Chartered Insurance

Institute of Nigeria
Chief Examiners’ Report
October 2023
Post AIIN
(Loss Adjusting Practice)
PF02-PA02
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PF02
CHARTERED INSURANCE INSTITUTE OF NIGERIA
POST AIIN - FOUNDATION
2023 OCTOBER EXAMINATION

SUBJECT – PF02
PF02 – LOSS ADJUSTING INSURANCE PRACTICE LOGO

All answers should be shaded on the answer form in accordance with the
following instructions:
• Two hours are allowed for this paper.
• Fill in the information requested on the answer form and attendance
form.

• Handle the answer form with care and do not write notes on it.
• No marks are deducted for incorrect answers, so do not leave any
questions unanswered.
• The answer form should be handed over personally by you to the
invigilator before you leave the Examination Hall.
• Insert your candidate’s number as given on your admission permit and
any other particulars required on the answer form.
• Ensure that you write the full and correct candidate’s number.
• If you bring a calculator into the examination room, it must be silent
battery or solar powered non-programmable calculator. The use of
programmable calculator is prohibited.
• No name should be written on the answer form.

FAILURE TO ADHERE TO INSTRUCTIONS (WRITTEN AND VERBAL)

WILL ATTRACT STATED SANCTIONS AS STATED IN THE OCTOBER
2023 DIET POST ASSOCIATESHIP CANDIDATES’ INSTRUCTIONS.
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 CHARTERED INSURANCE INSTITUTE OF NIGERIA
PF02 - FOUNDATION

LOSS ADJUSTING INSURANCE PRACTICE

INSTRUCTIONS TO CANDIDATES

READ THE INSTRUCTIONS BELOW BEFORE ANSWERING ANY QUESTIONS

Section A
The questions 1 – 60 in this paper are numbered and four options follow each question.
The options are labeled a,b,c,d. Only one of these options is correct. Select your answer
for each question and indicate it on the answer form by filling in the appropriate box.
Example:
The major role of a Loss Adjuster in claims processing is…?
(a) Pay the claim (b) Interpret the policy
(c) Advice on the admissible claims and quantum (d) Collate claims estimate.

The correct option is (c)

Section B
Questions 61 – 85 are to be answered as either True (T) or False (F). Select your chosen
option and indicate it on the answer form by filling in the appropriate box.
Example:
The Insurance market consists of different categories of intermediaries.
The correct option is True (T).

Section C
Questions 86 – 100. This section contains four (4) case studies each followed by some
questions. The case studies are not numbered and appear at the top of the page. Each of
the questions following a case study is numbered. Four options follow each question. The
options are labelled, a, b, c, d. Only one of these options is correct or best. Select your
answer for each question and indicate it on the answer from by filling in the appropriate
box.

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SECTION A – ATTEMPT ALL QUESTIONS (Questions 1 – 60)

1. An adjuster is considered as an independent claim assessor because the adjuster …..

(a) analyse the circumstances of the claim
(b) view the claim with fairness to both the insurer and claimant
(c) has the insurer influence its action
(d) engage expert to analyse the loss

2. The first Loss Adjusting Firm in Nigeria was ….

(a) T.A. Braithwaite (b) International Loss Adjuster
(c) C.T. Bowring & Co. Limited (d) Marine Technical

3. Conflicts between loss adjusters and interested parties may arise from any of the following
disagreement except ….. issues.
(a) personal (b) financial (c) political (d) none of the above

4. Which of these is a vital document for the renewal of a Loss Adjuster’s licence?
(a) Application Form 22
(b) Claim details of highest value of claim handled salvage recommendations
(c) Training records of all loss adjusters
(d) Certificate of medical fitness of the CEO

5. Essential communication skills include …….

(a) good phonics
(b) identifying non-verbal clues and active listening
(c) avoiding misunderstanding (d) none of above

6. Which is the first basic duty of a Loss Adjuster to the claimant when appointed on claim?
(a) Conduct market survey
(b) Communicate the notice of appointment to the claimant
(c) Take photograph exhibits
(d) Conduct discreet investigations

7. In the case of Ajala & Anor v American Life Insurance (1972), the court affirmed that an
estate of a deceased person has … and can enforce a life policy taken out by the deceased.
(a) martial interest (b) business interest
(c) insurable interest (d) partnership

8. The pioneer members of the Institute of Loss Adjuster of Nigeria were ….

(a) 12 (b) 8 (c) 16 (d) 21

9. The common form of “alternative dispute resolution” is through …..

(a) court proceedings (b) NAICOM
(c) mediation and/or arbitration (d) tort actions

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10. Who among the names stated below has not been a president of ILAN?
(a) Chief Lebi Omoboyowa (b) Mr. Darlington Mgbojikwe
(c) Chief Yinka Omilani (d) Mr. Eddie Okonkwo

11. Which of these is not a benefit to an Associate of IFAA?

(a) Discounted rates to the IFAA educational conferences
(b) Entitlement to use the designation of AIFFA or FIFAA as the case may be
(c) Assistance in the processing of visa applications to attend conferences as well work
permits to be engaged as loss adjuster in the UK
(d) Possession of Certificate of fellowship of Associateship

12. Interest can be classified in insurance contract as ….

(a) pecuniary, legal and subsisting (b) insurable interest
(c) material damage (d) subrogation rights

13. In …. an expectation to acquire an interest before the expiry of the policy is insurable
(a) fire insurance (b) motor insurance (c) marine insurance
(d) accident insurance

14. A person insured under a contract of insurance is required by law to have….

(a) subrogation right (b) insurance policy document
(c) insurable interest (d) utmost good faith

15. The Section of the Insurance Act 2003 that deals with the limitation on the amount
receivable for a person who has insurable interest in a life or event is Section …..
(a) 4 (b) 52 (c) 58 (d) 59

16. How many days is allowed for cancellation notification in a standard policy?
(a) 7 days (b) 15 days (c) 21 days (d) 30 days

17. NAICOM can enforce power on any erring loss adjuster by …

(a) intervention (b) discipline and enforcement
(c) civil and formal remedies (d) (a) & (b)

18. Whether the terms of the contract demand an insurable interest or not, an interest to some
extent is required by statute in every contract of insurance and the contract will therefore
be …. If the requisite interest is absent.
(a) illegal (b) cancelled (c) endorsed (d) judicial

19. Under the STR. the report format using Form AML-001 does not contain …. information
(a) amount involved (b) source of fund
(c) customer’s bank details (d) nature of transaction

20. The amount of fine payable by a loss adjuster for making my false return and or recklessly
giving false information to NAICOM is …..
(a) N100,000.00 (b) N150,000.00 (c) N250,000.00 (d) N500,000.00

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21. Which one of the following documents is not a requirement for the renewal of a loss
adjuster’s licence required by NAICOM?
(a) Duly completed Application Form 22
(b) Declaration of Ownership of Interest
(c) Evidence of Payment of Professional Indemnity Policy
(d) Evidence that the CEO is a Current Member of CIIN

