Certified All-Lines Adjuster (CALA) Designation Exam — Questions and Answers

Question 1: Under the Medicare Secondary Payer (MSP) Act, what obligation does an insurer have when settling a bodily injury claim?

The insurer has no obligation to Medicare in liability claims
The insurer must reimburse Medicare for any conditional payments it made for injury-related treatment (Correct answer)
The insurer must enroll the claimant in Medicare
The insurer must pay Medicare before paying the claimant

Correct answer: The insurer must reimburse Medicare for any conditional payments it made for injury-related treatment

The MSP Act requires liability insurers to satisfy Medicare's conditional payment lien before or at the time of settlement to avoid double-payment penalties.

Question 2: What is the difference between 'per person' and 'per occurrence' bodily injury liability limits?

They are interchangeable terms with the same meaning
Per occurrence is higher than per person in all policies
Per person is the max paid to any one claimant; per occurrence is the total max paid for all claimants in a single accident (Correct answer)
Per person applies to property damage; per occurrence applies to medical bills

Correct answer: Per person is the max paid to any one claimant; per occurrence is the total max paid for all claimants in a single accident

Bodily injury limits are split: the per-person limit caps recovery for each individual claimant, while the per-occurrence limit caps the total for all claimants from one accident.

Question 3: What does the term 'causation' mean in the context of a bodily injury claim?

The total dollar amount of medical bills
The type of insurance policy in force
The claimant's pre-existing health conditions
Whether the claimed injury was caused by the insured accident (Correct answer)

Correct answer: Whether the claimed injury was caused by the insured accident

Causation establishes the legal and medical link between the accident and the claimed injuries, which is essential for determining the insurer's liability.

Question 4: What is the significance of a statute of limitations in a bodily injury claim?

It limits the amount the insurer must pay
It sets the deadline by which a lawsuit must be filed or the claim is barred forever (Correct answer)
It defines the policy period
It restricts the number of medical providers the claimant can see

Correct answer: It sets the deadline by which a lawsuit must be filed or the claim is barred forever

The statute of limitations is a legal deadline; failing to file suit within the prescribed period (typically 2-3 years for personal injury in most US states) permanently extinguishes the claimant's legal right to recover.

Question 5: What is the primary purpose of an Examination Under Oath (EUO) in the fraud investigation context?

To allow the insurer to close the claim without paying
To provide the claimant an opportunity to renegotiate settlement terms
To formally obtain sworn testimony from the insured to verify claim facts and detect inconsistencies (Correct answer)
To satisfy the claimant's obligation to appear in small claims court

Correct answer: To formally obtain sworn testimony from the insured to verify claim facts and detect inconsistencies

An EUO compels the insured to provide sworn testimony about the claim under penalty of perjury, making it a powerful tool to detect material misrepresentations.

Question 6: Which term describes a policy condition requiring the insured to take reasonable steps to protect property from further damage after a covered loss?

Duty to cooperate
Protective safeguards
Subrogation
Preservation of property (Correct answer)

Correct answer: Preservation of property

The preservation of property condition obligates insureds to mitigate further loss after an insured event occurs or risk having part of the claim denied.

Question 7: Which element is REQUIRED in a proof of loss document submitted by an insured?

Approval from a state insurance commissioner
Notarized signature of the insured under oath (Correct answer)
Signature of the adjuster only
Witness signatures from two neighbors

Correct answer: Notarized signature of the insured under oath

Standard policy language requires the insured to sign the proof of loss under oath, often with notarization, to attest to the accuracy of claimed losses.

Question 8: Which state regulatory action is triggered when an insurer is found to have engaged in a systematic pattern of unfair claims practices?

License suspension
Receivership
Market conduct examination (Correct answer)
Rehabilitation

Correct answer: Market conduct examination

A market conduct examination is the regulatory tool used to investigate and address systematic patterns of unfair claims or business practices by insurers.

Question 9: Which FEMA program provides federally backed flood insurance to property owners in participating communities?

Community Development Block Grant (CDBG)
National Flood Insurance Program (NFIP) (Correct answer)
Stafford Act Individual Assistance Program
Federal Crop Insurance Program (FCIP)

Correct answer: National Flood Insurance Program (NFIP)

The NFIP, administered by FEMA, provides flood insurance to property owners in communities that adopt and enforce FEMA-approved floodplain management regulations.

Question 10: Under ISO's standard commercial property form, the 'building' definition generally includes:

Vehicles parked on the premises
Outdoor signs not attached to the building
Permanently installed fixtures and machinery (Correct answer)
Inventory stored in a separate warehouse

Correct answer: Permanently installed fixtures and machinery

ISO commercial property forms define 'building' to include permanently installed fixtures, machinery, and equipment as part of the covered structure.

Question 11: When documenting actual cash value (ACV) for a personal property item, the adjuster must record:

Only the original purchase price
The highest retail price currently available online
The amount the insured paid for insurance premiums
The replacement cost minus applicable depreciation, with the depreciation basis documented (Correct answer)

Correct answer: The replacement cost minus applicable depreciation, with the depreciation basis documented

ACV documentation must show both the replacement cost and the depreciation calculation methodology to support the final valuation.

Question 12: Which legal doctrine holds that an employer may be liable for the bodily injury negligence of its employee acting within the scope of employment?

Res ipsa loquitur
Comparative negligence
Assumption of risk
Respondeat superior (Correct answer)

Correct answer: Respondeat superior

Respondeat superior is the doctrine that imputes an employee's negligence to the employer when the employee was acting within the scope of their job duties at the time of the incident.

Question 13: An insured's dwelling is insured for $200,000 under a replacement cost policy. The coinsurance requirement is 80%. The home's replacement cost is $300,000. A covered loss results in $60,000 in damages. How much does the insurer pay (before deductible)?

$48,000
$50,000 (Correct answer)
$60,000
$40,000

Correct answer: $50,000

Required insurance = 80% × $300,000 = $240,000; carried = $200,000; penalty ratio = $200,000/$240,000 = 5/6; payment = $60,000 × 5/6 = $50,000.

