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OR Claims Adjuster practice questions

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Question 1Oregon insurance laws, rules, and regulations

An Oregon personal automobile liability policy must provide at least which minimum limits of liability?

  1. $30,000 per person, $60,000 per accident, and $25,000 for property damage
  2. $20,000 per person, $40,000 per accident, and $15,000 for property damage
  3. $25,000 per person, $50,000 per accident, and $20,000 for property damage Correct answer.
  4. $50,000 per person, $100,000 per accident, and $50,000 for property damage

Explanation

Oregon's financial responsibility law sets the minimum motor vehicle liability limits at $25,000 per person and $50,000 per accident for bodily injury, plus $20,000 for property damage. An insurer may issue higher limits, but an Oregon auto liability policy cannot provide lower limits.

Question 2Oregon insurance laws, rules, and regulations

Oregon resident insurance producers must complete continuing education each two-year license term. Which requirement is correct?

  1. 12 hours total, including 1 hour of ethics
  2. 20 hours total, including 2 hours of ethics
  3. 30 hours total, including 6 hours of ethics
  4. 24 hours total, including 3 hours of ethics Correct answer.

Explanation

Oregon requires resident producers to complete 24 continuing education credit hours every two years, and at least 3 of those hours must be in ethics. Completing fewer hours or omitting the ethics component can prevent timely license renewal.

Question 3Oregon insurance laws, rules, and regulations

An Oregon insurer decides to deny a first-party property claim. Under Oregon's unfair claim settlement practices law, what must the insurer do?

  1. Rely on the policy language without further explanation
  2. Give the claimant a written explanation of the basis for the denial Correct answer.
  3. Send the explanation only after the claimant files suit
  4. Explain the denial only orally to the producer

Explanation

Oregon law requires an insurer to promptly provide a reasonable written explanation of the basis in the policy for denying a claim or offering a compromise settlement. A bare policy citation or an oral explanation to the producer does not satisfy that duty.

Question 4Oregon insurance laws, rules, and regulations

An Oregon auto liability claimant has $80,000 in damages and is found 30 percent at fault. Under Oregon's modified comparative fault rule, what amount may the claimant recover?

  1. $80,000
  2. $24,000
  3. $0
  4. $56,000 Correct answer.

Explanation

Oregon reduces a claimant's damages by the claimant's percentage of fault, so 30 percent of $80,000 is deducted, leaving $56,000. Because the claimant's fault is less than 51 percent, recovery is not barred.

Question 5Oregon insurance laws, rules, and regulations

An Oregon insurer cancels a personal auto policy midterm for a reason other than nonpayment of premium. What minimum advance written notice must the insurer give the named insured?

  1. 10 days
  2. 30 days Correct answer.
  3. 45 days
  4. 20 days

Explanation

Oregon requires at least 30 days' written notice before cancelling or nonrenewing personal insurance for reasons other than nonpayment of premium. For cancellation due to nonpayment, the notice period is shorter, generally 10 days.

Question 6Oregon insurance laws, rules, and regulations

Under Oregon's claim settlement practices rules, an insurer must acknowledge receipt of a claim within what period?

  1. 5 working days
  2. 15 working days
  3. 10 working days Correct answer.
  4. 30 working days

Explanation

Oregon's unfair claim settlement practices rules require an insurer to acknowledge receipt of a claim within 10 working days. Prompt acknowledgment helps ensure the claim is opened and investigated without unnecessary delay.

Question 7Oregon insurance laws, rules, and regulations

Oregon requires uninsured motorist coverage in a motor vehicle liability policy unless which of the following occurs?

  1. The named insured rejects the coverage in writing Correct answer.
  2. The vehicle is more than ten years old
  3. The insurer decides not to offer the coverage
  4. The producer waives the coverage orally

Explanation

Oregon law requires uninsured motorist coverage at limits at least equal to the minimum liability limits, but the named insured may reject the coverage in writing. The insurer cannot avoid the requirement simply by choosing not to offer it.

Question 8Oregon insurance laws, rules, and regulations

Oregon personal injury protection (PIP) must provide at least what amount for medical expenses per person?

  1. $15,000 Correct answer.
  2. $25,000
  3. $5,000
  4. $10,000

Explanation

Oregon requires PIP benefits of at least $15,000 per person for medical expenses, along with other required benefits such as wage loss and essential services. Insurers may offer higher PIP limits, but they may not provide less than the statutory minimum.

