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AL state law · part 2 of 2
Alabama Independent Adjuster Practice Test: Alabama law, Part 2
15 more Alabama law questions for the Alabama Independent Adjuster exam. Every explanation cites the statute or rule it is based on, so you can read the source when a rule surprises you. Start with part 1 on the main Alabama adjuster page if you have not done it yet.
Subtopics in this part: Third-party claims, Disaster claim mediation, Auto liability minimums, Uninsured motorist coverage, Uninsured motorist stacking, Aftermarket crash parts, Residual market (AIUA), Guaranty association, Insurance fraud, Windstorm mitigation, Data security, Contributory negligence.
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Third-party claims · Challenging
An insured driver ignores the adjuster's calls about a rear-end collision in which the insured's liability is clear. Under Ala. Admin. Code 482-1-125-.07(8), may the insurer deny the injured third party's otherwise valid claim because of the insured's noncooperation?
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Correct answer: B. Only if it proves material, substantial and prejudicial noncooperation
Rule 482-1-125-.07(8), repeated in .08(10), prohibits denying or failing to adjust an otherwise valid third-party claim because the insured failed to cooperate, unless the insurer proves the lack of cooperation is material, substantial and to its prejudice. Unreturned calls on a clear-liability rear-end crash rarely meet that test. The defense is not abolished, so an absolute never goes too far, and a set number of letters does not satisfy it.
When the Commissioner issues a bulletin activating the mediation program in Ala. Admin. Code 482-1-135 after a disaster, within how many days of receiving an unresolved first-party residential property claim must the insurer mail the insured a notice of the right to mediate?
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Correct answer: C. 60 days
Rule 482-1-135-.04 requires the written mediation notice within 60 days of the insurer's receipt of the claim, in at least 12-point type. Either party may request mediation once 21 days have passed from the notice without resolution. Disputes generally must involve $500 or more, the insurer pays the $350 fee, attorneys other than the Department's do not attend, and the insured may rescind a settlement within 3 business days if the check is not cashed.
An insured carrying Alabama's minimum liability limits under Ala. Code 32-7-6 causes a crash. The two occupants of the other car have injury damages of $32,000 and $14,000, and their car, worth $27,000, is totaled. What is the most the policy pays in total?
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Correct answer: D. $64,000
Alabama's minimums are $25,000 per person and $50,000 per accident for bodily injury and $25,000 for property damage. The first occupant is capped at $25,000 and the second receives $14,000, a $39,000 total within the $50,000 per-accident limit. Property damage is capped at $25,000, so the policy pays $64,000. $73,000 is the full damages, and $71,000 ignores the per-person cap.
A named insured rejected uninsured motorist coverage when she bought her Alabama auto policy, and the policy is now renewing with the same insurer. Under Ala. Code 32-7-23(a), what applies to the renewal?
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Correct answer: A. UM need not be included unless she requests it in writing
Section 32-7-23(a) requires every auto liability policy for a vehicle registered or principally garaged in Alabama to include uninsured motorist coverage at least equal to the 25/50 bodily injury minimums, but the named insured may reject it. If she rejected it on a policy the same insurer previously issued, the coverage need not be provided on renewal unless she requests it in writing. Alabama's definition of an uninsured vehicle in 32-7-23(b) also reaches underinsured drivers.
Rosa's Alabama auto policy insures four cars, each with $25,000 per-person uninsured motorist coverage. An uninsured driver injures her, and her damages are $120,000. Under Ala. Code 32-7-23(c), what is the most she can recover under the UM provisions of this one policy?
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Correct answer: B. $75,000
Section 32-7-23(c) lets an injured person stack UM coverage within one contract, but recovery is limited to the primary coverage plus no more than two additional coverages for additional vehicles. Rosa can combine three $25,000 coverages for $75,000, even though the policy lists four cars. $100,000 ignores the two-coverage limit, and $25,000 ignores stacking within the policy altogether.
Under Ala. Code 32-17A-3, when an insurer's written repair estimate uses nonoriginal equipment manufacturer aftermarket crash parts, what must the estimate include?
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Correct answer: C. Identification of each such part and an attached disclosure
Section 32-17A-3 requires every written estimate that uses nonoriginal equipment manufacturer aftermarket crash parts to clearly identify each such part and to attach a disclosure, in type no smaller than 10 point, stating that the parts come from a source other than the vehicle's manufacturer and are warranted by their maker or distributor rather than the vehicle maker. Rule 482-1-125-.08(9) requires insurers to comply with this chapter.
A homeowner in Gulf Shores, in Baldwin County, cannot find windstorm coverage in the private market. Which statement describes the Alabama Insurance Underwriting Association (AIUA)?
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Correct answer: D. It is an insurer pool for wind and hail in Baldwin and Mobile
Ala. Code 27-1-24 requires every insurer writing fire and extended coverage in Alabama to be a member of the AIUA, an unincorporated nonprofit joint underwriting association. Its Plan of Operation provides wind, hail and hurricane coverage, and fire and extended coverage only in limited cases, in eligible areas south of the 31st parallel in Baldwin and Mobile Counties. It is not a state agency, does not sell flood insurance, and insures homes as well as commercial buildings.