Question 14: Under the NAIC Unfair Claims Settlement Practices Act model, failure to maintain adequate claim documentation can constitute:

A violation only if the insured complains to a court
A standard industry practice that is widely accepted
A minor administrative oversight with no consequences
An unfair claims settlement practice subject to regulatory penalties (Correct answer)

Correct answer: An unfair claims settlement practice subject to regulatory penalties

Inadequate documentation is recognized under NAIC model acts as a potential unfair claims practice, which can trigger regulatory investigations and fines.

Question 15: Under a standard homeowners policy, which of the following losses would most likely be excluded under the 'earth movement' exclusion?

Roof damage from high winds
Fire damage following a lightning strike
Water damage from a burst pipe
Foundation cracking caused by soil subsidence (Correct answer)

Correct answer: Foundation cracking caused by soil subsidence

Soil subsidence is a form of earth movement, which is excluded under standard homeowners policies regardless of the cause.

Question 16: What is a common challenge for catastrophe adjusters during large-scale events?

Low number of claims
High claim volume and restricted access (Correct answer)
Inability to find clients
Shortage of office supplies

Correct answer: High claim volume and restricted access

High claim volumes and limited accessibility in disaster areas can delay assessments and settlements.

Question 17: Which investigative tool allows an adjuster to examine social media posts from a claimant alleging permanent disability who is photographed hiking?

Social media investigation and open-source intelligence (OSINT) (Correct answer)
Subrogation demand
Medical authorization form
Recorded statement

Correct answer: Social media investigation and open-source intelligence (OSINT)

Social media and OSINT searches are legitimate investigative tools that can uncover publicly available information inconsistent with claimed injuries.

Question 18: Which document should an adjuster obtain to evaluate whether a business defendant had adequate liability coverage for a dram shop claim?

The liquor liability policy declarations page and any endorsements (Correct answer)
The business's employee handbook
The claimant's driving record
The business's tax returns

Correct answer: The liquor liability policy declarations page and any endorsements

Dram shop claims arise from alcohol-related incidents, and the liquor liability policy declarations and endorsements define the specific coverage available for such claims.

Question 19: A homeowner has a covered water damage loss. The insurer pays the claim and then sues the plumber whose negligence caused the pipe to burst. This is an example of:

Contribution
Salvage
Subrogation (Correct answer)
Indemnification

Correct answer: Subrogation

Subrogation is the insurer's right to step into the insured's shoes and recover from a negligent third party after paying the insured's claim.

Question 20: When a conflict arises between standard procedures and a unique situation in Catastrophe Claims Handling, what should a CALA professional prioritize?

Strict adherence to written procedures without exception
The preference of the client or stakeholder
Safety and ethical obligations while seeking expert consultation (Correct answer)
The most cost-effective solution available

Correct answer: Safety and ethical obligations while seeking expert consultation

Safety and ethics always take priority in Catastrophe Claims Handling. When standard procedures don't adequately address a unique situation, consulting with experienced colleagues or supervisors ensures both safety and professional standards are maintained.

Question 21: What is a 'Medicare Set-Aside' (MSA) arrangement and when is it relevant to a bodily injury settlement?

A separate insurance policy purchased by the claimant
A lien filed by the hospital against the settlement
A fund set aside to cover future Medicare-eligible medical expenses related to the injury, required in certain workers' comp and liability settlements (Correct answer)
A deduction from the settlement for Medicare premiums

Correct answer: A fund set aside to cover future Medicare-eligible medical expenses related to the injury, required in certain workers' comp and liability settlements

An MSA is a financial arrangement that allocates a portion of a settlement to cover future medical costs for Medicare beneficiaries, protecting Medicare's interests.

Question 22: 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.

Question 23: Under workers compensation, a 'scheduled loss' benefit typically applies to:

Fatal claims with a fixed survivor benefit schedule
Temporary total disability lasting a set number of weeks
Permanent partial disability involving specific body parts like limbs or digits (Correct answer)
Medical-only claims with no lost time

Correct answer: Permanent partial disability involving specific body parts like limbs or digits

Scheduled loss benefits are fixed statutory amounts for permanent loss or loss of use of specific body parts listed in the workers compensation statute.

Question 24: What are 'specials' in bodily injury claims terminology?

Quantifiable economic losses such as medical bills and lost wages (Correct answer)
Secret settlement amounts
Specialty medical procedures only
Special policy endorsements

Correct answer: Quantifiable economic losses such as medical bills and lost wages

In bodily injury claims, 'specials' refer to special (economic) damages that can be documented with receipts, including medical expenses and lost income.

Question 25: A property adjuster observes that the basement flooded after a heavy rainstorm caused a nearby river to overflow its banks. Which coverage scenario most likely applies?

Standard homeowners policy covers all flood damage
Overflow flooding is covered under the earth movement exclusion
The loss is likely excluded from homeowners but covered under an NFIP flood policy (Correct answer)
The adjuster should invoke the water backup endorsement automatically

Correct answer: The loss is likely excluded from homeowners but covered under an NFIP flood policy

Standard homeowners policies exclude flood damage from surface water overflow; such losses are typically covered only under a separate NFIP or private flood insurance policy.

Question 26: Which of the following BEST describes the role of an 'independent adjusting firm' in a catastrophe response?

A public adjusting company representing policyholders
An insurer's in-house claims department
A third-party company contracted by insurers to provide additional adjusting capacity during high-volume CAT events (Correct answer)
A firm owned by the state government to handle claims against insolvent insurers

Correct answer: A third-party company contracted by insurers to provide additional adjusting capacity during high-volume CAT events

Independent adjusting firms are third-party vendors contracted by insurers to supplement their staff capacity during catastrophes when claim volumes exceed in-house resources.