22. In …. Lawrence J. gave a classic definition of insurable interest

(a) African Alliance Tailor Wood (b) Lucena v Crauford
(c) Johnson V. Johnson (d) Philip v Anderson

23. Section 56(1) of the Insurance Act 2003 declares that a … made by a person on the life of
another person or on any other event whatsoever shall be null and void where the person
for whose benefit the policy is taken out has no insurable interest in the object of
insurance.
(a) service level agreement (b) policy of insurance
(b) contract agreement (d) subject matter

24. Loss Adjusters render service mainly to

(a) insurance companies (b) claimants
(c) general public (d) reinsurance companies

25. The use of loss assessors is increasing because

(a) brokers and direct policy holders seek for ways to maximise their claim returns
(b) loss adjusters have more work to do
(c) the insurers prefer a loss assessor to a loss adjuster
(d) NIA is encouraging the practice

26. Culture can be defined as …..

(a) good conduct (b) code of conduct
(c) acceptable norm among people or professionals
(d) professional ethics

27. In Young v Sun Alliance (1976), the insured’s claim failed because he could not show that
the seepage of water into a cloakroom was …..
(a) rain water (b) an act of God (c) flood (d) windstorm

28. Loss Adjuster’s financial integrity means ….

(a) regulatory rules (b) reputation
(c) ability to communicate (d) transparency of earnings

29. How do we prevent an “error and omission claims”?

(a) By putting effective risk management procedures in place
(b) By failure in management
(c) By compliance with policy
(d) By full documentation

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30. The main goal to achieve in conflict management is to ….
(a) reduce cost of litigation
(b) get all parties to agree on the resolution
(c) pay the insurance offer on the claim
(d) create relationships between all the parties

31. What role does private investigations play in claims management?

(a) gives a second opinion on the report issued by a loss adjuster
(b) serves as independent claim adjuster
(c) investigate cases where moral hazard is obviously noted in a claim
(d) both (a) and (c)

32. In an insurance contract, the appointed loss adjuster is strictly guided by terms and
conditions that are stated in the policy document which is the evidence of the contract.
However, application of …….. would be necessary where relevant
(a) conditions (b) warranties
(c) implied conditions (d) technology

33. Insurable interest is defined as the …. of the insured on the subject-matter of insurance
(a) national interest (b) personal interest
(c) pecuniary interest (d) loyal interest

34. Loss Adjuster’s final assessment report is expected to answer the following questions
except….
(a) if liability attaches (b) quantum of liability
(c) proximate cause (d) premium payable

35. In Leyland Shipping v. Norwich Union Fire Insurance Society Ltd (1918), it was stated,
“the cause which is truly proximate is that which is …….. in efficiency”.
(a) collaborative (b) timely and deliberate
(c) recklessly (d) proximate

36. Insurers still use the services of the loss adjusters, notwithstanding the increased costs
because of the following, except….
(a) inter-disciplinary skills (b) expert knowledge
(c) fairness (d) publicity

37. The vision of Institute of Loss Adjusters of Nigeria is to be Africa’s leading loss adjusting
Institute by providing the following, except…
(a) value to the insurance market
(b) member’ continued training and education
(c) profitable turnover
(d) the development of efficient processes

38. One of the following breaches by the insured can lead to repudiation of liability by the
insurer.

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 (a) Non-disclosure of public information (b) Fraud
(c) Innocent misrepresentation (d) typographical error

39. Loss Adjuster advising the claimant of their rights and obligations under the policy during
assessment of loss/damage is consistent with the role of …..
(a) negotiation (b) fairness (c) adjustment (d) assessment

40. A breach of term, whether called a warranty or a condition, shall not give rise to any right
by or afford a defence to the insured unless the term is materials and relevant to the risk or
loss insured against according what Section …. of the Insurance Act 2003.

41. Risk management function does not include …..

(a) identify risk (b) analysis of risk (c) speculative analysis
(d) risk control

42. Advocates of nominated loss adjusters clause in an insurance policy argue that it allows for
seamless claims experience except that the clause may affect
(a) appointment of foreign loss adjusters (b) fair competition
(c) ILAN (d) insurers

43. Sometimes loss adjusters may be required to report to the reinsurer directly without going
through the cedant, even though the loss adjuster was appointed by the cedant, provided
the policy is having….
(a) average control clause (b) general average clause
(c) claims control clause (d) treaty clause

44. Loss assessors are appointed by policyholders in view of the following except..
(a) claim preparation (b) meeting with insurers
(c) relating with ta authority for rebate (d) relating will loss adjusters

45. General exceptions to a short-term policy include those risks which an insurer and indeed
the short-term market will not, as a general rule, accept. This include all of the following,
among others, except …
(a) politically motivated damage (b) war damage
(c) impact damage (d) nuclear risks

46. Subrogation occurs in property/casualty insurance when insurer pays one of its insureds
for damages, then claims against others who may have, except…
(a) caused the loss (b) witness the loss
(c) insured the loss (d) contributed to the loss
47. If a loss is caused by two (or more) concurrent causes, one covered under the policy and
the other not mentioned at all or is expressly excluded and if the losses cannot be separated,
the…
(a) insurer will avoid liability totally
(b) policy section covering a part of the loss will be liable to pay the claim in full
(c) insurer will pay partly

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 (d) insurer and insured will share the liability

48. The insurer may offer covers that are wider than those mentioned in the operative clause.
This is done by way of a/an…
(a) exclusion (b) limitation (c) endorsement (d) extension

49. Where a fire occurred leaving the wall of a building in a dangerous state and the wall
collapsed thereafter damaging an adjoining building. The adjoining building may be said
to have been damaged by…
(a) wall collapse (b) windstorm (c) landslide (d) fire

50. Loss Adjusters perform an increasing range of different services for both the insurer and
their clients. One of them is…
(a) publication of losses (b) supply of stationery
(c) buying of salvage (c) risk management

51. All insurance intermediaries shall file Cash Transaction Reports (CTR) with Nigerian
Financial Intelligence Unit (NFIU) and copy NAICOM within seven (7) days of any single
cash transaction, lodgment or transfer of funds in excess of…
(a) N1m or its equivalent in the case of an individual
(b) N5m or its equivalent in the case of corporate body
(c) N10m or its equivalent in the case of an individual
d) None of the above

52. Where the licence of a loss adjuster has lapsed, a fresh registration is required by NAICOM.
The following are all part of the requirements except…
(a) receipt of payment of renewal fee
(b) evidence of current membership of NIA
(c) evidence that the CEO is a current member of CIIN
(d) original copy of the expired certificate

53. Late filing of annual returns to NAICOM by a loss adjusting firm shall attract a fine of
………per day for each day of default.
(a) N5,000.00 (b) N10,000.00 (c) N15,000.00 (d) None of the above

54. In addition to tariff based on a sliding scale commission, loss adjusters are to be reimbursed
for by the insurer/principal for the following except…
(a) transport expenses
(b) accommodation expenses
(c) expenses relating to involvement of specialist third parties
(d) underwriting expenses

55. Loss adjusting firms is expected to adhere to best international practices by way of regular
staff training which encompasses the following, except…
(a) classroom training (b) the use of technology on the job
(c) field activities where the trainee loss adjuster can gain “hands on” experience

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 (d) none of the above

56. Evidence available shows that the first loss adjusting firm in Nigeria served both as an
adjuster and a/an…
(a) apprentice (b) surveyor (c) broker (d) underwriter

57. Good corporate governance in the insurance sector requires one of the following.
(a) set of comprehensive internal control procedures and policies established by the
Board of Directors
(b) implemented internal control procedures by skilled personal
(c) monitoring by effective management team
(d) All of the above

58. Companies with a strong corporate culture are likely to…

(a) have clear personal goals
(b) have effective method(s) of communication
(c) have low monitoring activity and adapt procedures accordingly
(d) set clear targets and goals that are related to the personal goals

59. One of the main goals of negotiating with the third party is to come to an agreement that
will benefit all parties according to the terms and conditions of the policy, with the aim of
ensuring…
(a) client’s retention (b) that all righteousness is fulfilled
(c) concealment (d) all of the above

60. A conflict of interest is a set of circumstances that creates a risk that professional judgment
or actions regarding a primary interest will be unduly influenced by…
(a) dual interest (b) insurable interest
(c) personal interest (d) secondary interest.

SECTION B – ATTEMPT ALL QUESTIONS (Questions from 61 to 85)

Answer True (T) or False (F).

61. The complexity, size and location of a loss could suggest that claim should be appropriately
handled by an independent loss adjuster.

62. The celebrated case of Rozanes v. Bowen (1928) gave a judgment on proximate cause.

63. Professional loss adjuster must not be consistent and willing to practice within the
guidelines of the code of ethics.

64. The first ILAN President is Chief (Senator) O. O. Omilani of Yinka Omilani & Associates
Limited.

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65. In material damage insurance, there must be a physical object which is capable of being
destroyed, lost or damage.

66. Sworn declaration of reasonable care to secure continuous compliance with the provision
of the Insurance Act 2003 is a requirement for registration of a loss adjusting firm.

67. Loss adjusters must adhere to best international practices by way of regular staff visits and
giving of monetary tips to insurance companies.

68. Trust is the result of good conduct and this is generated when a loss adjuster meets or
exceeds the insurer expectations on the claim adjustment.

69. When dispute arises in claims settlement, the best of action negotiation.

70. Not only does the loss adjuster need to understand the policy terms and conditions to advise
on liability, but the loss adjuster must also be skilled in the art of negotiation to make
settlement free of rancor.

71. By establishing clear communication, the loss adjuster will avoid misunderstandings that
could prevent the parties from reaching a compromise.

72. Insurance contracts rely on all parties to the contract to observe the principle of utmost
good faith.

73. In a situation where incompetence is alleged by the Insurers following receipt of a loss
adjuster’s report, the loss adjuster should show the process by which he arrived at his
decision including presenting a certificate of competence received from a recent training
adjusting dynamics.

74. Material circumstances are confidential information acquired through a business

relationship unconnected to the contract of insurance.

75. Material representations of fact must be substantially correct.

76. As at date in the Nigerian insurance industry, there is agitation for upward review of the
loss adjuster’s scale of fees.

77. The current applicable minimum fee as per the market agreement between the Nigerian
Insurers Association and Institute of Loss Adjusters of Nigeria representatives N50,000.00.

78. Material representations of expectation or belief need not to be made in “good faith”.

79. Prior to the implementation of the Insurance Act 2003, an insurer would be entitled to avoid
the whole contract where the commercial proposer had failed to disclose all material
information whether asked for it or not.

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80. One of the sources of conflict in insurance contract could be technical error/omission in
the loss adjuster’s report, which may lead the report to be rejected by the insurer.

81. One of the options available to insurers handling rejected adjusters’ report is to ignore the
report.

82. The impact of the Insurance Act 2003 on “warranties” contained in the policy is that
warranty can no longer automatically terminate the contract.

83. Insurance Act 2003 section 55 (2) provides that where there is a breach of term of a contract
of insurance, the insurer shall be entitled to pay the whole or any claim brought on the
grounds of breach even if the breach amounts to a fraud.

84. The loss adjusting firm is to be well versed in the obligations of the loss adjuster’s principal
to the insured in the claim settlement process.

85. Corporate culture refers to the shared values, attitudes, standards and beliefs that
characterise non months of an organisation and define the nature of those members.

SECTION C- ATTEMPT ALL QUESTIONS (Questions 86 - 100)

Read the cases below carefully and answer the questions which follow.

In Winicofsky v. Army and Navy General Assurance Association Limited (1919), a policy
included an exclusion clause which excluded liability for loss or damage occasioned by outbreak
of hostilities, war and civil commotion and riots. During an air raid, goods were stolen from the
insured's shop and insurers denied liability on the ground that the loss was caused by hostilities.

86 Can the insurer make ex-gratia payment to the claimant?

(a) No (b) Yes
(c) All of the above (d) None of the above

87. Can the insured request to buy back the exclusion?

(a) Yes, on payment of additional premium
(b) No, since standard exclusion which cannot be bought bank
(c) Yes, but policy wordings had to be reviewed
(d) Probably, provided discussion is had with the broker first

88. Policy document always contain its own specific exceptions. What was the specific
exception in the case above?
(a) Hostilities, war, civil commotion and riots (b) Civil war
(c) Hostilities (d) None of the above

89. What is the cause of the loss?

(a) Air Raid (b) Hostilities (c) Warlike situation (d) Rioters

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90. Insurer did not admit liability because military personnel cannot be held liable
(a) False (b) True
(c) Negligence cannot be proved (d) None of the above

LMTS Company Limited has suffered a major fire loss resulting the damages to stock, plants and
equipment. Although the company has an active fire insurance cover with an insurer at the time of
fire incident, the insured is not very knowledgeable on what to do regarding quantification of loss
aside reporting the loss to the insurer as stipulated by the condition of the policy.
LMTS Company Limited is struggling to quantify the total loss, despite availability of relevant
records showing position of stock prior to the fire incident as well as details of salvage items and
functional assets register.
Aside submission of the fire brigade report, the finance team of LMTS Company Limited were
unable to generate details statement of loss from the various primary data available in the safe
(stock records, invoices. debit notes, delivery notes, requisition notes and others not affected by
the fire damage).
In view of the need to make a sound presentation of claim to the insurer under various sections of
the fire policy covering building, plants, machinery, stock, fixture and fitting including all
outbuilding as well as stock in the open yard within insured's premise, answer the following
questions.
91. Which of these policies will not cover a fire loss?
(a) Standard Fire Policy (b) "All Risk" Insurance
(c) Household Insurance (d) Fidelity Guarantee Insurance

