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NM state law · part 2 of 2
New Mexico Adjuster Practice Test: New Mexico law, Part 2
15 more New Mexico law questions for the New Mexico 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 New Mexico adjuster page if you have not done it yet.
Subtopics in this part: Catastrophic claims, Late payment interest, Claim check penalties, Insurance fraud reporting, Cease and desist orders, Penalties and fines, Criminal history and 18 U.S.C. 1033, Auto financial responsibility limits, Underinsured motorist coverage, Uninsured motorist rejection, Assigned risk plan, Insurance guaranty association, Guaranty association nonduplication, Cancellation, Natural disaster claims.
0 of 15 answered
Catastrophic claims · Application
A declared catastrophe produces the four claims below. Which one is a catastrophic claim subject to the 90-day settlement rule in 13.7.4 NMAC?
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Correct answer: C. A vehicle physical damage claim for hail dents on the insured's car
13.7.4.7(B) NMAC defines a catastrophic claim as a property insurance claim or a vehicle physical damage insurance claim directly resulting from a catastrophe. It excludes claims for injury or death, liability for loss or damage to another, loss of earnings and other consequential losses, so only the hail damage to the car falls under the 90-day rule. The other claims remain subject to the general unfair claims standards in 59A-16-20.
Rita furnished proof of loss on her property claim, and the insurer paid the amount justly due 70 days later. The claim was never in arbitration or litigation. Under NMSA 59A-16-21(B), what does the insurer owe in addition to the claim?
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Correct answer: D. Interest at 1.5 times the prime rate from the 46th day after proof
59A-16-21(B) makes an insurer that fails for 45 days after required proof of loss to pay the amount justly due liable for that amount plus interest at one and one-half times the prime lending rate for New Mexico banks. Interest accrues, and the rate is set, as of the 46th day after the proof of loss. Subsection C excludes claims in arbitration or litigation, which is why the stem rules them out.
A New Mexico resident deposits a $2,400 claim check from her insurer at a New Mexico bank. It is neither paid nor lawfully rejected within 10 days after the bank forwards it, and no bank or delivery delay is involved. Under NMSA 59A-16-21(A), what minimum damages may she recover, plus costs and attorney fees?
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Correct answer: B. $500
59A-16-21(A) gives a New Mexico resident a cause of action for 10% of a claim check, draft or electronic transfer that is not paid or lawfully rejected within 10 days of forwarding by a New Mexico financial institution, but never less than $500, plus costs of suit and attorney fees. 10% of $2,400 is only $240, so the $500 minimum applies. An insurer escapes only by proving a bank or delivery delay and payment within 48 hours of actual receipt.
While adjusting a theft claim, an independent adjuster finds receipts that appear to be forged. Under the New Mexico Insurance Fraud Act, NMSA 59A-16C, which statement is correct?
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Correct answer: A. He must report it to the superintendent and cooperate with any inquiry
59A-16C-6(A) requires every insurer and licensed insurance professional with a reasonable belief that insurance fraud will be, is being or has been committed to give that information to the superintendent and cooperate fully with any investigation; failing to do so can bring an administrative penalty under 59A-1-18. Under 59A-16C-7, a person who reports suspected fraud is protected from civil liability unless he intentionally communicates information he believes to be false.
The superintendent issues a cease and desist order for a practice prohibited by NMSA 59A-16. Under 59A-16-27, what happens if the person neither complies nor requests a hearing in writing within 20 days after receiving the order?
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Correct answer: A. The order becomes final and is not subject to review or appeal
59A-16-27(A) gives the person 20 days after receipt of a cease and desist order to comply or to request a hearing in writing. Without a timely hearing request, the order becomes final and is not subject to review or appeal, and the person is subject to penalties for each violation. If the person still does not comply, (D) lets the superintendent seek an injunction in the district court of the county where the violation occurred.
After a hearing, the superintendent finds that an adjuster committed three violations of the Insurance Code and that each was willful and intentional. No other monetary penalty applies. Under NMSA 59A-1-18(B), what is the maximum total administrative penalty?
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Correct answer: D. $30,000
59A-1-18(B) allows an administrative penalty of up to $5,000 for each Insurance Code violation where no other monetary penalty is provided, rising to $10,000 per violation when the violation is found willful and intentional. Three willful violations at $10,000 each total $30,000. The penalty is imposed by written order after a hearing and may be added to any suspension or revocation under (C). $15,000 wrongly applies the non-willful limit.
Paul applies for a resident New Mexico adjuster license. His background check shows a felony conviction for embezzling from a former employer. Under 13.4.8.9 NMAC, which applies 18 U.S.C. 1033, what does he need in order to be licensed?
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Correct answer: D. The written consent of the superintendent
13.4.8.9(G)(7)(a) NMAC states that, under 18 U.S.C. 1033, no individual convicted of a felony involving dishonesty or a breach of trust may be licensed as a resident adjuster unless the person has the written consent of the superintendent. Embezzlement is such a felony, and the age of the conviction alone does not remove the bar. Under (G)(7)(b), the Criminal Offender Employment Act also requires any criminal record to be considered in the review.
Auto financial responsibility limits · Challenging
Tyler carries only New Mexico's minimum auto liability limits. He causes a crash that injures three people, with damages of $30,000, $15,000 and $20,000. Under NMSA 66-5-208, what is the most his policy pays for all bodily injury claims?