Question 27: When analyzing a 'pollution exclusion' in a CGL policy, a 'sudden and accidental' exception would most likely allow coverage for:

An unexpected chemical spill during routine operations that is immediately contained (Correct answer)
Gradual chemical seepage over several years
A deliberately discharged waste stream
Long-term groundwater contamination from a buried tank

Correct answer: An unexpected chemical spill during routine operations that is immediately contained

The sudden and accidental exception to the pollution exclusion can restore coverage when a discharge is abrupt, unintended, and promptly addressed rather than gradual or ongoing.

Question 28: What is 'subrogation' and how does it influence settlement strategy?

The right of the insurer to recover payments from the responsible third party after paying the insured (Correct answer)
The transfer of the claim from one insurer to another
The process of reducing a claim by the insured's deductible
A method of determining coverage priority between two policies

Correct answer: The right of the insurer to recover payments from the responsible third party after paying the insured

Subrogation allows the insurer to step into the insured's shoes and pursue recovery from the at-fault party, directly affecting whether and how quickly to settle.

Question 29: Which of the following best describes the 'other insurance' pro-rata clause in property policies?

The insurer with the highest limit pays first
The first insurer to receive notice pays the entire loss
Each insurer pays the full loss up to its policy limit
Each insurer pays its proportionate share based on its limit relative to total coverage (Correct answer)

Correct answer: Each insurer pays its proportionate share based on its limit relative to total coverage

Under a pro-rata other insurance clause, each carrier pays its proportionate share based on the ratio of its limit to the combined limits of all policies.

Question 30: A claimant's attorney sends a 30-day demand letter threatening litigation if settlement is not reached. The adjuster believes the claim value is lower than demanded. What is the best approach?

Ignore the deadline and continue investigation at the current pace
Respond within the deadline with a counter-offer supported by documented valuation (Correct answer)
File a declaratory judgment action to deny all coverage
Immediately agree to the demand to avoid litigation

Correct answer: Respond within the deadline with a counter-offer supported by documented valuation

Responding with a documented counter-offer demonstrates good faith negotiation and prevents bad faith allegations from missing the deadline entirely.

Question 31: What does 'concurrent causation' mean in the context of catastrophe property claims?

Two or more perils contribute simultaneously or sequentially to a single loss, raising coverage questions when one peril is excluded (Correct answer)
Two separate claims occur at the same time for the same insured
An adjuster handles multiple claims from a single CAT event concurrently
Two insurers each contribute 50% to the same loss

Correct answer: Two or more perils contribute simultaneously or sequentially to a single loss, raising coverage questions when one peril is excluded

Concurrent causation arises when an excluded peril (e.g., flood) acts together with a covered peril (e.g., wind) to produce a loss, and policy language determines how coverage applies.

Question 32: In hail damage claims, 'functional damage' to a roof differs from 'cosmetic damage' in that:

Functional damage only applies to metal roofs
Functional damage affects only the appearance of shingles
Cosmetic damage always results in higher claim payouts
Functional damage compromises the roof's ability to perform its intended protective function (Correct answer)

Correct answer: Functional damage compromises the roof's ability to perform its intended protective function

Functional damage impairs the roof's protective performance (e.g., compromised granules leading to premature failure), while cosmetic damage affects only appearance.

Question 33: How often must an adjuster typically renew their license?

Only upon request
Every 5 years
Annually or biennially (Correct answer)
Every 6 months

Correct answer: Annually or biennially

Adjuster licenses usually need to be renewed every one or two years depending on state regulations.

Question 34: A 'proof of loss' form in a CAT claim serves what primary purpose?

It is a sworn statement by the insured documenting the amount claimed and circumstances of the loss (Correct answer)
It is the adjuster's final damage assessment report
It is a contractor's estimate submitted to the insured
It is a FEMA eligibility form for disaster assistance

Correct answer: It is a sworn statement by the insured documenting the amount claimed and circumstances of the loss

A proof of loss is a formal sworn document submitted by the insured specifying the claimed amount, which is required by most property policies.

Question 35: How does risk management apply to daily practice in Negotiation & Settlement Techniques for Certified All-Lines Adjuster professionals?

Through proactive identification of potential hazards and implementation of preventive measures (Correct answer)
Only through responding to incidents after they occur
By avoiding high-risk situations entirely
Through annual safety audits exclusively

Correct answer: Through proactive identification of potential hazards and implementation of preventive measures

Effective risk management in Negotiation & Settlement Techniques requires proactive hazard identification and preventive measures, not just reactive responses. This approach reduces incidents, improves outcomes, and protects both professionals and clients.

Question 36: Which type of damages may be awarded to punish grossly negligent or intentional conduct in a bodily injury case?

Nominal damages
Compensatory damages
Punitive (exemplary) damages (Correct answer)
Liquidated damages

Correct answer: Punitive (exemplary) damages

Punitive damages go beyond compensating the claimant and are intended to punish the defendant and deter similar egregious conduct in the future.

Question 37: During a coverage investigation, the adjuster discovers the insured intentionally caused the accident. What coverage defense applies?

Coverage applies because the victim was innocent
The insurer must pay but can seek reimbursement from the insured
The claim should be paid under the insured's uninsured motorist coverage
The intentional acts exclusion bars coverage because insurance does not cover deliberate harm (Correct answer)

Correct answer: The intentional acts exclusion bars coverage because insurance does not cover deliberate harm

Liability policies contain intentional acts exclusions because public policy prohibits insuring deliberate wrongdoing.

Question 38: When estimating the cost to repair a structure, an adjuster applies a regional cost factor. What does this factor account for?

Differences in labor and material costs between geographic markets (Correct answer)
State insurance department filing requirements
The insured's credit score and payment history
The age of the structure relative to the policy term

Correct answer: Differences in labor and material costs between geographic markets

Regional cost factors adjust base estimates to reflect local labor rates and material costs, which vary significantly across different US markets.

Question 39: Which of the following best describes a 'compromise and release' settlement in workers compensation?

