AIC 302, 4, AND 5 EXAM COMPLETE ACTUAL EXAM
QUESTIONS AND CORRECT DETAILED ANSWERS
(VERIFIED ANSWERS) |ALREADY GRADED A+| AIC 302 6
AND 7 EXAM |BRAND NEW!!
What is the most common number of days that insurers will wait for a stolen
vehicle to be recovered before declaring it an actual total loss? - CORRECT
ANSWER ✔✔ - The most common number of days insurers will wait before
declaring a stolen vehicle an actual total loss is 30. However, claims reps should
consult unfair claim settlement regulations, which may require a different waiting
period.
Even when an auto is repaired after sustaining damage in a collision or another
insured event, its resale value may be diminished compared with an auto of the
same age, make, and model that was never damaged. Consequently, claimants
may - CORRECT ANSWER ✔✔ - seek compensation for this diminished value.
Claims representatives should understand when these diminished value claims
occur and why courts reject or accept claimants' demands that they be paid.
What stance do most courts tend to take when it comes to whether diminished
value claims should be paid? - CORRECT ANSWER ✔✔ - The prevailing stance is
that auto insurers should not pay for diminished value. This stance is based
primarily on the language in insurance contracts and insurers' intent when
drafting coverages. However, because states are divided on this issue and
because court decisions on diminished value can be revisited, claims reps should
be aware of courts' reasons for rejecting or accepting these claims.
State court decisions for rejecting diminished value claims follow common
themes, and policy language often drives the decisions. These factors often
Pg. 1
,prompt rejection of diminished value claims: - CORRECT ANSWER ✔✔ - Promise
to restore to pre-loss condition rather than make the insured whole
Policy definition of property damage
Limit of liability provision
Policy definition of "repair or replace"
Language stating the insurer will not pay more than the cost to repair or replace
the auto
Use of clear and unambiguous policy language
Intent when drafting the policy language
Violation of fundamental rule of contract construction
Potential negative effect on society
Promise to restore to pre-loss condition rather than make the insured whole -
CORRECT ANSWER ✔✔ - Many auto insurance policies promise that the insurer
will restore the auto to its pre-loss condition. Conversely, some claimants
interpret this to mean that the insurer promises to make them whole by paying
them the difference between the auto's pre-loss market value and its market
value after the repair, in addition to the costs of the repair. However, most courts
deem that the policy obligates the insurer to pay only to restore the auto to its
pre-loss condition, not to restore the claimant to his or her pre-loss economic
condition.
Policy definition of property damage - CORRECT ANSWER ✔✔ - The Insurance
Services Office's (ISO's) Business Auto Coverage Form (BACF) defines property
damage as "damage to or loss of use of tangible property." As a result, many
courts state that property damage cannot be interpreted to mean the intangible
reduction in value of an auto after it has been properly repaired. The reduction in
the auto's value is only tangible if the auto is sold.
Pg. 2
,Policy definition of "repair or replace" - CORRECT ANSWER ✔✔ - Some policies
define "repair or replace" to mean restoring the auto to its pre-accident
mechanical function and condition. Other policies define it as returning the auto
to substantially the same pre-accident physical, operating, and mechanical
condition. According to some courts, both definitions preclude any interpretation
that the value of the auto will be restored to its pre-accident value.
Language stating the insurer will not pay more than the cost to repair or replace
the auto - CORRECT ANSWER ✔✔ - Some policies further indicate that the insurer
will not pay more than the cost to repair or replace the auto, which preserves the
insurer's option to limit payment under the policy.
Violation of fundamental rule of contract construction - CORRECT ANSWER ✔✔ -
In a few cases, courts ruled that obligating an insurer to pay an insured for a loss
that could not be reasonably repaired or replaced, as is the case with diminished
value, violates a fundamental rule of contract construction.
Potential negative effect on society - CORRECT ANSWER ✔✔ - To some, allowing
diminished value claims payments could negatively affect society. The thinking is
that if insurers are consistently required to pay diminished value claims, more
damaged autos would be designated as constructive total losses, and auto owners
would be more likely to minimally repair their autos, increasing the number of
damaged autos being used on roadways and creating potential hazards for the
public. In addition, premiums may increase if insurers had to pay for more
constructive total losses—which, in turn, would constitute a disservice to society.
