CALA Liability Claims Investigation 3 — Questions and Answers
Question 1: An adjuster receives a liability claim where the insured denies ownership of the vehicle involved. What is the first investigative step?
- Close the claim immediately
- Run a DMV title search to verify vehicle ownership (Correct answer)
- Accept the insured's statement and deny the claim
- Contact the claimant's attorney
Correct answer: Run a DMV title search to verify vehicle ownership
A DMV title search provides official documentation of vehicle ownership, which is essential before making any coverage or liability determination.
Question 2: Which type of liability arises when a product is defective regardless of how much care the manufacturer exercised?
- Negligence per se
- Strict products liability (Correct answer)
- Absolute liability
- Vicarious liability
Correct answer: Strict products liability
Strict products liability holds manufacturers and sellers liable for defective products without requiring proof of negligence.
Question 3: A claimant presents a demand that includes $15,000 in medical specials. The adjuster discovers the claimant had a pre-existing back condition. How should this affect the evaluation?
- The entire medical claim should be denied
- Only the aggravation or exacerbation of the pre-existing condition is compensable (Correct answer)
- Pre-existing conditions have no effect on claim value
- The claim value doubles because pre-existing conditions increase vulnerability
Correct answer: Only the aggravation or exacerbation of the pre-existing condition is compensable
Under the eggshell plaintiff rule, defendants take victims as they find them, but compensation is limited to aggravation of the pre-existing condition, not the underlying condition itself.
Question 4: What is the significance of an 'excess judgment' in liability claims handling?
- It is a bonus paid to the adjuster for closing claims quickly
- It occurs when a verdict exceeds the policy limits, potentially exposing the insurer to bad faith liability (Correct answer)
- It represents the insured's deductible obligation
- It is the amount owed to a subrogating carrier
Correct answer: It occurs when a verdict exceeds the policy limits, potentially exposing the insurer to bad faith liability
When a judgment exceeds policy limits, the insured is personally liable for the excess, and if the insurer mishandled settlement, it may owe bad faith damages.
Question 5: During investigation, the adjuster learns the claimant's treating physician is the claimant's personal friend. What investigative action is appropriate?
- Automatically deny all medical bills
- Request an independent medical examination (IME) to obtain an objective medical opinion (Correct answer)
- Accept all treatment as reasonable and necessary
- File a complaint with the state medical board
Correct answer: Request an independent medical examination (IME) to obtain an objective medical opinion
An IME provides an independent, objective medical assessment when the objectivity of the treating physician's findings may be questioned.
Question 6: What does 'loss of consortium' refer to in a liability claim?
- The insured's loss of business income after an accident
- A spouse's claim for loss of companionship, affection, and services due to the other spouse's injuries (Correct answer)
- The claimant's loss of future earning capacity
- A business partner's claim for financial losses
Correct answer: A spouse's claim for loss of companionship, affection, and services due to the other spouse's injuries
Loss of consortium is a derivative claim by the injured party's spouse for the deprivation of the benefits of the marital relationship caused by the injuries.
Question 7: An insured is sued for a liability claim after the policy has been cancelled. Under which circumstance might the cancelled policy still provide coverage?
- If the cancellation was non-renewal rather than mid-term
- If the occurrence that caused the injury happened during the policy period before cancellation (Correct answer)
- Coverage never applies after cancellation under any circumstance
- If the insured pays the overdue premium within 30 days of the lawsuit
Correct answer: If the occurrence that caused the injury happened during the policy period before cancellation
Occurrence-based policies cover incidents that happen during the policy period, even if the claim is filed after the policy has been cancelled.
CALA Liability Claims Investigation 3
An adjuster receives a liability claim where the insured denies ownership of the vehicle involved.
What is the first investigative step?