Policy Provisions, Endorsements, and Claims Handling
This domain tests how claims are reported, adjusted, and paid, and how endorsements change the policy. Expect duties after loss, proof of loss, appraisal, subrogation, mortgage clauses, cancellation rules, and unfair claims practices.
Claim duties and adjustment
- The insured must give prompt notice, protect property from further damage, cooperate, submit a signed proof of loss, and provide records.
- Proof of loss is a sworn statement of the amount claimed; it is separate from initial notice.
- Appraisal resolves disputes over the amount of loss when the policy provides it; it does not decide coverage.
- Subrogation lets the insurer pursue a responsible third party after paying the insured.
Policy provisions
- A mortgage clause protects the lender's interest and gives the lender notice and loss-payment rights.
- Cancellation and nonrenewal are governed by policy terms and state law; notice requirements differ for nonpayment, underwriting, and nonrenewal.
- Endorsements amend coverage, limits, deductibles, or definitions; the endorsement controls over the base form.
Claims handling standards
Unfair claims practices include unreasonable delay, failure to investigate, misrepresenting policy provisions, and offering less than the claim is worth without a reasonable basis. Bad faith exposure can arise from unreasonable denial or delay.
Worked example
A fire damages a kitchen. The insured reports the loss promptly but refuses to submit a signed proof of loss for six months and will not provide receipts. The insurer may deny or reduce the claim if it was prejudiced by the delay. The appraisal clause could resolve the repair amount, but it cannot excuse the failure to cooperate.
Traps
Do not confuse notice with proof of loss. Do not use appraisal to decide whether coverage exists. Do not assume an endorsement is ineffective because it conflicts with the base form; endorsements usually control.