92. Which of these policies will be better to be used to cover fluctuating stock in the companies'
shops?
(a) Standard Fire Policy (b) Stock Declaration Policy
(c) Household Insurance (d) Engineering Insurance

93. Which policy should the company use to cover loss of profit?
(a) Computer Insurance (b) "All Risk" Insurance
(c) Business Interruption Insurance (d) Fidelity Guarantee Insurance

94 The principle that enables LMTS company Limited to buy fire insurance is ...
(a) indemnity (b) insurance interest
(c) contribution (d) proximate cause

95. If it was discovered that the cause of loss was a third party, which insurance principle
applies to this scenario?
(a) Contribution (b) Subrogation
(c) Indemnity (d) Insurable interest

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Blackson Company Limited incepted a money insurance policy with an insurer with annual
premium paid in line the NAICOM guideline on premium remittance and cover issuance and
receipt of the premium was acknowledged by the insurer vide issuance of relevant policy
document. The money insurance policy following sections indicated in the table below:
Limit Anyone Incident Annual Aggregate
S/N Description
(₦) (₦)
1 Cash in Transit from office to bank
1,000,000.00 10,000,000.00
and vice versa
2 Cash in safe 2,000,000.00
3 Cash in custody of Chief
500,000.00
Accountant

Assuming compliance with terms and conditions the money policy by Blackson Company Limited
and policy excess of N200,000.00 or 10% - whichever is higher of every claim.

During the claim processing, it was discovered that the police report indicated active collaboration
between Chairman of Blackson Company Limited and a terrorist group. It was confirmed by the
police that the robbery of cash in transit was “stage managed” to look real, and that it was a
deliberate arrangement between the Chairman and the terrorist gang to transfer the cash in transit
to the terrorist as confirmed during the Police investigation as stated in the report.
96. With your appointment to adjust the claim of Blackson Company, what will be your
recommendation to the insurer regarding Blackson Company Limited claim for loss of
company’s cash of N10,000,000.00 in transit, whilst on the way to bank to make
lodgement?
(a) Recommend payment of N19,000,000.0
(b) Recommend payment of N800,000.00
(c) Flag the need to comply with Anti-Money Laundering/Combating Financing
Terrorism Activities Laws
(d) Recommend payment of N1,000,000.00

97. Money insurance is an example of ... insurance.

(a) General (b) “all risk” (c) extra peril (d) life

98. In the event of a loss of N1,000,000.00 only under the heading of cash-in-custody of the
Chief Accountant, how much will the policy pay
(a) N300,000.00 (b) N500,000 .00
(c) N800,000.00 (d) N1,000,000.00

99. In the event of a loss of N1,000,000.00 which of the excess should be used?
(a) N200,000.00 (b) 10% of the loss
(c) N200,000 & 10% (d) None of the above

100. The insured reported an aggregate loss of N6,000,000 in that year. How much will the
insurer be liable in gross amount terms?
(a) N1,000,000.00 (b) N2,000,000.00
(c) N6,000,000.00 (d) N10,000,000.00

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Chief Examiner’s Comments
The total number of candidates that registered for the examination was low.

Comments on Overall Performance

Very good performance.

Suggestion(s) on Improvements (if any):

There is need to market this course to increase entries by candidates.

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 PF02 – LOSS ADJUSTING PRACTICE
1 B 21 C 41 C 61 T 81 T
2 C 22 B 42 B 62 F 82 T
3 D 23 B 43 C 63 F 83 F
4 A 24 A 44 C 64 F 84 T
5 B 25 A 45 C 65 T 85 F
6 B 26 C 46 A 66 T 86 B
7 C 27 C 47 B 67 F 87 B
8 B 28 D 48 D 68 T 88 C
9 C 29 A 49 D 69 T 89 B
10 D 30 B 50 D 70 T 90 A
11 C 31 D 51 C 71 T 91 D
12 A 32 C 52 B 72 T 92 B
13 C 33 C 53 A 73 F 93 C
14 C 34 D 54 D 74 F 94 B
15 A 35 D 55 D 75 T 95 B
16 D 36 D 56 C 76 T 96 D
17 D 37 C 57 D 77 F 97 B
18 A 38 B 58 B 78 F 98 A
19 C 39 B 59 A 79 T 99 A
20 A 40 D 60 C 80 T 100 C

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 LOGO

CHARTERED INSURANCE INSTITUTE OF NIGERIA

POST AIIN - INTERMEDIATE

OCTOBER 2023 DIET EXAMINATION PAPER

SUBJECT PI02

PI02 – LOSS ADJUSTING PRACTICE

All answers are to be written on the answer booklet(s) supplied in accordance

with the following instructions:
• Three hours are allowed for this paper.
• Fill in the information requested on the answer booklet and on form B.
• Handle the answer booklet with care.

• Do not write on the question paper.

• The answer booklet should be handed over personally by you to the
invigilator before you leave the Examination Hall.
• Insert your candidate’s number as given on your admission permit and any
other particulars required on the cover and flap of the answer booklet.
• Ensure that you write the full and correct candidate’s number.
• No name should be written on any leaf of the book, or on any
supplementary leaves that may be issued to the candidates.
• The answer to each question must be commenced on a separate page.
Where however, a question consists of two of more parts, this instruction do
not apply to the separate parts.
• Write in the ruled margin the number and question attempted.
• Leave no blank pages among your answers.
• Where supplementary leaves are used, the candidate’s number should be
written in the space provided on them and fastened at the end of the book
inside the cover.
FAILURE TO ADHERE TO INSTRUCTIONS (WRITTEN AND VERBAL)
WILL ATTRACT STATED SANCTIONS AS STATED IN THE OCTOBER
2023 DIET CANDIDATES’ INSTRUCTIONS.
Page 18 of 32
 CHARTERED INSURANCE INSTITUTE OF NIGERIA

PI02 – LOSS ADJUSTING PRACTICE

INSTRUCTIONS TO CANDIDATES

Three hours are allowed for this paper.

You should answer all questions in Part I and two (2) out of the four (4) questions
in Part II.

The paper carries a total of 200 marks distributed as follows:

Part I - 140 marks.
Part II - 60 marks.

You are advised to spend not more than two (2) hours on Part I. You are strongly
advised to attempt ALL the required questions to score maximum possible marks.

Where a question is split into parts (a), (b), e.t.c., marks for each part are only
shown if they are split unevenly between the parts and you should spend your
time in accordance with the allocation.

In attempting the questions, you may find it helpful in some places to make rough
notes in the answer booklet. If you do this, you must cross through these notes
before you hand in the booklet.

It is important to show each step in any calculation, even if you have used a
calculator.

Answer each question on a new page. If a question has more than one part leave
several lines blank after each part.

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Chief Examiner’s Comments:
Question 1
The question tested candidates’ knowledge of NAICOM’s guideline on claims process. It was well
attempted and pass rate was 80%. Excellent performance by the candidate.

Question 2
The question tested candidates’ knowledge on the purpose of adjuster’s report and the documents
required by loss adjusters to complete valid claims. Good performance by the candidate. Pass rate
was 60%.

