AIC 30 Chapter 2

A representative investigating a third-party claim is very concerned about waiving any rights under the policy. She decides to send a reservation of rights letter to the third-party claimant. Generally, this action is Select one: A. Not advisable because a third-party claimant has no obligations under the policy. B. Not advisable because a nonwaiver agreement is the appropriate vehicle for third-party claimants. C. Advisable because a reservation of rights letter will prevent a claimant from incurring expenses if they think that there may be no insurance. D. Advisable because under the agency principle, she must act to protect the company's rights.

A . Reservation of rights, like nonwaiver agreements, can only be used with the insured on any type of first-party claim. They are not sent to third-party claimants because third-party claimants have no obligations under the policy, unless required by state law.

Once a claim is acknowledged, a claim representative should Select one: A. Identify the policy, contact the insured, investigate, and document the loss.amount and concluding the claim. B. Contact the insured, determine the amount that the insured is seeking, and then pay the claim. C. Determine the loss amount and pay the claim. D. Identify the policy, investigate the loss details, pay the claim, and then establish the claim reserve to ensure claim reserve.

A Correct. To ensure that every claim is handled in good faith, the claim representative should follow a systematic claim handling process which includes acknowledging the claim, identifying the policy, contacting the insured or insured representative, investigating and documenting the claim, determining cause of loss and loss

All of the following are common ways a loss is reported to an insurer, EXCEPT: Select one: A. By civil authorities B. Through an insurance agent C. Through a lawsuit D. By telephone

A. All listed are common ways a loss is reported to an insurer, EXCEPT by civil authorities.

An example of a record-only claim would be Select one: A. A hospital patient slips on a wet floor in her room but is not injured. B. A claim where coverage is denied by the insurer. C. An insured reports a theft of belongings from his automobile. D. A claim where insurance fraud is suspected.

A: A hospital patient slips on a wet floor in her room but is not injured.

Georgio, an adjuster for Grounded Insurance Company, is handling a windstorm loss for his insured, Matthew, who has an unendorsed HO-3 policy. He tells Matthew by phone to go ahead and repair all the roof damage on his home and his concrete building. When Georgio arrives at Matthew's home, he finds that Matthew has repaired the roof on the home and also the roof on his concrete building where his painting contracting business is located. There is no coverage for the concrete building since business is conducted there. Which one of the following principles describes the reason that Georgio cannot now deny the roof claim for the concrete building? Select one: A. Bad faith B. Waiver C. Barring of rights D. Reservation of rights

B Correct. When Matthew told Georgio to repair the damage to the concrete building over the phone, he waived the insurer's right to deny the claim later.

A mini-trial is a cost-effective alternative to a jury trial because Select one: A. It allows lawyers to present a case valued at less than $25,000 to a six-person jury in an expedited fashion, thus saving expenses. B. It allows lawyers to present an abbreviated version of a trial to a panel who give feedback on the strengths and weaknesses of a case. C. It allows lawyers to present a full trial to a jury without using expensive exhibits or experts, thus saving on expenses for the plaintiff. D. It allows lawyers to present a trial to a jury with time limits of one business day thereby, saving expenses for the insurer and plaintiff.

B. It allows lawyers to present an abbreviated version of a trial to a panel who give feedback on the strengths and weaknesses of a case. At mini-trial lawyers present an abbreviated version of a trial to a panel or an advisor who poses questions and offers opinions on the outcome of a trial. A mini-trial enables parties to test the validity of their positions and continue negotiations. Parties can terminate the process at any time.

Which one of the following is correct with respect to contractual liability? Select one: A. Insurance does not apply to claims involving assumptions of liability or warranties stated in the contract. B. It arises when someone's rights under a contract's terms are violated C. It can arise only out of a written contract, not from a verbal or implied contract. D. Insurance generally covers damages from breach of contract.

B. It arises when someone's rights under a contract's terms are violated.Correct. It arises when someone's rights under a contract's terms are violated.

Which one of the following pieces of information is most important for a claim representative to obtain upon first contact with a liability claimant? Select one: A. Claimant's medical history B. Nature and extent of the injuryCorrect. The claim representative should try to obtain information on the nature and extent of any injury. C. Claimant's accident history D. Claimant's sources of additional income

B. Nature and extent of the injury Correct. The claim representative should try to obtain information on the nature and extent of any injury.

Dan lives in an old home that always seems to need repair. He has known for months that several of the boards on his front porch are rotten, but he has not replaced them. He and his family avoid the porch and use the back door instead. One day the rotten boards collapse under the weight of the letter carrier who is delivering Dan's mail. The letter carrier suffers a broken leg, a sprained wrist, and contusions. Comparative negligence is followed in Dan's state, and the ordinary standard of care for liability based on negligence applies as to mail carriers delivering to residences. Which one of the following best describes liability in this situation? Select one: A. Because Dan was aware of the rotten boards in the porch and chose not to repair them, this omission would be considered an intentional tort. Dan would be responsible for the letter carrier's injuries, but his insurer would not provide any coverage since intentional torts are excluded. B. Because a reasonably prudent person should have seen that the porch was in bad repair, but the letter carrier continued to deliver Dan's mail to the front door, the letter carrier would be considered to be contributorily negligent. As a result, the letter carrier cannot recover for his injuries, and neither Dan nor his insurer is obliged to pay anything. C. Because the rotten boards made the porch dangerous, Dan would be held strictly liable for any injuries related to the porch, even if those injuries were the result of contributory or comparative negligence on the part of the letter carrier. Dan's insurer would pay under the liability portion of his homeowners policy. D. Because a reasonably prudent person would repair the porch, and because Dan's failure to do so was the proximate cause of the letter carrier's injuries, Dan would be considered negligent and therefore liable for those injuries in accordance with his degree of fault. His insurer would provide coverage under the liability portion of Dan's homeowners policy.

Because a reasonably prudent person would repair the porch, and because Dan's failure to do so was the proximate cause of the letter carrier's injuries, Dan would be considered negligent and therefore liable for those injuries in accordance with his degree of fault. His insurer would provide coverage under the liability portion of Dan's homeowners policy.Correct. Because a reasonably prudent person would repair the porch, and because Dan's failure to do so was the proximate cause of the letter carrier's injuries, Dan would be considered negligent and therefore liable for those injuries in accordance with his degree of fault. His insurer would provide coverage under the liability portion of Dan's homeowners policy.

Information gained during the investigation of a claim helps the claims representative to determine Select one: A. The amount of punitive damages that may be assessed B. The likely jury award amount and the insured's fault. C. The cause of loss, liability for the loss, and the amount of loss. D. The violated civil statutes and the appropriate plaintiff counsel.

C. The cause of loss, liability for the loss, and the amount of loss

Which one of the following statements is true concerning the six activities in the claim handling process. Select one: A. Not all activities are performed in every claim. B. Only one activity should be performed at a time. C. They are not always undertaken sequentially. D. D. Activities cannot be repeated for a particular claim.

C. They are not always undertaken sequentially.

Which one of the following is correct with respect to statutory liability? Select one: A. If common law covers a particular situation, statutory law cannot amend the rights of injured parties in that situation. B. "No-fault" laws eliminate the need to prove fault in order to sue the other party in an auto accident. Workers compensation statutes impose strict liability on the employer to pay specified benefits to injured workers. C. Workers compensation statutes impose strict liability on the employer to pay specified benefits to injured workers. D. It is created through laws that impose liability to ensure adequate compensation for injuries, but cause lengthy disputes over who is at fault.

C. Workers compensation statutes impose strict liability on the employer to pay specified benefits to injured workers.

Which one of the following is true with respect to a claims representative's need to conduct a medical investigation in bodily injury or disability claims? Select one: A. Medical documentation is required under HIPPA statutes and must be kept confidential. B. Collecting medical documentation of injuries gives the insurer more time to prepare negotiation tactics and make lower settlement offers. C. Medical documentation helps to determine the costs of treatment and the amount of pain and suffering that resulted from the injury or accident. D. Medical documentation is not necessary when evaluating a clear liability claim and /or when the injuries are obvious.

C: Medical documentation helps to determine the costs of treatment and the amount of pain and suffering that resulted from the injury or accident.Correct. A medical investigation helps the claims representative determine the costs of medical treatment, expected duration of treatment and disability, the need for rehabilitation, and the suitability of medical care for the type of injuries suffered. This information also assists in evaluating the amount of pain and suffering that resulted from the accident or injury.

