CALA Negotiation & Settlement Techniques 2 — Questions and Answers
Question 1: A claimant demands $50,000 but the adjuster's reserve is $30,000. What is the most effective opening negotiation tactic?
- Accept the demand to avoid litigation
- Make a counteroffer slightly below reserve without explanation
- Present a documented counteroffer with supporting rationale (Correct answer)
- Deny the claim to force a lower demand
Correct answer: Present a documented counteroffer with supporting rationale
A documented counteroffer with supporting rationale anchors the negotiation and demonstrates good faith.
Question 2: What does the term 'bracketing' mean in claims negotiation?
- Setting a hard reserve limit
- Making offers and counteroffers that bracket the target settlement (Correct answer)
- Splitting liability between multiple parties
- Categorizing claims by severity
Correct answer: Making offers and counteroffers that bracket the target settlement
Bracketing involves making offers and receiving counteroffers that progressively narrow toward a target settlement figure.
Question 3: When a claimant attorney sends a time-limited demand, what is the adjuster's primary obligation?
- Ignore it and wait for litigation
- Respond within the demand deadline or document reasons for delay (Correct answer)
- Automatically accept the demand
- Transfer the file to litigation counsel immediately
Correct answer: Respond within the demand deadline or document reasons for delay
Failure to respond to a time-limited demand within the deadline can expose the insurer to bad faith claims.
Question 4: What is 'nuisance value' in claims settlement?
- The cost of investigating a fraudulent claim
- A small payment to resolve a weak claim and avoid litigation costs (Correct answer)
- The attorney fee percentage on a settlement
- Punitive damages awarded for bad faith
Correct answer: A small payment to resolve a weak claim and avoid litigation costs
Nuisance value is a modest payment made to close a claim with low merit simply to avoid the cost and hassle of litigation.
Question 5: An adjuster is negotiating with an unrepresented claimant. Which ethical rule is most critical?
- Offer the minimum possible to maximize savings
- Avoid explaining coverage or rights to prevent manipulation
- Treat the claimant fairly and not take advantage of their lack of legal representation (Correct answer)
- Delay settlement to encourage the claimant to accept less
Correct answer: Treat the claimant fairly and not take advantage of their lack of legal representation
Adjusters have an ethical and legal duty of good faith that requires fair dealing, especially with unrepresented parties.
Question 6: Which factor most directly affects the settlement value of a bodily injury claim?
- The adjuster's personal relationship with the claimant
- The claimant's medical expenses, lost wages, and pain and suffering (Correct answer)
- The insured's driving record prior to the accident
- The insurer's current loss ratio
Correct answer: The claimant's medical expenses, lost wages, and pain and suffering
Bodily injury settlement value is primarily calculated from economic damages (medicals, lost wages) plus non-economic damages (pain and suffering).
Question 7: What is the purpose of a 'Mary Carter' agreement in multi-party litigation?
- To assign fault percentages to each defendant
- To allow one defendant to settle while remaining a party to help the plaintiff against co-defendants (Correct answer)
- To consolidate multiple lawsuits into one proceeding
- To limit punitive damages in bad faith cases
Correct answer: To allow one defendant to settle while remaining a party to help the plaintiff against co-defendants
A Mary Carter agreement lets one defendant settle secretly while staying in the lawsuit to assist the plaintiff, which many states restrict or prohibit.
CALA Negotiation & Settlement Techniques 2
A claimant demands $50,000 but the adjuster's reserve is $30,000.
What is the most effective opening negotiation tactic?