Negotiation and Settlement Flashcards

An insured has a $1,000 deductible. A third party's vehicle sustained $3,500 in damage. The insured is 100% at fault. How much does the insured's liability insurer pay the third party?

Answer: $3,500 — deductibles do not apply to liability payments

Deductibles apply to first-party (collision/comprehensive) claims only; liability coverage pays the full amount of a third-party's covered damages without a deductible offset.

What is 'subrogation' and how does it affect the settlement process?

Answer: It gives the insurer the right to recover payments made to its insured from a negligent third party

Subrogation allows the paying insurer to step into the insured's shoes and recover from the negligent party what it paid the insured, preventing the insured from collecting a double recovery.

During a multi-party accident negotiation, one claimant settles but another does not. What document protects the insurer when settling with just one claimant?

Answer: A partial release or individual release with specific language protecting the insurer's rights as to non-settling claimants

A partial or individual release allows the insurer to settle with one claimant while preserving rights regarding other claimants from the same accident.

A claimant demands payment for 'loss of use' while their vehicle is being repaired. What does this typically cover?

Answer: Rental car expenses or the daily value of being without the vehicle during covered repairs

Loss of use compensates the claimant for transportation expenses, typically rental costs, incurred while their vehicle is being repaired due to a covered loss.

What is the significance of a 'Mary Carter agreement' in the context of multi-defendant litigation?

Answer: A secret settlement agreement between a plaintiff and one defendant that keeps the settling defendant in the suit

A Mary Carter agreement allows one defendant to secretly settle with the plaintiff while remaining at trial, which can create strategic and ethical issues for remaining defendants.

If a claimant signs a release and later discovers additional injuries, can they typically re-open the claim?

Answer: Generally no, because a properly executed release extinguishes all claims, known and unknown, unless fraud or mistake is proven

A signed release is generally a final resolution of all claims from an incident; re-opening a claim is only possible in cases of fraud, mutual mistake, or when specifically excluded injuries are later discovered.

An adjuster uses 'anchoring' during negotiations. What does this technique involve?

Answer: Presenting an initial offer or number first to influence the reference point for the entire negotiation

Anchoring establishes a reference point early in the negotiation by presenting an initial number, which psychologically influences subsequent counteroffers.