CCP Settlement Negotiation Tactics 3 — Questions and Answers
Question 1: In the context of claims settlement, what is 'structured settlement' most appropriate for?
- Minor property damage claims under $5,000
- Claims involving ongoing medical needs, minors, or large long-term damage awards (Correct answer)
- Any commercial liability claim regardless of amount
- Cases where the claimant requests immediate full payment
Correct answer: Claims involving ongoing medical needs, minors, or large long-term damage awards
Structured settlements are best suited for cases with ongoing medical needs, future lost wages, or large awards where periodic payments serve the claimant's long-term interests.
Question 2: What is the primary purpose of a 'high-low agreement' in settlement negotiations?
- To allow the parties to negotiate without attorneys present
- To set minimum and maximum recovery limits regardless of verdict outcome (Correct answer)
- To establish high and low priority claims in multi-claimant scenarios
- To define the range of acceptable attorney fee percentages
Correct answer: To set minimum and maximum recovery limits regardless of verdict outcome
A high-low agreement caps the defendant's maximum exposure and guarantees the plaintiff a minimum recovery, eliminating the risk of extreme verdict outcomes.
Question 3: During mediation, the mediator proposes a 'mediator's proposal' after impasse. What does this mean?
- The mediator files a binding decision with the court
- The mediator suggests a specific settlement number that both parties accept or reject privately and simultaneously (Correct answer)
- The mediator recommends that one party's position be adopted
- The mediator withdraws from the case and sends it to arbitration
Correct answer: The mediator suggests a specific settlement number that both parties accept or reject privately and simultaneously
A mediator's proposal involves the mediator suggesting a number that both parties accept or reject simultaneously in private, removing the stigma of being the first to compromise.
Question 4: Which of the following BEST describes the 'reservation price' in settlement negotiations?
- The amount reserved in the claims file for future development
- The minimum or maximum amount a party will accept before walking away (Correct answer)
- A price quoted by an expert witness for their services
- The insured's deductible amount
Correct answer: The minimum or maximum amount a party will accept before walking away
The reservation price is the walk-away point—the least favorable settlement a party will accept before preferring to litigate.
Question 5: A claimant's attorney sends a time-limited policy limits demand. What is the CRITICAL first step for the claims professional?
- Immediately tender the policy limits to avoid bad faith
- Evaluate the claim on its merits and document the analysis before the deadline
- Request an extension and inform the insured of potential exposure (Correct answer)
- Deny the demand in writing to preserve negotiating leverage
Correct answer: Request an extension and inform the insured of potential exposure
The claims professional must evaluate the claim, document findings, and notify the insured of potential excess exposure before or concurrent with the response.
Question 6: What is 'concession patterning' designed to signal in a settlement negotiation?
- That the claims professional lacks authority to settle
- The pace and size of moves communicate how close a party is to their limit (Correct answer)
- That the opposing party should increase their demand
- A willingness to submit the dispute to arbitration
Correct answer: The pace and size of moves communicate how close a party is to their limit
Decreasing concession sizes signal that a party is approaching their limit, while consistent concessions suggest room remains, making the pattern strategically important.
Question 7: Under what circumstances is it appropriate for a claims professional to negotiate directly with a represented claimant rather than their attorney?
- Whenever the claims professional believes the attorney is being unreasonable
- Only if the attorney provides written consent or withdraws from representation (Correct answer)
- When the policy limits are minimal and litigation costs exceed the claim value
- Whenever the statute of limitations is approaching
Correct answer: Only if the attorney provides written consent or withdraws from representation
Directly contacting a represented party without their attorney's consent violates professional ethics rules and can expose the insurer to bad faith claims.
CCP Settlement Negotiation Tactics 3
In the context of claims settlement, what is 'structured settlement' most appropriate for?