CAIA Legal & Ethical Considerations in Insurance Adjusting 5 — Questions and Answers
Question 1: An adjuster is asked by a supervisor to alter claim notes to reduce the reserve amount before a quarterly audit. The adjuster should:
- Comply because supervisors have authority over reserves
- Refuse and report the request to the compliance or ethics hotline (Correct answer)
- Alter the notes but document the supervisor's request privately
- Request a transfer to another department
Correct answer: Refuse and report the request to the compliance or ethics hotline
Altering claim records fraudulently is illegal and unethical; the adjuster must refuse and report the misconduct through proper channels.
Question 2: In a subrogation action, the insurer steps into the shoes of the insured to pursue which party?
- The insured's own policy
- The negligent third party responsible for the loss (Correct answer)
- The state insurance guaranty fund
- The reinsurer
Correct answer: The negligent third party responsible for the loss
Subrogation allows the insurer, after paying the insured's claim, to recover from the at-fault third party who caused the loss.
Question 3: An adjuster learns that a claimant's attorney is also the brother-in-law of the adjuster's supervisor. This relationship should be:
- Kept confidential to protect all parties
- Disclosed as a potential conflict of interest and another adjuster assigned (Correct answer)
- Ignored if the adjuster handles the claim independently
- Reported only if settlement exceeds $50,000
Correct answer: Disclosed as a potential conflict of interest and another adjuster assigned
Any relationship that could create the appearance of bias must be disclosed and the claim reassigned to eliminate conflicts of interest.
Question 4: Under the doctrine of 'stacking' in UM/UIM coverage, a policyholder with multiple vehicles on one policy may:
- Combine the UM limits of each vehicle to increase the available coverage (Correct answer)
- Apply collision coverage from one vehicle to another
- Transfer liability coverage between vehicles on the same policy
- Use the highest single UM limit only, not combined limits
Correct answer: Combine the UM limits of each vehicle to increase the available coverage
Stacking allows the insured to combine UM/UIM limits across multiple vehicles on the policy, though many states permit anti-stacking policy language.
Question 5: A claimant submits repair estimates inflated by 30% with the collusion of the body shop. Both the claimant and shop owner could face charges of:
- Civil contempt only
- Insurance fraud, a criminal offense (Correct answer)
- Breach of warranty only
- Negligent misrepresentation only
Correct answer: Insurance fraud, a criminal offense
Intentionally submitting false or inflated repair estimates constitutes insurance fraud, which is prosecuted criminally in every US state.
Question 6: When adjusting a claim in a no-fault (PIP) state, first-party medical and wage-loss benefits are paid regardless of:
- The insured's policy limits
- Who was at fault in the accident (Correct answer)
- Whether the vehicle was insured
- The insured's deductible amount
Correct answer: Who was at fault in the accident
No-fault PIP benefits are paid to the insured by their own insurer without regard to who caused the accident.
Question 7: An adjuster must maintain claim file confidentiality primarily to protect:
- The insurer's negotiating strategy only
- The insured's and claimant's private information under state privacy laws (Correct answer)
- The adjuster's personal liability
- The body shop's proprietary repair methods
Correct answer: The insured's and claimant's private information under state privacy laws
State privacy laws and insurance regulations require adjusters to safeguard personal information in claim files, including financial, medical, and identifying details.
CAIA Legal & Ethical Considerations in Insurance Adjusting 5
An adjuster is asked by a supervisor to alter claim notes to reduce the reserve amount before a quarterly audit.
The adjuster should: