CALA Negotiation & Settlement Techniques 3 — Questions and Answers
Question 1: What is 'structured settlement' in claims resolution?
- A lump-sum payment made at trial
- Periodic payments over time instead of a single lump sum (Correct answer)
- A negotiated reduction of medical bills
- An agreement to resolve claims without admitting liability
Correct answer: Periodic payments over time instead of a single lump sum
A structured settlement provides a claimant with tax-free periodic payments over time rather than one lump-sum payment.
Question 2: A claimant refuses all offers and demands a jury trial. Which negotiation tool can still be used before trial?
- Filing a declaratory judgment action
- Participating in mediation or arbitration (Correct answer)
- Canceling the insured's policy
- Issuing a reservation of rights
Correct answer: Participating in mediation or arbitration
Mediation and arbitration are alternative dispute resolution tools available before or during trial to resolve claims without a verdict.
Question 3: What is 'comparative negligence' and how does it affect settlement negotiations?
- It assigns 100% fault to the defendant and increases settlement value
- It reduces the claimant's recovery by their percentage of fault (Correct answer)
- It eliminates the need for negotiation when liability is shared
- It allows adjusters to deny claims where any claimant fault exists
Correct answer: It reduces the claimant's recovery by their percentage of fault
Under comparative negligence, a claimant's recovery is reduced proportionally by their percentage of fault, directly lowering settlement value.
Question 4: When should an adjuster consider using a 'high-low' agreement in arbitration?
- When the adjuster wants to avoid paying any damages
- When both parties want to cap maximum exposure and guarantee a minimum recovery (Correct answer)
- When the insured refuses to cooperate with the investigation
- When the claimant's attorney is unlicensed
Correct answer: When both parties want to cap maximum exposure and guarantee a minimum recovery
A high-low agreement sets a floor and ceiling on the arbitration award, protecting both parties from extreme outcomes.
Question 5: What is the significance of a 'Stowers demand' in Texas claims handling?
- It requires the insurer to pay punitive damages automatically
- It is a demand within policy limits that triggers the insurer's duty to accept or risk excess liability (Correct answer)
- It allows the claimant to reject any offer below policy limits
- It is a statutory bad faith complaint filed with the insurance department
Correct answer: It is a demand within policy limits that triggers the insurer's duty to accept or risk excess liability
A Stowers demand obligates an insurer to accept a reasonable within-limits demand or potentially face liability for any excess judgment.
Question 6: How does 'loss of consortium' affect bodily injury settlement values?
- It has no recognized value in US courts
- It adds a derivative claim for a spouse's loss of companionship, increasing overall settlement value (Correct answer)
- It only applies in wrongful death cases
- It reduces settlement value by the claimant's comparative fault
Correct answer: It adds a derivative claim for a spouse's loss of companionship, increasing overall settlement value
Loss of consortium is a separate derivative claim by a spouse for loss of companionship and services, which can significantly increase total settlement exposure.
Question 7: What is the adjuster's role when a claim exceeds policy limits and the insured retains personal counsel?
- Close the file and let personal counsel handle everything
- Continue investigating and keep both the insurer and insured informed while cooperating with personal counsel (Correct answer)
- Deny the claim to protect the insurer from excess exposure
- Immediately tender full policy limits without negotiation
Correct answer: Continue investigating and keep both the insurer and insured informed while cooperating with personal counsel
When personal exposure exists, the adjuster must cooperate with insured's personal counsel, keep all parties informed, and document all settlement efforts to avoid bad faith.
CALA Negotiation & Settlement Techniques 3
What is 'structured settlement' in claims resolution?