurer?

Answer: The insurer may void the policy ab initio and seek recovery of the settlement payment

Material misrepresentation on a policy application typically allows the insurer to void the policy from inception (ab initio) and may permit recovery of claim payments already made.