Lanny, a claim representative with Babbling Brook Insurance Company, is ready to settle a serious bodily injury claim with Freda. He notices that Medicare is listed as payer on her hospital bill of $75,000. He and Freda have agreed to settle her claim for $255,000. Since Freda has been enrolled in Medicare for four years, which one of the following entities must approve the settlement? Select one: A. Department of Social Services B. Medicare and Medicaid Payment Coordination Division C. Center for Medicare and Medicaid Services D. Medicare and Medicaid Payer Program . The Center for Medicare and Medicaid Services must approve the settlement if the claimant is a Medicare beneficiary and the settlement amount is at least $250,000.

Center for medicare and medicaid ServicesThe Center for Medicare and Medicaid Services must approve the settlement if the claimant is a Medicare beneficiary and the settlement amount is at least $250,000.

Activities in the claim handling process include documenting the claim; determining the cause of loss; identifying the policy; and contacting the insured. Of these four activities, which one is normally performed earliest? A. Contacting the insured B. Determining the cause of loss C. Documenting the claim D. Identifying the policy

D

One of the most common alternative dispute resolution methods is Select one: A. Trials. B. Summary trials. C. Settlement negotiations. D. Mediation

D. .Correct. The most common ADR techniques are mediation, arbitration, appraisals, mini-trials, summary jury trials, and pretrial settlement conferences. In mediation, disputing parties use a neutral outside party to examine the issues and develop a mutually agreeable settlement.

The claim representative received a letter from an insured claiming damage to his property under a homeowners policy. Which one of the following statements about the letter is true? Select one: A. This can be an actual loss notice only if it contains all of the information concerning the loss and its causes. B. This is not an actual loss notice because the producer must submit an special form by mail, e-mail or fax. C. This is not an actual loss notice because an actual loss notice must follow a standardized format and be submitted electronically. D. This is an actual loss notice because losses can be reported by mail.

D. Not all losses are reported using a loss notice. Some notices of loss may be by letter or lawsuit. Not all details of the loss must be contained in the notice of loss.

Successful insurers follow a systematic approach to handling claims. The first step in the claims process is the Select one: A. Initial assessment. B. Coverage determination. C. Obtaining statements. D. Loss notice acknowledgment and assignment.

D. The first step in the claims process is the loss notice acknowledgment and assignment.

Damages that courts award in order to compensate claimants for such things as pain and suffering that do not involve specific measurable expenses are referred to as Select one: A. Compensatory damages. B. Special damages. C. General damages. D. Punitive damages.

General damages. Damages that courts award in order to compensate claimants for such things as pain and suffering that do not involve specific measurable expenses are referred to as general damages.

Which one of the following statements is true regarding liability based on statute? Select one: A. Employers in all 50 states are allowed the use of common law defenses for work-related injuries. B. No-fault laws and workers compensation laws are examples of contractual liability. C. A workers compensation statute helps facilitate an employee's right to sue the employer for most work-related injuries. D. In some states, no-fault laws were enacted to reduce the number of lawsuits resulting from auto accidents.

In some states, no-fault laws were enacted to reduce the number of lawsuits resulting from auto accidents.Correct. No-fault laws were enacted in some states to reduce the number of lawsuits resulting from auto accidents. They recognize the inevitability of accidents and restrict or eliminate the right to sue the other party except under specific circumstances or criteria.

Which one of the following alternative dispute resolution methods enables parties to test the validity of their positions and continue negotiations? Select one: A. Mini-trial B. Appraisal provision C. Arbitration D. Mediation

Mini TrialIncorrect. In a mini-trial a case undergoes an abbreviated version of a trial before a panel or an adviser who poses questions and offers opinions on the outcome of a trial, based on evidence presented.

Liability policies cover insureds for compensatory damages an insured owes to a third party. Compensatory damages normally covered by the policy include Select one: A. Pain and suffering and out-of-pocket expenses claimed up to the policy limit. B. Punitive Damages and legal expenses. C. General damages within the policy limit and all special damages. D. Damages from deceitful or malicious acts of an insured.

Pain and suffering and out-of-pocket expenses claimed up to the policy limit .Correct. Compensatory is compensation to claimants for their bodily injury or property damage resulting from a covered loss. Special Damages are monetary awards for specific, out of pocket expenses incurred because of a loss. General Damages are monetary awards to compensate a victim for losses such as pain and suffering that do not involve specific measurable expenses.

