Legal & Regulatory Compliance in Auto Insurance Flashcards

A driver in a no-fault state files a claim for lost wages after an accident. Under no-fault laws, this benefit is typically paid by:

Answer: The claimant's own Personal Injury Protection (PIP) coverage

In no-fault states, PIP coverage under the claimant's own policy pays for lost wages regardless of fault, up to policy limits.

What is the primary purpose of a reservation of rights letter sent by an insurer to an insured?

Answer: To notify the insured the claim is being investigated while preserving coverage defenses

A reservation of rights letter allows the insurer to investigate and defend without waiving its right to later deny coverage based on policy exclusions.

Which doctrine holds that an insurer may be estopped from denying coverage if it led the insured to reasonably believe coverage existed?

Answer: Promissory estoppel

Promissory estoppel prevents a party from going back on a promise when another party reasonably relied on it to their detriment, including insurers who imply coverage.

Under the Gramm-Leach-Bliley Act, what obligation does an insurer have regarding non-public personal information of claimants?

Answer: Provide privacy notices and limit disclosure to non-affiliated third parties

GLB requires financial institutions, including insurers, to provide privacy notices and restrict sharing of non-public personal information with non-affiliated third parties.

When adjusting a total loss in a state with a title-washing law, the adjuster must ensure:

Answer: The salvage vehicle receives a branded title indicating its total loss history

Anti-title-washing laws require that totaled vehicles receive a salvage or rebuilt title to disclose the vehicle's history to future purchasers.

What is 'stacking' in the context of uninsured/underinsured motorist coverage, and how do many states handle it?

Answer: Combining UM/UIM limits across multiple vehicles or policies; many states allow or prohibit it by statute

Stacking allows combining UM/UIM limits from multiple vehicles or policies; state laws vary widely, with some permitting it and others prohibiting it via anti-stacking statutes.

An insurer delays payment on a valid auto claim for 90 days without justification in a state requiring payment within 30 days of proof of loss. The adjuster's liability exposure includes:

Answer: Interest penalties and potential bad faith damages

Unjustified payment delays beyond statutory deadlines expose insurers to interest penalties, regulatory fines, and bad faith damage claims.