CCA Laws, Regulations, and Ethics 3 — Questions and Answers
Question 1: Under the NAIC Unfair Claims Settlement Practices Act, 'knowingly misrepresenting pertinent facts' to a claimant is considered:
- A minor regulatory infraction
- An unfair claims settlement practice (Correct answer)
- Standard negotiation tactics
- A permissible business practice
Correct answer: An unfair claims settlement practice
Knowingly misrepresenting facts or policy provisions is explicitly listed as an unfair claims settlement practice under the NAIC model act.
Question 2: A public adjuster's primary duty is owed to:
- The insurance company
- The state insurance department
- The policyholder (Correct answer)
- The reinsurer
Correct answer: The policyholder
Unlike staff or independent adjusters, public adjusters are hired by and represent the interests of the policyholder.
Question 3: Which ethical standard requires an adjuster to disclose all information relevant to a claim, even if it benefits the claimant?
- Duty of loyalty
- Duty of utmost good faith (uberrimae fidei) (Correct answer)
- Duty of indemnity
- Duty of subrogation
Correct answer: Duty of utmost good faith (uberrimae fidei)
Uberrimae fidei (utmost good faith) obligates both parties in an insurance contract to full and honest disclosure.
Question 4: State insurance regulations that govern claims handling practices are primarily enforced by:
- The Federal Insurance Office (FIO)
- The state insurance commissioner or department (Correct answer)
- The National Association of Insurance Commissioners (NAIC)
- The U.S. Department of Justice
Correct answer: The state insurance commissioner or department
Insurance regulation in the U.S. is primarily state-based, with each state's insurance commissioner holding enforcement authority.
Question 5: An adjuster who closes a claim without properly investigating because the amount is small is violating the duty of:
- Subrogation
- Reasonable investigation (Correct answer)
- Indemnification
- Salvage
Correct answer: Reasonable investigation
Adjusters are legally and ethically required to conduct a reasonable investigation regardless of the claim's monetary value.
Question 6: Which of the following best describes 'twisting' in the context of insurance ethics?
- Settling a claim for less than its value
- Inducing a policyholder to cancel a policy to buy another through misrepresentation (Correct answer)
- Adding fraudulent charges to a repair bill
- Denying a valid claim without cause
Correct answer: Inducing a policyholder to cancel a policy to buy another through misrepresentation
Twisting involves using misrepresentation or deception to convince a policyholder to switch policies, often to the agent's financial benefit.
Question 7: A claimant's attorney requests the complete claim file from the adjuster. Under most state laws, the adjuster should:
- Refuse all requests to protect trade secrets
- Provide only the summary sheet
- Consult with legal counsel and follow applicable discovery rules (Correct answer)
- Immediately forward all files without review
Correct answer: Consult with legal counsel and follow applicable discovery rules
Claim file disclosure is governed by state discovery rules and privilege laws, requiring legal counsel guidance before production.
CCA Laws, Regulations, and Ethics 3
Under the NAIC Unfair Claims Settlement Practices Act, 'knowingly misrepresenting pertinent facts' to a claimant is considered: