CALA Settlement Procedures 5

Question 1

Diminished value (DV) claims arise because:

Accepted Answer

A vehicle's market resale value is reduced even after a proper repair

Answer

Even after quality repairs, a vehicle's market value may be lower because its accident history is disclosed to future buyers.

Question 2

An insured's vehicle sustains hail damage totaling $4,800 ACV, with ACV of the vehicle at $5,500. The insurer will most likely:

Accepted Answer

Declare a total loss because repair costs approach or exceed ACV

Answer

When repair costs approach or exceed the vehicle's ACV, declaring a total loss is typically more economical for the insurer.

Question 3

A settlement involving a Medicare beneficiary may require a Medicare Set-Aside (MSA) arrangement primarily to:

Accepted Answer

Protect Medicare's interests by allocating funds for future injury-related medical costs

Answer

An MSA ensures Medicare is not billed for future injury-related treatment that the settlement funds were intended to cover.

Question 4

When settling a claim under a policy with stacked uninsured motorist (UM) coverage, the insured can:

Accepted Answer

Combine UM limits across multiple vehicles on the policy for a higher total limit

Answer

Stacked UM coverage allows the insured to multiply the per-vehicle UM limit by the number of vehicles insured under the policy.

Question 5

An adjuster must apply 'bad faith' standards carefully because bad faith can result in:

Accepted Answer

Extracontractual damages awarded against the insurer beyond policy limits

Answer

Bad faith judgments can expose the insurer to punitive damages and verdicts far exceeding the policy's limits.

(CALA) Certified Automotive Loss Adjuster Practice Test