CA Fair Claims

Question 1

Lawrence holds both an independent staff adjusters license and a public adjusters license as permitted by law in his state. He is employed by Binders Keepers, Inc. and regularly adjusts claims for the company that arise from Homeowners policies. Lawrence has been hired by Kelli to act as a public adjuster on her behalf to present a claim under her Homeowners policy that was issued by Binders Keepers, Inc. If Lawrence accepts the contract with Kelli, it may:

Answer Choices: Select the Correct Answer
Present a conflict of interest.
Be a violation of Lawrence’s appointment.
An example of quid pro quo.
Be a violation of the statute of limitations of Lawrence’s license.

Answer 1

Present a conflict of interest. is correct.

EXPLANATION:
This situation may present a conflict of interest for Lawrence. It would not be a violation of his appointment by Binders Keepers, Inc. because the question states that state law permits Lawrence to hold both licenses.

Question 2

Indemnify Insurance, Inc. is deploying adjusters to an area recently hit by a hurricane. The company has 25 employee adjusters who are ready to deploy but they need 25 more. Carol is a licensed adjuster who signs a contract with Indemnify Insurance, Inc. to work on their behalf during this deployment. Carol is acting as:

Answer Choices: Select the Correct Answer
An independent adjuster.
A public adjuster.
A field adjuster.
A staff adjuster.

Answer 2

An independent adjuster. is correct.

EXPLANATION:
Carol is being deployed as an independent adjuster under contract (an independent contractor) who is NOT an employee of the insurance company.

Question 3

The type of “agent authority” that allows an adjuster to exercise his/her express authority is:

Answer Choices: Select the Correct Answer
Evident authority.
Implied authority.
Apparent authority.
Actual authority.

Answer 3

Implied authority. is correct.

EXPLANATION:
“Implied authority” allows the adjuster to perform all of the usual tasks necessary to adjust a claim that are specified in their “express authority”.

Question 4

An independent adjuster acts on behalf of his or her principal. Which of the following is the principal for an independent adjuster?

Answer Choices: Select the Correct Answer
The court.
The claimant.
The insurer.
The insured.

Answer 4

The insurer. is correct.

EXPLANATION:
The “principal” for an independent adjuster is the insurer. Independent adjusters work on behalf of the insurance company against which, the claim is being made.

Question 5

Skye is an insured under an insurance policy that covers both the insured and the insured’s actions for which they can be held liable. Which of the following statements is NOT true in this situation?

Answer Choices: Select the Correct Answer
Any claim submitted against the policy for bodily injury caused by Skye is a third-party claim.
Any claim submitted against the policy for an act of negligence accidentally committed by Skye is a first-party claim.
Any claim submitted against the policy by Skye is a first-party claim.
Any claim submitted against the policy for property damage caused by Skye is a third-party claim.

Answer 5

Any claim submitted against the policy for an act of negligence accidentally committed by Skye is a first-party claim. is correct.

EXPLANATION:
The answer choice: “Any claim submitted against the policy for an act of negligence accidentally committed by Skye is a first-party claim.” is NOT true. Claims submitted to cover acts of negligence for which Skye is liable are third-party liability claims.

Question 6

All of the following statements are TRUE regarding the fiduciary responsibilities of an adjuster, EXCEPT:

Answer Choices: Select the Correct Answer
The adjuster must represent the interests of their principal.
The adjuster has the authority to act on behalf of their principal.
The adjuster should not represent interests that are averse to those of the principal.
The adjuster must make statements in writing before they will bind the principal.

Answer 6

The adjuster must make statements in writing before they will bind the principal. is correct.

EXPLANATION:
Statements made by the adjuster can be ORALLY or in writing to bind the principal. Therefore, statements are not required to be in writing to bind the principal.

Question 7

Which of the following is NOT considered to be a “specialty adjuster”?

Answer Choices: Select the Correct Answer
Workers’ compensation adjuster.
Accident & health adjuster.
Casualty adjuster.
Automobile liability adjuster.

Answer 7

The correct answer is: Casualty adjuster.

EXPLANATION:
A property and/or casualty adjuster is not a “specialty adjuster” because they do not specialized in a single type of claim.

Question 8

Kelly, Vince, Ed, and Ginny are all staff adjusters. Which of these adjusters is acting appropriately as a fiduciary agent?

Answer Choices: Select the Correct Answer
Kelly tries to calm an angry claimant by telling him that she’s sure his claim will be covered, even though she has not yet determined the cause of loss.
Vince finds additional damage that seems to be related to the claim, but he leaves it off of his estimate because the claimant didn’t notice it in the first place.
Ed knows the claimant can’t possibly afford to pay for their extensive damages, but he denies the claim anyway because the cause of loss was not covered by the policy.
Ginny investigates the claim and determines the loss is not covered, but writes up her estimate in such a way that it would appear to be covered so she can pay the claimant anyway.

Answer 8

Ed knows the claimant can’t possibly afford to pay for their extensive damages, but he denies the claim anyway because the cause of loss was not covered by the policy. is correct.

EXPLANATION:
If a claim is not covered by the policy, the staff adjuster has a fiduciary responsibility to protect the financial interest of the insurer and deny the loss. The fact that the claimant can’t afford to pay for the damages has nothing to do with the coverage issue.

Question 9

The information provided by the insured in a proof of loss form is considered:

Answer Choices: Select the Correct Answer
A representation.
A warranty.
An assignment.
An agreement.

Answer 9

The correct answer is: A representation.

EXPLANATION:
Representations are statements made by the insured that are assumed to be truthful to the best of the insured’s knowledge.

Question 10

The duties of the insured after a loss are included in insurance policy language to:

Answer Choices: Select the Correct Answer
Benefit the named insured under the policy.
Comply with state statutes requiring the insured to report the loss in a timely manner.
Assist in the adjuster’s investigation of the claim.
Reduce the likelihood that the insured will bring a lawsuit against the insurer.

Answer 10

The correct answer is: Assist in the adjuster’s investigation of the claim.

EXPLANATION:
The duties of the insured assist the adjuster in conducting the claim investigation.

Question 11

All of the following are duties of the insured after a loss, EXCEPT:

Answer Choices: Select the Correct Answer
To provide the insurer with the amount they expect to be paid for the claim submitted.
To provide the insurer with a prompt notice of loss.
To cooperate in the investigation of the claim.
To make honest representations regarding the pertinent facts of a claim.

Answer 11

To provide the insurer with the amount they expect to be paid for the claim submitted. is correct.

EXPLANATION:
The insured does not have a duty to provide the insurer with the amount they expect to be paid for the claim. The amount paid on a claim is determined by the policy provisions.

Question 12

Which of the following statements is TRUE regarding an “examination under oath”?

Answer Choices: Select the Correct Answer
An EUO is routinely requested by an insurer in first-party claims as part of a proper claims investigation.
An EUO is always requested by an insurer in third-party liability claims to determine if the insured is actually liable for the injury or damage claimed.
An EUO will only be requested by an insurer if they have reason to believe an insured has not been truthful in their account of the circumstances of the loss.
An EUO will only be requested of witnesses in a claim investigation if they have evidence of fraud on the part of the insured or claimant.

Answer 12

The correct answer is: An EUO will only be requested by an insurer if they have reason to believe an insured has not been truthful in their account of the circumstances of the loss.

EXPLANATION:
An EUO will only be requested by an insurer if they have reason to believe an insured has not been truthful in their account of the circumstances of the loss. If the insured swears to their account of the loss and it is later determined to be false, the insurer will have grounds to deny the claim and the insured could possibly face criminal charges for insurance fraud.

Question 13

All of the following statements are true regarding a lawyer who is acting in the capacity of an adjuster, EXCEPT:

Answer Choices: Select the Correct Answer
Lawyers may act in the capacity of an adjuster for an insurance company without an adjuster license.
Lawyers can never act in the capacity of an adjuster without being subject to the adjuster licensing requirements of the state(s) in which they are working.
Lawyers who are acting the capacity of an adjuster for an insurance company are subject to all the laws and regulations to which the insurance company is subject.
Lawyers for insurance companies work closely with company adjusters to carry out the procedures necessary to settle claims.

Answer 13

Lawyers can never act in the capacity of an adjuster without being subject to the adjuster licensing requirements of the state(s) in which they are working. is correct.

EXPLANATION:
The answer choice that is NOT true is: “Lawyers can never act in the capacity of an adjuster without being subject to the adjuster licensing requirements of the state(s) in which they are working.” All of the other answer choices are true of lawyers who work for insurance companies adjusting claims.

Question 14

Which of the following statements is NOT true regarding the insurer’s request for an “examination under oath” when investigating a claim?

Answer Choices: Select the Correct Answer
An EUO is usually requested by the insurer while investigating a first-party claim.
An EUO is requested by an insurance company only when they feel the insured’s account of the claim circumstances are questionable.
The insured has a duty under their policy to submit to an EUO if the insurer requests it.
An EUO is usually requested by the insurer while investigating third-party claims to determine the truthfulness of the claimant’s account of their injuries.

