Arkansas Adjuster Practice Test: Arkansas law, Part 2

Correct answer: C. No, it needs proof of a demand and her unfounded refusal

Section 9(i) bars an insurer from denying a claim for the claimant's failure to exhibit the damaged property without proof of a demand and an unfounded refusal by the claimant. Showing the property is a real policy duty, which is why the second option is tempting, but the insurer must first ask and then document a refusal that has no good reason. Insurers may require inspections; they simply cannot deny on this ground without that record.

Reference: AID Rule 43 (23 CAR pt 15), Section 9(i)

Correct answer: B. From two or more local dealer quotes, plus taxes and fees

A cash settlement must equal the actual cost, less the deductible, to buy a comparable automobile, including taxes, license fees and transfer fees. When a comparable car is available locally, that local cost is used; when it is not, the insurer may use one of two or more quotations from two or more qualified dealers or appraisal services in the local market area. Any deviation must be documented, and deductions must be itemized and explained to the claimant.

Reference: AID Rule 43 (23 CAR pt 15), Section 10(a)(2) and (3)

Correct answer: D. $500

Section 10(d) requires insurers to include the insured's deductible in subrogation demands and to share recoveries with the first-party claimant on a proportionate basis unless the deductible was otherwise recovered. Ayesha bore $1,000 of the $9,000 loss, one-ninth, so she receives one-ninth of $4,500, or $500. No collection expense may be deducted because no outside attorney was retained. Paying her the full $1,000 first is not the proportionate method the rule requires.

Reference: AID Rule 43 (23 CAR pt 15), Section 10(d)

Correct answer: A. Requiring a specific repair shop as a condition of payment

Rule 43, Section 10(c) bars insurers from requiring a claimant to have the car repaired at a specific shop as a condition of recovery, or to travel an unreasonable distance for an estimate or repair. Section 10(f) requires the insurer to give the claimant a copy of any estimate it prepares and allows it to name conveniently located shops. Ark. Code Ann. 23-66-206 also lists requiring repairs by a particular shop as an unfair claims settlement practice when done as a general business practice.

Reference: AID Rule 43 (23 CAR pt 15), Section 10(c) and (f); Ark. Code Ann. 23-66-206 (unfair claims settlement practices)

Correct answer: B. $5,040

When an insurer fails to pay a loss within the time specified in the policy after demand, it owes 12% damages on the amount of the loss plus reasonable attorney's fees. Recovering less than the demand does not defeat this if the recovery is within 20% of the amount demanded. Here $42,000 is at least 80% of $50,000 ($40,000), so 12% x $42,000 = $5,040. Applying 12% to the $50,000 demand is the common error.

Reference: Ark. Code Ann. 23-79-208(a)(1) and (d)

Correct answer: D. $25,000/$50,000/$25,000

Section 27-22-104 makes it unlawful to operate a motor vehicle in Arkansas without coverage of at least $25,000 for bodily injury or death of one person, $50,000 for bodily injury or death of two or more persons in one accident, and $25,000 for property damage. The same limits apply to proof of financial responsibility under section 27-19-605, and Arkansas uninsured and underinsured motorist minimums are tied to those bodily injury limits.

Reference: Ark. Code Ann. 27-22-104(b); 27-19-605

Correct answer: C. Up to $5,000 per person for expenses incurred within 24 months

Section 23-89-202(1) provides reasonable medical, hospital, nursing, dental, surgical, ambulance, funeral and prosthetic expenses incurred within 24 months after the accident, up to $5,000 per person, without regard to fault. PIP also pays a $5,000 accidental death benefit when death occurs within one year. The named insured may reject any or all PIP coverages in writing under section 23-89-203, and Arkansas keeps tort liability, so PIP does not bar a lawsuit.

Reference: Ark. Code Ann. 23-89-202(1) and (3); 23-89-203; 23-89-206

Correct answer: B. $140 a week, beginning 8 days after the accident

The PIP income disability benefit pays 70% of lost income from work for a period starting 8 days after the accident, for up to 52 weeks, subject to a maximum of $140 a week. Seventy percent of $800 is $560, which exceeds the cap, so Andre receives $140 a week. A person with no income can instead receive up to $70 a week for essential services. Benefits are overdue if unpaid 30 days after reasonable proof.