Database information on a claimant reveals that the claimant's current injury is the same injury reported on three other accidents within the last five years. The appropriate next step for the claims representative is to Select one: A. Ignore past accidents and injuries as they will have no impact on the current claim. The claims representative should investigate as though this was a new injury claim. B. Investigate the prior accidents and injuries to determine if the insurer has legal liability. C. Investigate the accidents to determine if the current claim can be denied as the claimant was injured previously. D. Advise the claimant that the past accidents may preclude any claim payments, because pre-existing conditions are not covered.

Prior claim investigations help prevent paying for property damage or bodily injury that has been paid through prior claims by the same or other insurers. The claims representative should investigate the claim history. B

Liability based on negligence must be established by four elements. Which one of the following describes one of those elements? Select one: A. No comparative negligence on the part of the injured party B. Plaintiff's legal duty to use due care, owed to the defendant C. No breach of the duty of care D. Proximate causation

Proximate causation Correct. Proximate cause, or a casual connection between the negligent act and the harm or injury, must be present.

For liability claims, damages for which the insured may be found liable include compensatory and Select one: A. Negligence. B. Liability. C. Punitive. D. Specific.

Punitive.Correct. For liability claims, the insured may be liable for compensatory damages and punitive damages.

A claims representative is investigating a tort claim where the insured is reluctant to allow the carrier to inspect the site. Thinking that coverage may be an issue, the representative should Select one: A. Assign an outside investigator to inspect the site at night and use this information to adjust the claim. B. Send a nonwaiver agreement to the insured, as the insured is not complying with the policy conditions of cooperation and inspection C. Advise the insured that the investigation is delayed and wait until the insured complies with the policy conditions. D. Initiate suit against the insured without advising the insured of the policy conditions.

Send a nonwaiver agreement to the insured, as the insured is not complying with the policy conditions of cooperation and inspection.Correct. A nonwaiver agreement is usually used when the claim representative is concerned about investigating a claim, before the insured has substantially complied with policy conditions, or when there appears to be a specific coverage problem or defense. Both parties must sign the agreement.

Which one of the following databases should a claim representative review prior to issuing a claim payment? Select one: A. State databases for delinquent child support payments B. State databases for pending lawsuits C. National databases for escheat payments D. State databases for traffic violations

State databases for delinquent child support payments Claim representatives must check various databases to ensure that the claim payment complies with federal and state laws.

Glenda recently had her brakes repaired on her 1972 Ford at Go's Garage. Glenda left the garage and drove into a tree. Glenda claimed her brakes failed. She submitted a claim for the damage to her car to her auto insurer. Glenda's claim representative may need to consider which one of the following types of investigation? Select one: A. Arbitration B..Subrogation C. Legal D. Negotiation

SubrogationCorrect. Subrogation is an insurer's right to recover payment from a negligent third party who caused a property or liability loss that the insurer has paid to or on behalf of an insured

Which one of the following statements is true regarding file status notes? Select one: A. The file status notes should recount the subjective thinking of the claims adjuster so that regulators will understand the mindset of the adjuster in making claim decisions. B. The file status notes should be written in eloquent language so that if it is read aloud at trial it will come across as sophisticated and impressive. C. The file status notes must be written with abbreviations to protect the confidentiality of the claimant. D. The file status notes must contain concise and accurate information documenting claim file decisions.

The file status notes must contain concise and accurate information documenting claim file decisions. Correct. Clear, concise and accurate file status notes are essential, because a claim file must speak for itself. The notes should be a chronological account of the claim representative's activities.

Buddy's store is damaged in a fire. He suffers loss of his merchandise as well as loss of income while he replenishes his stock. His direct loss is Select one: A. There is no direct loss in this example. B. The loss of customers who go to his competitors. C. The loss of income while he replenishes his stock. D. The loss of his merchandise and damage to the store.

The loss of his merchandise and damage to the store.Correct. A direct loss is a reduction in property value resulting immediately and proximately from damage caused by a covered cause of loss. An indirect loss is a loss arising as a result of damage to property, other than the direct loss to the property. Property damage to the store and to the merchandise is a direct loss. Income loss is an indirect loss.