CCP Claims Settlement & Negotiation 2 — Questions and Answers
Question 1: In a structured settlement, periodic payments are typically funded through which financial instrument?
- Certificate of deposit
- Annuity contract (Correct answer)
- Treasury bond ladder
- Money market fund
Correct answer: Annuity contract
Structured settlements are funded by annuity contracts purchased from life insurance companies, providing guaranteed periodic payments.
Question 2: A claimant's attorney demands $200,000 for a disputed soft-tissue injury. The adjuster's reserve is $60,000. What is the most appropriate initial response?
- Immediately offer the full reserve amount
- Reject the demand in writing and close the file
- Acknowledge the demand and request supporting medical documentation (Correct answer)
- Offer the policy limit to avoid litigation
Correct answer: Acknowledge the demand and request supporting medical documentation
The adjuster should acknowledge the demand and request substantiating documentation before making any counter-offer.
Question 3: Which negotiation technique involves deliberately understating the initial offer to leave room for concessions?
- Bracketing (Correct answer)
- Anchoring
- Nibbling
- Splitting the difference
Correct answer: Bracketing
Bracketing sets an opening offer strategically below the target settlement so the midpoint of demand and offer lands near the desired outcome.
Question 4: Under the Unfair Claims Settlement Practices Act, failing to attempt a prompt, fair, and equitable settlement when liability is reasonably clear constitutes:
- A permissible delay tactic
- An unfair claims practice (Correct answer)
- Standard reservation of rights
- Acceptable litigation strategy
Correct answer: An unfair claims practice
The UCSPA prohibits failing to settle claims promptly when liability is clear, classifying it as an unfair claims settlement practice.
Question 5: What does 'Mary Carter agreement' refer to in claims settlement?
- A structured payment plan for catastrophic injuries
- A secret settlement where one defendant stays in the case while reducing claimant's recovery (Correct answer)
- A subrogation waiver between insurers
- A consent judgment requiring court approval
Correct answer: A secret settlement where one defendant stays in the case while reducing claimant's recovery
A Mary Carter agreement is a secret contract where a settling defendant remains in the lawsuit but has a financial stake in the outcome against the non-settling defendant.
Question 6: When a claimant is represented by an attorney, the claims adjuster should generally:
- Contact the claimant directly to expedite settlement
- Communicate only through the claimant's attorney (Correct answer)
- Refuse all settlement discussions until suit is filed
- Require the claimant to appear in person at the insurer's office
Correct answer: Communicate only through the claimant's attorney
Once a claimant retains counsel, all communications must go through the attorney to avoid ethical violations and potential bad faith claims.
Question 7: A 'high-low agreement' in claims settlement means:
- The insurer pays half now and half after trial
- The verdict is bounded between a guaranteed minimum and a capped maximum regardless of jury award (Correct answer)
- The claimant accepts the lowest reasonable offer
- Settlement is contingent on appeal outcome
Correct answer: The verdict is bounded between a guaranteed minimum and a capped maximum regardless of jury award
A high-low agreement guarantees the claimant a minimum recovery and caps the insurer's maximum exposure regardless of the actual jury verdict.
CCP Claims Settlement & Negotiation 2
In a structured settlement, periodic payments are typically funded through which financial instrument?