Answer 14

An EUO is usually requested by the insurer while investigating third-party claims to determine the truthfulness of the claimant’s account of their injuries. is correct.

EXPLANATION:
The statement: “An EUO is usually requested by the insurer while investigating third-party claims to determine the truthfulness of the claimant’s account of their injuries.” is not true because EUOs are used only with first-party claims.

Question 15

Which of the following is NOT a “duty of the insured” after a loss?

Answer Choices: Select the Correct Answer
To meet with the adjuster and return the adjuster’s phone calls.
To pay damages to any third-party claimant while waiting to be reimbursed by the insurer for the loss.
To provide any evidence requested by the adjuster.
To submit a proof of loss statement when requested by the insurer.

Answer 15

To pay damages to any third-party claimant while waiting to be reimbursed by the insurer for the loss. is correct.

EXPLANATION:
The insured does NOT have the duty to pay damages to any third-party claimant while waiting to be reimbursed by the insurer for the loss.

Question 16

All of the following are duties of the insurer in case of a loss as specified by insurance policies, EXCEPT:

Answer Choices: Select the Correct Answer
To investigate a claim after a notice of loss has been submitted to them.
To pay amounts to the insured or a third-party claimant that are at least as high as the national average of similar claim settlements.
To indemnify the insured if coverage applies under their first-party coverage.
To defend the insured in lawsuits and to pay defense costs if a claim is covered by the insured’s liability policy.

Answer 16

To pay amounts to the insured or a third-party claimant that are at least as high as the national average of similar claim settlements. is correct.

EXPLANATION:
Insurance claim settlement amounts are determined by a policy’s limit of liability, not a national average that is paid on similar claims.

Question 17

Which of the following statements is CORRECT regarding the use of non-original equipment manufactured replacement crash parts in the repair of an automobile in California?

Answer Choices: Select the Correct Answer
The parts are prohibited from being used by law.
The parts can only be used if the original manufactured parts are no longer being made.
Insurers may only specify the use of these parts if the vehicle is more than 5 years old.
Insurers specifying the use of these parts must pay the cost to modify them to fit the vehicle being repaired.

Answer 17

The correct answer is: Insurers specifying the use of these parts must pay the cost to modify them to fit the vehicle being repaired.

EXPLANATION:
The only TRUE statement in the answer choices is: “Insurers specifying the use of these parts must pay the cost to modify them to fit the vehicle being repaired.”

Question 18

George is insured by Indemnify Insurance, Inc. and Janet has filed a lawsuit against George for damages that he is legally liable to pay. Janet contacts the adjuster for Indemnify to ask some questions. According to California law, how long does the adjuster have to respond to Janet?

Answer Choices: Select the Correct Answer
The adjuster is not required to respond to Janet.
15 working days.
21 days.
15 calendar days.

Answer 18

The correct answer is: The adjuster is not required to respond to Janet.

EXPLANATION:
The California Code of Regulations does not require insurers to respond to communications from claimants, if that claimant has filed a lawsuit.

Question 19

The California Insurance Code requires that an insurer must provide to the claimant necessary forms, instructions, and reasonable assistance within ______ after receiving notice of a claim.

Answer Choices: Select the Correct Answer
30 days.
72 hours.
15 calendar days.
10 calendar days.

Answer 19

The correct answer is: 15 calendar days.

EXPLANATION:
Claim forms must be provided within 15 calendar days.

Question 20

Samuel is in charge of training all claims agents in his California Insurance Company. Part of Samuel’s job is submitting certification to the California Department that the required annual training covering the standards for prompt investigation and processing of claims has been performed with all claims agents. The certification must be submitted on or before September 1st of each calendar year but on August 31st, Samuel realized that he did not train three of his claims agents in the “standards”. Samuel submits the certificate for those three agents and justifies it by thinking he will perform the training the following week. If Samuel’s deception is discovered, he will be penalized as if he:

Answer Choices: Select the Correct Answer
Committed fraud.
Committed perjury.
Committed an unfair claim settlement practice.
Committed an unfair trade practice.

Answer 20

The correct answer is: Committed perjury.

EXPLANATION:
The required certification is a declaration executed under penalty of perjury.

Question 21

An insurance company in California has received a notice of claim. The company must begin a claims investigation:

Answer Choices: Select the Correct Answer
Within 30 calendar days.
Within 15 business days.
Within 15 calendar days.
Within 30 business days.

Answer 21

The correct answer is: Within 15 calendar days.

EXPLANATION:
The claims investigation can begin immediately, but in no event more than 15 days after receipt of the notice of claim.

