CA Insurance Policies & Regulations 2 — Questions and Answers
Question 1: Under California Insurance Code, what is the maximum number of days an insurer has to acknowledge receipt of a first-party property damage claim?
- 10 days (Correct answer)
- 15 days
- 30 days
- 45 days
Correct answer: 10 days
California Insurance Code Section 790.03 requires insurers to acknowledge receipt of a claim within 10 working days.
Question 2: Which California regulation governs unfair claims settlement practices by insurers?
- California Code of Regulations Title 10, Chapter 5, Subchapter 7.5 (Correct answer)
- California Insurance Code Section 533
- California Civil Code Section 3294
- California Business and Professions Code Section 17200
Correct answer: California Code of Regulations Title 10, Chapter 5, Subchapter 7.5
CCR Title 10, Chapter 5, Subchapter 7.5 (Fair Claims Settlement Practices Regulations) sets specific standards for claims handling in California.
Question 3: A homeowner's policy excludes 'earth movement.' A sinkhole causes foundation damage. How should a California adjuster treat this claim?
- Deny based on the earth movement exclusion
- Pay only if the sinkhole was caused by a third party
- Investigate whether a covered peril triggered the sinkhole before applying the exclusion (Correct answer)
- Automatically refer to the California Earthquake Authority
Correct answer: Investigate whether a covered peril triggered the sinkhole before applying the exclusion
California adjusters must investigate whether a covered peril (e.g., burst pipe) initiated the earth movement before applying the exclusion under concurrent causation rules.
Question 4: What does the California Insurance Code require regarding written acceptance or denial of a claim after proof of loss is submitted?
- Within 15 working days
- Within 40 calendar days (Correct answer)
- Within 30 calendar days
- Within 60 calendar days
Correct answer: Within 40 calendar days
California insurers must accept or deny a claim within 40 calendar days after receiving proof of loss under the Fair Claims Settlement Practices Regulations.
Question 5: Which of the following best describes a 'reservation of rights' letter in California claims handling?
- A document waiving the insurer's right to deny coverage
- A notice that the insurer is investigating coverage while continuing to defend or adjust without waiving coverage defenses (Correct answer)
- A demand letter sent by the claimant's attorney
- A policy endorsement limiting insurer liability
Correct answer: A notice that the insurer is investigating coverage while continuing to defend or adjust without waiving coverage defenses
A reservation of rights letter protects the insurer's ability to deny coverage later while it investigates, preventing waiver or estoppel.
Question 6: Under California law, when must an insurer provide a written settlement offer for a first-party claim?
- Within 15 working days of accepting liability (Correct answer)
- Within 30 calendar days of accepting liability
- Within 40 calendar days of proof of loss
- Within 60 calendar days of the claim date
Correct answer: Within 15 working days of accepting liability
California regulations require a written settlement offer within 15 working days after liability has been accepted by the insurer.
Question 7: A California auto policy has a $500 deductible for collision. The insured's vehicle sustains $450 in damage. What is the proper claims handling outcome?
- Pay $450 and waive the deductible as a goodwill gesture
- Deny the claim because damages are below the deductible
- Pay $0 since damage does not exceed the deductible (Correct answer)
- Refer the claim to arbitration
Correct answer: Pay $0 since damage does not exceed the deductible
When damages do not exceed the applicable deductible, the insurer owes nothing — the insured bears the full loss up to the deductible amount.
CA Insurance Policies & Regulations 2
Under California Insurance Code, what is the maximum number of days an insurer has to acknowledge receipt of a first-party property damage claim?