Question 9Oregon insurance laws, rules, and regulations

An Oregon insurer receives a complete proof of loss, does not pay within six months, and the insured sues and recovers more than the insurer had tendered. What is the likely result under ORS 742.061?

  1. Reasonable attorney fees for the insured Correct answer.
  2. Attorney fees only if the insurer acted in bad faith
  3. Attorney fees automatically whenever the insured files suit
  4. No attorney fees, because Oregon follows the American rule in insurance cases

Explanation

ORS 742.061 creates an exception to the usual American rule: if an insurer fails to settle within six months after proof of loss and the insured's recovery exceeds the tender, the court may award reasonable attorney fees to the insured. Bad faith is not required for this statutory fee remedy.

Question 10Oregon insurance laws, rules, and regulations

An Oregon homeowner's insurer denies a fire claim under a written homeowners policy. If the insured sues for breach of the insurance contract, what is the statute of limitations?

  1. Six years Correct answer.
  2. Three years
  3. Ten years
  4. Two years

Explanation

Oregon's general statute of limitations for breach of a written contract is six years. A two-year period generally applies to personal injury claims, not to a suit for breach of a written insurance policy.

Question 11Oregon insurance laws, rules, and regulations

An Oregon personal automobile insurer cancels a policy because the named insured failed to pay the premium. What is the minimum advance written notice the insurer must give?

  1. 20 days
  2. 30 days
  3. 10 days Correct answer.
  4. 45 days

Explanation

Oregon requires at least 10 days' written notice when canceling a personal auto policy for nonpayment of premium. Longer notice applies to midterm cancellations for reasons other than nonpayment. The shorter period reflects the insured's ability to cure the payment default.

Question 12Oregon insurance laws, rules, and regulations

An independent adjuster who investigates and settles property claims in Oregon for an insurer must hold which license?

  1. No Oregon license, if the adjuster is supervised by an insurer
  2. An Oregon insurance producer license
  3. An Oregon adjuster license Correct answer.
  4. An Oregon public adjuster license

Explanation

Oregon requires independent adjusters who investigate and settle claims for insurers to hold an adjuster license issued by the Department of Consumer and Business Services. A public adjuster license is for representatives of insureds, not insurer-side adjusters. A producer license authorizes sales activity, not independent claim adjusting.

Question 13Oregon insurance laws, rules, and regulations

Under the standard fire policy provisions adopted in Oregon, an insured must furnish a sworn proof of loss within how many days after the loss unless the insurer extends the period in writing?

  1. 45 days after the loss
  2. 60 days after the loss Correct answer.
  3. 30 days after the loss
  4. 90 days after the loss

Explanation

The standard fire policy gives the insured 60 days after the loss to submit a sworn proof of loss, unless the insurer extends that time in writing. The proof of loss lets the insurer evaluate the amount and cause of loss. Missing the deadline can prejudice the claim unless an extension applies.

Question 14Oregon insurance laws, rules, and regulations

An Oregon homeowners policy has been in force for three years. The insurer decides not to renew the policy at its next anniversary date. What minimum written notice must the insurer provide?

  1. 20 days before the anniversary date
  2. 30 days before the anniversary date Correct answer.
  3. 60 days before the anniversary date
  4. 10 days before the anniversary date

Explanation

Oregon requires at least 30 days' advance written notice of nonrenewal for personal insurance policies. The notice gives the insured time to arrange replacement coverage. The 30-day period is a minimum, and the policy may require more.

Question 15Oregon insurance laws, rules, and regulations

An Oregon insurer denies a property claim without interviewing the insured, inspecting the damage, or reviewing the submitted photographs. Which unfair claim settlement practice does this conduct most directly violate?

  1. Failure to pay within 30 days after settlement
  2. Failure to acknowledge the claim
  3. Failure to provide a written denial
  4. Failure to conduct a reasonable investigation Correct answer.

Explanation

Oregon's unfair claim settlement practices rules require a reasonable investigation before denying a claim. Denying without basic steps such as reviewing submitted evidence or inspecting the loss is a prohibited practice. The rule targets the quality of the investigation, not merely the timing of a denial.

Question 16Oregon insurance laws, rules, and regulations

An Oregon insurer accepts liability for $8,000 of a $20,000 property claim but disputes the rest. What does Oregon's unfair claim settlement practices law require regarding the undisputed $8,000?

