Arizona Adjuster Practice Exam

Why was Edie's claim denied by the insurance company?

1. Edie filed the claim late

2. Edie doesn't have insurable interest in the car

3. The policy was expired

4. The car was leased

The correct answer is: Edie doesn't have insurable interest in the car

The reason for the denial of Edie's claim stems from the concept of "insurable interest." This principle requires that the policyholder has a tangible stake in the insured item, meaning they would suffer a financial loss if that item were damaged or lost. In this scenario, if Edie does not have an insurable interest in the car, the insurance company is justified in denying the claim. When someone leases a car, they typically do not own it; instead, they have a contractual agreement with the leasing company. Since the leasing company retains ownership of the vehicle, Edie would not have a legitimate financial interest in the car to warrant a claim. This lack of insurable interest is a valid basis for the insurance company to deny coverage because they fundamentally require policyholders to have a vested interest in the property they insure. In contrast, other potential reasons for denial, such as filing a late claim, having an expired policy, or the car being leased, may not directly relate to the fundamental structure of insurable interest, thereby making them less applicable in this instance.