Question 3
The question tested candidates’ knowledge on piece of information required in the adjuster preliminary
report. Excellent performance by the candidate. Pass rate was 100%.

Question 4
The question tested candidates’ knowledge on types of dry cargo ships and names of P & I Clubs.
Good performance by the candidate. Pass rate was 60%.

Question 5
The question tested candidates’ knowledge of agreed valued policy and standard documents
required good-in-transit claims. The candidate did not attempt this question.

Question 6
The question tested candidates’ knowledge of various marine insurance terms such as:
displacement tonnage, deadweight tonnage, gross registered tonnage, net registered tonnage, and
maritime mobile service identity. It was a very good performances by the candidate. Pass rate was
90%.

Question 7
The question tested candidates’ knowledge of the significance of market survey to claims
adjustment. Candidate performed badly on the question. Pass rate was 20%.

Question 8
The question tested candidates’ knowledge on the item that the preliminary report should possess
in any marine claims. It was an average performance by the candidate. Pass rate was 50%.

Question 9
The question tested candidates’ knowledge on salvage and business interruption claims
adjustments. It was not well attended by the candidate Pass rate was 30%.

Question 10
The question tested candidates’ knowledge of the contents of facing sheet in the final report of
money insurance as well as the collusion clause in money insurance. The candidate performed
below average. Pass rate was 40%.

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Question 11
The question tested candidates’ knowledge on some memos that attach to standard goods-in-transit
policy. It was an excellent performance by the candidate. Pass rate was 90%.

Question 12
The question tested candidates’ knowledge on the qualities of a post loss report and the sources of
information in the adjuster’s report. It was a below average excellent performance by the candidate.
Pass rate was 40%.

Question 13
The question tested candidates’ knowledge and ability to investigate and adjust a marine in a case
study. It was a below average performance by the candidate. Pass rate was 40%.

Question 14
The question tested candidates’ knowledge of the types of survey vessels. Pass rate was 10%. The
candidate performed badly on this question.

Question 15
The question tested candidates’ knowledge of market survey and types of market survey. It was
not attempted by the candidate.

Question 16
The question tested candidates’ knowledge of safety warranty in money insurance, collusion of
employee clause and how the risk of “hold up” may arise. It was a below average performance by
the candidate. Pass rate was 43%.

Question 17
The question tested candidates’ knowledge on the item that the preliminary report should possess.
The question was not attempted.

Question 18
The question tested candidates’ knowledge of “hired vehicle clause” as well as the classification
of vessel. It was a below average performance by the candidate. Pass rate was 27%.

Comments on Overall Performance

100% pass rate was recorded.

Suggestions on Improvement (if any)

Candidates should endeavor to prepare very well before the examinations.

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 PI02
Part I
Answer ALL questions in Part I.
Each question carries 10 marks.

1. NAICOM requires that every insurance institution must put in place some processes in
relation to the claim process. Enumerate any five (5) of these processes.
Solution
NAICOM requires that that every insurance institution must put in place some processes in
relation to the claim process. These processes are:
• insurance companies must make sure claims settlement procedure are duly put in
place and communicated to the insured;
• setting a timeline in the policy and procedure manual within which to settle all
admitted claims;
• have a fair and transparent claim handling and claim dispute resolution procedure in
place;
• provide claimant information about the status of their claim on a timely manner;
• ensuring that adjuster or assessors are given independence to operate;
• inform claimant about the procedure, formalities and common timeframe for claims
settlement;
• maintain written documentation on all its claim handling process;
• communicate to the insured their duty to notify the claims promptly and disclose all
material fact on the claim and advise on any new development;
• give prompt advise to the client on any requirement in respect of the claim;
• timely and accurate information shall be provided to the policy holder or claimant at
all times.
(2 marks for each correct and completely stated process. Maximum of 5 to be graded. Total: 10 marks)

2. (a) Enumerate any eight (8) vital documents required by a loss adjuster to complete
a valid claims’ report. (8 marks)
(b) What is the main purpose of a loss adjuster’s report? (2 marks)
Solution
(a) The vital documents required by an Adjuster to complete a valid claims’ report are:
• policy document; * police report
• specialist reports (e. g. quantity surveyor’s, engineer’s, doctor’s report, e.t.c.)
• invoice and/or repair estimates; * eye witness oral & written statements;
• letter of instruction; * investigative interviews;
• photographs; * site layout plan;
• media clippings; * completed claim form.
(1 mark for each correctly stated document. Maximum of 8 to be graded. Sub-Total: 8 marks)

(b) The main purpose of a loss adjuster’s report is to elicit all the relevant circumstances, facts,
figures, opinion and advice in respect of a reported claim to insurer. (Sub-Total: 2 marks)
(Grand Total: 10 marks)

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3. List any five (5) piece of information that should be included in an Adjuster’s preliminary
report.
Solution
The pieces of information that should be included in an Adjuster’s preliminary report are:
(i) name & business address of the insurer; (ii) policy number;
(iii) name & business address of the insured; (iv) claim number;
(v) name of insured and insurer; (vi) type of loss;
(vii) date of inspection/survey; (viii) extent of loss;
(ix) recommended/tentative reserve; (x) date of loss.
(2 marks for each correctly stated piece of information. Maximum of 5 to be graded. Total: 10 marks)

4. (a) Enumerate any three (3) types of dry cargo ships. (6 marks)
(b) Approximately 90% of the world’s maritime tonnage is covered by P & I clubs.
Enumerate any four (4) P & I Clubs. (4 marks)
Solution
(a) The different types of dry cargo ships are:
* bulk carriers; * general cargo vessels; * container vessels;
* reefer vessels; * ro-ro vessels
(2 marks for each correctly stated type. Maximum of 3 to be graded. Sub-Total: 6 marks)
Grand-Total: 10 marks

(b) P & I clubs are:

(i) American Steamship Owners Mutual Protection and Indemnity Association,
(Incorporated); (ii) Assurance foreningen Skuld;
(iii) Guard P&I (Bermuda) Limited (iv) The Standard Club Limited;
(v) The Britannia Steam Ship Insurance Association Limited;
(vi) The Japan Ship Owners’ Mutual Protection & Indemnity Association;
(vii) The London Steam-Ship Owners’ Mutual Insurance Association Limited;
(viii) The North of England Protecting & Indemnity Association Limited;
(ix) The Shipowners’ Mutual Protection & Indemnity Association (Luxembourg);
(x) The Steamship Mutual Underwriting Association (Bermuda) Limited;
(xi) Sveriges Ångfartygs Assurans Förening/The Swedish Club;
(xii) United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited
(xiii) The West of England Ship Owners Mutual Insurance Association (Luxembourg).
(1 mark for each correctly stated club. Maximum of 4 to be graded. Sub-Total: 4 marks)
Grand-Total: 10 marks

5. (a) Briefly describe the term “agreed valued policy”. (4 marks)