  1. The insurer must pay it promptly without a release of the disputed portion Correct answer.
  2. The insurer may withhold it until the entire claim is resolved
  3. The insurer must wait for a new proof of loss before paying it
  4. The insurer may pay it only if the insured signs a release of all claims

Explanation

Oregon prohibits an insurer from withholding clearly owed undisputed benefits to gain leverage over a disputed portion. The insurer must pay the undisputed amount promptly and may not condition that payment on a release of the disputed claim. Requiring a full release for an undisputed amount is an unfair practice.

Question 17Oregon insurance laws, rules, and regulations

An Oregon dwelling is insured for $300,000 under a fire policy. A fire causes a total loss of the dwelling; its actual cash value at the time of loss is $250,000. Under Oregon's valued policy law, what is the insurer's liability before any deductible?

  1. $0, because the home was worth less than the policy limit
  2. $300,000, the policy limit Correct answer.
  3. $275,000, the average of ACV and policy limit
  4. $250,000, the actual cash value

Explanation

Oregon's valued policy law makes the policy amount the agreed value for a total fire loss to real property. The insurer pays the policy limit rather than the lower actual cash value. The deductible and other policy terms still apply to the loss.

Question 18Oregon insurance laws, rules, and regulations

An Oregon insurer and a claimant agree to settle a property claim for $12,000. Under Oregon's claim settlement practices rules, within what period after the settlement must the insurer pay the agreed amount?

  1. 10 days after the settlement
  2. 60 days after the settlement
  3. 15 days after the settlement
  4. 30 days after the settlement Correct answer.

Explanation

Oregon requires an insurer to pay a settled claim within 30 days after the settlement. The deadline prevents post-agreement delay once the amount is no longer in dispute. An insurer that misses the deadline may face unfair claim settlement practice exposure.

Question 19Oregon insurance laws, rules, and regulations

The Oregon Insurance Guaranty Association pays covered claims of insolvent insurers. What is the maximum amount OIGA may pay for a single covered claim?

  1. $100,000
  2. $500,000
  3. Unlimited
  4. $300,000 Correct answer.

Explanation

Oregon's guaranty association statute caps covered claims at $300,000 per claim, subject to statutory exclusions and adjustments. The cap limits the association's exposure while protecting policyholders of insolvent insurers. Amounts above the cap are not covered by OIGA.

Question 20Oregon insurance laws, rules, and regulations

An Oregon auto insurer pays $10,000 in PIP benefits to its insured. The insured then settles a third-party claim for $12,000, although the insured's total damages are $40,000. Under Oregon's made-whole rule, what amount may the PIP insurer recover from the $12,000 settlement?

  1. The full $10,000, because PIP benefits are reimbursed first
  2. $6,000, representing a pro rata share
  3. $0, because the insured is not made whole Correct answer.
  4. $12,000, because the insurer has priority

Explanation

Under Oregon's made-whole doctrine, an insurer with subrogation rights may not recover from a third-party recovery until the insured has been fully compensated. Because the insured recovered only $12,000 of $40,000 in damages, the PIP insurer has no right to share in that settlement. The insured bears the uncompensated loss first.

Question 21Oregon insurance laws, rules, and regulations

An Oregon insurance producer moves to a new business address. Within how many days must the producer notify the Oregon Department of Consumer and Business Services of the address change?

  1. 10 days
  2. 90 days
  3. 30 days Correct answer.
  4. 60 days

Explanation

Oregon producer licensing rules require a licensed producer to notify the Department of Consumer and Business Services within 30 days after a change of business or residence address. The notice keeps licensing records current and allows official correspondence to reach the producer.

Question 22Oregon insurance laws, rules, and regulations

Oregon law requires a public adjuster's written contract with an insured to give the insured a right to rescind the contract within what period?

  1. One business day after signing
  2. Five calendar days after signing
  3. Ten business days after the contract is signed
  4. Three business days after signing Correct answer.

Explanation

Oregon requires a public adjuster's contract to be written and to include a three-business-day right to rescind after the insured signs. The rescission right protects the insured from making an immediate, uninformed commitment after a loss.

Question 23Oregon insurance laws, rules, and regulations

An Oregon personal auto policy has been in force for more than 60 days. Under Oregon law, which circumstance permits the insurer to cancel the policy midterm?