These are some common reasons courts rule that diminished value claims should
be paid: - CORRECT ANSWER ✔✔ - Economic interpretation of policy language
Ambiguity in policy language should favor the insured
State Farm Mutual Automotive Insurance Company v. Mabry
Pg. 3
, Economic interpretation of policy language - CORRECT ANSWER ✔✔ - In some
cases, state courts use an economic interpretation of policy language. These
courts interpret policy language to mean that the insurer is obligated to make the
claimant whole, which requires compensating the claimant for his or her auto's
diminished value in addition to paying to have the auto repaired.
Ambiguity in policy language should favor the insured - CORRECT ANSWER ✔✔ -
Some courts cite that there is ambiguity in policy language that favors insureds.
This ambiguity often centers on definitions or plain and ordinary meanings of
terms such as loss, repair, and damage. Some courts stipulate that the ordinary
meanings of these terms, when combined in an insurance contract, favor
providing coverage for diminished value claims. For example, a court may rule
that, because loss is ordinarily defined as "a financial detriment that a party
suffers when its property is damaged," repair therefore must mean restoration
from such loss.
State Farm Mutual Automotive Insurance Company v. Mabry - CORRECT ANSWER
✔✔ - The most notable case favoring an insurer's payment of a diminished value
claim, State Farm Mutual Automotive Insurance Company v. Mabry, set
precedent for all Georgia first-party auto damage claims. The case clarified that
the physical damage coverage of auto policies written according to Georgia state
law requires insurers to make insureds whole, stating that "both utility and value"
are lost when property is physically damaged by a covered event.1
Automotive repair and appraisal professionals can speak their own language.
These are some of the most important and frequently used terms that claims reps
should know: - CORRECT ANSWER ✔✔ - Remove and install (R&I)
Remove and replace (R&R)
Overhaul (OH)
Pg. 4
QUESTIONS AND CORRECT DETAILED ANSWERS
(VERIFIED ANSWERS) |ALREADY GRADED A+| AIC 302 6
AND 7 EXAM |BRAND NEW!!
What is the most common number of days that insurers will wait for a stolen
vehicle to be recovered before declaring it an actual total loss? - CORRECT
ANSWER ✔✔ - The most common number of days insurers will wait before
declaring a stolen vehicle an actual total loss is 30. However, claims reps should
consult unfair claim settlement regulations, which may require a different waiting
period.
Even when an auto is repaired after sustaining damage in a collision or another
insured event, its resale value may be diminished compared with an auto of the
same age, make, and model that was never damaged. Consequently, claimants
may - CORRECT ANSWER ✔✔ - seek compensation for this diminished value.
Claims representatives should understand when these diminished value claims
occur and why courts reject or accept claimants' demands that they be paid.
What stance do most courts tend to take when it comes to whether diminished
value claims should be paid? - CORRECT ANSWER ✔✔ - The prevailing stance is
that auto insurers should not pay for diminished value. This stance is based
primarily on the language in insurance contracts and insurers' intent when
drafting coverages. However, because states are divided on this issue and
because court decisions on diminished value can be revisited, claims reps should
be aware of courts' reasons for rejecting or accepting these claims.
State court decisions for rejecting diminished value claims follow common
themes, and policy language often drives the decisions. These factors often
Pg. 1
,prompt rejection of diminished value claims: - CORRECT ANSWER ✔✔ - Promise
to restore to pre-loss condition rather than make the insured whole
Policy definition of property damage
Limit of liability provision
Policy definition of "repair or replace"
Language stating the insurer will not pay more than the cost to repair or replace
the auto
Use of clear and unambiguous policy language
Intent when drafting the policy language
Violation of fundamental rule of contract construction
Potential negative effect on society
Promise to restore to pre-loss condition rather than make the insured whole -
CORRECT ANSWER ✔✔ - Many auto insurance policies promise that the insurer
will restore the auto to its pre-loss condition. Conversely, some claimants
interpret this to mean that the insurer promises to make them whole by paying
them the difference between the auto's pre-loss market value and its market
value after the repair, in addition to the costs of the repair. However, most courts
deem that the policy obligates the insurer to pay only to restore the auto to its
pre-loss condition, not to restore the claimant to his or her pre-loss economic
condition.
