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PA Public Adjuster practice questions

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Question 1Insurance Principles and Policy Provisions

For a first-party property claim under a Pennsylvania policy, insurable interest must exist:

  1. Only when the policy is written as a valued policy with a stated amount.
  2. Continuously from the policy's inception through each renewal.
  3. At the time of the loss, even if not at policy issuance. Correct answer.
  4. Only when the application is signed and the first premium is paid.

Explanation

Property coverage is a contract of indemnity, so the insured must hold an insurable interest when the loss happens in order to collect. An owner who sells the building after the policy is issued has no recoverable interest in later damage to that building. Pennsylvania follows this common-law timing rule for first-party claims.

Question 2Insurance Principles and Policy Provisions

Which insurance principle limits a property settlement to the value of the insured's actual financial loss so the insured does not profit from the event?

  1. Indemnity Correct answer.
  2. Subrogation
  3. Utmost good faith
  4. Coinsurance

Explanation

Indemnity means the settlement restores the insured to roughly the pre-loss financial position, no better and no worse. It underlies actual cash value valuation, policy limits, and the bar on collecting twice for one loss. Subrogation and coinsurance serve or modify indemnity but are not the principle itself.

Question 3Insurance Principles and Policy Provisions

Under most standard property forms that do not state a different valuation method, actual cash value means:

  1. The full cost to replace with new property of like kind and quality.
  2. Replacement cost minus depreciation for the damaged property. Correct answer.
  3. The value stated on the declarations page for the covered building.
  4. The price the insured originally paid for the damaged property.

Explanation

Actual cash value is ordinarily replacement cost less physical depreciation, which approximates the pre-loss condition of the property. The declarations value is a limit of liability, not a valuation method, and original purchase price does not measure current worth. The policy's own definition controls if it provides one.

Question 4Insurance Principles and Policy Provisions

A homeowners policy has a $1,000 base deductible and a separate $5,000 windstorm deductible. A covered windstorm causes $30,000 of damage to the dwelling. How much does the insurer pay?

  1. $30,000
  2. $29,000
  3. $24,000
  4. $25,000 Correct answer.

Explanation

A peril-specific deductible replaces the base deductible for that peril instead of stacking on top of it. The payment is $30,000 minus the $5,000 windstorm deductible, or $25,000. Subtracting both deductibles would improperly apply the base deductible twice.

Question 5Insurance Principles and Policy Provisions

A commercial building policy has a $300,000 limit and an 80% coinsurance clause. Replacement cost at the time of loss is $500,000 and a covered fire causes $100,000 of damage. The policy has a $1,000 deductible. What does the insurer pay?

  1. $74,000 Correct answer.
  2. $99,000
  3. $60,000
  4. $75,000

Explanation

The coinsurance requirement is 80% of $500,000, or $400,000, so the insured is underinsured. The payment is ($300,000 divided by $400,000) times $100,000, which equals $75,000, less the $1,000 deductible, for $74,000. The coinsurance penalty is applied before the deductible.

Question 6Insurance Principles and Policy Provisions

After paying a $60,000 fire loss caused by a contractor's negligence, the insurer sues the contractor. Which statement about the insured's position is correct?

  1. The insured may collect the full loss from the contractor and keep the insurance payment.
  2. The insured may still pursue the deductible but cannot recover twice. Correct answer.
  3. The insurer must share any recovery equally with the insured regardless of the deductible.
  4. The insured loses any right to pursue the contractor once the insurer pays.

Explanation

Subrogation transfers the insured's claim against the responsible party to the insurer only to the extent the insurer paid. The insured keeps the right to pursue uninsured amounts such as the deductible, but may not be made whole twice for the same damage. Any duplicate recovery belongs to the insurer.

Question 7Insurance Principles and Policy Provisions

Two property policies cover the same building on the same basis: Policy A has a $200,000 limit and Policy B a $300,000 limit. A $100,000 covered loss occurs and each policy contains a pro rata other-insurance clause. How much does Policy A pay?

  1. $60,000
  2. $100,000
  3. $50,000
  4. $40,000 Correct answer.

