CALA Subrogation & Recovery 3

Question 1

What is the term for the formal demand sent by an insurer to a third party seeking reimbursement for a paid claim?

Accepted Answer

Subrogation demand letter

Answer

Coverage disclaimer

Answer

Reservation of rights letter

Answer

Proof of loss notice

Question 2

Under the anti-subrogation rule, an insurer CANNOT subrogate against which party?

Accepted Answer

Its own insured for a covered act

Answer

A negligent contractor hired by the insured

Answer

An at-fault driver in an auto accident

Answer

A product manufacturer whose defect caused the loss

Question 3

In property subrogation involving a defective product that caused a fire, which legal theory is most commonly used to establish third-party liability?

Accepted Answer

Products liability / strict liability

Answer

Comparative negligence

Answer

Assumption of risk

Answer

Contributory negligence

Question 4

What is 'made whole' as it relates to subrogation recovery distribution?

Accepted Answer

The insured must be fully compensated for all losses before the insurer takes a share of the recovery

Answer

The insurer is fully reimbursed before the insured receives anything

Answer

The third party must be financially solvent for subrogation to proceed

Answer

Both parties split the recovery equally

Question 5

What is 'equitable allocation' in a subrogation recovery scenario where the total recovery is less than the combined losses of the insurer and the insured?

Accepted Answer

The recovery is allocated proportionally to each party's respective loss

Answer

The insurer takes 100% of the recovery

Answer

The insured waives all rights to the recovery

Answer

The court determines who is at fault before distributing funds

Question 6

Which federal law significantly limits health insurer subrogation rights in cases involving employee benefit plans governed by ERISA?

Accepted Answer

The Employee Retirement Income Security Act (ERISA)

Answer

The Affordable Care Act (ACA)

Answer

The Federal Insurance Office Act

Answer

The Consolidated Omnibus Budget Reconciliation Act (COBRA)

Question 7

When a negligent third party's liability insurer offers a settlement that is insufficient to fully reimburse both the insurer and the insured, who typically has the right to approve or reject the settlement?

Accepted Answer

Both the insurer and the insured must agree, or the party who controls the litigation

Answer

Only the subrogating insurer

Answer

Only the insured

Answer

The state insurance commissioner