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Correct answer: C. $50,000
66-5-208 sets the minimums at $25,000 for bodily injury to one person, $50,000 for bodily injury to two or more people in one accident and $10,000 for property damage. The first claimant is capped at $25,000, so the per-person amounts are $25,000, $15,000 and $20,000, or $60,000. That exceeds the $50,000 per-accident limit, so the policy pays no more than $50,000 in all. $60,000 overlooks the accident limit.
Nora's auto policy insures one car and has uninsured motorist limits of $100,000 per person. A driver with a $25,000 per-person bodily injury limit injures her, her damages are $150,000, and his insurer pays its $25,000. Under NMSA 66-5-301(B) and 13.12.3 NMAC, how much does Nora's underinsured motorist coverage pay?
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Correct answer: B. $75,000
New Mexico uninsured motorist coverage includes underinsured motorist coverage, and a driver is underinsured when his bodily injury limits are less than the insured's uninsured motorist limits (66-5-301(B)). Sums paid by or for the at-fault driver reduce the amount payable (13.12.3.17(F)(3)(a) NMAC). Nora's $100,000 limit minus the $25,000 already paid leaves $75,000. Paying $125,000 would ignore both her limit and the offset. With one insured car, no stacking of limits is involved.
When Sam bought his auto policy, he told the agent by phone that he did not want uninsured motorist coverage. Nothing was put in writing or made part of the policy. Under NMSA 66-5-301 and 13.12.3.9 NMAC, what is the effect of his rejection?
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Correct answer: C. It fails, since a rejection must be in writing and part of the policy
66-5-301(C) lets the named insured reject uninsured motorist coverage, but 13.12.3.9 NMAC treats the rejection as one required to be in writing and requires it to be endorsed, attached, stamped or otherwise made a part of the policy. A spoken refusal noted only in an agent's file does not meet that standard, so the coverage has not been validly rejected. The right to reject is real, which is why the last option is wrong.
Under the Motor Vehicle Assigned Risks Law, NMSA 59A-32, what is the purpose of New Mexico's auto assigned risk plan?
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Correct answer: D. To share among insurers the drivers unable to buy coverage normally
59A-32-3 says the plan exists to distribute and apportion fairly, among insurers authorized to write auto liability and physical damage insurance in New Mexico, the coverage for applicants who are in good faith entitled to insurance but cannot obtain it through ordinary methods. Injuries caused by uninsured drivers fall under uninsured motorist coverage, and claims against insolvent insurers go to the guaranty association. Plan grievances may be appealed to the superintendent (59A-32-5).
A New Mexico homeowner's insurer, which was authorized in the state, is declared insolvent and ordered liquidated. Her covered fire loss, which occurred before the insolvency, is $180,000, her dwelling limit is $250,000 and she has no other insurance. Under NMSA 59A-43-4, what is the most the guaranty association pays on this claim?
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Correct answer: D. $100,000
Under 59A-43-4(C), a covered claim must exceed $25 and, subject to lower policy limits, is capped at $100,000, with all covered claims by one claimant limited to $100,000 per occurrence; only workers' compensation claims are paid in full. Her $180,000 loss is within the $250,000 dwelling limit, but the association pays no more than $100,000. The $300,000 figure is a common cap in other states, not New Mexico's statutory cap.
Ines's car is damaged by a driver whose liability insurer later becomes insolvent. Ines carries collision coverage with a solvent insurer. Under NMSA 59A-43-11, how must she pursue her property damage claim?
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Correct answer: B. Exhaust her own collision coverage first, which reduces any association payment
59A-43-11(A) requires a person whose claim is also covered under another, solvent policy to exhaust rights under that policy first, and any amount payable by the guaranty association is reduced by the recovery available under it. Ines must use her collision coverage first. Collecting twice is barred by this nonduplication rule, and the section also says no action against the insolvent insurer's insured may be tried until other sources of recovery are exhausted.
A new commercial property policy took effect on March 1. On April 5, while reviewing the new account, the insurer decides to cancel for underwriting reasons. Under NMSA 59A-18-29, what may the insurer do?
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Correct answer: A. Cancel without stating cause, with at least 10 days' written notice
Under 59A-18-29(B), an insurer may cancel without cause within 60 days after a policy's original issuance and effective date if it gives the named insured at least 10 days' written notice and the cancellation takes effect within that 60-day period. After 60 days, (C) allows cancellation only for reasonable cause set by rule, while nonpayment always needs 10 days' notice under (A). Nonrenewal differs: 13.8.4.9 NMAC requires 30 days' notice before expiration.
A hailstorm damages Ruth's home, and her homeowners insurer pays the covered claim. At renewal, the insurer wants to nonrenew solely because of that claim. Under NMSA 59A-16-20.1, which statement is correct?
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Correct answer: C. It may not nonrenew solely because of a natural disaster claim
59A-16-20.1(A) bars canceling or refusing to renew a homeowner's policy because of a claim for natural disaster damage to the private residence when the policy covers that damage. Subsection B defines natural disaster broadly, including storms, floods, earthquakes, fire and other catastrophes causing substantial property damage, with no declaration required. The 30-day notice in 13.8.4.9 NMAC governs how a lawful nonrenewal is done, but notice cannot make a prohibited reason acceptable.