Explanation

Under pro rata contribution, each insurer pays the loss in the proportion that its limit bears to the total of all applicable limits. Policy A's share is $200,000 divided by $500,000, or 40%, which is $40,000 of the $100,000 loss.

Question 8Insurance Principles and Policy Provisions

A standard mortgage clause in a property policy entitles the lender to:

  1. Cancel the policy at any time without notifying the named insured.
  2. Collect the full policy limit regardless of the outstanding loan balance.
  3. Receive proceeds to the extent of its interest despite the insured's acts. Correct answer.
  4. Adjust the loss on the insured's behalf without the insured's consent.

Explanation

A mortgagee clause protects the lender's separate security interest in the property. The insurer pays the mortgagee to the extent of the debt and its interest, and the mortgagee's recovery is generally not defeated by the insured's acts or neglect. The named insured's own coverage is still judged under the policy terms.

Question 9Insurance Principles and Policy Provisions

The insurer agrees a fire loss is covered but disputes the dollar amount of the damage. Which policy provision addresses that disagreement over value?

  1. Proof of loss provision
  2. Salvage provision
  3. Appraisal provision Correct answer.
  4. Subrogation clause

Explanation

The appraisal provision lets each side select a competent appraiser when they disagree only on the amount of loss, with an umpire resolving differences. It addresses valuation, not coverage, so questions about whether the policy applies remain with the insurer and the courts.

Question 10Insurance Principles and Policy Provisions

A commercial property policy is written with an agreed value option and a limit equal to the agreed value. After a total loss, which statement is correct?

  1. Coinsurance still applies and is measured against replacement cost at the time of loss.
  2. Coinsurance does not apply, and the agreed value is the basis for payment. Correct answer.
  3. The agreed value is advisory only, and the insurer may pay actual cash value instead.
  4. The insured must reestablish replacement cost at the time of loss before collecting.

Explanation

The agreed value option suspends the coinsurance condition because the parties have already fixed the property's value for loss settlement. For a total loss the insurer pays the agreed amount, subject to the policy's other terms, without a later underinsurance penalty. The limit should equal the agreed value for the option to operate as intended.

Question 11Insurance Principles and Policy Provisions

An insurer writes a large number of similar, independent homeowners risks. Its estimate of aggregate loss costs becomes more reliable as the number of insured risks increases. Which insurance concept does this illustrate?

  1. The doctrine of subrogation
  2. The principle of indemnity
  3. The law of large numbers Correct answer.
  4. The coinsurance clause

Explanation

The law of large numbers holds that actual loss experience tends to approach expected loss experience as the number of similar exposure units increases, which supports ratemaking and reserving. It concerns predictability of pooled losses, not the measure of any one insured's recovery.

Question 12Insurance Principles and Policy Provisions

An applicant for a commercial property policy knowingly omits a prior fire loss when the application asks about loss history. In insurance terminology, this intentional withholding of a material fact is best described as:

  1. A salvage agreement
  2. A subrogation waiver
  3. A warranty
  4. A concealment Correct answer.

Explanation

Concealment is the intentional withholding of a material fact from the insurer. It differs from an express warranty, which is a promise or statement incorporated into the policy, and it can affect the insurer's willingness to issue or price the risk.

Question 13Insurance Principles and Policy Provisions

A property policy requires the insured to give the insurer prompt notice of a covered loss. What is the main purpose of this condition?

  1. To transfer ownership of the damaged property to the insurer
  2. To prevent the insured from making any temporary repairs
  3. To fix the exact amount the insurer must pay before investigation
  4. To let the insurer investigate while evidence is still available Correct answer.

Explanation

Prompt notice gives the insurer an opportunity to investigate the circumstances, inspect damage, and preserve evidence before conditions change. It does not itself establish the payable amount, transfer property, or prohibit reasonable mitigation.

Question 14Insurance Principles and Policy Provisions

During a claim investigation, an adjuster tells an insured that a late proof of loss 'will not be a problem' and continues to negotiate the amount. Later the insurer denies the claim for late proof. Which doctrine most directly supports the insured's argument that the insurer should not be allowed to deny coverage?