An arrangement where the employer pays future medical costs directly to providers
A lump-sum settlement that closes all aspects of the claim in exchange for a release of future liability (Correct answer)
A partial settlement covering only medical benefits while leaving indemnity open
An agreement to reduce medical expenses in exchange for faster payment

Correct answer: A lump-sum settlement that closes all aspects of the claim in exchange for a release of future liability

A compromise and release is a full and final settlement where the claimant accepts a lump sum in exchange for releasing the employer and insurer from all future obligations on the claim.

Question 40: What is a 'reservation of rights' letter in the context of a bodily injury claim?

An insurer's agreement to pay all damages without limit
A letter from the claimant reserving the right to sue
A notice of policy cancellation
A letter informing the insured that the insurer is investigating the claim while preserving its right to deny coverage if warranted (Correct answer)

Correct answer: A letter informing the insured that the insurer is investigating the claim while preserving its right to deny coverage if warranted

A reservation of rights letter allows the insurer to defend or investigate a claim without waiving its right to later assert coverage defenses.

Question 41: Which of the following actions by an insured would most likely impair an insurer's subrogation rights?

Cooperating with the adjuster during investigation
Providing a recorded statement
Releasing the negligent third party from liability before the insurer is notified (Correct answer)
Filing a claim promptly

Correct answer: Releasing the negligent third party from liability before the insurer is notified

If the insured releases the responsible third party from liability without the insurer's consent, this act can bar the insurer from pursuing subrogation recovery.

Question 42: A claim involves damage to a historic home's plaster walls. Standard drywall would be cheaper but would not match the original construction. What should the adjuster consider?

Deny the claim because historic homes are not covered under standard policies
Pay the difference between plaster and drywall as betterment
Consider the policy's obligation to restore like kind and quality, which may require plaster repair (Correct answer)
Pay only for drywall since it is functionally equivalent

Correct answer: Consider the policy's obligation to restore like kind and quality, which may require plaster repair

Most policies require restoration to 'like kind and quality'; for a historic home with plaster walls, this standard may obligate the insurer to cover the higher cost of proper plaster repair.

Question 43: What is the PRIMARY purpose of continuing education requirements in Workers Compensation Claims for CALA professionals?

Maintaining current knowledge and competency as the field evolves (Correct answer)
Earning additional credentials for career advancement
Networking with other professionals in the field
Fulfilling mandatory regulatory requirements only

Correct answer: Maintaining current knowledge and competency as the field evolves

Continuing education in Workers Compensation Claims ensures professionals maintain current knowledge and skills as standards, technologies, and best practices evolve in the Certified All-Lines Adjuster field.

Question 44: Which factor most significantly affects the settlement value of a soft-tissue bodily injury claim?

Whether the insured has a prior traffic citation
The deductible amount on the policy
Duration of treatment and documented medical expenses (Correct answer)
The color of the vehicle involved

Correct answer: Duration of treatment and documented medical expenses

For soft-tissue injuries, the length and cost of medical treatment are the primary drivers of settlement value since there are no objective diagnostic findings like fractures.

Question 45: A 'storm surge' loss differs from a standard flood loss primarily because:

Storm surge damages only commercial properties
Storm surge is caused by ocean water pushed inland by hurricane winds, not rainfall (Correct answer)
Storm surge losses are excluded from all NFIP policies
Storm surge is always covered under homeowners policies

Correct answer: Storm surge is caused by ocean water pushed inland by hurricane winds, not rainfall

Storm surge is ocean water driven inland by hurricane-force winds and is a distinct peril from rain-caused flooding.

Question 46: A commercial property insured under a Business Owner's Policy (BOP) suffers tornado damage. The insured has a $1,000 deductible and $500,000 building limit. Covered damage totals $475,000. What does the insurer owe for the building?

$499,000
$500,000
$474,000 (Correct answer)
$475,000

Correct answer: $474,000

The insurer pays the covered loss minus the deductible: $475,000 − $1,000 = $474,000, which is within the policy limit.

Question 47: What is the PRIMARY purpose of continuing education requirements in Catastrophe Claims Handling for CALA professionals?

Fulfilling mandatory regulatory requirements only
Maintaining current knowledge and competency as the field evolves (Correct answer)
Earning additional credentials for career advancement
Networking with other professionals in the field

Correct answer: Maintaining current knowledge and competency as the field evolves

Continuing education in Catastrophe Claims Handling ensures professionals maintain current knowledge and skills as standards, technologies, and best practices evolve in the Certified All-Lines Adjuster field.

Question 48: A property policy is written on a 'replacement cost' basis. The insured's 10-year-old roof is destroyed by a covered peril. How is the claim typically settled?

Actual cash value minus a $1,000 deductible
Cost of a new roof of like kind and quality (Correct answer)
Depreciated value of the old roof
Market value of the home minus the land value

Correct answer: Cost of a new roof of like kind and quality

Replacement cost coverage pays the cost to replace damaged property with new property of like kind and quality, without a deduction for depreciation.

Question 49: Why is the NFIP (National Flood Insurance Program) important in catastrophe adjusting?

It provides flood insurance under federal guidelines (Correct answer)
It regulates earthquake coverage
It offers free insurance to homeowners
It funds fire departments

Correct answer: It provides flood insurance under federal guidelines

NFIP provides standardized coverage for flood-related damage, which is typically excluded from standard property insurance.

Question 50: A claimant alleges injuries from a dog bite. Which defense doctrine could bar recovery if the claimant provoked the animal?

Provocation doctrine (Correct answer)
Contributory negligence
Comparative fault
Assumption of risk

Correct answer: Provocation doctrine

Many states apply the provocation doctrine as a complete defense in dog bite cases when the victim's actions caused the animal to react.

Question 51: An insured's auto policy has a $500 comprehensive deductible. A deer strikes the vehicle, causing $1,800 in damage. How much does the insurer pay?

$500
$0, because animal collision is excluded
$1,300 (Correct answer)
$1,800

Correct answer: $1,300

Animal strikes are covered under comprehensive (other-than-collision); the insurer pays $1,800 minus the $500 deductible = $1,300.

Question 52: A CAT adjuster suspects fraud after noticing that a claimed swimming pool never existed based on satellite imagery taken before the hurricane. What is the first step the adjuster should take?