(b) Enumerate any six (6) standard document required from the insured for a goods-in-
transit claim. (6 marks)
Solution
(a) Agreed Value Policy is an agreement between the insurer and the insured that the sum
insured has been agreed as the true value of the property and in event of a claim, the property
would be assumed to be that value. (4 marks)

(b) The standard documents required from the insured for a goods-in-transit claim are:
* duly completed goods-in transit claim form; * detailed statement of claim;

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 * incident report/eye witness statement; * police report;
* delivery waybill; * particulars of carrying;
* cost analysis/price evidence/purchase receipt; * vehicle and driver.
(1 mark for each correctly stated document. Maximum of 6 to be graded. Sub-Total: 6 marks)
Grand-Total: 10 marks

6. Explain what the following terms connote under marine insurance:

(a) Displacement Tonnage; (b) Deadweight Tonnage (DWT)
(c) Gross Registered Tonnage (GRT) (d) Net Registered Tonnage
(e) Maritime Mobile Service Identity (MMSI).
Solution
(a) Displacement Tonnage: is the weight of water that a ship pushes aside when floating
which is in turn the weight of the ship [and its content fuel inclusive.

(b) Dead Weight Tonnage (DWT): defines the weight a vessel can carry; it is normally used
in the technical vessel documents and classifications.

(c) Gross Registered Tonnage (GRT): is the volume of Space within the hull and enclosed
space above the deck of a merchant ship which are available for cargo, stores, fuel, passenger and
crew.

(d) Net Registered Tonnage (NRT): is a ship’s cargo volume expressed in “register tons”,
one of which equals to a volume of 100 cubic feet.

(e) Maritime Mobile Service Identity (MMSI): is a nine-digit number that uniquely
identifies ship stations, ship earth stations, coast stations, coast earth stations and group calls.
(2 marks for each correct and completely stated explanation. Total: 10 marks)

7. Enumerate any four (4) significance of market survey to the claim adjustment.
Solution
The significances of market survey to the claim adjustment are:
(i) allows for a balanced pool of pricing sources;
(ii) allows comparative analysis;
(iii) is the process of researching on the price of items submitted by the insured to make good
the loss;
(iv) market survey must take into consideration the quality of items being claimed and the
initial market environment. This will enable the adjuster adopt a reasonable price that will
adequately indemnify the insured;
(v) sources of market prices adopted would be quoted in the report for the sake of clarity and
verification if needed.
(vi) the information gathered during the market survey would be stated in full with copies of
invoices obtained attached (where possible) so as to support the Loss Adjuster’s findings.
(2½ marks for each correct and completely stated significance. Maximum of 4 to be graded. Total: 10
marks)

8. Concisely enumerate any ten (10) item that the preliminary report on any valid marine
claim should address.
Solution

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The preliminary report on any valid marine claim should address the following:
*policy coverage; * the business; * mode of packaging;
* circumstances; * damage/cause; * investigations;
* third parties and/or bailees or parties responsible for the loss * claim;
* recovery; * policy conditions & liability; * quantum;
* subrogation; * contribution; * reserve
(1 mark for each correctly stated item. Maximum of 10 to be graded. Total: 10 marks)

9. (a) Concisely explain, with two (2) explanations, what the Adjuster should do when
the issue of salvage arises. (4 marks)
(b) Briefly explain, with two (2) complete and correctly stated explanation, the
importance of any three (3) of the following in Business Interruption claims
adjustments.
(i) Annual Turnover; (ii) Standard Turnover;
(iii) Adjustments Clause; (iv) Material Damage Proviso.(6 marks)
Solution
(a) The Adjuster must ensure that the Assured protects the salvage from further damage
pending conclusion of the claim. Details of any realised salvage must be stated. If the salvage has
been retained by the insured and will form part of the adjustment, it is perhaps better to state this
fact before proceeding with the actual adjustment.
(2 marks for each correct and completely stated explanation. Maximum of 2 to be graded. Sub-Total: 4
marks)
(b) (i) Annual Turnover: the money paid or payable to the insured for goods sold and
delivered and for services rendered in the course of the insured’s business and rents receivable.
The turnover during the twelve months immediately before the date of the damage.
(2 marks)
(ii) Standard Turnover: the turnover during that period in the twelve months immediately
before the date of the damage which corresponds with the indemnity period. (2 marks)
(iii) Adjustment Clause: Also known as the “other circumstances clause”. The clause allows
the loss adjuster to consider trends and other circumstances, upturns or downswings what may
have affected the business. These adjustments can be applied to the standard turnover and rate of
gross profit in the interests of providing an indemnity. (2 marks)
(d) Material Damage Proviso: the material damage proviso provides that the business
interruption policy will not come into play unless liability for the material damage has been
admitted by the material damage insurer. (2 marks)
(2 marks for each correct and completely stated explanation. Maximum of 1 to be graded under each term.
Maximum of 3 terms to be graded. Sub-Total: 6 marks)
(Grand Total: 10 marks)

10. (a) Enumerate any six (6) pieces of information that are provided in the phasing
sheet of a final report on money insurance claims. (6 marks)
(b) What does the collusion clause in the money policy stand to address and what is
the remedy? (4 marks)
Solution
(a) The information provided in the phasing sheet of a final report on money insurance claims
are:
(i) Report Number (i.e. either the Loss Adjuster’s Reference Number; or the Claim
Number: (Insurer or Lead Insurers Claim Number);

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 (ii) Policy Number (i.e. Insurer or Lead Insurers Policy Number);
(iii) Report Issued To; (iv) Insured; (v) Cause of Loss;
(vi) Date of Loss; (vii) Period of Cover; (vii) Amount of Claim;
(ix) Amount Adjusted; (x) Scope of Cover/Interest Cover.
(1 mark for each correctly stated information. Maximum of 6 to be graded. Sub-Total: 6 marks

(b) Collusion clause in the money policy stand to address the fact that during the claim
adjustment process, the investigation by the adjuster will reveal if there was any collusion by any
employee. (2 marks) The remedy is that if any collusion is discovered, the claim shall stand to be
voidable. If collusion is traced, then a money insurance claim will fail however a fidelity guarantee
policy, if any, may indemnify for the loss (2 marks). (Grand Sub-Total: 4 marks)
(Grand-Total: 10 marks)
11. Explain the Following Memos attaching to the standard Good-In-Transit.
(a) Brittle / Fragile Article Clause; (b) Declaration Warranty;
(c) Carrying Vehicles Exclusion Clause; (d) Locked Vehicles Clause;
(e) Unattended Vehicles Clause.
Solution
(a) Brittle / Fragile Article Clause: it is a condition of the policy that losses arising from
breakage of brittle articles, containers, china glass, earthenware, picture, scientific instruments,
statuary marble or plasterwork are excluded unless caused by (a) fire (b) theft (c) an accident to
the conveying vehicle or an object falling on to the conveyance. (2 marks)

