Settling the Claim

Question 1

Claim definition

Answer 1

formal request to settle

Question 2

What 4 options does an adjuster have when a claimant submits a claim?

Answer 2

1. ) Accept and pay
2. ) Refuse and deny
3. ) Negotiate
4. ) Alternative dispute resolution method

Question 3

“Accept request and pay the claim” process:

Answer 3

1. ) Claimant proves damages
2. ) Adjuster determines settlement amount based on investigation.
3. ) If amount is close to claimant’s offer, adjuster comes to agreement with claimant and issues settlement check. Small differences should be settled in favor of the claimant.

Question 4

What does draft authority?

Answer 4

• Adjuster can settle directly with claimants and write checks for the insurer.
• Often limited to a certain amount (ex.: $5,000)
• Without draft authority, adjuster would submit settlement for approval.

Question 5

“Refuse the request and deny the claim” reasons:

Answer 5

• Damages aren’t covered.
• claim is fraudulent.
• claimant can’t prove damages.
• loss occurred outside policy period.

Question 6

Reasons for “Negotiate with the claimant” option:

Answer 6

• damage is covered
• claimant is asking for more than insurer is willing to pay
• adjuster must negotiate to find an amount that will settle the claim.

Question 7

When is negotiation not possible?

Answer 7

Adjusters must know the exact amount that the insurer is willing to pay to settle prior to investing time in the negotiation process.

No negotiations:

• When dollar amount difference offered is too small.- goes to court
• When dollar amount difference is too great.- settle the case if it is close enough.
• For punitive damages.

Question 8

Adjuster/claimant negotiation only works when____ and is the ___, ____ negotiation option.

Answer 8

• both parties are motivated to settle.
• Easiest
• lowest-cost

Question 9

Alternative dispute resolution methods

Answer 9

• Arbitration
• Meditation
• Appraisal
• Declaratory Judgement
• Litigation (letting the claim go to court) Last resort due to unpredictability and cost.

Question 10

Arbitration characteristics

Answer 10

• Arbitrator is a neutral third party.
• Arbitrator’s decision is legally binding.
• Costs less to tax payers than a court of law.
• Less formal atmosphere allows more evidence.
• Arbitrators often have more expertise than juries.

Question 11

Mediation characteristics

Answer 11

• mediator is a neutral third party
• mediator only advises in the negotiation
• mediation decision is not legally binding
• settlement is only legally binding if both parties agree to it. (claimant can back out for a short time, but insurer cannot)
• Either party may “Walk away” (impasse)

Question 12

Consequences for failure to appear at mediation

Answer 12

• Severe for the insurer: contempt of court and/or penalties.
• Mild for the claimant- no penalty or minor penalty.

Question 13

Appraisal condition (clause) conditions

Answer 13

• A definite disagreement must exist prior to appraisal.
• Each side chooses an appraiser
• Both appraisers agree on an umpire
• Agreement by any two of the three is binding
• Appraisal only decides settlement amount, not whether coverage exists in the first place.

Question 14

Declaratory judgement action

Answer 14

• Court declares the legal rights of both parties
• Court does not decide how to resolve the case
• Disputing parties then use the court’s decision to come to settlement.

Question 15

Litigation

Answer 15

• Last resort
• Taking a claim to court can be:
• expensive
• unpredictable
• possible even after binding negotiations of previous methods

Question 16

Settlement definition

Answer 16

When two parties in a dispute reach an agreement.

• how much will be paid
• terms and conditions of payment

Question 17

When a settlement is reached, the claimant gives up her right to ____ and right to ___. As long as the insurer follows the _____.

Answer 17

• seek any further damages
• right to sue.
• Terms of the settlement.

Question 18

Full release settlement (aka “full release of all claims and settlement agreement”)

Answer 18

• all damages paid at once
• most common settlement option
• insurer pays immediate, single ‘lump sum’ to claimant
• claimant signs Full Release Form that releases the insurer from additional claims.

Question 19

Scheduled payment release (aka “Open-ended release” or “Rehabilitation Settlement”)

Answer 19

• Insurer agrees to pay ALL Compensatory Damages (special and general) up to the point of settlement.
• Insurer also pays for certain future “incidentals” related to the claim
• Most commonly used in Workers Comp claims.

Question 20

Partial Release ( aka: “payment of property damage; bodily injury pending”)

Answer 20

• involves claims that have property damage and bodily injury
• insurer indemnifies all property damages while it awaits the proper indemnification for bodily injury.
• claimant must be in a condition in which he can understand this settlement option.

Question 21

Advance payment settlement

Answer 21

• Used when the claimant’s damages are mostly bodily injury and the claimant is unable to work.
• Involves a series of partial payments that will be subtracted when the final settlement amount is determined
• Decreases chances of lawsuit

Question 22

No release settlement (aka “walk-away” settlement

Answer 22

• Insurer pays the bills submitted by the claimant

- signing and cashing a check substitutes for the release form

Question 23

Structured settlement

Answer 23

• Series of smaller payments over time
• Reserved for largest claims
• Insurer often must pay a portion up front

Question 24

Full release

Answer 24

Insurer writes one check to cover all damages, claimant signs a full release form.

Question 25

Scheduled payment release

Answer 25

Insurer pays all compensatory damages and agrees to pay certain future “incidentals”.

Question 26

Payment of property damage, bodily injury pending

Answer 26

Insurer indemnifies for property damage first; then bodily injury, when the amount is available.

Question 27

Advance payment

Answer 27

Insurer makes multiple partial payments until the final settlement is agreed upon.

Question 28

No release form

Answer 28

Insurer cuts a check for the amount of the damages, but the claimant is not required to sign a release form.

Question 29

Structured settlement

Answer 29

Breaks up the indemnity into a series of smaller payments.