CALA Legal & Regulatory Compliance in Auto Insurance 4 — Questions and Answers
Question 1: Which legal principle requires a loss adjuster to treat all similarly situated claimants consistently to avoid discrimination claims?
- Indemnity principle
- Equal treatment obligation (Correct answer)
- Proximate cause doctrine
- Duty to defend rule
Correct answer: Equal treatment obligation
Insurers must apply consistent standards to similarly situated claimants; differential treatment without justification can constitute unlawful discrimination.
Question 2: A claimant submits a fraudulent repair invoice for auto damage. Under most state insurance fraud statutes, this constitutes:
- A civil tort only
- Insurance fraud, which is a criminal offense (Correct answer)
- Breach of contract only
- An unfair trade practice by the body shop only
Correct answer: Insurance fraud, which is a criminal offense
Submitting a fraudulent insurance claim is a criminal offense under state insurance fraud statutes, punishable by fines and imprisonment.
Question 3: What is the legal significance of an 'Examination Under Oath' (EUO) clause in an auto insurance policy?
- It is optional and refusal has no consequences
- The insured is obligated to submit to questioning, and refusal can void coverage (Correct answer)
- It applies only to third-party claimants
- It replaces the need for any other claim documentation
Correct answer: The insured is obligated to submit to questioning, and refusal can void coverage
An EUO is a contractual condition precedent to coverage, and an insured's refusal to comply can be grounds for denial of the claim.
Question 4: Under what circumstance can an insurer exercise the right of subrogation after paying an auto claim?
- Only when the insured requests it
- When a negligent third party caused the loss, allowing the insurer to recover from that party (Correct answer)
- Only in commercial auto policies
- When fraud is suspected by the insured
Correct answer: When a negligent third party caused the loss, allowing the insurer to recover from that party
Subrogation allows an insurer that paid a claim to step into the insured's shoes and pursue recovery from the at-fault third party responsible for the loss.
Question 5: Which provision in an auto insurance policy allows an insurer to void the policy from inception if the insured made material misrepresentations on the application?
- Rescission (Correct answer)
- Cancellation
- Non-renewal
- Exclusion
Correct answer: Rescission
Rescission voids the policy ab initio (from the beginning) when the insurer proves material misrepresentation on the application, as if the policy never existed.
Question 6: A claimant in a tort state demands compensation for pain and suffering after a minor auto accident. The adjuster must verify the claimant first meets:
- A minimum income threshold
- The state's verbal or monetary tort threshold if applicable (Correct answer)
- Federal ADA disability requirements
- NAIC minimum impact standards
Correct answer: The state's verbal or monetary tort threshold if applicable
Some states with limited tort or tort-threshold rules require claimants to meet a verbal or monetary threshold before recovering non-economic damages like pain and suffering.
Question 7: What does 'concurrent causation' mean in auto insurance claims, and why is it legally significant?
- Two insurers both deny the same claim simultaneously
- Two causes contribute to a loss, one covered and one excluded, creating coverage disputes (Correct answer)
- The claimant and insured are equally at fault
- Two separate accidents occur on the same date
Correct answer: Two causes contribute to a loss, one covered and one excluded, creating coverage disputes
Concurrent causation occurs when both a covered peril and an excluded peril contribute to a loss, and courts in different states resolve coverage disputes differently based on the dominant or efficient proximate cause.
CALA Legal & Regulatory Compliance in Auto Insurance 4
Which legal principle requires a loss adjuster to treat all similarly situated claimants consistently to avoid discrimination claims?