CALA Legal & Regulatory Compliance in Auto Insurance 2 — Questions and Answers
Question 1: Under the Fair Claims Settlement Practices Act, what is the maximum number of days an insurer typically has to acknowledge receipt of a claim after notification?
- 10 days (Correct answer)
- 30 days
- 45 days
- 60 days
Correct answer: 10 days
Most state fair claims settlement regulations require insurers to acknowledge receipt of a claim within 10 days of notification.
Question 2: Which federal law prohibits insurers from using race, color, religion, or national origin as factors in underwriting or claims handling?
- Fair Housing Act
- Civil Rights Act of 1964 (Correct answer)
- Equal Credit Opportunity Act
- Americans with Disabilities Act
Correct answer: Civil Rights Act of 1964
The Civil Rights Act of 1964 prohibits discrimination based on race, color, religion, sex, or national origin, which applies to insurance claims handling.
Question 3: When a claimant alleges bad faith against an auto insurer, which element is typically NOT required to be proven?
- The insurer denied a valid claim
- The denial was unreasonable
- The insurer acted with intent to defraud (Correct answer)
- The insurer knew the denial lacked reasonable basis
Correct answer: The insurer acted with intent to defraud
Bad faith does not require proof of intent to defraud; unreasonable denial with knowledge of the lack of reasonable basis is sufficient in most jurisdictions.
Question 4: What does the McCarran-Ferguson Act of 1945 primarily establish regarding insurance regulation?
- Federal oversight of all insurance companies
- State primacy in regulating the insurance industry (Correct answer)
- Mandatory minimum coverage requirements nationwide
- Federal anti-fraud standards for insurers
Correct answer: State primacy in regulating the insurance industry
McCarran-Ferguson grants states the primary authority to regulate insurance, limiting federal intervention unless state law does not adequately address the matter.
Question 5: A loss adjuster discovers that a claimant's attorney sent a demand letter but the insurer has not responded within the state's required timeframe. This exposes the insurer to:
- Criminal prosecution
- Extra-contractual damages (Correct answer)
- License revocation only
- Mandatory arbitration
Correct answer: Extra-contractual damages
Failure to respond to settlement demands within required timeframes can expose insurers to extra-contractual damages, including bad faith liability beyond policy limits.
Question 6: Under most state statutes of limitations, how long does a claimant typically have to file suit for property damage from an auto accident?
- 1 year
- 2–3 years (Correct answer)
- 5–7 years
- 10 years
Correct answer: 2–3 years
Most states set a 2–3 year statute of limitations for property damage claims arising from auto accidents, though this varies by state.
Question 7: Which regulatory body primarily oversees insurance company solvency and market conduct in the United States?
- Securities and Exchange Commission (SEC)
- National Association of Insurance Commissioners (NAIC) (Correct answer)
- Federal Insurance Office (FIO)
- Consumer Financial Protection Bureau (CFPB)
Correct answer: National Association of Insurance Commissioners (NAIC)
The NAIC coordinates state insurance regulators to establish uniform standards and best practices for solvency and market conduct oversight.
CALA Legal & Regulatory Compliance in Auto Insurance 2
Under the Fair Claims Settlement Practices Act, what is the maximum number of days an insurer typically has to acknowledge receipt of a claim after notification?