(b) Declaration Warranty: The Insured shall always contact underwriters before any product
of the insured is carried stating the details below:
(i) The make of the vehicle and or/ whether hired or owned.
(ii) The registration number of the vehicle.
(iii)The place of loading the product.
(iv) The destination of the product.
The company shall not be liable to the Insured in the event of an accident occurring, when the
above particulars have not been furnished to the company. (2 marks)

(c) Carrying Vehicles Exclusion Clause: the Insurance by this policy does not extend to
apply to the carrying vehicles but only to the goods carried in such vehicle. (2 marks)

(d) Locked Vehicles Clause: this policy does not cover loss or damage by theft of pilferage
to the subject matter insured if such loss or damage occurs whilst any or the insured articles are
left in unattended vehicle in any public place or in a vehicle which is laid up or temporarily stored
in any garage or similar premises unless the vehicle shall have been securely locked at all point of
access and unless such loss or damage results from forcible entry into the vehicle.
(2 marks)
(e) Unattended Vehicles Clause: no liability attaches to the Company under this policy while
any vehicle described in the Schedule of the policy is left unattended by the insured's employees,
unless such vehicle is garaged in the insured's enclosed premises which are securely locked with
a watchman in constant attendance. (2 marks)
(Grand Total: 10 marks)

12. (a) The adjuster can be said to be the eyes and ears of the insurer. Enumerate any

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 two (2) qualities which a post loss report should possess to be of use to an insurer.
(4 marks)
(b) Adjusters report must be full of objective contents for amicable settlement of claim.
List any six (6) sources of information that the contents of an adjuster’s report can
be sourced from. (6 marks)
Solution
(a) It is a short, sharp concise document which is written for a particular purpose and audience.
It sets out and analyses a situation or problem with recommendation for future actions. It
is a factual paper and needs to be clear, well-structured and balanced.
(2 marks for each correct and completely stated quality. Maximum of 2 to be graded. Sub-total: 4 marks)

(b) The sources of information that the contents of an adjuster’s report can be sourced from
are:
* letter of instruction; * policy document; * specialist reports
* investigative interviews; * police report; * photographs;
* invoices and repair estimates; * site layout plan; * media clipping;
* valuation documents; * eye witness account.
(1 mark for each correctly stated source. Maximum of 6 to be graded. Sub-Total: 6 marks)
(Grand-Total: 10 marks)

13. You are instructed by XYZ Insurance Company to investigate and adjust a marine cargo
claim. On receipt of the instruction mail, you directed the trainee surveyor to list down
areas of investigative interest. Upon presenting the list, you observed that some essential
requirements of the assignment were missing. List any of the five (5) important areas that
are required to have been included in the write up or survey plan.
Solution
The important areas that are required to have been included in the write up or survey plan are:
(i) exact date of vessel arrival at port;
(ii) date of container discharge from the vessel;
(iii) condition of container when discharged from the vessel;
(iv) date of delivery from port;
(v) condition of container when delivered from the port support with the container
condition report;
(vi) was clean receipt given to bailee/port authority?;
(vii) date containers ware received at consignee’s warehouse;
(viii) what were the condition of container when received at consignee warehouse?;
(ix) documentary evidence of holding the ship/bailee port authority;
(x) copy of marine insurance cover note;
(xi) copies of bill of lading;
(xii) copies of final invoice;
(2 marks for each correct and completely stated area. Maximum of 5 points to be graded. Total: 10
marks)

14. List and explain any five (5) types of vessel surveys.
Solution
The different types of vessel surveys are:

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1. Dry Dock Survey or Intermediate Survey: is an extensive form of an annual survey in
which several other functional operational aspect and maintenance routine of shipboard equipment
is verified.
2. Safety Construction Survey: focuses on the structural strength of the vessel. It would be
accessed for any excessive corrosion of the deck or hall along with the condition of watertight
doors, bilge pumping and drainage system, fire protection equipment, and fixed and portable
firefighting equipment. Condition of steam lines on decks, anchos chains and cables and means of
emergency escape are also checked.
3. Load Line Survey: this is done before the assignment of the load line to the vessel. During
the survey, a vessel structural strength is checked for cracks or deformation in the hull to ensure
that various openings such as hatches, machinery space openings or any other openings on decks
are water tight.
4. Cargo Ship Equipment Survey: pertain to the condition and management of the safety
system on board. Muster list, life jacket donning instructions, survival craft launching instructions
and muster stations are to be updated and posted in required locations. Arrow markings for
emergency muster stations, conditions of lifeboat, its equipment and launching appliances.
5. Five Yearly Dry Dock Surveys: is a thorough inspection and testing as per the guideline
of classification society.
6. Terminal Safety Inspection: a terminal safety manager or representative visits the ship
and ascertain safe operation as per terminal requirement.
7. Port State Inspection: done to confirm that the vessel complies with mandatory rules and
regulation of international convention for safety of lives at sea and prevention of pollution from
ship i.e solas (MARPOL).
(1 mark for correctly stated type. 1 point for explanation. Sub-Total per type: 2 marks. Grand Total: 10
marks)

Part II
Answer two questions in Part II.
Each question carries thirty (30) marks
15. (a) Concisely explain the phrase “market survey”. (3 marks)
(b) State and briefly explain the three (3) different types of market surveys open to a
loss adjuster. (12 marks)
(c) Enumerate and briefly explain three (3) methods that an adjuster might adopt to be
able to report an adjusted claim effectively. (15 marks)
Solution
(a) Market survey is the process of verifying the price of items submitted by the insured in
respect of a lodged claim. (3 marks)

(b) The different types of market surveys open to a loss adjuster are:
(i) Open Market Survey: ascertaining the price of a product or service in open market
by visiting similar dealers and/or service providers;
(ii) Quotation from reputable manufacturers or dealers having supplied them with
specific details o product/service to enable them give a price list;
(iii) Authorised manufacturer’s representative: obtaining a quotation/repair estimate
for an item not readily obtained in the open market other than from an authorised
manufacturer’s representative being the sole dealers in such products/service.

