CAIA Subrogation and Salvage 5 — Questions and Answers
Question 1: Which legal doctrine holds that a subrogated insurer 'stands in the shoes' of the insured when pursuing recovery from a third party?
- Respondeat superior
- Equitable subrogation (Correct answer)
- Res ipsa loquitur
- Comparative negligence
Correct answer: Equitable subrogation
Under equitable subrogation, the insurer assumes the same legal rights and position as the insured to recover from the responsible party.
Question 2: An insurer discovers that the salvage vehicle it sold at auction was actually repaired and resold without disclosure of its salvage title status. This is an example of:
- Subrogation fraud
- Salvage title washing (Correct answer)
- Betterment adjustment
- Total loss misclassification
Correct answer: Salvage title washing
Salvage title washing occurs when a salvage-titled vehicle is re-registered in a state with less stringent disclosure laws to obscure its salvage history.
Question 3: In a multi-vehicle accident where both drivers share fault, how does comparative negligence affect the insurer's subrogation recovery?
- Subrogation recovery is eliminated entirely if the insured is at all at fault
- Recovery is reduced proportionally to the insured's percentage of fault (Correct answer)
- Recovery is increased to compensate for the insured's shared liability
- Comparative negligence does not affect subrogation amounts
Correct answer: Recovery is reduced proportionally to the insured's percentage of fault
In comparative negligence states, the insurer's subrogation recovery is reduced by the percentage of fault attributed to the insured.
Question 4: What is the role of a 'salvage pool' or 'salvage auction' in the total loss process?
- To store vehicles pending court-ordered inspections
- To provide a marketplace where damaged vehicles are sold to dismantlers, rebuilders, and dealers (Correct answer)
- To facilitate insured-to-insured vehicle transfers after accidents
- To allow insurers to purchase replacement vehicles at below-market prices
Correct answer: To provide a marketplace where damaged vehicles are sold to dismantlers, rebuilders, and dealers
Salvage pools/auctions are platforms where insurers sell totaled vehicles to buyers such as auto dismantlers, rebuilders, and used parts dealers.
Question 5: When an insurer pays a first-party comprehensive claim for a stolen vehicle that is later recovered, what typically happens next?
- The insured must return the claim payment and reclaim the vehicle
- The insurer evaluates repair costs and determines whether to retain or return the vehicle to the insured (Correct answer)
- The recovered vehicle automatically reverts to the insured's ownership
- The insurer must sell the vehicle immediately without notifying the insured
Correct answer: The insurer evaluates repair costs and determines whether to retain or return the vehicle to the insured
Upon recovery, the insurer evaluates repair cost versus salvage value; if repairs are feasible, the insurer may offer to return the vehicle with the insured reimbursing the claim payment.
Question 6: Which federal regulation requires insurers to report total loss vehicles to avoid fraudulent re-titling and protect consumers?
- HIPAA
- The National Motor Vehicle Title Information System (NMVTIS) (Correct answer)
- The Federal Insurance Fraud Prevention Act
- The Uniform Commercial Code (UCC)
Correct answer: The National Motor Vehicle Title Information System (NMVTIS)
NMVTIS requires insurers and junk/salvage yards to report total loss and salvage vehicles to a national database accessible to consumers and title agencies.
Question 7: A subrogation demand letter sent to the at-fault party's insurer should include which key elements?
- Only the insured's policy number and date of loss
- Claim details, amount paid, proof of the at-fault party's liability, and a demand for reimbursement (Correct answer)
- A signed waiver from the insured releasing the at-fault party
- Only the salvage auction receipt and title transfer document
Correct answer: Claim details, amount paid, proof of the at-fault party's liability, and a demand for reimbursement
A subrogation demand letter must document the loss, establish liability, state the amount paid, and formally demand reimbursement from the responsible party's insurer.
CAIA Subrogation and Salvage 5
Which legal doctrine holds that a subrogated insurer 'stands in the shoes' of the insured when pursuing recovery from a third party?