CALA Settlement Procedures 4 — Questions and Answers
Question 1: In a multi-vehicle accident where liability is shared, a state using 'pure comparative negligence' would:
- Bar recovery if the claimant is more than 50% at fault
- Allow recovery reduced by the claimant's percentage of fault, regardless of degree (Correct answer)
- Only allow recovery if the claimant is less than 1% at fault
- Assign 100% liability to the driver with the most damage
Correct answer: Allow recovery reduced by the claimant's percentage of fault, regardless of degree
Under pure comparative negligence, a claimant can recover even if 99% at fault, but the award is reduced proportionally.
Question 2: When multiple insurers cover the same loss, the principle that determines which pays first is called:
- Indemnification
- Coordination of benefits / other insurance provisions (Correct answer)
- Subrogation priority
- Pro-rata allocation
Correct answer: Coordination of benefits / other insurance provisions
Coordination of benefits rules and 'other insurance' policy provisions determine primary vs. excess insurer obligations.
Question 3: An adjuster closes a claim with payment. The insured later discovers additional related damage. Can they reopen the claim?
- Never, once a payment is made the claim is permanently closed
- Yes, if a signed release was not obtained and the damage is clearly related to the original loss (Correct answer)
- Only if they file a new policy claim with a fresh deductible
- Only within 24 hours of the original payment
Correct answer: Yes, if a signed release was not obtained and the damage is clearly related to the original loss
Without a signed release, a claimant may reopen a claim if supplemental damage is discovered and tied to the original event.
Question 4: What is the key difference between a 'release' and a 'covenant not to sue'?
- A release is verbal; a covenant not to sue must be written
- A release extinguishes the claim entirely; a covenant not to sue preserves the right to sue but promises not to exercise it (Correct answer)
- A covenant not to sue requires court approval; a release does not
- They are legally identical in all US jurisdictions
Correct answer: A release extinguishes the claim entirely; a covenant not to sue preserves the right to sue but promises not to exercise it
A release fully discharges the claim, while a covenant not to sue retains the underlying right but contractually bars its exercise.
Question 5: A claimant is represented by an attorney. The adjuster should:
- Continue negotiating directly with the claimant to expedite settlement
- Direct all communications through the attorney and not contact the claimant directly (Correct answer)
- Request the claimant fire the attorney before proceeding
- Automatically increase the settlement offer by 25%
Correct answer: Direct all communications through the attorney and not contact the claimant directly
Once a claimant is represented, ethical and legal standards require the adjuster to communicate exclusively through the attorney.
Question 6: What is 'loss of use' coverage designed to compensate?
- Mechanical breakdown during repair
- The cost of a rental vehicle while the insured's car is being repaired (Correct answer)
- Diminished resale value after a collision repair
- Lost wages when the insured cannot drive to work
Correct answer: The cost of a rental vehicle while the insured's car is being repaired
Loss of use coverage reimburses the insured for rental car expenses during the reasonable repair period.
Question 7: When calculating rental reimbursement for a total loss, payment typically ends when:
- The insured purchases a replacement vehicle or a reasonable replacement period expires, whichever comes first (Correct answer)
- The policy limit is exhausted regardless of circumstances
- The insured requests termination of coverage
- Exactly 30 days after the total loss determination
Correct answer: The insured purchases a replacement vehicle or a reasonable replacement period expires, whichever comes first
Rental reimbursement on a total loss ends when the insured buys a replacement or after a reasonable time period, usually 3–5 days after ACV payment is made.
CALA Settlement Procedures 4
In a multi-vehicle accident where liability is shared, a state using 'pure comparative negligence' would: