Professional Standards & Ethics Flashcards

In a third-party liability claim, an insurer refuses a reasonable settlement offer within policy limits, and a verdict exceeds the limits. The insurer may face:

Answer: Liability for the excess verdict due to bad-faith failure to settle

Unreasonable refusal to settle within limits can make the insurer liable for the full excess judgment.

An adjuster receives a claimant's medical records. Which use of that information is appropriate?

Answer: Using them only for evaluating the claim and protecting them per privacy rules

Personal and health information obtained in a claim must be used only for legitimate claim purposes and kept confidential.

Which situation is most likely to violate state anti-discrimination rules in claim handling?

Answer: Varying settlement offers based on the claimant's ZIP code demographics rather than loss facts

Settlement decisions must rest on facts of the loss, not on protected characteristics or proxies for them.

An insured disputes the amount of a property loss but agrees coverage applies. Which policy provision typically allows the dispute to be resolved?

Answer: Appraisal provision

The appraisal provision resolves disputes over the amount of loss using appraisers and an umpire.

What is the primary ethical purpose of sending a reservation of rights letter?

Answer: To notify the insured of potential coverage issues while the insurer continues investigating

A reservation of rights gives timely, honest notice of coverage concerns while preserving both parties' positions.

An adjuster who is licensed only in Ohio is asked to handle a catastrophe claim in Florida. What should occur first?

Answer: Obtain a Florida emergency or nonresident adjuster license as required

Adjusters must hold a valid license in the state where the loss occurs, often via emergency or nonresident licensing.

Which communication practice best reflects professional standards when a claim decision is delayed?

Answer: Proactively update the insured in writing with the reason for delay and what is still needed

Many states require written status updates explaining delays, and prompt communication reflects good faith.