  1. The named insured submits a fraudulent claim under the policy. Correct answer.
  2. The insured files a claim for damage caused by a windstorm.
  3. The insured adds a teenage driver to the policy.
  4. The insurer decides to reduce its book of business in the state.

Explanation

After a personal insurance policy has been in force for 60 days, Oregon limits midterm cancellation to specified grounds such as nonpayment, fraud or material misrepresentation, or a substantial change in risk. A fraudulent claim falls within those permitted grounds.

Question 24Oregon insurance laws, rules, and regulations

An Oregon auto liability claimant asks to use her own body shop for repairs. The adjuster tells her the insurer will pay only if she uses a shop on the insurer's preferred list. Which statement reflects Oregon law?

  1. The insurer may require a preferred shop only for structural repairs.
  2. The claimant may choose a shop only if the insurer's estimate exceeds $2,500.
  3. The claimant may choose the repair shop, and the insurer may not require a preferred shop. Correct answer.
  4. The insurer may require a preferred shop if it guarantees the repairs.

Explanation

Oregon law gives the insured or claimant the right to choose the repair shop. An insurer may suggest a shop or a direct repair program, but it may not require the claimant to use a preferred shop as a condition of payment.

Question 25Oregon insurance laws, rules, and regulations

An Oregon adjuster tells a claimant that her homeowners policy excludes water damage from a burst pipe, although the policy expressly covers sudden accidental discharge. Which unfair claim settlement practice does this describe?

  1. Failing to pay an undisputed amount within 30 days
  2. Compelling the claimant to sue by offering substantially less
  3. Misrepresenting pertinent policy provisions to a claimant Correct answer.
  4. Failing to acknowledge a claim within 10 working days

Explanation

Oregon's unfair claim settlement practices law prohibits misrepresenting pertinent facts or policy provisions relating to coverage at issue. Telling a claimant that covered sudden water damage is excluded is a misrepresentation of the policy.

Question 26Oregon insurance laws, rules, and regulations

Under Oregon claim settlement practices rules, how long must an insurer retain a claim file after the claim is closed?

  1. Five years after the claim is closed Correct answer.
  2. Ten years after the claim is closed
  3. Three years after the claim file is opened
  4. Two years after the claim is closed

Explanation

Oregon claim settlement practices rules require an insurer to keep a claim file for at least five years after the claim is closed. The file supports the insurer's investigation and is available for regulatory examination.

Question 27Oregon insurance laws, rules, and regulations

An Oregon claimant calls an insurer three times about the status of a pending property claim and receives no response. Under Oregon claim settlement practices rules, the insurer must respond to a claimant's inquiry within what period?

  1. Five working days
  2. Ten working days
  3. Two working days
  4. Thirty calendar days Correct answer.

Explanation

Oregon's claim settlement practices rule requires an appropriate reply within 30 calendar days after receipt of a pertinent claim communication that reasonably calls for a response. An inquiry about the status of a pending property claim falls within that requirement.

Question 28Oregon insurance laws, rules, and regulations

An Oregon producer collects a premium from an applicant but does not immediately remit it to the insurer. Under Oregon law, how are those premium funds held by the producer?

  1. As funds belonging to the insurer at all times
  2. As earned commission once the application is signed
  3. In a fiduciary capacity as trust funds Correct answer.
  4. As ordinary business debt owed to the producer

Explanation

Oregon law treats premiums collected by an insurance producer as trust funds held in a fiduciary capacity. The producer must account for and remit the premiums to the insurer rather than treat them as ordinary business funds.

Question 29Oregon insurance laws, rules, and regulations

An Oregon auto insurer declares a vehicle a total loss with an actual cash value of $18,000. The insurer offers $18,000 and refuses to pay title and registration fees needed to replace the vehicle. Which statement is correct under Oregon law?

  1. The insurer must pay applicable taxes and fees plus actual cash value. Correct answer.
  2. The insurer may deduct fees because actual cash value already includes them.
  3. The insurer must pay fees only if the insured buys a new vehicle from a dealer.
  4. The insurer may refuse fees because Oregon has no sales tax.

Explanation

When an Oregon auto insurer settles a total loss, the payment must include the vehicle's actual cash value plus applicable taxes and fees. The insured should not have to absorb title or registration costs that are required to replace the vehicle.

