Legal & Regulatory Compliance in Auto Insurance Flashcards

Under the Unfair Claims Settlement Practices Act model law, which of the following constitutes an unfair claim practice when done with such frequency as to indicate a general business practice?

Answer: Compelling insureds to litigate by offering substantially less than amounts ultimately recovered

Systematically making lowball settlement offers that force litigation when recoveries are substantially higher is a prohibited unfair claims settlement practice.

Which type of auto insurance coverage is typically mandated by state law as minimum required coverage?

Answer: Bodily injury and property damage liability

All states requiring auto insurance mandate minimum bodily injury and property damage liability coverage to protect other parties from the insured's negligence.

A loss adjuster in California must comply with the California Fair Claims Settlement Practices Regulations (10 CCR §2695). If the adjuster fails to conduct a reasonable investigation, this most directly violates:

Answer: The duty to thoroughly investigate before accepting or denying claims

California's fair claims regulations explicitly require adjusters to conduct a thorough investigation of each claim before making coverage decisions.

What is the primary legal difference between a 'cancellation' and a 'non-renewal' of an auto insurance policy?

Answer: Cancellation terminates a policy mid-term; non-renewal declines to extend at expiration

Cancellation ends coverage before the policy expiration date and is subject to stricter statutory grounds, while non-renewal simply declines to extend the policy at its natural expiration.

When adjusting a claim involving a minor (under 18) claimant, what legal consideration is most critical before finalizing settlement?

Answer: Securing court approval for the settlement to bind the minor

Settlements involving minors generally require court approval to be legally binding, since minors lack full contractual capacity and the court protects their interests.

Which doctrine prevents an insurer from recovering from its own insured in subrogation after paying a claim?

Answer: Anti-subrogation rule

The anti-subrogation rule bars an insurer from subrogate against its own insured for the same risk it was paid to cover, preventing insurers from recouping from the party they insured.

A claimant who is 30% at fault in a comparative negligence state files a claim for $100,000 in damages. In a pure comparative negligence jurisdiction, the claimant would recover:

Answer: $70,000, reduced by their percentage of fault

Pure comparative negligence reduces the claimant's recovery by their percentage of fault, so 30% fault on a $100,000 claim yields a $70,000 recovery.