Question 22

In California, how soon after receiving a proof of claim (proof of loss) must an insurer accept or deny the claim?

Answer Choices: Select the Correct Answer
15 working days.
30 days.
40 calendar days.
60 calendar days.

Answer 22

The correct answer is: 40 calendar days.

EXPLANATION:
Upon receiving proof of claim (loss), every insurer must immediately but in no event more than 40 calendar days later, accept or deny the claim in whole or in part.

Question 23

Upon acceptance of a claim in whole or in part and, when necessary, upon receipt of a properly executed release, every insurer, except as otherwise specified in the California Insurance Code (CIC), tender payment of the claim within:

Answer Choices: Select the Correct Answer
15 calendar days.
21 calendar days.
30 calendar days.
45 calendar days.

Answer 23

The correct answer is: 30 calendar days.

EXPLANATION:
The claim must be paid within 30 calendar days.

Question 24

All of the following statements are TRUE regarding the requirements to acknowledge the receipt of a notice of claim in California, EXCEPT:

Answer Choices: Select the Correct Answer
The acknowledgement is required to be made in writing.
The acknowledgement must be made immediately.
The acknowledgement cannot be made more than 15 days from the receipt of the notice.
The acknowledgement must be noted in the insurer’s claim file and dated.

Answer 24

The correct answer is: The acknowledgement is required to be made in writing.

EXPLANATION:
The California Insurance Code does not require that the acknowledgement be made in writing.

Question 25

When a settlement of an automobile claim in California is made by paying for a comparable automobile of like kind and quality, that automobile must be available for retail purchase in the local market area within ________ of the date of the final settlement offer.

Answer Choices: Select the Correct Answer
15 days
21 days
30 days
90 days

Answer 25

90 days is correct.

EXPLANATION:
The comparable automobile must be available for retail purchase within 90 days of the final settlement offer.

Question 26

In California, when a residential or commercial fire and extended coverage property insurance policy provides for the settlement of first-party losses on a replacement cost basis, all of the following standards apply, EXCEPT:

Answer Choices: Select the Correct Answer
The insured is not required to pay for depreciation or any other cost except for the deductible.
When the loss requires replacement of items and the replaced items do not match in quality, color or size, the insurer must replace all items in the damaged area to conform to a reasonably uniform appearance.
The insurer is permitted to require that the insured have the property repaired at a specific repair shop in order to be sure all claim settlement standards are met.
When a loss requires repair, any consequential damage caused during the repair must be included in the loss.

Answer 26

The insurer is permitted to require that the insured have the property repaired at a specific repair shop in order to be sure all claim settlement standards are met. is correct.

EXPLANATION:
Insurers are NOT permitted to require that repairs be made at a specific repair shop.

Question 27

Cathy’s Claims Services, a third-party administrator in California, has had an especially busy year and decides to certify that their claims agents have been properly trained in the prompt investigation and processing of claims when they have not. Cathy’s is guilty of:

Answer Choices: Select the Correct Answer
Insurance fraud.
A misdemeanor.
Perjury.
Violating an unfair claim settlement practice.

Answer 27

Perjury. is correct.

EXPLANATION:
Cathy’s is required to truthfully certify, under penalty of perjury, that their claims agents have been trained. Perjury is a felony in California.

Question 28

Annalise lives in California and submits a claim to her insurance company for $7,000 in property damage caused by a third party. The company pays the claim for $6,500 because Annalise has a $500 deductible on her policy. The insurance company subsequently makes a subrogation demand against the third party that caused the damage to Annalise’s property. How much will the insurance company demand from the third party?

Answer Choices: Select the Correct Answer
$6,000
$7,500
$6,500
$7,000

Answer 28

$7,000 is correct.

EXPLANATION:
The California Code of Regulations (CCR) - 2695.7 states that: “Every insurer that makes a subrogation demand shall include in every demand the first party claimants deductible.” Therefore, the amount of the demand in this scenario is $7,000.

Question 29

In California, Surety claims must be accepted or denied within ________ after receipt of the proof of loss.

Answer Choices: Select the Correct Answer
15 days
21 days
35 days
40 days

Answer 29

The correct answer is: 40 days

EXPLANATION:
In California, surety claims must be accepted or denied within 40 days after receipt of the proof of loss.

Question 30

All claims agents (adjusters) in California must have adequate training, provided by the insurance company that employs them, in the standards for prompt investigation and processing of claims. Certification of this training must be submitted to the Insurance Department annually:

Answer Choices: Select the Correct Answer
At least 24 hours before the date the certificate was submitted the prior year.
On or before December 1st of each calendar year.
On or before January 1st of each calendar year.
On or before September 1st of each calendar year.