  1. Doctrine of merger
  2. Doctrine of reformation
  3. Doctrine of waiver and estoppel Correct answer.
  4. Doctrine of contributory negligence

Explanation

Waiver is the voluntary relinquishment of a known right, and estoppel can prevent an insurer from asserting a right after its conduct misled the insured to rely on it to the insured's detriment. The adjuster's assurance plus continued handling can support that argument.

Question 15Insurance Principles and Policy Provisions

A building owner sells the insured building and gives the buyer a written assignment of the property policy. The policy states that assignment is void without the insurer's written consent, and the insurer has not consented. A covered loss occurs after the sale. Which statement is most accurate?

  1. The assignment is valid if the buyer pays the remaining premium
  2. The insurer must pay the buyer because property policies run with the land
  3. The assignment is ineffective against the insurer without consent Correct answer.
  4. The assignment automatically transfers coverage because the buyer has an insurable interest

Explanation

Property policies are generally personal contracts, and a policy condition requiring the insurer's written consent to assignment is enforceable. Without consent, the transfer does not bind the insurer, although the original insured's rights may still be affected by the sale and insurable interest rules.

Question 16Insurance Principles and Policy Provisions

Following a covered fire, the insurer sends the insured a proof-of-loss form. Which statement best describes the function of a proof of loss in a property claim?

  1. It is the insurer's formal admission that the entire claim is covered
  2. It is a court order requiring the insurer to pay within a set time
  3. It is a release that waives the insured's right to supplemental payment
  4. A sworn statement detailing the amount, cause, and interest claimed Correct answer.

Explanation

A proof of loss is a signed, often sworn, statement that provides the insurer with the details of the loss and the amount claimed. It is a claim-handling condition, not an admission of coverage or a final release of rights.

Question 17Insurance Principles and Policy Provisions

An insurer broadens coverage under its standard homeowners form by filing a new endorsement that applies to all policies issued or renewed on or after a date. Which policy provision automatically gives the broader coverage to an existing policy when the insurer adopts it without additional premium?

  1. Liberalization clause Correct answer.
  2. Appraisal clause
  3. Mortgage clause
  4. Pair and set clause

Explanation

A liberalization clause extends broader coverage that the insurer adopts during the policy period to insureds under existing forms, usually without additional premium. It avoids penalizing policyholders simply because their policy was issued before the broader form.

Question 18Insurance Principles and Policy Provisions

A covered peril damages one chair from a matched dining set of six chairs. The policy contains a pair-and-set clause. The insurer's liability for the damaged chair is generally:

  1. The damaged chair's value or proportionate share of the set Correct answer.
  2. No payment, because one item of a matched set cannot be valued
  3. The full policy limit for any item that is part of a set
  4. The full cost of replacing all six chairs so the set matches

Explanation

A pair-and-set clause generally limits recovery to the value of the damaged item or its proportion of the set, rather than paying for an entire matched set. Some forms add coverage by endorsement for the diminished value of the remaining items.

Question 19Insurance Principles and Policy Provisions

After a fire heavily damages an insured building, the insured writes to the insurer: 'The building is yours; pay the full policy limit.' The policy contains a standard no-abandonment condition. Which statement is correct?

  1. The no-abandonment condition eliminates all coverage for a total loss
  2. The insurer may take the salvage only if it first pays the full limit
  3. Abandonment requires the insurer's consent; the loss is still measured under the policy Correct answer.
  4. The insured's offer automatically transfers the building to the insurer and obligates payment of the full limit

Explanation

Standard property forms prohibit abandonment of damaged property to the insurer without the insurer's consent. The insured must still document and value the loss under the policy; the insurer may instead take salvage after payment or as the policy allows, but it is not forced to accept the property.

Question 20Insurance Principles and Policy Provisions

A Pennsylvania property policy uses a term that is not defined, and the term is reasonably susceptible to two meanings in the context of the loss. The insured and insurer disagree about which meaning applies. How would a court most likely resolve the ambiguity?

