CAIA Negotiation and Settlement 5 — Questions and Answers
Question 1: What is the purpose of an 'independent medical examination' (IME) in a bodily injury settlement negotiation?
- To provide free medical treatment to the claimant during litigation
- To obtain an objective medical opinion on the nature, extent, and causation of the claimant's injuries (Correct answer)
- To determine whether the claimant qualifies for health insurance benefits
- To permanently terminate the claimant's treating physician relationship
Correct answer: To obtain an objective medical opinion on the nature, extent, and causation of the claimant's injuries
An IME provides the insurer with an independent physician's assessment of the injury's causation, extent, and need for future treatment, informing settlement value.
Question 2: A claimant's attorney proposes mediation to resolve a disputed liability claim. What is mediation?
- A binding arbitration process where an arbitrator decides the outcome
- A voluntary, non-binding process where a neutral third party facilitates settlement discussions (Correct answer)
- A court-ordered hearing where a judge evaluates liability
- A formal negotiation process where both parties must accept the mediator's recommendation
Correct answer: A voluntary, non-binding process where a neutral third party facilitates settlement discussions
Mediation is a voluntary, non-binding process where a neutral mediator helps the parties communicate and explore settlement without imposing a decision.
Question 3: When is it appropriate to offer a claimant the full policy limits without further negotiation?
- Whenever the claimant demands policy limits
- When the damages clearly and substantially exceed the policy limits and liability is reasonably clear (Correct answer)
- Only after a lawsuit has been filed and the first court date passes
- Whenever the insured requests that the adjuster settle the claim quickly
Correct answer: When the damages clearly and substantially exceed the policy limits and liability is reasonably clear
When liability is clear and damages substantially exceed policy limits, tendering limits promptly protects the insured from excess judgment exposure and reduces bad faith risk.
Question 4: What does 'comparative negligence' mean in the context of auto claim settlement?
- Comparing the negligence of multiple insurers involved in the claim
- A legal doctrine where the claimant's recovery is reduced by their own percentage of fault (Correct answer)
- The process of comparing industry standards to determine adjuster negligence
- Comparing a claimant's negligence to that of an average driver
Correct answer: A legal doctrine where the claimant's recovery is reduced by their own percentage of fault
Under comparative negligence, a claimant's damages are reduced proportionally by their percentage of fault; in some states, being more than 50% at fault bars recovery entirely.
Question 5: A claimant presents medical bills totaling $15,000 for treatment following a minor rear-end accident. The adjuster suspects the treatment was excessive. What is the appropriate response?
- Pay the full $15,000 without review to avoid a bad faith claim
- Request medical records, review treatment reasonableness, and consider a peer review or IME if necessary (Correct answer)
- Deny all medical bills since they appear excessive
- Only pay bills from the first 30 days post-accident
Correct answer: Request medical records, review treatment reasonableness, and consider a peer review or IME if necessary
The adjuster should review medical records for causation and reasonableness, and may order a peer review or IME to evaluate whether all treatment was medically necessary and accident-related.
Question 6: What is a 'high-low agreement' in the context of auto insurance litigation?
- An agreement to pay all damages above the low limit and below the high limit
- An agreement where the parties set a minimum payment and a maximum payment regardless of the verdict (Correct answer)
- A tiered payment structure based on the severity of the claimant's injuries
- A settlement agreement that adjusts based on inflation between accident and trial
Correct answer: An agreement where the parties set a minimum payment and a maximum payment regardless of the verdict
A high-low agreement sets a guaranteed floor (minimum) and ceiling (maximum) on the verdict, protecting the claimant from a zero verdict and the insurer from a runaway award.
Question 7: Which of the following best describes the adjuster's duty of good faith during settlement negotiations?
- To minimize every payout regardless of the strength of the claim
- To investigate claims thoroughly, evaluate them fairly, and settle meritorious claims promptly for reasonable value (Correct answer)
- To strictly follow only the written policy language and deny anything ambiguous
- To prioritize the insurer's financial interests over all other considerations
Correct answer: To investigate claims thoroughly, evaluate them fairly, and settle meritorious claims promptly for reasonable value
Good faith requires the adjuster to conduct a prompt, thorough, and unbiased investigation and to settle valid claims fairly without unreasonable delay.
CAIA Negotiation and Settlement 5
What is the purpose of an 'independent medical examination' (IME) in a bodily injury settlement negotiation?