Immediately deny the claim and send a denial letter
Document the finding thoroughly and refer the claim to the Special Investigations Unit (SIU) (Correct answer)
Confront the insured directly during the inspection and demand proof
Close the file and mark it as no coverage without further action

Correct answer: Document the finding thoroughly and refer the claim to the Special Investigations Unit (SIU)

Suspected fraud should be referred to the SIU for a formal investigation; the adjuster must document findings but not conduct or conclude the fraud investigation independently.

Question 53: The '3-point contact' documentation standard in claims handling requires:

Three adjuster signatures on every report
Initial contact with the insured, claimant, and witnesses within specified timeframes, all documented (Correct answer)
Contact with three different insurance carriers on every claim
Three written estimates for every repair

Correct answer: Initial contact with the insured, claimant, and witnesses within specified timeframes, all documented

The 3-point contact standard requires timely documented contact with the insured, claimant, and at least one other party (such as a witness) within required timeframes.

Question 54: Which of the following is NOT typically considered an 'insured location' under a personal homeowners policy?

The insured's primary residence
A vacation home the insured owns
A hotel room the insured temporarily occupies
A rental property with 5 residential units (Correct answer)

Correct answer: A rental property with 5 residential units

Standard homeowners policies limit insured locations to smaller rental properties (usually 1-4 units); a 5-unit building requires a commercial policy.

Question 55: Which of the following best describes 'twisting' as a prohibited practice under state insurance codes?

Charging different premiums for the same risk
Paying a referral fee to an unlicensed person
Adjusting a claim without the insured's consent
Misrepresenting policy terms to induce a policyholder to replace their coverage (Correct answer)

Correct answer: Misrepresenting policy terms to induce a policyholder to replace their coverage

Twisting is the illegal practice of misrepresenting or making incomplete comparisons to induce a policyholder to lapse, forfeit, or surrender their existing insurance.

Question 56: Which section of the commercial package policy (CPP) addresses loss of business income caused by a covered property loss that forces the insured to suspend operations?

Commercial crime form
Commercial general liability form
Business income (and extra expense) coverage form (Correct answer)
Commercial inland marine form

Correct answer: Business income (and extra expense) coverage form

The Business Income (and Extra Expense) form covers lost net income and continuing expenses when a covered property loss causes a business interruption.

Question 57: Under a personal auto policy, Medical Payments coverage (MedPay) pays for reasonable medical expenses regardless of:

Whether the injured party is a listed driver
Whether a deductible has been satisfied
The vehicle's year, make, or model
Who was at fault for the accident (Correct answer)

Correct answer: Who was at fault for the accident

MedPay is a first-party, no-fault coverage that pays medical expenses for the insured and passengers without regard to fault.

Question 58: During a CAT deployment, an adjuster discovers a property where the insured has filed claims with both their homeowners insurer and NFIP. The adjuster should:

Coordinate with the NFIP adjuster to ensure no overlap in payments for the same damaged items (Correct answer)
Report the insured for insurance fraud immediately
Combine both claim payments without coordination
Deny the homeowners claim since NFIP will pay everything

Correct answer: Coordinate with the NFIP adjuster to ensure no overlap in payments for the same damaged items

When both a homeowners policy and NFIP policy are in force, adjusters must coordinate to ensure damages are properly allocated and not paid twice.

Question 59: A 'loss run report' in the context of commercial insurance documentation is:

A summary of an individual claim's repair timeline
A document generated only during policy renewal disputes
A report of losses exceeding policy limits only
A multi-year history of claims showing dates, amounts paid, and loss types for an insured account (Correct answer)

Correct answer: A multi-year history of claims showing dates, amounts paid, and loss types for an insured account

Loss runs provide a historical claims record used to evaluate risk, price renewals, and identify patterns — they are key documentation in commercial account management.

Question 60: Which approach is considered best practice when an adjuster first suspects fraud but lacks conclusive evidence?

Continue handling the claim normally while referring it to SIU and documenting all concerns (Correct answer)
Deny the claim and notify the claimant of fraud allegations
Delay the claim indefinitely until the investigation is complete
Contact the claimant's attorney to disclose the suspicion

Correct answer: Continue handling the claim normally while referring it to SIU and documenting all concerns

Best practice is to continue good-faith claim handling while simultaneously referring to SIU and documenting red flags, avoiding premature denial or accusation.

Question 61: When adjusting an auto liability claim, what is the adjuster's first step after confirming coverage?

Investigate the facts of loss to determine liability (Correct answer)
File a police report on behalf of the insured
Obtain a recorded statement from unrelated witnesses only
Issue payment to the claimant immediately

Correct answer: Investigate the facts of loss to determine liability

After confirming coverage exists, the adjuster must investigate the facts to establish which party bears liability for the accident.

Question 62: What is the primary purpose of obtaining medical authorizations (HIPAA releases) during a bodily injury claim investigation?

To access the claimant's medical records relevant to the injury claimed (Correct answer)
To transfer the claim to a health insurer
To waive the claimant's right to future treatment
To authorize the insurer to perform surgery

Correct answer: To access the claimant's medical records relevant to the injury claimed

A HIPAA-compliant medical authorization allows the adjuster to obtain medical records necessary to evaluate the nature and extent of the claimant's injuries.

Question 63: Which standard of practice is MOST important for ensuring quality in Coverage Analysis & Interpretation?

Strictly adhering to the same procedure in every situation
Using the most advanced technology available regardless of need
Following evidence-based protocols while adapting to specific circumstances (Correct answer)
Minimizing documentation to focus on practical work

Correct answer: Following evidence-based protocols while adapting to specific circumstances

Evidence-based protocols provide a foundation of proven practices, but effective Certified All-Lines Adjuster professionals must also adapt their approach based on specific circumstances and individual case needs within Coverage Analysis & Interpretation.