  1. By applying only the insurer's internal underwriting manual definition
  2. By disregarding the policy language and awarding the policy limit
  3. For the insured, because ambiguity is construed against the insurer Correct answer.
  4. In favor of the insurer, because the insurer drafted the policy

Explanation

Under the doctrine of contra proferentem, ambiguity in an insurance policy is generally construed against the drafter, the insurer, and in favor of the insured's reasonable interpretation. The court still examines the policy and context; it does not automatically award the full limit.

Question 21Insurance Principles and Policy Provisions

In a Pennsylvania homeowners policy, which section identifies the named insured, the insured premises, the policy period, and the applicable limits?

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

Explanation

The declarations page supplies the individualized facts that identify the risk and the contract: named insured, location, dates, and limits. The insuring agreement states the insurer's promise, conditions impose duties, and exclusions remove coverage. Public adjusters routinely check the declarations first because limits and named insureds control the claim.

Question 22Insurance Principles and Policy Provisions

An endorsement attached to a property policy is best described as:

  1. A list of perils the policy excludes
  2. A written amendment that changes the policy Correct answer.
  3. A sworn statement submitted after a loss
  4. A promise by the insurer to renew the policy

Explanation

An endorsement is a written amendment that alters the policy, such as adding coverage, changing a limit, or adding an insured. It becomes part of the policy and controls over conflicting original wording. It is not a proof-of-loss form, exclusion list, or renewal promise.

Question 23Insurance Principles and Policy Provisions

A Pennsylvania applicant for property insurance receives a binder from the agent before the policy is issued. The binder:

  1. Guarantees the final premium shown on the policy
  2. Replaces the policy for the entire policy period
  3. Provides temporary evidence that coverage is in effect Correct answer.
  4. Eliminates the applicant's duty to disclose material facts

Explanation

A binder is temporary evidence that insurance is in effect until the policy is issued or the binder expires. It does not guarantee final premium, replace the policy for the full term, or excuse the applicant from disclosing material facts.

Question 24Insurance Principles and Policy Provisions

An applicant for a Pennsylvania commercial property policy states on the application that the building has a central-station fire alarm. The statement is a representation, which means it is:

  1. A promise that the alarm will remain operational for the policy term
  2. A statement of fact the applicant believes true when made Correct answer.
  3. An exclusion that removes alarm-related losses from coverage
  4. A warranty that voids the policy if the alarm later fails

Explanation

A representation is a statement of fact on the application that the applicant believes to be true when made. It is not a continuing promise that the alarm will remain operational, which would be more like a warranty. Materiality and intent generally determine the effect of an inaccurate representation.

Question 25Insurance Principles and Policy Provisions

After a covered fire damages a roof, the insured does nothing to cover the opening, and rain ruins the interior. The policy's duties-after-loss provision most likely affects the claim because the insured is required to:

  1. Complete all permanent repairs before reporting the claim
  2. Take reasonable steps to protect the property from further damage Correct answer.
  3. Pay the policy deductible before any duty arises
  4. Wait for the insurer to arrange all emergency repairs

Explanation

Property policies require the insured to take reasonable steps to protect covered property from further damage after a loss. Emergency repairs, tarping, and water removal are typical examples. The insurer may deny or reduce the portion of loss that the insured could have prevented through reasonable mitigation.

Question 26Insurance Principles and Policy Provisions

A commercial property policy suspends certain coverage when the building has been vacant beyond 60 days. If a building covered by that form is vacant for 90 days and is damaged by a peril listed in the vacancy provision, the insurer may:

  1. Deny or restrict the claim under the vacancy condition Correct answer.
  2. Cancel the policy back to its inception date
  3. Be required to pay because the policy was still in force
  4. Shift the loss to the mortgagee as a matter of law

Explanation

A vacancy condition can suspend or restrict coverage for specified perils once a building has been vacant beyond the stated period. The insurer may deny or limit the claim under that condition even though the policy was in force. The condition does not cancel the policy retroactively or shift the loss to the mortgagee as a matter of law.

