AIC AIC Litigation & Legal Proceedings

Question 1

What is the primary purpose of a reservation of rights letter in claims litigation?

Accepted Answer

To notify the insured that coverage may not apply while the insurer continues to investigate

Answer

To deny the claim outright

Answer

To settle the claim quickly

Answer

To request additional medical records

Question 2

In the context of claims litigation, what does 'subrogation' allow an insurer to do?

Accepted Answer

Pursue recovery from a negligent third party after paying a claim

Answer

Deny a claim based on fraud

Answer

Increase the insured's deductible

Answer

Assign the claim to another insurer

Question 3

What is the 'duty to defend' as it applies to liability insurance claims?

Accepted Answer

The insurer's obligation to provide a legal defense for covered claims even if the claim may be groundless

Answer

The insured's obligation to cooperate with the insurer

Answer

The insurer's right to settle without insured consent

Answer

The duty to report all claims within 24 hours

Question 4

During litigation, what is the purpose of an Examination Under Oath (EUO)?

Accepted Answer

To allow the insurer to formally question the insured about the claim under oath

Answer

To finalize settlement terms

Answer

To assign liability to a third party

Answer

To conduct a physical inspection of damaged property

Question 5

What does 'bad faith' mean in the context of insurance claims handling?

Accepted Answer

An insurer's unreasonable denial or delay of a valid claim without a legitimate basis

Answer

Filing a fraudulent claim

Answer

An insured's failure to cooperate

Answer

A claimant's exaggeration of damages

Question 6

What is an 'excess judgment' in insurance litigation?

Accepted Answer

A court verdict that exceeds the insured's policy limits

Answer

A judgment awarded only for punitive damages

Answer

The amount the insured must pay before coverage applies

Answer

A judgment against a third-party claimant