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 (2 marks for each correctly stated type. 2 marks for a correct and completely stated explanation.
Maximum of 1 explanation to be graded. Sub-Total per type: 4 marks. Grand Sub-Total: 12 marks)

(c) The methods that an adjuster might adopt to be able to report an adjusted claim effectively
are:
* incident overview; * claimant’s interview/statement;
* documentary evidence; * physical evidence; and * witness statements.
(Candidates are required to also briefly explain the enumerated method. 3 marks for each correctly
enumerated method. 2 marks for each correct and completely stated explanation under each type. Sub-Total
per type: 5 marks. Grand Sub-Total: 15 marks).
Grand-Total: 30 marks

16. (a) Give a brief explanation of the “safe warranty” in money insurance policies, and
how it is applied in the claim process? (6 marks)
(b) Explain why “collusion by an employee” is an excluded cause under the money
Policy. (6 marks)
(c) Explain the term “hold – up” and two (2) various ways it may arise in a loss
scenario. (18 marks)
Solution
(a) Safe warranty is a warranty that must be strictly complied with; it is fundamental and
material to any claim. The warranty may state that the safe used must not be less than a specified
weight and must be embedded in the in the wall and/or the ground or both. The loss adjuster should
be properly guided in instances where the safe is removed entirely by the robbers.
(3 marks for any correct and completely stated explanation. 3 marks for correct and completely stated
application. Sub-Total: 6 marks)

(b) The loss adjuster’s investigations should reveal if there was any form of collusion by an
employee resulting in the loss of cash to the employer (3 marks). Where a clear case of collusion
by an employee is established, the claim should fail but might be appropriately covered under a
fidelity guarantee policy (3 marks). (6 marks)

(c) The term hold-up can be explained as an attempted or completed robbery carried out with
the use of force. It is common nowadays to come across burglary polices with additional clauses such as
the hold up extension and larceny cover which allows the policy to accommodate theft losses not involving
violence or the threat thereof. The hold up extension to the policy is a clause which considers where the
burglars entered the premises by the threat of violence such as holding a person at gunpoint or with threat
of physical harm, and forcing them to open access to the building or part of building where the theft is to
be committed. Where this clause is endorsed on a burglary policy, the requirement for violent entry and/or
exit is waived. (6 marks)

Some ways that it may arise in a loss scenario are:

(i) where thieves enter into the premises and threaten to assault the insured (perhaps with
a gun or knife) or an employee in an attempt to steal, this will be construed as the use
of violence. If under such threat they are forced to open their door or to open a safe
then there will be no forcible entry and exit. However, the use of threat is a type of
assault. Assault and violence should be considered with the context of the meaning in
law. Assault occurs when one person intentionally or recklessly causes another to be in
fear of immediate and unlawful violence. No contact is required for an assault to be

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 construed. Assault can occur when a person points a weapon at another or acts as if a
weapon will be used or perhaps threatens another with his fist.
(ii) The Hold Up extension to the policy is a clause which considers where the burglars entered the
premises by the threat of violence such as holding a person at gunpoint or with threat of physical
harm, and forcing them to open access to the building or part of building where the theft is to
be committed. Where this clause is endorsed on a burglary policy, the requirement for violent
entry and/or exit is waived.

(3 marks for each correct and completely stated explanation. Maximum of 2 to be graded under each
description. Sub-total per description: 6 marks. Grand Sub-Total: 12 marks)
(Grand sub-Total: 18 marks)
(Grand Total: 34 marks)

17. (a) Concisely state any three (3) provisions of the “hired vehicles clause” and
explain its importance. (18 marks)

(b) Classification is essential to the structural and engineering design of a vessel.

Discuss with four (4) explicit thought lines. (16 marks)
Solution
(a) The provisions of the “hired vehicles clause” are:
The insured;
• shall enter into a written agreement with the carrier whereby the latter accepts liability for
loss or damage to the goods whilst in their/his custody;
• shall be in a position to identify and present the owner and driver of the carrying vehicle;
• shall obtain identification particulars of the vehicle and the driver;
• it is warranted that the cover granted by this policy is a floating cover and the insured must
notify the insurers the value of any carrying prior to the time that they would make any
carrying.
(4 marks for each correctly stated point. Maximum of 3 points to be graded. Sub-Total: 12 marks)

The importance of this clause is to ensure that the insurer exercises its subrogation rights (2 marks)
for the recovery of their outlay on the claim (2 marks) where the loss /damaged was occasioned as
a result of the omission/commission on the part haulage contractor and/or his agents (2 marks).
(6 marks)
(Sub-Total: 18 marks)

(b) Classification is essential to the structural and engineering design, construction and
operation of ships and affects shipbuilding, maintenance and repair, shipbroking, chartering,
insurance, e.t.c. The certificate issued is an imperative document which confirms that the ship has
been built as per the classification society’s standards and that she adheres to the level of the quality
associated with such society. Classification societies are non-governmental organisations that
define and maintain construction and operation standards for ships and offshore structures. To
maintain its class while in service, a ship must be surveyed annually, with a major survey every 5
years. These surveys get stricter as the ship gets older. Failure to adhere to the quality standards of
the classification societies renders the certificate liable to be invalid. Valid classification
certificates are important to the loss adjuster as it is usually a condition precedent to liability that
a vessel must be in class – which means that its certificate must be valid.

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 (4 marks for each correct and completely stated explanation. Maximum of 4 to be graded. Sub-Total: 16
marks)
Grand-Total: 30 marks

18. (a) Explain, with three (3) sentences what happens if there are more than one policy
covering the interest in the property insured. (9 marks)
(b) When one of the policies is subject to average, what is the method to be used in the
loss calculation? What does this method consider? (7 marks)
(c) Calculate the liability of policy A and policy B given that:
Policy A has a sum insured of N1,000,000.00 on stock.
Policy B has sum insured of N2,000,000.00 on stock, fixtures and fittings.
Actual value of stock at risk is N1,600,000.00.
Loss sustained is N600,000.00.
Both policies are subject to average. (14 marks)
Solution
(a) If there are more than one policy covering the interest in the property insured,
contribution will be brought into operation. Dual insurance cover does arise occasionally.
Examples are where one policy covers stock and another covers stock and machinery or where
one policy covers stock in a particular warehouse and another covers stock in all warehouses
nationwide. Where this occurs, any insurer making a payment under the policy will still recover
an appropriate proportion from the other even if the policy does not make a provision for
contribution. The right of contribution is derived from equity, not subrogation. For contribution
to arise, the following factors must exist;
(i) The damaged property must be identified and covered in both policies.
(ii) The loss or damage must be caused by the contingency against which the policy provides
cover
(iii) Both policies must insure the same interest i.e. insurable interest of the same insured.
(iv) The policies in question must be in force at the time of the loss.
(3 marks for each complete and correctly stated explanation. Maximum of 3 explanations to be graded. Sub-
Total: 9 marks)

(b) When one of the policies is subject to average, the method to be used in the loss calculation
is the Independent Liability Method (3 marks) which considers the limit of liability under
the policy (2 marks) (for the concurrent interest only) (2 marks).
(Sub-Total: 7 marks)

(c) Independent liability of Policy A

= Sum Insured x Loss Sustained (2 marks)
Value at Risk
= N1,000,000.00 x N600,000.0 (2 marks)
N1,600,000.00
= N375,000.00. (1 mark)
Policy B will also have an independent liability of N600,000.00 because average will not apply.
(2 marks)

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The total liabilities under both policies = N375,000.00 + N600,000.00 = N975,000.00. (2 marks)

The calculation of payment will thus be based on their respective independent liabilities thus;
Policy A’s Liability will be:
= N375,000.00 x N600,000.00 = (2 marks)
N975,000.00
= N230,000.00 (1 mark)

Policy B’s Liability will be:

= N600,000.00 x N600,000.00 (1 mark)
N975,000.00
= N360,230.00 (1 mark)
(Sub-Total: 14 marks)
Grand-Total: 30 marks

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