Insurance and Legal Procedures Flashcards
7 cards from real CAADE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Insurance and Legal Procedures flashcards as text
Under which legal doctrine can an insurer who pays a claim then pursue the at-fault third party for reimbursement?
Answer: Subrogation
Subrogation allows the insurer to step into the insured's legal shoes and recover paid claim amounts from the responsible third party.
A vehicle owner disputes the insurer's total loss valuation. The most common contractual mechanism to resolve this without litigation is:
Answer: Appraisal clause invocation
Most auto policies include an appraisal clause that allows both parties to hire independent appraisers whose umpire decision is binding.
Which federal law requires insurers to provide written explanations when denying or partially paying auto insurance claims?
Answer: Unfair Claims Settlement Practices Act
The Unfair Claims Settlement Practices Act (UCSPA) mandates that insurers communicate claim decisions in writing with clear explanations.
When a claimant signs a release of liability in exchange for a settlement check, this document is legally known as:
Answer: A full and final release
A full and final release extinguishes all claims related to the loss once the claimant accepts the settlement payment.
An insurer issues a 'reservation of rights' letter when:
Answer: It is investigating a claim where coverage may not apply
A reservation of rights letter notifies the insured that the insurer is handling the claim while preserving its right to deny coverage if a policy exclusion applies.
Which valuation method for total loss settlement is most commonly required by state regulations in the United States?
Answer: Actual Cash Value (ACV)
Most state regulations mandate that total loss settlements be based on Actual Cash Value, which accounts for depreciation from the vehicle's replacement cost.
A lienholder listed on an auto insurance policy has a legal right to:
Answer: Receive payment up to the outstanding loan balance in a total loss settlement
A lienholder has a secured interest in the vehicle and is entitled to claim proceeds up to the loan balance owed before the vehicle owner receives remaining funds.