Minnesota Property and Casualty Adjuster Practice Test: Minnesota law, Part 2

Correct answer: A. Take none, because the item was not affected by age or use

Clause (9) makes it an unfair settlement practice to reduce, or try to reduce, a settlement for depreciation on items not adversely affected by age, use or obsolescence. Clause (7) adds that an actual cash value settlement may not be less than the property's value immediately before the loss, including applicable taxes and license fees, though the insurer never owes more than the amount of insurance.

Reference: Minn. Stat. 72A.201, subd. 5(7) and (9)

Correct answer: B. Within 5 business days after receiving notice of the claim

When an insured's damaged vehicle cannot be safely driven, failing to exercise the right to inspect before repair within five business days after notification of claim is an unfair practice. In other cases the inspection must be made within 15 days. The 30-business-day period in subdivision 4 governs completing the investigation, not the inspection.

Reference: Minn. Stat. 72A.201, subd. 6(3)

Correct answer: C. $250

The insurer must include the deductible in its subrogation demand and share any recovery at least proportionately with the insured. Ava's deductible is $500 of the $8,000 loss, or 6.25%, so her share of the $4,000 recovery is at least $250. The full deductible must come first only when the insurer collects in installments directly from an uninsured third party.

Reference: Minn. Stat. 72A.201, subd. 6(6)

Correct answer: D. $40,000: $20,000 medical and $20,000 for income and other losses

Basic economic loss benefits must provide at least $40,000 per person: $20,000 for medical expense loss and $20,000 combined for income loss, replacement services loss, funeral expense loss, survivor's economic loss and survivor's replacement services loss. Weekly caps apply within the non-medical half, such as $500 a week for income loss and $200 a week for replacement services.

Reference: Minn. Stat. 65B.44, subds. 1, 3 and 5

Correct answer: B. $500

Income loss benefits pay 85% of the injured person's gross income lost because of inability to work, up to $500 per week. 85% of $700 is $595, which exceeds the cap, so Malik receives $500. The weekly maximum may not be prorated into a daily maximum, and income from available substitute work reduces the benefit.

Reference: Minn. Stat. 65B.44, subd. 3

Correct answer: B. $60

Benefits are overdue if not paid within 30 days after the insurer receives reasonable proof of the fact and amount of loss, and overdue payments bear simple interest at 15% a year. $3,650 x 15% = $547.50 a year, and $547.50 x 40/365 = $60. The $105 figure charges interest for 70 days, wrongly including the 30 days before the payment became overdue.

Reference: Minn. Stat. 65B.54, subds. 1 and 2

Correct answer: C. No, because only $3,700 counts toward the $4,000 threshold

Noneconomic damages are recoverable only if countable medical expense exceeds $4,000 or the injury causes permanent disfigurement, permanent injury, death or disability for 60 days or more. Expenses for diagnostic X-rays and rehabilitation are subtracted, so $5,200 - $1,500 = $3,700. Three weeks of disability is short of 60 days, so Elena meets no threshold.

Reference: Minn. Stat. 65B.51, subd. 3

Correct answer: B. Liability 30/60/10; UM and UIM 25/50 each

Subdivision 3 requires residual liability limits of at least $30,000 per person and $60,000 per accident for bodily injury and $10,000 for property damage. Subdivision 3a requires separate uninsured and underinsured motorist coverages, each at least $25,000 per person and $50,000 per accident, and limits for two or more vehicles may not be added together.

Reference: Minn. Stat. 65B.49, subds. 3 and 3a

Correct answer: A. No, since injuries while riding a motorcycle do not qualify

Section 65B.46, subd. 3, says injuries suffered while on, mounting or alighting from a motorcycle do not arise out of the maintenance or use of a motor vehicle, even if a car is involved. A pedestrian struck by a motorcycle does have a right to benefits. Under 65B.48, subd. 5, an applicant for motorcycle insurance without PIP must be told in writing that auto policy PIP will not cover a motorcycle accident.

Reference: Minn. Stat. 65B.46, subds. 1 and 3; Minn. Stat. 65B.48, subd. 5

Correct answer: C. No-fault, comprehensive or collision claims of $10,000 or less

Section 65B.525 requires court rules providing for mandatory submission to binding arbitration of cases where the claim, at the start of arbitration, is $10,000 or less against an insured's reparation obligor for no-fault benefits or comprehensive or collision coverage. Larger claims may go to court or be arbitrated by agreement. Third-party liability claims are not covered by this rule.

Reference: Minn. Stat. 65B.525, subd. 1

Correct answer: D. $250,000, the full policy amount

Minnesota's valued policy provision requires the insurer, absent an unconsented change increasing the risk or intentional fraud by the insured, to pay the whole amount stated in the policy for a total loss. The adjuster's lower valuation does not reduce the payment. Only the Minnesota FAIR Plan may contest the policy amount on a total loss, and it must prove a lower value by clear and convincing evidence.

Reference: Minn. Stat. 65A.08, subd. 2

Correct answer: D. Agents may not bind coverage on the plan's behalf

Section 65A.36, subd. 1, says agents are not permitted to bind coverage; the plan issues a policy if the risk meets preliminary underwriting requirements. Anyone with an insurable interest who has been canceled, nonrenewed or otherwise rejected in the private market may apply, with no set number of declinations (65A.34). Neighborhood location is not an acceptable reason to decline (65A.36, subd. 3), and auto coverage is outside the plan (65A.33).

Reference: Minn. Stat. 65A.33, subd. 3; 65A.34, subd. 1; 65A.36, subds. 1 and 3

Correct answer: B. $300,000 to Joan and $420,000 to Raul

Payment of a covered claim is limited to $300,000, whether it arises under one policy or several, but that limit does not apply to workers' compensation claims. Joan's fire loss is therefore capped at $300,000, while Raul's workers' compensation benefits are paid in full. The association never owes more than the insolvent insurer would have owed under its policy.

Reference: Minn. Stat. 60C.09, subd. 3

Correct answer: A. $40,000

Section 604.18 allows taxable costs when an insurer denied benefits without a reasonable basis and knew it or acted in reckless disregard. Clause (1) allows one-half of the proceeds awarded above an offer made at least ten days before trial, or $250,000, whichever is less: ($150,000 - $70,000) / 2 = $40,000. Reasonable attorney fees up to $100,000 may be added under clause (2).

Reference: Minn. Stat. 604.18, subds. 2 and 3

Correct answer: A. To the Bureau of Criminal Apprehension; deadlines are tolled

An insurer or insurance professional with a reasonable belief that insurance fraud has been committed must furnish all relevant information to the Bureau of Criminal Apprehension or another authorized person, with a copy to the BCA. Proper notice tolls unfair claims practices time periods until 30 days after the BCA decides not to recommend action and notifies the insurer. Good-faith reporters are immune from liability.

Reference: Minn. Stat. 60A.952, subds. 2 to 4