Texas All-Lines Adjuster Practice Test: Texas law, Part 4

Correct answer: D. Acknowledge within 30 business days; pay within 20 business days of acceptance

Sec. 542.055(a) gives an eligible surplus lines insurer until the 30th business day after receiving notice of a claim to acknowledge it, begin investigating, and request needed items, instead of 15 days. Sec. 542.057(c) gives it until the 20th business day, instead of the 5th, to pay after notifying the claimant it will pay or after the claimant performs a required act. The 15-business-day decision deadline in Sec. 542.056 has no surplus lines exception.

Reference: Texas Insurance Code Secs. 542.055(a) and 542.057(c)

Correct answer: A. 60 days

Sec. 542.058(a) provides that if an insurer, after receiving all items, statements, and forms reasonably requested, delays payment beyond the period set by other applicable statutes or, if none, for more than 60 days, it must pay damages under Sec. 542.060: 18 percent annual interest plus attorney's fees (or the Chapter 542A rate in weather suits). The rule does not apply if arbitration or litigation finds the claim invalid.

Reference: Texas Insurance Code Secs. 542.058 and 542.060

Correct answer: C. The period since its last TDI examination, 18 months ago

Sec. 542.005 requires an insurer to keep a complete record of all complaints received during the preceding three years or since its last TDI examination, whichever period is shorter; here 18 months is shorter. The record must show the total number of complaints, their classification by line of insurance, the nature and disposition of each, and the time spent processing each. Failing to keep it is an unfair claim settlement practice under Sec. 542.003(b)(6).

Reference: Texas Insurance Code Secs. 542.003(b)(6) and 542.005

Correct answer: D. Request within 30 days; finish within 60 days of notice if reasonably possible

Sec. 542A.004 lets a person who receives a pre-suit notice send a written request, not later than the 30th day after receiving it, to inspect, photograph, or evaluate the property in a reasonable manner and at a reasonable time. If reasonably possible, the inspection must be completed not later than the 60th day after the notice was received. Being denied a requested inspection is a ground for abatement under Sec. 542A.005.

Reference: Texas Insurance Code Secs. 542A.004 and 542A.005

Correct answer: C. A verified plea abates the suit on the 11th day after filing unless controverted

Sec. 542A.005 lets a defendant file a plea in abatement within 30 days after filing its original answer if it did not receive a compliant pre-suit notice or was denied a requested inspection. A verified plea abates the action automatically, without a court order, starting on the 11th day after filing unless the claimant files a controverting affidavit before then. Abatement lasts until the later of 60 days after a compliant notice or 15 days after the inspection.

Reference: Texas Insurance Code Sec. 542A.005

Correct answer: B. $18,000

Sec. 542A.007(a) limits fees to the lesser of the fees found by the jury, fees allowed by other law, or the fees multiplied by the ratio of the judgment to the amount demanded in the notice. Here $48,000 / $80,000 = 0.6, and 0.6 x $30,000 = $18,000. Full fees ($30,000) require a ratio of at least 0.8, and no fees are allowed if the ratio is below 0.2. $24,000 would apply a 0.8 ratio that was not met.

Reference: Texas Insurance Code Sec. 542A.007

Correct answer: D. Submit repair cost and completion records within 545 days after acceptance

Sec. 2210.5741(a) lets a claimant with replacement cost coverage request the replacement cost payment by submitting documentation of the cost and completion of repairs not later than the 545th day after receiving TWIA's acceptance notice. TWIA must state in writing within 30 days how much it will pay and the appraisal deadline, then pay within 10 days. A claimant who disputes that amount may demand appraisal within 30 days of the notice.

Reference: Texas Insurance Code Sec. 2210.5741

Correct answer: C. TWIA asks within 60 days of the notice; it ends within 60 days of the request

Under Sec. 2210.575, after a claimant gives notice of intent to sue over a partial or full denial, TWIA may require mediation or a moderated settlement conference before suit. It must request alternative dispute resolution within 60 days after receiving the notice, and the process must be completed within 60 days after the request, unless extended by commissioner rule or mutual consent. If the dispute is unresolved, the claimant may sue in the district court of the county of loss.

Reference: Texas Insurance Code Sec. 2210.575

Correct answer: B. $300,000

Sec. 462.213(a) caps an individual covered claim at $300,000, so the guaranty association pays no more than $300,000 of the $420,000 loss. Workers' compensation claims are the exception: under subsection (b) the association pays them in full. Under subsection (c), derivative claims by more than one person arising from the same occurrence are treated together as a single claim subject to the cap.

Reference: Texas Insurance Code Sec. 462.213

Correct answer: D. 104 weeks after income benefits begin to accrue

Sec. 401.011(30) defines MMI as the earliest of the date after which further material recovery or lasting improvement can no longer reasonably be anticipated, the end of 104 weeks from the date income benefits begin to accrue, or a date set under Sec. 408.104, which allows an extension in certain spinal surgery cases. Temporary income benefits continue until MMI (Sec. 408.102). The 401-week figure ends eligibility for temporary, impairment, and supplemental income benefits (Sec. 408.083).

Reference: Texas Labor Code Secs. 401.011(30), 408.102, 408.104

Correct answer: A. $16,800

Under Sec. 408.121, impairment income benefits begin the day after MMI and last three weeks for each percentage point of impairment: 10 x 3 = 30 weeks. Sec. 408.126 sets the weekly amount at 70 percent of the average weekly wage: 0.70 x $800 = $560, under TDI's FY2027 maximum of $920. Total: 30 x $560 = $16,800. The carrier must begin paying within 5 days after receiving the doctor's MMI report.