Question 30Oregon insurance laws, rules, and regulations

An Oregon homeowner and insurer agree that a fire loss is covered but disagree on the amount of loss. The homeowners policy contains the appraisal provision of Oregon's standard fire policy. What is the proper mechanism?

  1. The insurer's estimate controls unless the insured sues within 30 days.
  2. Either party may demand appraisal; each selects a competent appraiser. Correct answer.
  3. The Director of the Department of Consumer and Business Services sets the loss amount.
  4. Appraisal is unavailable once the insurer has paid the undisputed amount.

Explanation

Oregon's standard fire policy includes an appraisal process for disagreements about the amount of loss when coverage itself is not disputed. Either party may demand appraisal, each side selects a competent appraiser, and an umpire resolves any difference between the appraisers.

Question 31Oregon insurance laws, rules, and regulations

An Oregon personal auto policy is issued with the minimum required personal injury protection (PIP) coverage. What is the minimum medical benefit that Oregon law requires PIP to provide for each person?

  1. $25,000 per person
  2. $15,000 per person Correct answer.
  3. $5,000 per person
  4. $50,000 per person

Explanation

Oregon's minimum personal injury protection coverage includes up to $15,000 per person for medical, hospital, and related expenses. Higher limits may be purchased, but $15,000 is the statutory minimum medical benefit.

Question 32Oregon insurance laws, rules, and regulations

An Oregon resident buys a private passenger auto liability policy. How does Oregon law treat uninsured motorist coverage under that policy?

  1. It is optional and may be omitted without any written election.
  2. It must be included unless the named insured rejects it in writing. Correct answer.
  3. It is required only after a claim is denied by the other driver's insurer.
  4. It is required only for commercial auto policies.

Explanation

Oregon requires uninsured motorist coverage to be included in a motor vehicle liability policy unless the named insured rejects it in writing. The rejection must be documented; the coverage is not optional by silence.

Question 33Oregon insurance laws, rules, and regulations

Under Oregon's insurance information privacy law, what right does a claimant generally have regarding personal information an insurer records during a claim investigation?

  1. The right to access recorded personal information and request correction. Correct answer.
  2. No right, because claim files are confidential under Oregon law.
  3. The right to receive the insurer's internal fraud scoring model.
  4. The right to demand that the insurer destroy all claim records immediately.

Explanation

Oregon's Insurance Information and Privacy Protection Act gives individuals the right to access recorded personal information about them and to request correction of inaccurate information. Claim files are not wholly outside the claimant's rights.

Question 34Oregon insurance laws, rules, and regulations

An Oregon insurer receives notification of a covered property claim on March 1 and does not pay it that day. Under Oregon claim settlement practices rules, by when must the insurer acknowledge receipt of the claim?

  1. Within 30 calendar days
  2. Within 5 calendar days
  3. Within 10 calendar days
  4. Within 15 calendar days Correct answer.

Explanation

Oregon claim settlement practices rules require an insurer to acknowledge receipt of a claim notification within 15 calendar days unless payment is made within that period. The acknowledgment duty begins when the insurer receives notice of the claim.

Question 35Oregon insurance laws, rules, and regulations

An Oregon adjuster decides to deny a homeowner's claim. To comply with Oregon claim settlement practices rules, the denial notice must do which of the following?

  1. Include a copy of the insurer's complete claims manual with the notice.
  2. State the policy provision and factual basis relied on for the denial. Correct answer.
  3. Offer to submit the denial to binding arbitration before the insured may file suit.
  4. Waive any policy time limits for filing a proof of loss.

Explanation

Oregon's unfair claim practices rules require a denial to include a reasonable explanation of the basis for denial, tied to the relevant policy provision and the facts. A bare denial without that explanation is not sufficient.

Question 36Oregon insurance laws, rules, and regulations

An Oregon resident insurance producer is renewing a two-year license. How many continuing education hours must the producer complete, including ethics, unless an exemption applies?

  1. 24 hours Correct answer.
  2. 30 hours
  3. 12 hours
  4. 45 hours

Explanation

Oregon resident producers must complete 24 continuing education credit hours every two-year license term, including at least three hours of ethics. Exemptions apply in limited circumstances.

Question 37Oregon insurance laws, rules, and regulations

An Oregon insurer terminates a producer's appointment for cause. Within how many days must the insurer notify the Oregon Insurance Division of the termination?

