LA CLAIMS ADJUSTER PROPERTY AND
CAUSALITY PRACTICE EXAM 1 QUESTIONS
AND ANSWERS
Insurable Interest - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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) - CORRECT 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 - CORRECT ANSWER- which is a combination of
"replacement cost minus depreciation" and "fair market value" that a judge determines
Replacement Cost - CORRECT 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 - CORRECT 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 - CORRECT 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. - CORRECT ANSWER- perils that are typically
not covered under property insurance policies are:
Fair Access to Insurance Requirements (FAIR Plans) - CORRECT ANSWER- state-
mandated insurance programs that provide "fair" access to property
insurance for individuals who cannot secure insurance in the standard market.
High risk - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT ANSWER- A person or entity breaches the duty of care by
failing to take reasonable care in fulfilling the duty.
Contributory Negligence - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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.
Statute of Limitations - - CORRECT ANSWER- States have enacted laws as to when
certain types of lawsuits
must be filed.
Absolute Liability - CORRECT ANSWER- As we have discussed, negligence has to be
present to hold someone
legally liable for an action. There are some exceptions, however. Absolute liability is
imposed
by law on those participating in certain activities that are considered especially
hazardous.
Absolute liability is most frequently applied to activities involving
Vicarious Liability (imputed) - CORRECT ANSWER- This is a situation when a person is
held
responsible for the negligent acts of another person. A common form of vicarious
liability
involves the relationship between an employer and an employee. Often, the negligence
of an
employee can be imputed (charged) to an employer, because the employer has control
over the employee.
CAUSALITY PRACTICE EXAM 1 QUESTIONS
AND ANSWERS
Insurable Interest - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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) - CORRECT 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 - CORRECT ANSWER- which is a combination of
"replacement cost minus depreciation" and "fair market value" that a judge determines
Replacement Cost - CORRECT 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 - CORRECT 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 - CORRECT 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. - CORRECT ANSWER- perils that are typically
not covered under property insurance policies are:
Fair Access to Insurance Requirements (FAIR Plans) - CORRECT ANSWER- state-
mandated insurance programs that provide "fair" access to property
insurance for individuals who cannot secure insurance in the standard market.
High risk - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT ANSWER- A person or entity breaches the duty of care by
failing to take reasonable care in fulfilling the duty.
Contributory Negligence - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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.
Statute of Limitations - - CORRECT ANSWER- States have enacted laws as to when
certain types of lawsuits
must be filed.
Absolute Liability - CORRECT ANSWER- As we have discussed, negligence has to be
present to hold someone
legally liable for an action. There are some exceptions, however. Absolute liability is
imposed
by law on those participating in certain activities that are considered especially
hazardous.
Absolute liability is most frequently applied to activities involving
Vicarious Liability (imputed) - CORRECT ANSWER- This is a situation when a person is
held
responsible for the negligent acts of another person. A common form of vicarious
liability
involves the relationship between an employer and an employee. Often, the negligence
of an
employee can be imputed (charged) to an employer, because the employer has control
over the employee.
