CALA Claims Investigation Process 5 — Questions and Answers
Question 1: What is the primary legal standard an adjuster must meet when handling claims under the duty of good faith?
- Investigate all claims within 24 hours of receipt
- Give equal consideration to both the insured's interests and the insurer's financial interests
- Promptly, fairly, and thoroughly investigate and settle claims without unreasonable delay or denial (Correct answer)
- Approve all claims under $5,000 without investigation
Correct answer: Promptly, fairly, and thoroughly investigate and settle claims without unreasonable delay or denial
Good faith requires insurers to conduct prompt, thorough, and fair investigations and settlements without unreasonably favoring the insurer's interests.
Question 2: An insured's collision claim is submitted 18 months after the accident occurred. The adjuster should first:
- Pay the claim since late reporting is not grounds for denial
- Deny the claim automatically for untimely reporting
- Review the policy's notice and cooperation provisions and assess prejudice caused by the delay (Correct answer)
- Refer the claim to the legal department immediately
Correct answer: Review the policy's notice and cooperation provisions and assess prejudice caused by the delay
Late notice may be a coverage defense, but most states require the insurer to demonstrate actual prejudice from the delay before denying on that basis alone.
Question 3: When an adjuster closes a claim file with a payment, which document formally acknowledges the settlement and releases the insurer from further obligation?
- The proof of loss form
- A signed release or settlement agreement (Correct answer)
- The adjuster's closing report
- The repair shop's final invoice
Correct answer: A signed release or settlement agreement
A signed release is the legal document by which the claimant accepts payment and waives future claims arising from the same loss.
Question 4: Which of the following is a common indicator of a staged accident during the investigation?
- Multiple credible eyewitnesses at the scene
- Vehicles towed to a pre-arranged body shop with immediate attorney representation and multiple soft-tissue injury claimants (Correct answer)
- Damage patterns consistent with the reported mechanism of loss
- A police report filed immediately after the accident
Correct answer: Vehicles towed to a pre-arranged body shop with immediate attorney representation and multiple soft-tissue injury claimants
Staged accidents often involve a pattern of pre-arranged service providers and multiple soft-tissue injury claimants designed to maximize fraudulent payouts.
Question 5: When an adjuster determines a vehicle is a total loss, what happens to the salvage vehicle?
- It is returned to the insured after settlement
- The insurer typically takes title and sells the salvage to offset the total loss payment (Correct answer)
- The salvage is donated to charity by the insurer
- The salvage value is subtracted from the insured's deductible
Correct answer: The insurer typically takes title and sells the salvage to offset the total loss payment
After paying ACV, the insurer acquires title to the salvage and sells it, reducing the net cost of the total loss claim.
Question 6: What does 'policy stacking' refer to in the context of uninsured motorist coverage investigation?
- Combining deductibles from multiple policies to reduce out-of-pocket costs
- Attempting to collect UM benefits from multiple vehicles on the same policy or from multiple policies for a single loss (Correct answer)
- Adding endorsements to an existing policy after a loss
- Staggering claim payments across multiple coverage periods
Correct answer: Attempting to collect UM benefits from multiple vehicles on the same policy or from multiple policies for a single loss
Stacking allows insured parties to combine UM limits from multiple vehicles or policies; many states restrict or prohibit it.
Question 7: During investigation, the adjuster learns the insured vehicle was being used for rideshare driving at the time of loss, but the policy only covers personal use. The adjuster should:
- Pay the claim since the vehicle is still the same insured vehicle
- Investigate the commercial use exclusion and issue a reservation of rights pending coverage determination (Correct answer)
- Immediately deny the claim without further investigation
- Require the rideshare company to pay the full claim
Correct answer: Investigate the commercial use exclusion and issue a reservation of rights pending coverage determination
Commercial use exclusions may void coverage, but a reservation of rights and thorough investigation are required before any denial decision.
CALA Claims Investigation Process 5
What is the primary legal standard an adjuster must meet when handling claims under the duty of good faith?