CA Ethical & Legal Compliance 3 — Questions and Answers
Question 1: A California adjuster is handling a workers' compensation claim and realizes the employer is pressuring the injured worker to return early. The adjuster should:
- Side with the employer to expedite the claim closure
- Remain neutral and ensure the claim is handled according to state law (Correct answer)
- Advise the employee to consult an attorney immediately
- Report the employer to OSHA without further investigation
Correct answer: Remain neutral and ensure the claim is handled according to state law
Adjusters must remain impartial and follow applicable state workers' compensation statutes regardless of employer pressure.
Question 2: Which act specifically governs how insurers must handle claims in most US states by prohibiting deceptive practices?
- Fair Credit Reporting Act
- Unfair Claims Settlement Practices Act (Correct answer)
- Gramm-Leach-Bliley Act
- Employee Retirement Income Security Act
Correct answer: Unfair Claims Settlement Practices Act
The UCSPA, adopted in various forms by most states, establishes minimum standards for fair and timely claims handling.
Question 3: When an adjuster settles a claim knowing the claimant lacks legal representation, the adjuster must:
- Take advantage of the situation to minimize the payout
- Inform the claimant they should obtain counsel before settling (Correct answer)
- Advise the claimant on legal strategy
- Proceed faster since no attorney review is needed
Correct answer: Inform the claimant they should obtain counsel before settling
Good faith requires informing unrepresented claimants that they may seek legal counsel, though adjusters cannot provide legal advice.
Question 4: An adjuster who intentionally lowballs a settlement offer knowing it is below the actual claim value may be liable for:
- Comparative negligence
- Bad faith claims handling (Correct answer)
- Professional indemnity exclusion
- Subrogation waiver
Correct answer: Bad faith claims handling
Intentionally undervaluing a claim is a classic example of bad faith, which can expose the insurer to extra-contractual damages.
Question 5: Which type of adjuster is licensed by the state and works independently for multiple insurers on a fee basis?
- Staff adjuster
- Independent adjuster (Correct answer)
- Public adjuster
- Desk adjuster
Correct answer: Independent adjuster
Independent adjusters are contracted by insurers on a per-claim basis and must hold a state adjuster license.
Question 6: The ethical concept requiring adjusters to fully investigate all aspects of a claim before making a coverage decision is known as:
- Prompt payment doctrine
- Thorough and fair investigation (Correct answer)
- Reservation of rights
- Estoppel by waiver
Correct answer: Thorough and fair investigation
A thorough and fair investigation ensures coverage decisions are based on complete facts rather than assumptions or shortcuts.
Question 7: If an adjuster suspects a claimant is exaggerating injuries, the most appropriate first step is to:
- Immediately deny the claim
- Conduct a thorough investigation including medical review and surveillance if warranted (Correct answer)
- Confront the claimant directly during the recorded statement
- Refer the claim to an attorney without further investigation
Correct answer: Conduct a thorough investigation including medical review and surveillance if warranted
Suspicion of fraud must be investigated objectively before any denial, using proper investigative tools and documentation.
CA Ethical & Legal Compliance 3
A California adjuster is handling a workers' compensation claim and realizes the employer is pressuring the injured worker to return early.
The adjuster should: