CALA Laws, Regulations & Licensing Compliance 3 — Questions and Answers
Question 1: Under the McCarran-Ferguson Act, federal antitrust laws apply to the insurance industry only when:
- The insurer operates in multiple states
- State law does not regulate the specific conduct (Correct answer)
- The insurer is publicly traded
- The policy involves interstate commerce
Correct answer: State law does not regulate the specific conduct
The McCarran-Ferguson Act provides that federal antitrust laws apply to insurance only to the extent state law does not regulate that particular activity.
Question 2: Which document formally authorizes a licensed adjuster to act on behalf of an insurer for a specific claim?
- Power of attorney
- Letter of authority (Correct answer)
- Reservation of rights letter
- Assignment of claim
Correct answer: Letter of authority
A letter of authority (or authorization letter) from the insurer formally designates the adjuster to handle a specific claim on the company's behalf.
Question 3: An adjuster who falsifies a claim report to increase the settlement amount may be charged under which category of insurance crime?
- Premium fraud
- Claims fraud (Correct answer)
- Rate evasion
- Churning
Correct answer: Claims fraud
Falsifying claim documents to inflate a settlement constitutes claims fraud, a criminal offense that can result in license revocation and prosecution.
Question 4: When a homeowner's policy contains an 'other insurance' clause and two policies cover the same dwelling, each insurer typically pays:
- The full policy limit
- Nothing until the other pays first
- Its pro-rata share based on policy limits (Correct answer)
- Equally regardless of limits
Correct answer: Its pro-rata share based on policy limits
Under pro-rata other insurance clauses, each insurer pays the proportion its policy limit bears to the total limits of all applicable policies.
Question 5: A non-resident adjuster license is typically required when an adjuster handles claims in a state where they:
- Are not domiciled but are licensed in another state (Correct answer)
- Have no physical office
- Handle fewer than 10 claims per year
- Work only for surplus lines insurers
Correct answer: Are not domiciled but are licensed in another state
A non-resident adjuster license allows an adjuster domiciled and licensed in another state to legally adjust claims in the non-resident state.
Question 6: Under most state statutes, what is the standard prompt-payment deadline for an insurer to acknowledge receipt of a claim?
- 5 business days
- 10 business days (Correct answer)
- 15 business days
- 30 calendar days
Correct answer: 10 business days
Most states require insurers to acknowledge receipt of a claim within 10 business days of notification, under prompt-payment statutes.
Question 7: The concept of 'concurrent causation' in insurance claims most often arises in disputes involving:
- Liability limits and umbrella policies
- Two causes of loss — one covered, one excluded — occurring simultaneously (Correct answer)
- Multiple insureds on the same policy
- Stacking of uninsured motorist coverage
Correct answer: Two causes of loss — one covered, one excluded — occurring simultaneously
Concurrent causation occurs when a covered peril and an excluded peril both contribute to a loss, creating disputes over whether the claim is payable.
CALA Laws, Regulations & Licensing Compliance 3
Under the McCarran-Ferguson Act, federal antitrust laws apply to the insurance industry only when: