CCA Claims Handling and Investigation 3 — Questions and Answers
Question 1: Which type of adjuster is an independent contractor hired by insurers on a per-claim basis?
- Staff adjuster
- Public adjuster
- Independent adjuster (Correct answer)
- Catastrophe adjuster
Correct answer: Independent adjuster
Independent adjusters are self-employed or work for independent adjusting firms and are engaged by insurers when extra capacity or specialized expertise is needed.
Question 2: A claimant hires a public adjuster after a storm loss. Whose interests does the public adjuster represent?
- The insurer's interests
- The state insurance department
- The claimant/policyholder's interests (Correct answer)
- Both the insurer and claimant equally
Correct answer: The claimant/policyholder's interests
Public adjusters are hired by and exclusively represent policyholders to help them document, file, and negotiate their insurance claims.
Question 3: What is the significance of a 'reservation of rights' letter sent by an insurer?
- It confirms the claim is fully covered
- It informs the insured that the insurer is investigating while reserving the right to deny coverage (Correct answer)
- It closes the claim file
- It transfers the claim to a different adjuster
Correct answer: It informs the insured that the insurer is investigating while reserving the right to deny coverage
A reservation of rights letter allows the insurer to investigate and defend a claim without waiving coverage defenses that may apply.
Question 4: An adjuster discovers that the insured misrepresented a material fact on the application. What potential remedy does the insurer have?
- File criminal charges directly
- Rescind the policy ab initio (from the beginning) (Correct answer)
- Increase future premiums retroactively
- Transfer the claim to arbitration automatically
Correct answer: Rescind the policy ab initio (from the beginning)
Material misrepresentation on an application may give the insurer grounds to void (rescind) the policy as if it never existed, subject to state law requirements.
Question 5: Which of the following BEST describes the 'actual cash value' (ACV) method of loss valuation?
- Replacement cost minus applicable deductible
- Replacement cost new minus depreciation (Correct answer)
- Original purchase price plus inflation adjustment
- Market value of the property at time of purchase
Correct answer: Replacement cost new minus depreciation
ACV is generally calculated as the cost to replace the damaged property with new property of like kind and quality, less depreciation for age and condition.
Question 6: A claimant alleges soft-tissue injuries after an auto accident but has no objective medical findings. What investigative tool might an adjuster use to verify the claim?
- Require the claimant to retake the driver's license exam
- Order an Independent Medical Examination (IME) (Correct answer)
- Automatically deny all soft-tissue claims
- Refer the claim to the state attorney general
Correct answer: Order an Independent Medical Examination (IME)
An IME by an independent physician can provide an objective medical opinion on the nature, extent, and causation of the claimant's injuries.
Question 7: Under most state bad faith laws, what conduct could expose an insurer to bad faith liability?
- Paying a claim in installments with the claimant's consent
- Conducting a thorough investigation before making an offer
- Refusing to settle a claim within policy limits when liability is reasonably clear (Correct answer)
- Requesting additional documentation to support a large loss
Correct answer: Refusing to settle a claim within policy limits when liability is reasonably clear
Failing to settle within policy limits when liability is clear and the demand is reasonable is a classic example of bad faith claims handling.
CCA Claims Handling and Investigation 3
Which type of adjuster is an independent contractor hired by insurers on a per-claim basis?