  1. 20 days
  2. 60 days
  3. 30 days Correct answer.
  4. 10 days

Explanation

Oregon law requires an insurer to notify the insurance regulator within 30 days after terminating a producer's appointment. If the termination is for cause, the insurer must also provide the reason.

Question 38Oregon insurance laws, rules, and regulations

An Oregon insurer issues a new homeowners policy. Under Oregon law, what is the insurer's obligation regarding earthquake coverage?

  1. Earthquake coverage is prohibited unless the insured obtains a separate flood policy.
  2. The insurer must offer earthquake coverage and make the required disclosures. Correct answer.
  3. Earthquake coverage must be included automatically in every homeowners policy.
  4. Earthquake coverage may be offered only by surplus lines insurers.

Explanation

Oregon requires insurers that write residential property policies to offer earthquake coverage and to make the required disclosures about it. The insured may reject the offer, but the insurer must make it.

Question 39Oregon insurance laws, rules, and regulations

An Oregon insurer receives a properly executed proof of loss on a fire claim on June 1. It neither affirms nor denies coverage for several months. Under Oregon claim settlement practices rules, within what initial period after receiving proof of loss must the insurer accept or deny the claim or explain to the claimant why additional time is needed?

  1. 15 days
  2. 30 days Correct answer.
  3. 90 days
  4. 60 days

Explanation

Within 30 days after receiving properly executed proof of loss, the insurer must accept or deny the claim or notify the claimant why more time is needed. This is an initial response deadline, not an unconditional deadline for a final coverage decision. The 45-day interval concerns subsequent notices of continued delay.

Question 40Oregon insurance laws, rules, and regulations

An Oregon insurer declares a vehicle a total loss and uses a third-party valuation service to establish actual cash value. The insured asks how the actual cash value was determined. What must the insurer do under Oregon total loss claim rules?

  1. Provide the report only after the insured signs a general release.
  2. Refuse the request because the valuation service report is proprietary.
  3. Require the insured to obtain an independent appraisal.
  4. Provide a written explanation and a copy of the report. Correct answer.

Explanation

Oregon total loss claim rules require the insurer to explain how actual cash value was determined and, on request, to furnish the valuation report or comparables it used. A proprietary-service objection does not eliminate that disclosure duty.

Question 41Insurance principles and concepts

Which principle of insurance limits a property claim payment to the insured's actual financial loss so that the insured does not profit from a loss?

  1. The principle of indemnity Correct answer.
  2. The principle of insurable interest
  3. The principle of subrogation
  4. The principle of contribution

Explanation

Indemnity is the principle that an insured should be restored to approximately the same financial position as before the loss, no better. It prevents a claimant from using insurance as a source of gain. Subrogation, contribution, and insurable interest are related concepts, but they do not define the measure of recovery in this way.

Question 42Insurance principles and concepts

An insured owns a commercial building and buys a property policy on it. Which concept requires the insured to have a financial stake in the building at the time of loss for the claim to be payable?

  1. Contribution
  2. Aleatory contract
  3. Insurable interest Correct answer.
  4. Utmost good faith

Explanation

Insurable interest means the insured would suffer a financial loss if the covered property were damaged or destroyed. Property insurance generally requires that interest to exist at the time of loss. Contribution involves multiple insurers, utmost good faith concerns fair disclosure, and an aleatory contract involves unequal exchange of value.

Question 43Insurance principles and concepts

In a property insurance policy, which section identifies the named insured, the policy period, the covered property, and the policy limits?

  1. The insuring agreement
  2. The conditions section
  3. The declarations section Correct answer.
  4. The exclusions section

Explanation

The declarations section contains the individualized information about the policy, such as who is insured, what is covered, the policy term, and the limits. The conditions state the duties of the parties, exclusions remove coverage, and the insuring agreement states the broad promise to cover.

Question 44Insurance principles and concepts

A building has a replacement cost of $8,000 for damaged siding. Depreciation is 25%. The policy pays actual cash value and has a $500 deductible. Ignoring other charges, what is the payable claim amount?

  1. $5,500 Correct answer.
  2. $6,000
  3. $7,500
  4. $5,000

Explanation

Actual cash value is replacement cost minus depreciation, so $8,000 less 25% equals $6,000. The $500 deductible is then subtracted, producing a payable amount of $5,500. Applying the deductible before depreciation or ignoring depreciation would produce a different figure.