Question 64: A personal auto policy's 'medical payments' coverage differs from bodily injury liability in that medical payments coverage:

Requires a third-party claimant to file suit
Pays regardless of fault for occupants of the insured vehicle (Correct answer)
Is mandatory in all 50 states
Only applies when the insured is at fault

Correct answer: Pays regardless of fault for occupants of the insured vehicle

Medical payments (MedPay) is a no-fault coverage that pays reasonable medical expenses for occupants of the insured vehicle regardless of who caused the accident.

Question 65: When should an adjuster consider using a 'high-low' agreement in arbitration?

When the claimant's attorney is unlicensed
When the insured refuses to cooperate with the investigation
When both parties want to cap maximum exposure and guarantee a minimum recovery (Correct answer)
When the adjuster wants to avoid paying any damages

Correct answer: When both parties want to cap maximum exposure and guarantee a minimum recovery

A high-low agreement sets a floor and ceiling on the arbitration award, protecting both parties from extreme outcomes.

Question 66: An adjuster re-inspects a property and finds damage items not in the original estimate. What document is used to add these items to the claim?

A supplemental claim or supplemental estimate (Correct answer)
An endorsement added to the insurance policy
A new claim filed under a separate claim number
A revised proof of loss voiding the original

Correct answer: A supplemental claim or supplemental estimate

A supplement is an additional estimate that captures discovered or additional damages not included in the original estimate, added to the existing claim without reopening it.

Question 67: Which form is typically used in the US to report a motor vehicle accident to the state's DMV?

SR-1 or equivalent state accident report form (Correct answer)
FNOL incident form
FS-5A form
ACORD 125 form

Correct answer: SR-1 or equivalent state accident report form

Most US states require parties to file an SR-1 (or equivalent state form) with the DMV when an accident exceeds a property damage threshold or results in injury.

Question 68: Which of the following losses would most likely be covered under the 'collapse' additional coverage in a standard homeowners policy?

A chimney leaning due to age
Foundation shifting due to soil erosion
A wall cracking due to normal settling over time
A floor caving in due to hidden insect damage (Correct answer)

Correct answer: A floor caving in due to hidden insect damage

Many homeowners forms extend collapse coverage to include hidden insect or vermin damage as a specified cause, distinguishing it from ordinary settling or deterioration.

Question 69: An insurer that denies a claim without conducting a reasonable investigation may be liable for:

Subrogation failure
Reinsurance breach
Coinsurance penalty
Bad faith (Correct answer)

Correct answer: Bad faith

Denying a claim without a reasonable investigation can constitute bad faith, exposing the insurer to extracontractual damages beyond the policy limits.

Question 70: How can catastrophe adjusters support policyholders during disasters?

Communicate clearly and provide timely updates (Correct answer)
Use technical terms only
Focus only on paperwork
Avoid contact until assessment is done

Correct answer: Communicate clearly and provide timely updates

Clear communication and timely updates reduce stress and help claimants understand the process and next steps.

Question 71: Which of the following best describes the 'insuring agreement' section of an insurance policy?

States the insurer's promise to pay covered losses in exchange for premium (Correct answer)
Lists the conditions the insured must fulfill to maintain coverage
Defines terms used throughout the policy
Identifies specific perils and property excluded from coverage

Correct answer: States the insurer's promise to pay covered losses in exchange for premium

The insuring agreement is the core promise of the policy where the insurer agrees to pay for covered losses, subject to the policy's terms, conditions, and exclusions.

Question 72: Which standard of practice is MOST important for ensuring quality in Catastrophe Claims Handling?

Following evidence-based protocols while adapting to specific circumstances (Correct answer)
Minimizing documentation to focus on practical work
Strictly adhering to the same procedure in every situation
Using the most advanced technology available regardless of need

Correct answer: Following evidence-based protocols while adapting to specific circumstances

Question 73: A contractor's CGL policy has a 'your work' exclusion. Which scenario would this exclusion most likely bar from coverage?

Damage to the building the contractor was hired to renovate (Correct answer)
Bodily injury to a passerby from a falling tool
Property damage to a neighbor's fence caused by debris
A worker's injury on the job site

Correct answer: Damage to the building the contractor was hired to renovate

The 'your work' exclusion eliminates coverage for property damage to the work the contractor performed, as this is considered a business risk rather than an insurable event.

Question 74: Which document best establishes a claimant's lost wages in a bodily injury claim?

A tax return from five years prior
The claimant's verbal statement of income
A personal bank account statement
A wage verification letter from the employer and recent pay stubs (Correct answer)

Correct answer: A wage verification letter from the employer and recent pay stubs

Employer-verified wage documentation and pay stubs provide contemporaneous, objective evidence of the claimant's earnings and time missed from work.

Question 75: During a recorded statement, a claimant provides inconsistent accounts of how an injury occurred. What is the best immediate action for the adjuster?

End the interview and deny the claim
Advise the claimant to consult an attorney before continuing
Accept the most recent version of events as controlling
Document the inconsistencies and refer the matter to SIU for further review (Correct answer)

Correct answer: Document the inconsistencies and refer the matter to SIU for further review

Inconsistent statements are a fraud indicator that warrants documentation and SIU referral rather than an immediate denial or acceptance.

Question 76: What is the term for the formal demand sent by an insurer to a third party seeking reimbursement for a paid claim?

Reservation of rights letter
Proof of loss notice
Subrogation demand letter (Correct answer)
Coverage disclaimer

Correct answer: Subrogation demand letter

A subrogation demand letter formally notifies the responsible party or their insurer of the subrogating insurer's claim and the amount sought for reimbursement.

Question 77: Which type of damages compensates a bodily injury claimant for physical pain and emotional distress?

Special (economic) damages
General (non-economic) damages (Correct answer)
Punitive damages
Nominal damages

Correct answer: General (non-economic) damages

General damages cover intangible losses like pain, suffering, and emotional distress that are not easily quantified by bills or receipts.

