CAIA Negotiation and Settlement 2 — Questions and Answers
Question 1: A claimant rejects your initial offer and presents a demand that exceeds the policy limits. What is the most appropriate next step for the adjuster?
- Immediately close the file as the claim exceeds coverage
- Document the demand, advise the insured of the excess exposure, and continue negotiating within authority (Correct answer)
- Accept the demand to avoid bad faith litigation
- Transfer the file to underwriting for policy rescission
Correct answer: Document the demand, advise the insured of the excess exposure, and continue negotiating within authority
When a demand exceeds policy limits, the adjuster must document it, notify the insured of potential personal exposure, and continue negotiating within delegated authority.
Question 2: Which negotiation technique involves deliberately pausing after making an offer to allow the claimant time to respond without pressure?
- Anchoring
- The flinch technique
- Strategic silence (Correct answer)
- Bracketing
Correct answer: Strategic silence
Strategic silence uses deliberate pauses after an offer to create psychological space and encourage the other party to speak or concede.
Question 3: A claimant has a soft tissue injury claim with no objective medical evidence. What approach best supports a fair settlement evaluation?
- Deny the claim outright due to lack of objective findings
- Evaluate based on the claimant's reported symptoms, treatment history, and comparable verdicts in the jurisdiction (Correct answer)
- Offer only the policy deductible and close the file
- Require the claimant to undergo surgery before settling
Correct answer: Evaluate based on the claimant's reported symptoms, treatment history, and comparable verdicts in the jurisdiction
Soft tissue claims should be evaluated using reported symptoms, treatment records, and local jury verdict research to determine a fair value.
Question 4: What is 'bracketing' in the context of insurance claim negotiations?
- Listing all damages in a bracket format on the settlement worksheet
- Making an offer so that the midpoint between your offer and the claimant's demand equals your target settlement (Correct answer)
- Offering to settle only certain covered damages while excluding others
- Using legal brackets to define policy exclusions during negotiation
Correct answer: Making an offer so that the midpoint between your offer and the claimant's demand equals your target settlement
Bracketing is a technique where the adjuster makes an offer so that the mathematical midpoint between that offer and the claimant's demand is the adjuster's actual target settlement figure.
Question 5: Under what circumstance is it appropriate for an adjuster to bypass the claimant and negotiate directly with the claimant's attorney?
- Whenever the adjuster prefers dealing with attorneys
- Only when the claimant has formally designated the attorney as their authorized representative (Correct answer)
- Whenever the claim value exceeds $10,000
- Only after the claimant has filed a lawsuit
Correct answer: Only when the claimant has formally designated the attorney as their authorized representative
Once a claimant retains an attorney and designates them as their representative, the adjuster must direct all settlement communications through the attorney.
Question 6: A total loss vehicle has an ACV of $18,000 and the insured owes $22,000 on their auto loan. What should the adjuster advise?
- Pay the lienholder $22,000 to satisfy the loan
- Pay ACV of $18,000 to the lienholder and advise the insured about GAP coverage (Correct answer)
- Deny payment because the loan exceeds the vehicle's value
- Negotiate the loan balance down before issuing payment
Correct answer: Pay ACV of $18,000 to the lienholder and advise the insured about GAP coverage
The adjuster pays ACV to the lienholder and should advise the insured that GAP insurance, if they have it, may cover the remaining $4,000 deficiency.
Question 7: What is the primary purpose of a 'reservation of rights' letter during settlement negotiations?
- To delay settlement while additional coverage defenses are investigated
- To notify the insured that the insurer is investigating coverage issues while still defending the claim (Correct answer)
- To formally deny the claim pending further investigation
- To reserve the insurer's right to collect subrogation after settlement
Correct answer: To notify the insured that the insurer is investigating coverage issues while still defending the claim
A reservation of rights letter allows the insurer to participate in the defense or investigation while preserving the right to later deny coverage if a coverage defense is valid.
CAIA Negotiation and Settlement 2
A claimant rejects your initial offer and presents a demand that exceeds the policy limits.
What is the most appropriate next step for the adjuster?