CALA - Certified Automotive Loss Adjuster Settlement Procedures Questions and Answers

Question 1

A vehicle with an ACV of $25,000 is declared a total loss. The policyholder has a $500 deductible and owes $18,000 to a lienholder. What is the correct distribution of the settlement payment?

Accepted Answer

The lienholder receives $18,000, and the insured receives $6,500.

Answer

The settlement starts with the ACV ($25,000) minus the deductible ($500), resulting in a total payout of $24,500. The lienholder has the primary financial interest and must be paid first. The lienholder receives the full amount owed ($18,000). The remaining balance ($24,500 - $18,000 = $6,500) is then paid to the insured.

Question 2

A third-party claimant signs a 'Release of All Claims' form after settling a property damage liability claim for their vehicle repairs. What is the primary legal effect of this document?

Accepted Answer

It prevents the claimant from pursuing any future claims against the at-fault party or their insurer for that specific incident.

Answer

A 'Release of All Claims' is a legally binding contract where the claimant, in exchange for the settlement payment, agrees to relinquish the right to pursue any further legal action or make additional claims related to the specific incident against the at-fault party and their insurer.

Question 3

A vehicle is not a mandatory total loss by the state's percentage threshold. However, the adjuster determines that the cost of repairs plus the anticipated salvage value is greater than the vehicle's ACV. This is known as a:

Accepted Answer

Constructive Total Loss

Answer

A Constructive Total Loss (CTL) occurs when a vehicle is not an actual total loss by law, but it is economically impractical for the insurer to repair it. The decision is made using the Total Loss Formula (TLF): Cost of Repair + Salvage Value > ACV. If this formula is true, the vehicle is typically deemed a CTL.

Question 4

An insurance company takes possession of a vehicle after settling a total loss claim. What is the company's procedural responsibility regarding the vehicle's title before it can be sold?

Accepted Answer

Apply to the state's DMV for a branded 'Salvage Title'.

Answer

State laws require insurance companies to report a total loss to the Department of Motor Vehicles (DMV) and apply for a specific type of title, most commonly a 'Salvage Title'. This brands the title, warning future buyers that the vehicle was once declared a total loss.

Question 5

Which document authorizes an insurance company to pay a repair facility directly for the work performed on an insured's vehicle?

Accepted Answer

Direction to Pay

Answer

A 'Direction to Pay' form is a legal document signed by the vehicle owner that explicitly authorizes their insurance company to make a payment for repairs directly to the body shop, rather than to the owner.

(CALA) Certified Automotive Loss Adjuster Practice Test

(CALA) Certified Automotive Loss Adjuster Practice Test

CALA - Certified Automotive Loss Adjuster Settlement Procedures Questions and Answers