CALA Claims Investigation Process 4 — Questions and Answers
Question 1: Which of the following best describes 'actual cash value' (ACV) in automotive loss adjustment?
- The original purchase price of the vehicle
- Replacement cost minus depreciation, reflecting current market value (Correct answer)
- The cost to repair the vehicle regardless of age
- The amount the insured owes on their auto loan
Correct answer: Replacement cost minus depreciation, reflecting current market value
ACV represents what a vehicle was worth immediately before the loss, calculated as replacement cost minus depreciation.
Question 2: An adjuster receives a repair estimate that includes 'betterment' charges. What does this mean for the settlement?
- The insurer pays extra for improved parts
- The insured may be required to contribute toward parts that improve the vehicle beyond its pre-loss condition (Correct answer)
- Betterment charges are always waived for newer vehicles
- Betterment is only applied in total loss situations
Correct answer: The insured may be required to contribute toward parts that improve the vehicle beyond its pre-loss condition
Betterment allows the insurer to share costs with the insured when new parts replace worn components, preventing the insured from profiting from the loss.
Question 3: What is the 'indemnity principle' as it applies to auto claims?
- The insured should profit from the insurance claim
- The insured should be restored to the same financial position as before the loss, no better or worse (Correct answer)
- The insurer must pay replacement cost regardless of depreciation
- The insured receives the full policy limit on every claim
Correct answer: The insured should be restored to the same financial position as before the loss, no better or worse
The indemnity principle ensures insurance compensates for actual loss without enriching the insured beyond their pre-loss financial position.
Question 4: During investigation, an adjuster discovers the vehicle's odometer was rolled back before the loss. This finding primarily affects:
- The liability determination
- The vehicle's ACV since mileage directly impacts market value (Correct answer)
- The medical payments coverage
- The deductible amount
Correct answer: The vehicle's ACV since mileage directly impacts market value
Odometer rollback is fraud that inflates ACV; correcting the true mileage reduces the vehicle's pre-loss market value.
Question 5: When investigating a vehicle fire loss, which initial resource provides the most objective information about the fire's origin and cause?
- The insured's personal account of the fire
- The fire department report and fire investigator's findings (Correct answer)
- The vehicle dealer's service records
- The insurance agent's notes from policy issuance
Correct answer: The fire department report and fire investigator's findings
Fire department reports and certified fire investigator findings provide expert, contemporaneous documentation of fire origin and cause.
Question 6: A claimant reports theft of a vehicle but the adjuster finds no signs of forced entry. The best next investigative step is:
- Immediately deny the claim for fraud
- Obtain a recorded statement and investigate whether the vehicle had keyless entry or prior key duplication history (Correct answer)
- Pay the claim since lack of forced entry doesn't prove fraud
- Close the file pending police recovery of the vehicle
Correct answer: Obtain a recorded statement and investigate whether the vehicle had keyless entry or prior key duplication history
Modern vehicles can be stolen without forced entry through key fob cloning or spare keys, requiring thorough investigation before any coverage decision.
Question 7: In a diminished value claim following a repaired collision loss, what does the claimant assert?
- The repair shop caused additional damage during repairs
- The vehicle is worth less after repairs than it was before the accident, even though fully repaired (Correct answer)
- The vehicle's fuel economy decreased after the collision
- The insurance payment was insufficient to cover repair costs
Correct answer: The vehicle is worth less after repairs than it was before the accident, even though fully repaired
Diminished value claims assert that a vehicle's resale value is permanently reduced due to its accident history despite quality repairs.
CALA Claims Investigation Process 4
Which of the following best describes 'actual cash value' (ACV) in automotive loss adjustment?