LA Claims Adjuster Property and
Causality Practice Exam 1 100%
Accurate
Insurable Interest - ANSWER ______in the property and would suffer a financial loss if
the property were damaged by an insured peril, their family members (names need not
be listed in the policy), and others such as a lien holder, for example, the bank that
holds the mortgage on a house.
Cause of Loss Forms - ANSWER ____establish and define the causes of loss (or perils)
for which coverage is provided under the form. (Please do not confuse the "cause of
loss" forms with the "proof of loss" form, which is the form submitted to the insurance
company by the insured when they have a claim.)
Basic Cause of Loss Form - ANSWER This form is a "named peril" form, that specifies
the perils insured against. The perils listed on this form will usually be, as the name
implies,
the most basic perils. This form will only cover those perils that are specifically named in
the form.
Broad Cause of Loss Form - ANSWER This form is also a "named peril" form and
provides coverage for the perils named in the basic form, but adds additional perils and
names
them on the form.
Special Cause of Loss Form - ANSWER ___form is an "open peril" or "all risk"
form that provides coverage for all risks of loss, from any peril, except those that are
specifically excluded in the policy. Remember for your state licensing exam that
when coverage is provided under an open peril form, the burden of proof lies with
the insurance company to prove that the cause of loss is excluded.
Appraisal Clause - ANSWER This property insurance provision allows either the insured
or the insurance company to demand a binding appraisal of the damaged property in
the event of a dispute as to the value of the property. The clause also establishes the
required appraisal procedure.
Coinsurance Clause - ANSWER A provision in property insurance policies stating that
the insurance company and the insured will share in the loss incurred by the insured,
based on a fixed percentage of the value of the insured property. In addition, the
insured will face a penalty, and must pay a higher percentage on the loss if they do not
insure the property for a certain percentage of its full value (usually at least 80%).
Sometimes, in Dwelling & Homeowners policies this clause is called the "Loss
Settlement Clause".
,Concurrent Causation - ANSWER This term, when referring to property insurance, is a
doctrine stating that if loss or damage to property occurs as a result of more than one
cause, one of which is covered under the policy, while the other cause is not covered,
the damages are still likely to be compensated by the insurer. However, this doctrine is
being revisited frequently in the courts and a number of recent cases have been
decided in favor of denying the claim.
Pair or Set Clause - ANSWER This policy provision states that if part of a pair or set is
lost or damaged, the loss will be valued as a fair proportion of the total value of the set.
It gives consideration to the importance of the damaged article to the set. The insurer is
not required to pay for the value of the whole set
The Standard Mortgage Clause (Mortgagee Rights) - ANSWER This provision protects
the
interests of the bank/financial institution that holds the mortgage on the insured
property.
This clause also grants coverage to the mortgagee, even if the insured intentionally
caused the loss. The bank can also provide a proof of loss or pay the insurance
premiums in case the insured cannot, or refuses to do so. The mortgagee must also be
advised if the
contract has been cancelled or nonrenewed by the insurer
broad evidence rule - ANSWER which is a combination of
"replacement cost minus depreciation" and "fair market value" that a judge determines
Replacement Cost - ANSWER This is defined as "the current cost to purchase new, the
item that was lost or damaged, with no deduction for depreciation".
Functional Replacement Cost - ANSWER would be used to value of the property at the
cost to replace the property that was lost,
damaged or destroyed, with property that serves the same function.
Valued Policy Law - ANSWER a state law requiring insurance companies to pay the full
"agreed value" of the policy in
the event of a total loss.
• Flood (a separate policy must be purchased);
• Earthquake (a separate policy must be purchased);
• Mold;
• Acts of War;
• Parts of the property in disrepair, such as worn-out electrical wiring and plumbing, air
conditioning, heating units, and roofs. - ANSWER perils that are typically not covered
under property insurance policies are:
, Fair Access to Insurance Requirements (FAIR Plans) - ANSWER state-mandated
insurance programs that provide "fair" access to property
insurance for individuals who cannot secure insurance in the standard market.
High risk - ANSWER FAIR Plans are considered part of the "residual market" of any
state. Insurers in the standard market may consider the individual's claims history or the
property they are attempting to insure, ___
A liability loss - ANSWER ____ occurs when a person or entity is determined to have
been responsible, or
legally liable, for injury or loss to another person or liable for damage to another's
property and
the law requires them to make financial restitution.
A duty of care - ANSWER arises when the law recognizes a relationship between two
parties, and due to this relationship, one party has a legal obligation to act in a certain
manner toward the other. For example, a department store has a duty to take
reasonable
care to keep their premises safe for customers
Breach of Duty - ANSWER A person or entity breaches the duty of care by failing to
take reasonable care in fulfilling the duty.
Contributory Negligence - ANSWER Common law defense against negligence states
that if an
individual contributes to his or her own loss in any way, then another cannot be held
liable for the loss
Comparative Negligence - ANSWER Law that allows an injured party to collect from
another
party for a loss, even when the injured party contributed to his or her own loss.
Damages are reduced to the extent of the injured party's negligence. This is the
defense used in most states.
Assumption of Risk - ANSWER In some states, a doctrine known as assumption of risk
may
apply. Assumption of risk applies when a person knowingly exposes himself or herself
to
danger or injury. When a person assumes this risk, he or she may be prevented from
recovering from a negligent party. This doctrine is frequently associated with injuries
incurred by spectators at sporting events
Intervening Cause - ANSWER An independent action that breaks the chain of causation
and
sets in motion a new chain of events. When this occurs, the intervening cause becomes
the proximate cause of loss. This can serve as a common law defense.
