4.1 Role of the Adjuster Copy
Commissioner of Insurance
The commissioner is the department’s chief executive and administrative officer. The commissioner administers and enforces insurance the laws of Texas, and other laws granting jurisdiction or applicable to the department or the commissioner. The commissioner is appointed by the Texas governor, with the Texas Senate approval, for a two-year period.
The Texas Department of Insurance
The governing body for all insurance regulation in The Great State of Texas.
Law and the Legal System
Criminal and Civil Law
Criminal laws- Protect public interests by governing how suspects are investigated, charged, and tried; and specify the punishment. Criminal laws are statutory laws designed to punish wrongdoers.
Civil laws– Protect individuals’ private rights
Sources of Law
Common Law– The body of law that has developed over time through the decisions of judges
Statutory Law– The body of law developed from statutes rather than decisions of judges.
Statutes- Laws enacted by legislative bodies.
Hearsay– Hearsay is a person’s testimony of what he or she has heard others say but of which he or she has no personal knowledge.
Claims Agents and Their Role in Insurance
The Law of Large Numbers
The Law of Large Numbers The Law of Large Numbers helps insurers to predict the number of losses they will pay in any given time period so that they can determine what premium is required to pay for those losses.
The Principle of Indemnity and Insurable Interest
Principle of Indemnity– Explains that an insured who has suffered a loss should be restored to the same financial position as before the loss. Insurers use the loss ratio as a tool to measure their profitability.
The pure loss ratio is expressed as a percentage, as shown below:
(Incurred losses divided by Earned premium) x 100 = Pure loss ratio
The loss ratio adds loss adjustment expenses to incurred losses:
(Incurred losses + Loss adjustments expenses) divided by Earned premium) x 100% = Loss ratio
Determination of Liability
For first-party losses, adjusters determine the number of damages after verifying coverage and the initial assessment. For liability claims, adjusters focus on determining liability, or establishing legal fault, along with determining damages.
Tort
A tort is a wrongful act or omission, other than a breach of contract, which causes harm and might lead to a civil lawsuit for damages. A person or an organization that commits a tort is called a tortfeasor.
Classes of Torts
Negligence– Negligence refers to torts that occur when a person fails to use the proper safeguards for the safety of another person on his or her property. Negligence is the most significant area of tort law for adjusters.
Strict Liability- Strict Liability (or absolute liability) often arises from ultra-hazardous operations.
Intentional Torts- Intentional torts occur when the tort-feasor purposefully harms another person through his or her actions.
Contractual Liability
Contractual Liability- Arises when someone’s rights are violated under the terms of a contract.
Contractual Assumptions of Liability– As a condition of a business contract, a party often agrees to assume financial responsibility for liabilities imposed by law on another party.
Warranties
A warranty is a contractual promise that accompanies the sale of a product. Express warranties are promises made orally or in writing by the manufacturer or retailer. An implied warranty is not specifically expressed, but a purchaser could reasonably infer that the warranty exists. Adjusters encounter warranties when they are handling product liability claims.
Nothing gives one person so much advantage over another as to remain always cool and unruffled under all circumstances. – Thomas Jefferson