Reference: Ark. Code Ann. 23-89-202(2); 23-89-208

Correct answer: A. UM applies unless rejected in writing, and UIM requires UM

Section 23-89-403 requires UM bodily injury coverage at least equal to the section 27-19-605 limits unless a named insured rejects it in writing, and the rejection lasts until withdrawn in writing. Buyers of higher liability limits must be offered UM up to those limits. Section 23-89-209 requires an opportunity to buy UIM, which may be rejected in writing, but UIM is not available unless the insured has elected UM and is never issued without it.

Reference: Ark. Code Ann. 23-89-403(a); 23-89-209(a) and (b)

Correct answer: C. It loses its rights to the proceeds and to recoup its payment

Within 30 days of the written notice, the UIM insurer may pay its insured the tentative settlement amount and take over the right to pursue the at-fault driver. If it does not pay within 30 days, it has no right to the settlement proceeds, no right to recoup its UIM payment from the driver or the driver's insurer, and no right to refuse UIM benefits because of the settlement. The notice steps are waived when one company writes both policies.

Reference: Ark. Code Ann. 23-89-209(c), (d) and (e)

Correct answer: D. Elena $36,000; Victor $0

Arkansas uses modified comparative fault. A claimant whose fault is less than the fault of the parties being sued recovers damages reduced by his or her own percentage; a claimant whose fault is equal to or greater than theirs recovers nothing. Elena's 40% is less than 60%, so she recovers $60,000 x 60% = $36,000. Victor's 50% equals the other party's share, so he recovers $0. Awarding Victor $30,000 would be a pure comparative fault result.

Reference: Ark. Code Ann. 16-64-122(b)

Correct answer: B. $300,000 on liability; the full $380,000 on the comp claim

Under the Arkansas Property and Casualty Insurance Guaranty Act, individual covered claims, excluding workers' compensation claims, are limited to $300,000. Act 283 of 2017 removed workers' compensation from that cap, so the comp claim is not limited to $300,000. Covered claims also include unearned premium up to $25,000 per policy, but exclude punitive damages and claims of insureds or claimants with a net worth over $50 million.

Reference: Ark. Code Ann. 23-90-103(2) (NCIGF compilation, updated November 2025)

Correct answer: D. She uses her own policy first; the fund deducts that recovery

Section 23-90-117 requires a person whose claim is also covered under a policy issued by a solvent insurer to exhaust that policy first, and any amount payable by the guaranty system is reduced by the recovery under that policy. The same exhaustion rule applies to governmental insurance or guaranty programs. When a claim could go to more than one state's guaranty association, the claimant generally starts with the association of the insured's state of residence.

Reference: Ark. Code Ann. 23-90-117 (NCIGF compilation, updated November 2025)

Correct answer: A. $250,000

Arkansas's valued policy law treats a property policy, other than flood or earthquake coverage, as a liquidated demand for the full amount stated in the policy when the insured property is a total loss by fire or natural disaster. Ben is owed the $250,000 limit; only commercial policies subtract the deductible, so $249,000 is wrong. The law excludes personal property, detached structures, builder's risk and most blanket policies, losses the insured causes through crime or fraud, and property covered by two or more policies.

Reference: Ark. Code Ann. 23-88-101(a) and (b)

Correct answer: C. From day one of disability, excluding the injury day

Arkansas pays no compensation for the first 7 days of disability, not counting the day of injury, and if disability continues, payments start with the ninth day. If the disability lasts two weeks, compensation is paid back to the first day of disability, still excluding the day of injury. Tamika's three-week disability passes the two-week mark, so the waiting period is paid retroactively. Total disability is paid at 66 2/3% of the average weekly wage, subject to the state maximum.

Reference: Ark. Code Ann. 11-9-501(a) and (b); AWCC Question and Answer Brochure