Policy definition of property damage - CORRECT ANSWER ✔✔ - The Insurance
Services Office's (ISO's) Business Auto Coverage Form (BACF) defines property
damage as "damage to or loss of use of tangible property." As a result, many
courts state that property damage cannot be interpreted to mean the intangible
reduction in value of an auto after it has been properly repaired. The reduction in
the auto's value is only tangible if the auto is sold.
Pg. 2
,Policy definition of "repair or replace" - CORRECT ANSWER ✔✔ - Some policies
define "repair or replace" to mean restoring the auto to its pre-accident
mechanical function and condition. Other policies define it as returning the auto
to substantially the same pre-accident physical, operating, and mechanical
condition. According to some courts, both definitions preclude any interpretation
that the value of the auto will be restored to its pre-accident value.
Language stating the insurer will not pay more than the cost to repair or replace
the auto - CORRECT ANSWER ✔✔ - Some policies further indicate that the insurer
will not pay more than the cost to repair or replace the auto, which preserves the
insurer's option to limit payment under the policy.
Violation of fundamental rule of contract construction - CORRECT ANSWER ✔✔ -
In a few cases, courts ruled that obligating an insurer to pay an insured for a loss
that could not be reasonably repaired or replaced, as is the case with diminished
value, violates a fundamental rule of contract construction.
Potential negative effect on society - CORRECT ANSWER ✔✔ - To some, allowing
diminished value claims payments could negatively affect society. The thinking is
that if insurers are consistently required to pay diminished value claims, more
damaged autos would be designated as constructive total losses, and auto owners
would be more likely to minimally repair their autos, increasing the number of
damaged autos being used on roadways and creating potential hazards for the
public. In addition, premiums may increase if insurers had to pay for more
constructive total losses—which, in turn, would constitute a disservice to society.
These are some common reasons courts rule that diminished value claims should
be paid: - CORRECT ANSWER ✔✔ - Economic interpretation of policy language
Ambiguity in policy language should favor the insured
State Farm Mutual Automotive Insurance Company v. Mabry
Pg. 3
, Economic interpretation of policy language - CORRECT ANSWER ✔✔ - In some
cases, state courts use an economic interpretation of policy language. These
courts interpret policy language to mean that the insurer is obligated to make the
claimant whole, which requires compensating the claimant for his or her auto's
diminished value in addition to paying to have the auto repaired.
Ambiguity in policy language should favor the insured - CORRECT ANSWER ✔✔ -
Some courts cite that there is ambiguity in policy language that favors insureds.
This ambiguity often centers on definitions or plain and ordinary meanings of
terms such as loss, repair, and damage. Some courts stipulate that the ordinary
meanings of these terms, when combined in an insurance contract, favor
providing coverage for diminished value claims. For example, a court may rule
that, because loss is ordinarily defined as "a financial detriment that a party
suffers when its property is damaged," repair therefore must mean restoration
from such loss.
State Farm Mutual Automotive Insurance Company v. Mabry - CORRECT ANSWER
✔✔ - The most notable case favoring an insurer's payment of a diminished value
claim, State Farm Mutual Automotive Insurance Company v. Mabry, set
precedent for all Georgia first-party auto damage claims. The case clarified that
the physical damage coverage of auto policies written according to Georgia state
law requires insurers to make insureds whole, stating that "both utility and value"
are lost when property is physically damaged by a covered event.1
Automotive repair and appraisal professionals can speak their own language.
These are some of the most important and frequently used terms that claims reps
should know: - CORRECT ANSWER ✔✔ - Remove and install (R&I)
Remove and replace (R&R)
Overhaul (OH)
Pg. 4