Question 27Insurance Principles and Policy Provisions

A property policy contains an increase-of-hazard condition. Without notifying the insurer, the insured begins storing large amounts of flammable solvents in the insured warehouse. If a fire occurs, the insurer may:

  1. Be liable for double the policy limit because the risk changed
  2. Ignore the change because storage is not a policy condition
  3. Automatically cancel the policy back to the inception date
  4. Deny coverage if the insured knew of and controlled the increased hazard Correct answer.

Explanation

An increase-of-hazard condition addresses a material change in risk that the insured knows about and controls. If the insured fails to notify the insurer, coverage may be denied for loss occurring while the increased hazard exists. The condition does not double the limit or automatically rescind the policy from inception.

Question 28Insurance Principles and Policy Provisions

A business income form covers lost earnings during the period of restoration. That period generally begins when:

  1. The damage occurs and ends when repairs are reasonably complete Correct answer.
  2. The insurer completes its investigation and pays the claim
  3. The insured reopens, even if repairs are still incomplete
  4. The policy is issued and the first premium has been paid

Explanation

Business income coverage measures lost earnings during the period of restoration, which generally starts with the physical damage and ends when the property could be repaired with reasonable speed. It does not wait for the insurer's payment or extend indefinitely because the insured delays reopening. The purpose is to restore the business's income stream, not to pay a fixed sum.

Question 29Insurance Principles and Policy Provisions

A commercial property policy has a $1,000,000 limit and does not reinstate limits after a loss. After a covered $200,000 loss is paid, a second covered loss of $900,000 occurs in the same policy period. Ignoring deductibles, the maximum remaining limit available for the second loss is:

  1. $0
  2. $800,000 Correct answer.
  3. $900,000
  4. $1,000,000

Explanation

When a policy does not reinstate limits after a loss, the available limit is reduced by payments already made. Here, $1,000,000 minus the $200,000 paid leaves $800,000 for later losses in the same policy period. The second loss cannot exceed that remaining amount.

Question 30Insurance Principles and Policy Provisions

A property policy lists a tenant as an additional insured and a mortgage lender as a loss payee. If a covered fire damages the building, the primary difference is that the:

  1. Loss payee may claim the entire policy limit and keep the proceeds for its own general use
  2. Additional insured has its own insured status; the loss payee is limited to its secured interest Correct answer.
  3. Loss payee and the additional insured have identical rights to all policy proceeds
  4. Additional insured is only a lender, while the loss payee is an insured for liability claims

Explanation

An additional insured has insured status and can claim for its own covered interest in the property. A loss payee is typically a lender whose rights are tied to its secured interest and who is protected against impairment of that interest. The two statuses are not identical, and the loss payee cannot keep the entire policy limit for general use.

Question 31Insurance Principles and Policy Provisions

A Pennsylvania resident buys a homeowners policy covering a house owned by a neighbor, and the resident has no financial interest in the house. If the house is damaged by a covered fire, what is the most likely result?

  1. The policy is enforceable only if the resident occupied the house at the time of loss.
  2. The policy is valid, but payment is limited to the policy's actual cash value.
  3. The policy is valid because the neighbor consented to the coverage.
  4. The policy is unenforceable because the named insured lacked insurable interest at inception. Correct answer.

Explanation

Property insurance requires the insured to have an insurable interest in the covered property. A person with no ownership, leasehold, or other financial stake cannot collect for damage to another person's house. Consent by the owner or occupancy alone does not create the required financial interest.

Question 32Insurance Principles and Policy Provisions

An insurer pays an insured's covered water-damage claim caused by a plumber's negligence and then sues the plumber to recover the amount paid. The insurer is exercising which policy right?

  1. Salvage
  2. Subrogation Correct answer.
  3. Contribution
  4. Indemnification

Explanation

Subrogation allows an insurer that has paid a loss to stand in the insured's shoes and pursue a responsible third party. It supports the principle that the insured should not recover twice for the same loss. Contribution and salvage address different situations, such as multiple insurers or disposal of damaged property.