Answer 30

The correct answer is: On or before September 1st of each calendar year.

EXPLANATION:
The certificate of this training must be submitted on or before September 1st of each calendar year.

Question 31

Adjuster’s claim files in California must be maintained:

Answer Choices: Select the Correct Answer
For seven years.
For three years.
For the current year and the preceding five years.
For the current year and the preceding four years.

Answer 31

The correct answer is: For the current year and the preceding four years.

EXPLANATION:
Claims files in California must be maintained for the current year, and the preceding four years, for a total of five years.

Question 32

The California legislature has adopted a new standard for the prompt investigation and processing of claims. Cathy’s Claims Services, a third-party administrator, is required to adopt and communicate to all its adjusters the new standard:

Answer Choices: Select the Correct Answer
At least 90 days before the standard becomes effective.
Within 90 days after the effective date of the new standard.
At least 45 days before the standard becomes effective.
Within 45 days after the effective date of the new standard.

Answer 32

The correct answer is: Within 90 days after the effective date of the new standard.

EXPLANATION:
Cathy’s must adopt the new standard and train their claims agents (adjusters) on the new standard within 90 days after the effective date of the new standard.

Question 33

Upon receiving any written or oral inquiry from the Department of Insurance concerning a
claim, every licensee must immediately, but in no event more than ___ calendar days of
receipt of that inquiry, furnish the Department of Insurance with a complete written response
based on the facts as then known by the licensee.

Answer 33

in no event more than 21 calendar days

Question 34

Upon receiving any communication from a claimant, regarding a claim, that reasonably suggests
that a response is expected, every licensee must immediately, but in no event more than
___ calendar days after receipt of that communication, furnish the claimant with a complete
response based on the facts as then known by the licensee.

Answer 34

in no event more than
15 calendar days

Question 35

Upon receiving notice of claim, every insurer, except as specified below, must immediately,
but in no event more than ___ calendar days later, do the following unless the notice of claim
received is a notice of legal action:

• Acknowledge receipt of the notice to the claimant, unless the insurer makes the
  claim payment within that period of time.
• Provide to the claimant necessary forms, instructions, and reasonable assistance
• Begin any necessary investigation of the claim

Answer 35

in no event more than 15 calendar days

Question 36

Upon receiving proof of claim, every insurer must immediately, but in no event more than ___
calendar days later, accept or deny the claim, in whole or in part.

Answer 36

in no event more than 40
calendar days later, accept or deny the claim, in whole or in part. The amounts accepted or
denied must be clearly documented in the claim file unless the claim has been denied in its
entirety.

Question 37

Upon acceptance of the claim in whole or in part and, when necessary, upon receipt of a
properly executed release, every insurer, must immediately, but in no event more than ___
calendar days later, tender payment or otherwise take action to perform its claim
obligation.

Answer 37

in no event more than 30
calendar days later, tender payment or otherwise take action to perform its claim
obligation. (This does NOT apply to disability, disability income, mortgage guaranty, and auto
repair claims.)

Question 38

surety claims must be accepted or denied no later than ___
days after receipt of the proof of loss.

Answer 38

no later than 40
days after receipt of the proof of loss.

Question 39

When a surety claim is not in dispute, payment must be made:
* Within ___ calendar days following determination of liability where the surety does
not require the claimant to execute a release; OR
* Within ___ calendar days following the surety’s receipt of a release properly executed
by the claimant, when a release is required by the surety. (10 CCR 2695.10)

Answer 39

Within 15 calendar days

Question 40

Juanita had her automobile insured by Binders Keepers, Inc. insurance company in California. She had a car accident where she was at-fault and submits a claim to her insurance company. Binders Keepers sends a claim draft payment for Juanita to use to purchase a comparable automobile but she has not been able to find one. She must notify her insurer:

Answer 40

The correct answer is: Within 35 calendar days after she received her claim draft.

EXPLANATION:
Juanita must contact her insurance company within 35 calendar days of the date she received the draft payment. Notifying the insurer will permit them to take additional steps in assisting Juanita in finding a comparable automobile.

Question 41

The California legislature has adopted a new standard for the prompt investigation and processing of claims. Cathy’s Claims Services, a third-party administrator, is required to adopt and communicate to all its adjusters the new standard:

Answer 41

The correct answer is: Within 90 days after the effective date of the new standard.

EXPLANATION:
Cathy’s must adopt the new standard and train their claims agents (adjusters) on the new standard within 90 days after the effective date of the new standard.