CA Negotiation & Settlement Processes 2 — Questions and Answers
Question 1: When a claimant rejects an initial settlement offer, what is the adjuster's best next step?
- Close the file immediately
- Request a detailed explanation of the claimant's valuation (Correct answer)
- Increase the offer by 50% without further review
- Transfer the claim to litigation immediately
Correct answer: Request a detailed explanation of the claimant's valuation
Understanding the claimant's basis for rejection allows the adjuster to identify gaps and craft a more targeted counteroffer.
Question 2: What does 'bracketing' mean in the context of insurance claim negotiation?
- Limiting the time allowed for negotiation
- Setting high and low anchor points to guide settlement toward a midpoint (Correct answer)
- Grouping multiple claims together for bulk settlement
- Placing a legal hold on settlement funds
Correct answer: Setting high and low anchor points to guide settlement toward a midpoint
Bracketing involves offering a range where both parties' positions overlap, steering the negotiation toward a mutually acceptable midpoint.
Question 3: A claimant's attorney sends a demand letter with a 30-day deadline. What should the adjuster do first?
- Ignore the deadline and wait for litigation
- Log the deadline, review coverage, and begin evaluation immediately (Correct answer)
- Auto-tender policy limits to avoid exposure
- Deny the claim due to attorney involvement
Correct answer: Log the deadline, review coverage, and begin evaluation immediately
Timely response to demand letters is critical to avoid bad faith exposure; the adjuster must log the deadline and begin substantive review.
Question 4: Which negotiation technique involves the adjuster deliberately pausing after presenting an offer?
- Silence as leverage (Correct answer)
- Hard bargaining
- Anchoring
- Logrolling
Correct answer: Silence as leverage
Silence after an offer creates psychological pressure on the other party to fill the void, often prompting concessions.
Question 5: What is a 'Mary Carter agreement' in the context of multi-defendant claims?
- A settlement where one defendant secretly pays the plaintiff while remaining a nominal defendant (Correct answer)
- A court-ordered mandatory mediation process
- An agreement to split liability equally among all defendants
- A structured settlement paid in installments
Correct answer: A settlement where one defendant secretly pays the plaintiff while remaining a nominal defendant
A Mary Carter agreement allows one defendant to settle privately while appearing to remain in litigation, which can affect the dynamics of the remaining case.
Question 6: When is it appropriate to invoke a 'reservation of rights' letter during settlement negotiations?
- Only after a jury verdict
- When coverage questions exist but the insurer is still investigating (Correct answer)
- When the claimant is represented by an attorney
- Only when the policy limits are exceeded
Correct answer: When coverage questions exist but the insurer is still investigating
A reservation of rights letter protects the insurer's ability to deny coverage later while still allowing the investigation and negotiation to proceed.
Question 7: What is the purpose of a 'high-low agreement' in litigation-phase settlements?
- To set maximum attorney fees
- To guarantee a minimum recovery for the plaintiff and cap the defendant's exposure regardless of verdict (Correct answer)
- To rank the severity of injuries on a scale
- To set the timeline for discovery
Correct answer: To guarantee a minimum recovery for the plaintiff and cap the defendant's exposure regardless of verdict
A high-low agreement caps the insurer's maximum payout and guarantees the claimant a minimum amount, reducing risk for both parties.
CA Negotiation & Settlement Processes 2
When a claimant rejects an initial settlement offer, what is the adjuster's best next step?