Question 33Insurance Principles and Policy Provisions

A property policy settles a covered loss at the cost to repair or replace with new material of like kind and quality without deducting depreciation. This settlement basis is called:

  1. Replacement cost Correct answer.
  2. Actual cash value
  3. Functional replacement cost
  4. Agreed value

Explanation

Replacement cost valuation pays the cost of new property of like kind and quality without a depreciation deduction. Actual cash value generally deducts depreciation from replacement cost. Agreed value and functional replacement cost use different valuation approaches.

Question 34Insurance Principles and Policy Provisions

A commercial building policy has a $600,000 limit, an 80% coinsurance clause, and a $5,000 deductible. At the time of loss, the building's replacement cost is $1,000,000, and a covered fire causes $200,000 in damage. Ignoring other provisions, what amount will the insurer pay?

  1. $145,000 Correct answer.
  2. $160,000
  3. $120,000
  4. $150,000

Explanation

The coinsurance requirement is 80% of $1,000,000, or $800,000. The limit carried is $600,000, so the insured carried 75% of the requirement; the covered loss is reduced to 75% of $200,000, or $150,000, and then the $5,000 deductible is subtracted. The insurer pays $145,000.

Question 35Insurance Principles and Policy Provisions

A covered loss of $100,000 is covered by two property policies that both provide primary coverage on a pro rata basis. Policy A has a $300,000 limit and Policy B has a $200,000 limit. How much does Policy A pay toward the loss?

  1. $60,000 Correct answer.
  2. $100,000
  3. $50,000
  4. $40,000

Explanation

Pro rata other-insurance provisions divide the loss according to each policy's share of the total applicable limits. Policy A's limit is $300,000 out of $500,000 total, or 60%. Policy A therefore pays 60% of the $100,000 loss, which is $60,000.

Question 36Insurance Principles and Policy Provisions

During a suspicious fire claim, a property insurer demands that the named insured answer questions under oath. What is the primary purpose of an examination under oath in a property policy?

  1. To allow the insured to negotiate a higher settlement
  2. To transfer the claim to the mortgagee
  3. To replace the proof-of-loss requirement
  4. To give the insurer a sworn record to evaluate and verify the claim Correct answer.

Explanation

An examination under oath is a policy condition that lets the insurer question the insured formally and create sworn testimony about the loss. It helps the insurer investigate and verify the claim, including possible fraud or misrepresentation. It is not a settlement negotiation, a transfer to the mortgagee, or a substitute for the separate proof-of-loss requirement.

Question 37Insurance Principles and Policy Provisions

A property policy contains a printed condition that conflicts with a typewritten endorsement added for the insured's specific risk. In Pennsylvania, which provision generally controls?

  1. Neither; the conflict makes the policy void
  2. The typewritten endorsement, because it is more specific and later in time Correct answer.
  3. The declarations page, because it lists the limits
  4. The printed condition, because it is part of the standard form

Explanation

When policy provisions conflict, specific and handwritten or typewritten terms generally prevail over preprinted general forms. The endorsement was added for the particular risk and is treated as the more precise expression of intent. A conflict does not automatically void the policy; it is resolved through established interpretation rules.

Question 38Insurance Principles and Policy Provisions

An insured and insurer agree that a fire is covered but disagree on the amount of loss. The policy contains a standard appraisal provision. What does that provision typically allow?

  1. The insurer may select the amount without the insured's involvement
  2. The insured must file suit before any amount is determined
  3. The public adjuster alone sets the binding loss amount
  4. Each side selects a competent appraiser, and an umpire resolves differences Correct answer.

Explanation

A standard appraisal provision is used to resolve disagreements about the amount of loss when coverage itself is not disputed. Each party selects a competent appraiser, and if the appraisers disagree, an umpire resolves the difference. Appraisal does not decide whether coverage applies.

Question 39Insurance Principles and Policy Provisions

A homeowners policy covers windstorm but excludes faulty workmanship. A covered windstorm and excluded defective construction both contribute to a roof collapse, and the policy contains an anti-concurrent causation clause. How is the loss most likely treated?

  1. The loss is split equally between covered and excluded causes
  2. The loss is excluded because an excluded cause contributed, regardless of the sequence Correct answer.
  3. The loss is covered because the policy is interpreted against the insurer
  4. The loss is covered because windstorm was the first cause in the chain

Explanation

An anti-concurrent causation clause is designed to exclude loss when an excluded cause contributes to the damage, even if a covered cause also contributes or the excluded cause occurs later in the sequence. The clause prevents recovery when the excluded and covered causes combine to produce the loss. Ordinary concurrent causation rules do not override that specific policy language.

Question 40Insurance Principles and Policy Provisions

A building owner intentionally burns the insured building. The policy has a standard mortgagee clause naming the lender. What is the lender's usual right under that clause?

  1. The lender can recover its mortgage interest, and the insurer may subrogate against the insured Correct answer.
  2. The lender must first sue the insured and obtain a judgment before presenting a claim
  3. The lender receives nothing because the insured's intentional act voids all coverage
  4. The lender's recovery is limited to the insured's equity in the building

Explanation

A standard mortgagee clause creates separate protection for the lender, so the lender's rights generally are not defeated by the insured's intentional acts. The insurer can pay the mortgagee for its interest and then pursue subrogation against the responsible insured. The lender's recovery is based on its mortgage interest, not merely the insured's equity.

Question 41Public Adjuster Licensing, Law and Ethics (Act 21 of 2012)

Under Pennsylvania's public adjuster licensing law (Act 21 of 2012), a person who negotiates or settles first-party property claims for compensation on behalf of insureds must:

  1. Register with the Attorney General as a claims representative
  2. Hold a Pennsylvania public adjuster license Correct answer.
  3. Hold only a Pennsylvania insurance producer license
  4. Be certified by the insurer that issued the policy

Explanation

Act 21 of 2012 created a separate public adjuster license administered by the Pennsylvania Insurance Department, and acting for an insured for compensation without it is unlicensed activity. A producer license, an Attorney General registration, or an insurer's blessing is not a lawful substitute for that license.

Question 42Public Adjuster Licensing, Law and Ethics (Act 21 of 2012)

A public adjuster and an insured agree on a 12% contingency fee for a water-damage claim. Under Act 21 of 2012, the compensation agreement must be:

  1. Recorded in the insurer's claim file within ten days of the loss
  2. Approved in advance by the Insurance Department
  3. In writing and signed by the insured Correct answer.
  4. Oral, provided the percentage is disclosed at the first meeting

Explanation

The statute requires a written contract, signed by the insured, that states the compensation and the other required disclosures before the adjuster performs services. An oral fee arrangement fails the writing requirement and cannot be enforced against the insured.

Question 43Public Adjuster Licensing, Law and Ethics (Act 21 of 2012)

Shortly after signing a public adjuster contract, an insured decides to cancel. Pennsylvania law gives the insured the right to rescind:

  1. Only with the Insurance Department's prior approval
  2. Only if the insurer has formally denied the claim in writing
  3. Within thirty days of the date of loss
  4. By written notice within three business days Correct answer.

Explanation

The Act builds in a short cooling-off period: the insured may rescind the contract without penalty by written notice within three business days after signing. A timely rescission voids the agreement, so the adjuster cannot collect the contingency fee.

Question 44Public Adjuster Licensing, Law and Ethics (Act 21 of 2012)

An insurer asks a licensed public adjuster who already represents the insured on a fire loss to also handle that same claim for the insurer for an hourly fee. The adjuster should:

  1. Decline, because serving both parties is a conflict of interest Correct answer.
  2. Accept, once the arrangement is disclosed to the Insurance Department
  3. Accept, because the adjuster already holds a valid Pennsylvania license
  4. Accept, if the insured and the insurer both consent in writing

Explanation

A public adjuster's duty runs exclusively to the insured, so also acting for the carrier on the same loss is a disqualifying conflict of interest. Consent, disclosure, or possession of a license does not cure that conflict.