Question 78: Under most state immunity statutes, an insurer that reports suspected fraud to a state fraud bureau in good faith is:

Liable only if the report contains inaccurate information
Required to obtain a court order before reporting
Subject to civil liability if the accused is found innocent
Protected from civil liability for making the report (Correct answer)

Correct answer: Protected from civil liability for making the report

Most states provide civil immunity to insurers and their employees who report suspected insurance fraud in good faith to authorized authorities.

Question 79: In a CAT deployment, 'desk adjusting' refers to:

Supervising field adjusters from headquarters
Reviewing desk items and office furniture damaged in a disaster
Performing administrative tasks at the CAT command center
Adjusting claims from a remote office using photos and documentation without a field inspection (Correct answer)

Correct answer: Adjusting claims from a remote office using photos and documentation without a field inspection

Desk adjusting involves handling claims remotely using submitted photos, contractor estimates, and documentation rather than in-person inspection.

Question 80: When evaluating a bodily injury demand package, what does the adjuster assess to determine pre-existing conditions?

Prior medical records, prior claims history, and any gap in treatment before the accident (Correct answer)
The insured's driving record
The age of the vehicle involved
The claimant's credit score

Correct answer: Prior medical records, prior claims history, and any gap in treatment before the accident

Reviewing prior medical records and claims history helps identify conditions that pre-dated the accident, which may reduce the insurer's liability for aggravation versus new injury.

Question 81: 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
Delay settlement to encourage the claimant to accept less
Treat the claimant fairly and not take advantage of their lack of legal representation (Correct answer)

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 82: Which of the following best describes 'occurrence' coverage under a CGL policy?

Coverage applies when the injury or damage occurs during the policy period (Correct answer)
Coverage applies when the claim is filed during the policy period
Coverage applies when the lawsuit is served during the policy period
Coverage applies when the policy is renewed

Correct answer: Coverage applies when the injury or damage occurs during the policy period

Occurrence-based CGL policies trigger coverage based on when the bodily injury or property damage actually happened, not when the claim is made.

Question 83: An adjuster identifies mold behind damaged drywall during a water loss inspection. What is the most appropriate next step?

Immediately authorize full mold remediation without reviewing coverage
Deny the entire water claim due to the mold presence
Document the mold and determine whether the policy includes or excludes mold remediation coverage (Correct answer)
Ignore the mold since it is not structural damage

Correct answer: Document the mold and determine whether the policy includes or excludes mold remediation coverage

The adjuster must document the mold, verify whether the policy provides mold coverage or has a mold exclusion or sublimit, and then handle remediation costs accordingly.

Question 84: What is the adjuster's role when a claim exceeds policy limits and the insured retains personal counsel?

Continue investigating and keep both the insurer and insured informed while cooperating with personal counsel (Correct answer)
Close the file and let personal counsel handle everything
Immediately tender full policy limits without negotiation
Deny the claim to protect the insurer from excess exposure

Correct answer: Continue investigating and keep both the insurer and insured informed while cooperating with personal counsel

When personal exposure exists, the adjuster must cooperate with insured's personal counsel, keep all parties informed, and document all settlement efforts to avoid bad faith.

Question 85: What is the primary role of an Independent Medical Examination (IME) in a workers compensation claim?

To obtain an objective medical opinion on the nature, extent, or causation of the claimant's injury (Correct answer)
To finalize the permanent disability rating before claim closure
To determine whether the claimant is committing fraud
To replace the treating physician's care with a more qualified provider

Correct answer: To obtain an objective medical opinion on the nature, extent, or causation of the claimant's injury

An IME provides an independent, objective medical evaluation to assist adjusters, attorneys, or courts in resolving disputes about diagnosis, causation, or degree of disability.

Question 86: An independent medical examination (IME) is typically requested by an insurer for what purpose?

To authorize additional surgery at the insurer's expense
To replace the claimant's treating physician
To deny all future medical treatment automatically
To obtain an objective physician's opinion on the nature, extent, and causation of injuries (Correct answer)

Correct answer: To obtain an objective physician's opinion on the nature, extent, and causation of injuries

An IME provides an independent medical assessment that helps the insurer evaluate whether claimed injuries and treatment are causally related to the accident.

Question 87: A liability policy has a $1,000,000 per-occurrence limit and a $2,000,000 aggregate limit. After two $900,000 claims are paid in the same policy year, how much aggregate coverage remains?

$0
$200,000 (Correct answer)
$100,000
$1,000,000

Correct answer: $200,000

Two $900,000 payments total $1,800,000 paid against the $2,000,000 aggregate, leaving $200,000 of aggregate coverage remaining for the policy year.

Question 88: An adjuster who falsifies a claim report to increase the settlement amount may be charged under which category of insurance crime?

Rate evasion
Claims fraud (Correct answer)
Churning
Premium fraud

Correct answer: Claims fraud

Falsifying claim documents to inflate a settlement constitutes claims fraud, a criminal offense that can result in license revocation and prosecution.

Question 89: Which type of additional living expense (ALE) is NOT typically covered under a standard homeowners policy following a covered catastrophe?

Hotel costs while the home is being repaired
Mortgage payments on the damaged home (Correct answer)
Pet boarding fees if the temporary housing does not allow pets
Restaurant meals exceeding normal food expenditures

Correct answer: Mortgage payments on the damaged home

ALE covers increased costs of living above normal expenses; mortgage payments are a pre-existing obligation, not an increased living cost caused by the loss.

Question 90: In a third-party bodily injury claim, what does 'third party' refer to?

A government agency overseeing the claim
A medical provider involved in the claim
A claimant who is not the insured but is injured by the insured's negligence (Correct answer)
The insurance company

Correct answer: A claimant who is not the insured but is injured by the insured's negligence

A third-party claim is brought by someone other than the insured (the policyholder) who was injured or suffered damages due to the insured's negligence.

Question 91: In a multi-claimant accident where aggregate damages exceed policy limits, what approach should the adjuster take?

Tender limits only to the most seriously injured claimant
Prorate policy limits among all claimants to avoid preferential treatment (Correct answer)
Deny all claims until litigation determines priority
Pay the first claimant who settles in full

Correct answer: Prorate policy limits among all claimants to avoid preferential treatment

When multiple claimants compete for insufficient limits, prorating limits equitably among all claimants is the standard approach to avoid bad faith.