An applicant asks the AIUA to insure an Orange Beach home located in an NFIP AE flood zone. Under the AIUA Plan of Operation effective November 1, 2025, what flood insurance must the applicant show?
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Correct answer: B. At least the AIUA policy limits or the NFIP maximum available
Section III of the Plan requires an applicant for property in a special flood hazard area, meaning any NFIP zone with an A or V designation, to prove flood insurance in an amount no less than the AIUA policy limits or the maximum available from the NFIP, and failing to keep it is a ground for cancellation. The same Plan caps AIUA dwelling coverage at $650,000 per building and issues one-year policies that do not renew automatically.
An Alabama auto insurer is liquidated, and a claimant holds a covered $400,000 bodily injury claim against an insured whose policy limit is $500,000. Under Ala. Code 27-42-8, what is the most the Alabama Insurance Guaranty Association pays on this claim?
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Correct answer: A. $300,000
Section 27-42-8(a)(1) limits the Association to the lesser of $300,000 or the policy limits per claim, and all claims arising from bodily injury to one person count as a single claim. The claim's size and the $500,000 policy limit do not raise the cap. Workers' compensation claims are paid in full, unearned premium refunds are capped at $10,000 per policy, and claims generally must be filed within 25 months of the liquidation order.
Which of the following does the Alabama Insurance Guaranty Association pay in full, without the $300,000 per-claim cap, under Ala. Code 27-42-8?
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Correct answer: C. Workers' compensation benefits owed to an injured employee
Section 27-42-8(a)(1) directs the Association to pay the full amount of covered workers' compensation claims. Unearned premium refunds are capped at $10,000 per policy. Under 27-42-5(7), covered claims exclude punitive damages, other than those awarded under the Wrongful Death Act, and first-party claims of a high net worth insured, defined in 27-42-5(8) as one whose net worth exceeds $25 million.
A claimant knowingly submits fake receipts to inflate a theft claim by $2,500, but the adjuster catches the scheme before any payment is made. Under Ala. Code 27-12A-2 and 27-12A-3, what crime has been committed?
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Correct answer: D. Insurance fraud in the first degree, a Class B felony
Knowingly presenting false information in support of a claim, with intent to defraud, is insurance fraud under 27-12A-2(4). Section 27-12A-3 makes it first-degree fraud, a Class B felony, when the loss or potential loss exceeds $1,000, so the unpaid $2,500 still counts. Second-degree fraud, a Class C felony under 27-12A-4, covers losses or potential losses of $1,000 or less.
An adjuster reports a suspected staged accident to the Alabama Department of Insurance. The investigation later clears the claimant, who threatens to sue the adjuster over the report. Under Ala. Code 27-12A-22, can the adjuster be held civilly liable for reporting?
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Correct answer: A. Only for false statements in the report made with actual malice
Section 27-12A-22(a) provides that no civil liability arises against a person for furnishing information about suspected, anticipated or completed insurance fraud. Under subsection (b), the immunity does not cover false statements made with actual malice, and a plaintiff must plead malice specifically. A report that simply turns out to be mistaken is still protected. Insurers have a separate duty under 27-12A-21 to report suspected fraud to the Department.
Under Ala. Code 27-31D-2.1, what must an insurer writing homeowners insurance offer when it issues a new policy on an eligible home that is not built to a fortified standard?
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Correct answer: B. A fortified roof endorsement for covered roof replacements
Section 27-31D-2.1 requires insurers writing homeowners coverage to offer a fortified bronze roof endorsement that upgrades an otherwise eligible nonfortified home to a fortified standard when covered damage requires the roof to be replaced. The offer is made on new policies and at the first renewal after January 1, 2020. Adjusters handling a roof replacement should check for the endorsement, and 27-31D-1 and 27-31D-2 separately require premium discounts for fortified construction.
A three-person Alabama independent adjusting firm has $800,000 in annual revenue. Under the Alabama Insurance Data Security Act, which requirement does the firm NOT have to meet?
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Correct answer: D. Maintaining a written information security program
Ala. Code 27-62-9(a)(1) exempts a licensee from the information security program requirement in 27-62-4 if it has fewer than 25 employees, less than $5 million in gross annual revenue, or less than $10 million in year-end assets. The exemption covers only 27-62-4. The firm must still investigate cybersecurity events and keep records for five years under 27-62-5, and notify the Commissioner within three business days when 27-62-6 applies.
A driver sues an Alabama insured for negligence after an intersection crash. The evidence shows the driver was about 10% at fault and the insured about 90%, and the insured proves the driver's negligence helped cause the crash. Neither wantonness nor last clear chance is at issue. What can the driver recover under Alabama law?
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Correct answer: C. Nothing, because the driver's negligence bars recovery
Alabama still follows the common-law rule of contributory negligence: a plaintiff whose own negligence proximately contributed to the injury recovers nothing on a negligence claim, however small that share. In Williams v. Delta International Machinery Corp., 619 So. 2d 1330 (Ala. 1993), the Alabama Supreme Court declined to replace it with comparative negligence, and no statute has adopted comparative negligence since. The bar does not apply to wanton conduct, and last clear chance can still allow recovery.