Question 45Public Adjuster Licensing, Law and Ethics (Act 21 of 2012)

A public adjuster offers a roofing contractor 30% of every fee generated by claims the contractor refers. Under Pennsylvania law, this arrangement is:

  1. Permitted, because contractors are not required to hold adjuster licenses
  2. Prohibited only when the contractor also performs the repairs
  3. Permitted, if the split is disclosed in the insured's contract
  4. Prohibited, because it shares fees with an unlicensed person Correct answer.

Explanation

Paying an unlicensed person for the solicitation of adjusting business is prohibited because it lets unlicensed parties share in activity reserved to licensees and invites steering of insureds. Writing the split into the insured's contract does not make the arrangement lawful.

Question 46Public Adjuster Licensing, Law and Ethics (Act 21 of 2012)

Which of the following is a ground on which the Insurance Department may deny, suspend, or revoke a public adjuster license?

  1. Advertising adjusting services in a local newspaper
  2. Misrepresenting policy terms to induce an insured to sign Correct answer.
  3. Disagreeing with an insurer's valuation of a claim
  4. Charging the fee stated in the written contract

Explanation

Fraudulent and dishonest practices, including misstating an insured's coverage in order to obtain a signed contract, are statutory grounds for disciplinary action. Vigorous advocacy, ordinary advertising, and collecting the fee the contract specifies are all lawful.

Question 47Public Adjuster Licensing, Law and Ethics (Act 21 of 2012)

A public adjuster licensed only in Ohio is hired by a Pennsylvania homeowner to handle a Pittsburgh fire loss. The adjuster must:

  1. Notify the Department within thirty days after starting work
  2. Obtain a Pennsylvania public adjuster license before adjusting the claim Correct answer.
  3. Take a power of attorney from the insured in place of a license
  4. Rely on the Ohio license because the insured chose the adjuster

Explanation

Adjusting a Pennsylvania loss requires authority from the Pennsylvania Insurance Department, typically through a nonresident license issued under the statute's reciprocity provisions. Beginning work first and notifying the Department afterward is unlicensed activity.

Question 48Public Adjuster Licensing, Law and Ethics (Act 21 of 2012)

A licensed public adjuster pays an unlicensed friend to visit disaster victims, discuss their coverage, and negotiate settlement figures, while the licensee signs the contracts. The core licensing violation is that:

  1. The licensee is aiding unlicensed activity and faces discipline Correct answer.
  2. The friend should have been paid a salary rather than a commission
  3. The friend's visits occurred without the insurer's notice
  4. The licensee failed to advertise the referral arrangement

Explanation

Only a licensed public adjuster may negotiate claims for compensation, so a licensee who arranges for an unlicensed person to perform that core work is aiding unauthorized practice and exposes both parties to penalties. The form of payment and whether the carrier was notified do not change that conclusion.

Question 49Public Adjuster Licensing, Law and Ethics (Act 21 of 2012)

A public adjuster receives a settlement check payable to the insured and mortgagee, endorses it, and deposits it into the firm's payroll account to cover expenses before forwarding the insured's share. This is best characterized as:

  1. A breach of the adjuster's fiduciary duty and grounds for discipline Correct answer.
  2. Acceptable, because the funds were eventually going to the insured
  3. Acceptable, provided the adjuster keeps a signed receipt
  4. A minor bookkeeping issue the Department does not regulate

Explanation

Claim funds collected for an insured are held in a fiduciary capacity and must be kept separate from the adjuster's own operating money and accounted for promptly. Commingling or spending them exposes the licensee to license discipline as well as civil liability.

Question 50Public Adjuster Licensing, Law and Ethics (Act 21 of 2012)

Before the Insurance Department suspends a public adjuster's license, the licensee is entitled to:

  1. Automatic reinstatement of the license pending the outcome
  2. A jury trial in the county where the loss occurred
  3. Notice of the charges and an opportunity for an administrative hearing Correct answer.
  4. The written consent of every insured on the adjuster's active claims

Explanation

License discipline follows administrative due process: the Department must notify the licensee of the allegations and provide a hearing at which the licensee can respond. The matter is adjudicated before the Department rather than a jury, and no insured or insurer consent is required.