Question 45Insurance principles and concepts

A property policy has an 80% coinsurance requirement. The building's value at the time of loss is $400,000. The insured carries $240,000 of coverage and suffers a covered $80,000 loss with no deductible. Under the coinsurance formula, what amount is payable?

  1. $60,000 Correct answer.
  2. $80,000
  3. $64,000
  4. $48,000

Explanation

The required amount of insurance is 80% of $400,000, or $320,000. The insured carried $240,000, so the ratio is $240,000 divided by $320,000, or 75%. Applying that ratio to the $80,000 loss gives $60,000.

Question 46Insurance principles and concepts

A windstorm tears off part of a roof. Rain then enters through the opening and damages the interior. The policy covers windstorm and excludes rain damage unless the rain enters through an opening created by a covered peril. How should the adjuster treat the interior rain damage?

  1. Deny it because windstorm and rain are separate perils and only the roof damage is covered.
  2. Cover it because the windstorm created the opening and is the proximate cause of the rain damage. Correct answer.
  3. Cover it only if the insured first repairs the roof before submitting the claim.
  4. Deny it because rain is expressly excluded in every circumstance.

Explanation

The rain exclusion contains an exception for rain entering through an opening created by a covered peril. Here the windstorm opened the roof, so the windstorm is the proximate cause of the ensuing rain damage. The adjuster should apply the exception rather than deny solely because rain was involved.

Question 47Insurance principles and concepts

Under a claims-made liability policy, what determines whether a claim is covered?

  1. The date the alleged injury or damage occurred, without regard to when the claim is made.
  2. The date the insurer receives final judgment in the underlying lawsuit.
  3. The date the claim is first made against the insured, subject to the policy's retroactive date and reporting requirements. Correct answer.
  4. The date the insured first purchased any liability coverage.

Explanation

A claims-made policy is triggered by the claim being first made during the policy period. The retroactive date limits coverage for acts that occurred too far in the past, and reporting requirements determine whether the claim was timely reported. Occurrence policies, by contrast, generally look to when the injury or damage occurred.

Question 48Insurance principles and concepts

An adjuster tells an insured that a late proof of loss will be accepted and that no further documents are needed. The insured reasonably relies on that statement and misses the policy deadline. The insurer later denies the claim for late filing. What doctrine most likely prevents the insurer from enforcing the deadline?

  1. Estoppel Correct answer.
  2. Subrogation
  3. Coinsurance
  4. Representation

Explanation

Estoppel can prevent an insurer from enforcing a policy condition when its representative's statement induced the insured to reasonably rely on it and the insured was harmed by that reliance. The adjuster's assurance and the insured's detrimental reliance are the key facts. Waiver may also be relevant, but among the listed choices estoppel is the doctrine that addresses this situation.

Question 49Insurance principles and concepts

Two property policies cover the same building on the same loss. Policy A has a $100,000 limit and Policy B has a $200,000 limit. Both contain identical pro rata other-insurance clauses, and the covered loss is $150,000. How should the loss be shared?

  1. Policy A pays nothing and Policy B pays $150,000.
  2. Policy A pays $100,000 and Policy B pays $50,000.
  3. Policy A pays $50,000 and Policy B pays $100,000. Correct answer.
  4. Policy A pays $75,000 and Policy B pays $75,000.

Explanation

Under a pro rata other-insurance clause, each policy contributes in proportion to its limit. Policy A's $100,000 limit is one-third of the $300,000 total, and Policy B's $200,000 limit is two-thirds. One-third of the $150,000 loss is $50,000, and two-thirds is $100,000.

Question 50Insurance principles and concepts

An insurer pays an insured $6,000 for collision damage caused by another driver. The insured then accepts $2,000 from the at-fault driver for the same damage. What is the insurer's subrogation position?

  1. The insurer is entitled to reimbursement from the insured's $2,000 recovery to the extent of its payment, and the insured cannot impair the insurer's subrogation rights. Correct answer.
  2. The insurer must return the entire $6,000 because the insured made a recovery.
  3. The insured may keep both payments because subrogation applies only to property claims, not auto claims.
  4. The insurer can collect only from the at-fault driver and has no right against the insured's duplicate recovery.

Explanation

Subrogation allows the insurer, after paying a covered loss, to step into the insured's position against the responsible party. The insured cannot make a double recovery for the same loss or take action that impairs the insurer's subrogation rights. The insurer may therefore recover the duplicate payment to the extent of its claim payment.