CAADE Insurance and Legal Procedures 4 — Questions and Answers
Question 1: An appraiser discovers a vehicle was previously declared a total loss and rebuilt. This history must be disclosed because it affects:
- Actual cash value and insurability (Correct answer)
- Only the collision deductible amount
- The at-fault party's liability limits
- The insurer's loss reserves only
Correct answer: Actual cash value and insurability
A salvage or rebuilt title history significantly reduces ACV and may limit available coverage options, making disclosure legally and ethically required.
Question 2: Which insurance coverage specifically protects the insured when the at-fault driver has no auto liability insurance?
- Uninsured motorist coverage (UM) (Correct answer)
- MedPay coverage
- Gap insurance
- Personal injury protection (PIP)
Correct answer: Uninsured motorist coverage (UM)
Uninsured motorist coverage compensates the insured for bodily injury and sometimes property damage caused by a driver who carries no liability insurance.
Question 3: A repair facility submits a supplemental estimate after disassembly reveals additional hidden damage. The insurer's obligation is to:
- Evaluate the supplement and pay for covered legitimate damage (Correct answer)
- Deny it because the original estimate was already agreed upon
- Require the insured to pay the supplement out-of-pocket
- Only cover supplements filed within 24 hours of teardown
Correct answer: Evaluate the supplement and pay for covered legitimate damage
Insurers are obligated to cover all legitimate repair costs for covered damages, including supplements for hidden damage discovered after disassembly.
Question 4: In states with no-fault insurance laws, a driver injured in an accident must first seek compensation from:
- Their own insurer's Personal Injury Protection (PIP) coverage (Correct answer)
- The at-fault driver's liability policy
- Workers' compensation
- The state motor vehicle fund
Correct answer: Their own insurer's Personal Injury Protection (PIP) coverage
No-fault states require each driver's own PIP coverage to pay for their medical expenses and lost wages regardless of who caused the accident.
Question 5: A public adjuster working on behalf of a policyholder is legally prohibited from:
- Contracting with repair facilities to receive referral fees (Correct answer)
- Reviewing the insured's policy documents
- Negotiating settlement amounts with the insurer
- Filing a supplemental claim
Correct answer: Contracting with repair facilities to receive referral fees
Accepting referral or steering fees from repair facilities creates a conflict of interest and violates public adjuster licensing laws in most states.
Question 6: When an insurer denies a claim in bad faith, the insured may be entitled to:
- Extracontractual damages beyond the policy limits (Correct answer)
- Only the original policy benefit amount
- A refund of all premiums paid
- A replacement policy at no cost
Correct answer: Extracontractual damages beyond the policy limits
Bad faith claim denials can expose the insurer to extracontractual damages, including punitive damages and attorney fees, beyond the policy limits.
Question 7: The primary purpose of an anti-fraud provision in an auto insurance policy is to:
- Void coverage when the insured materially misrepresents facts related to a claim (Correct answer)
- Allow the insurer to increase premiums after any claim
- Limit the insured's right to hire an attorney
- Require the insured to use insurer-approved repair shops
Correct answer: Void coverage when the insured materially misrepresents facts related to a claim
Material misrepresentation or fraud in connection with a claim voids coverage under the anti-fraud provision and may expose the insured to criminal liability.
CAADE Insurance and Legal Procedures 4
An appraiser discovers a vehicle was previously declared a total loss and rebuilt.
This history must be disclosed because it affects: