CALA Claims Handling Procedures & Ethics 2 — Questions and Answers
Question 1: An adjuster discovers during investigation that the claimant's damages are significantly higher than initially reported. What is the adjuster's ethical obligation?
- Settle for the originally reported amount to save the insurer money
- Revise the estimate to accurately reflect actual damages discovered (Correct answer)
- Delay settlement until the claimant re-submits documentation
- Deny the additional damages as they were not in the original claim
Correct answer: Revise the estimate to accurately reflect actual damages discovered
Adjusters have an ethical duty to fairly evaluate and compensate all damages actually discovered during investigation, regardless of initial estimates.
Question 2: Under the Unfair Claims Settlement Practices Act (UCSPA), which of the following constitutes a prohibited practice?
- Acknowledging a claim within 10 days of receipt
- Requesting additional documentation when genuinely needed
- Misrepresenting pertinent facts or policy provisions to deny a claim (Correct answer)
- Conducting a thorough investigation before making a coverage decision
Correct answer: Misrepresenting pertinent facts or policy provisions to deny a claim
The UCSPA prohibits misrepresenting facts or policy provisions as a method of denying or reducing claims.
Question 3: A claimant contacts an adjuster after hours regarding a time-sensitive fire loss. What is the most appropriate response?
- Ignore the call until the next business day
- Provide a referral to an emergency contact or on-call service (Correct answer)
- Take a recorded statement immediately without proper authorization
- Deny the claim due to delayed notification
Correct answer: Provide a referral to an emergency contact or on-call service
Insurers should have protocols for emergency after-hours contact so claimants with urgent losses can receive timely assistance.
Question 4: When an adjuster issues a reservation of rights letter, what is the primary purpose?
- To deny the claim outright while investigation continues
- To notify the insured that the insurer is investigating while preserving the right to deny coverage (Correct answer)
- To admit full coverage and begin immediate payment
- To request a recorded statement from the claimant
Correct answer: To notify the insured that the insurer is investigating while preserving the right to deny coverage
A reservation of rights letter allows the insurer to investigate and potentially defend a claim without waiving the right to later deny coverage if warranted.
Question 5: An adjuster learns that a claimant has exaggerated medical expenses by 15%. What is the proper course of action?
- Pay the full claimed amount to avoid confrontation
- Document the discrepancy, investigate further, and only pay legitimate expenses (Correct answer)
- Deny the entire claim due to the exaggeration
- Accept the exaggerated amount but reduce future renewals
Correct answer: Document the discrepancy, investigate further, and only pay legitimate expenses
Adjusters must document discrepancies, investigate potential fraud, and compensate only legitimate, verified losses.
Question 6: Which standard governs how quickly an insurer must acknowledge receipt of a claim under most state regulations?
- Within 5 business days
- Within 10 calendar days (Correct answer)
- Within 30 calendar days
- Within 60 business days
Correct answer: Within 10 calendar days
Most state regulations following the NAIC model require insurers to acknowledge claims within 10 working or calendar days of receipt.
Question 7: A third-party claimant asks an adjuster for legal advice on whether to accept a settlement offer. How should the adjuster respond?
- Provide detailed legal advice to help the claimant decide
- Recommend the claimant consult an independent attorney for legal guidance (Correct answer)
- Pressure the claimant to accept immediately before seeking counsel
- Ignore the request and finalize the settlement without answering
Correct answer: Recommend the claimant consult an independent attorney for legal guidance
Adjusters must not practice law; advising claimants to seek independent legal counsel is the ethical and proper response.
CALA Claims Handling Procedures & Ethics 2
An adjuster discovers during investigation that the claimant's damages are significantly higher than initially reported.
What is the adjuster's ethical obligation?