Question 92: What is the purpose of a structured settlement in resolving a large bodily injury claim?

To transfer the claim to a health maintenance organization
To provide the claimant with periodic tax-free payments over time instead of a single lump sum (Correct answer)
To deny future medical expenses automatically
To reduce the insurer's claim reserves immediately

Correct answer: To provide the claimant with periodic tax-free payments over time instead of a single lump sum

A structured settlement uses an annuity to provide the claimant with periodic payments, offering tax advantages under IRC Section 104(a)(2) and ensuring long-term financial security.

Question 93: An adjuster discovers that a homeowner made unauthorized repairs before the inspection, preventing accurate documentation of the original damage. What should the adjuster do?

Request all receipts, photos taken before repairs, and contractor statements to reconstruct the original damage scope (Correct answer)
Accept the completed repair invoices as the full measure of loss without further investigation
Refer the claim to the SIU without conducting any further investigation
Deny the claim immediately for failure to cooperate

Correct answer: Request all receipts, photos taken before repairs, and contractor statements to reconstruct the original damage scope

The adjuster should gather all available documentation to reconstruct the pre-repair damage, honoring the insured's duty to mitigate while maintaining accurate loss valuation.

Question 94: During a hurricane CAT, a temporary tarping company charges $4,000 to tarp a roof. The adjuster believes a reasonable tarping cost is $1,500. How should the adjuster handle this?

Pay the reasonable and customary amount of $1,500 and document why the charged amount is excessive (Correct answer)
Pay the full $4,000 because emergency mitigation costs are always covered in full
Pay nothing until the insured provides three competing bids
Deny the tarping expense because the insured should have shopped for a better price

Correct answer: Pay the reasonable and customary amount of $1,500 and document why the charged amount is excessive

Insurers pay reasonable and customary charges for emergency mitigation; the adjuster should document the market rate and pay accordingly, not the inflated amount.

Question 95: An adjuster is asked by a supervisor to settle a claim for less than its known value to meet quarterly budget targets. The correct ethical response is to:

Comply because the supervisor has authority over claims decisions
Settle for the lower amount but pay the difference from a discretionary fund
Immediately resign from the company
Refuse and document the directive, escalating to compliance or legal if necessary (Correct answer)

Correct answer: Refuse and document the directive, escalating to compliance or legal if necessary

Settling claims below known value for financial reasons violates state unfair claims practices laws and adjuster ethical obligations; refusal and escalation is required.

Question 96: Which of the following is critical when assessing roof damage after a storm?

Gutter condition only
Shingle and structural damage (Correct answer)
Exterior paint color
Type of landscaping

Correct answer: Shingle and structural damage

Evaluating shingle loss, water intrusion, and structural impact helps determine the extent of the damage and appropriate settlement.

Question 97: Under a standard personal auto policy, which coverage pays for damage to the insured's own vehicle caused by a collision?

Collision coverage (Correct answer)
Comprehensive coverage
Uninsured motorist property damage
Medical payments coverage

Correct answer: Collision coverage

Collision coverage applies when the insured's vehicle sustains damage resulting from a collision with another object or vehicle.

Question 98: When is it appropriate for a claims adjuster to use an independent medical examination (IME)?

Only when the claimant specifically requests one
When the treating physician's opinion is unclear or conflicting medical evidence exists (Correct answer)
On every bodily injury claim to reduce payout amounts
Never, because IMEs are considered bad faith

Correct answer: When the treating physician's opinion is unclear or conflicting medical evidence exists

IMEs are appropriate tools when medical evidence is unclear, conflicting, or when there is a reasonable basis to question the scope or causation of claimed injuries.

Question 99: What does 'betterment' mean when applied to an auto repair claim?

An upgrade the insured can request at no charge
A deduction applied when a new part improves the vehicle's condition beyond its pre-loss state (Correct answer)
A premium discount for safe driving
An increase in coverage limits after a claim

Correct answer: A deduction applied when a new part improves the vehicle's condition beyond its pre-loss state

Betterment is a reduction in claim payment to account for the added value when a worn part is replaced with a new one, ensuring indemnity rather than improvement.

Question 100: What is 'loss of consortium' as a component of a bodily injury claim?

Loss of income due to inability to work
Damages claimed by a spouse for the loss of companionship and marital relations due to the injured party's condition (Correct answer)
Loss of vehicle use during repairs
The injured claimant's loss of business profits

Correct answer: Damages claimed by a spouse for the loss of companionship and marital relations due to the injured party's condition

Loss of consortium is a derivative claim by the injured person's spouse for the deprivation of the benefits of their marital relationship caused by the injury.

Question 101: Which of the following describes 'functional obsolescence' when depreciating a structure?

A loss in value due to outdated design, layout, or features that reduce utility (Correct answer)
Physical deterioration caused by weather exposure over time
Depreciation applied to personal property rather than the structure
Damage caused by failure to perform routine maintenance

Correct answer: A loss in value due to outdated design, layout, or features that reduce utility

Functional obsolescence reduces a property's value due to outdated features (e.g., low ceilings, poor floor plans) that make it less desirable even if it is physically sound.

Certified All-Lines Adjuster (CALA) Designation Exam

The Certified All-Lines Adjuster (CALA) is a Florida-approved designation offered by Kaplan Financial Education that qualifies candidates for the Florida 6-20 All-Lines Adjuster License, covering property and casualty insurance, medical claims, claims handling procedures, coverage interpretation, and catastrophe adjusting.

100

Questions

120 min

Time Limit

70%

To Pass

Checking for saved progress...

Exam Rules

You can skip questions and return to them later
Flag questions for review before submitting
No feedback shown until you submit the entire exam
Unanswered questions count as wrong — answer everything
10 pretest questions are mixed in and don't affect your score
Timer auto-submits when time runs out
Your progress is auto-saved every 30 seconds