Reference: Texas Labor Code Secs. 408.121 and 408.126; TDI maximum and minimum weekly benefits

Correct answer: B. No, because these benefits require an impairment rating of 15 percent or more

Sec. 408.142(a) makes an employee eligible for supplemental income benefits at the end of the impairment income period only if the impairment rating is 15 percent or more, the employee has not returned to work or earns less than 80 percent of the average weekly wage as a direct result of the impairment, has not commuted impairment benefits, and meets the work-search rules. With a 12 percent rating, Gloria fails the first test.

Reference: Texas Labor Code Sec. 408.142

Correct answer: C. It may not limit or end the worker's right to medical benefits

Sec. 408.005(b) says an employee's right to medical benefits under Sec. 408.021 may not be limited or terminated, and Sec. 408.021(d) says the carrier's liability for medical benefits may not be limited or terminated by agreement or settlement. An injured employee is entitled to all health care reasonably required by the compensable injury, as and when needed. Settlements must also be approved by the commissioner.

Reference: Texas Labor Code Secs. 408.005 and 408.021

Correct answer: A. Pay 364 weeks of death benefits into the Subsequent Injury Fund

Sec. 403.007(a) requires a carrier, when a compensable death occurs and no legal beneficiary survives (or no timely claim for death benefits is made), to pay the Division an amount equal to 364 weeks of the death benefits otherwise payable, for deposit in the Subsequent Injury Fund. If no beneficiary claims within one year of the death, the law presumes none survived, except against a minor or an incompetent beneficiary without a guardian.

Reference: Texas Labor Code Sec. 403.007

Correct answer: B. Notify the employer in writing within 5 days after starting work

Under Sec. 406.034, an employee of a covered employer waives the common-law right of action for work injuries unless she notifies the employer in writing, within 5 days after beginning employment (or after receiving written notice that the employer obtained coverage), that she waives workers' compensation coverage and keeps her common-law rights. Without that notice, workers' compensation is her remedy against the employer.

Reference: Texas Labor Code Sec. 406.034

Correct answer: D. Employer reports to its carrier within 8 days; carrier files with DWC within 7 days

Sec. 409.005 requires the employer to report the injury to its insurance carrier not later than the 8th day after the employee's absence from work for more than one day (or after notice of an occupational disease), and to give the employee a written copy. The carrier must then file the report with the Division of Workers' Compensation within 7 days after receiving it. The report is not an admission of liability.

Reference: Texas Labor Code Sec. 409.005

Correct answer: A. Until he turns 25, as long as he stays a full-time student

Sec. 408.183(d) lets a child who is a full-time student at an accredited institution receive death benefits until the earliest of ceasing full-time enrollment for a second consecutive semester, turning 25, or death. Minor children otherwise receive benefits until 18. The spouse receives benefits for life or until remarriage, when she receives a final 104 weeks of benefits. Death benefits equal 75 percent of the employee's average weekly wage (Sec. 408.181).

Reference: Texas Labor Code Secs. 408.181 and 408.183

Correct answer: B. A 19-year-old living in a state that lets Texas residents act as adjusters there

Sec. 4101.053(a)(2) requires an individual applicant to be at least 18 years old and to reside in Texas or in a state or country that permits Texas residents to act as adjusters there. The applicant must also be trustworthy, have enough experience or training to handle loss claims, and pass the exam or qualify for an exemption. Applicants under 18, or from a jurisdiction that does not allow Texas residents to adjust, do not qualify.

Reference: Texas Insurance Code Sec. 4101.053(a)

Correct answer: C. It must designate a licensed adjuster responsible for its compliance

Sec. 4101.053(c) requires a business entity applicant to be eligible to designate Texas as its home state, be trustworthy, designate a licensed adjuster responsible for the entity's compliance with Texas insurance laws, have committed no act that is a ground for discipline under Sec. 4101.201, and pay the required fees. TDI's application calls for at least one officer or active partner who holds a Texas all-lines adjuster license.

Reference: Texas Insurance Code Sec. 4101.053(c); TDI, Adjuster: all lines, Apply for a license

Correct answer: D. He may not adjust those claims, and doing so is a criminal misdemeanor

Sec. 4101.102 allows TDI, when the commissioner considers it necessary, to issue a limited license that specifically limits the kinds of insurance the holder may handle, and the holder may not adjust claims in any other kind. Under Sec. 4101.203, violating Sec. 4101.102(c) is a misdemeanor punishable by a fine of up to $500, up to 6 months in county jail, or both.

Reference: Texas Insurance Code Secs. 4101.102 and 4101.203

Correct answer: A. Once TDI gives her written notice that she qualifies for the exemption

28 TAC 19.1004(c) exempts a licensee who, on or after January 1, 2003, has been continuously licensed by TDI for at least 20 years, meaning no lapse over 90 days. The exemption begins with the reporting period in which the licensee reaches the 20th year, but she may not claim it until TDI or its designee gives written notice that she qualifies. A separate subsection covers agents who had 20 years of licensure as of December 31, 2002.

Reference: 28 TAC 19.1004(b), (c)

Correct answer: B. It does not qualify, because business reasons are not beyond his control

Texas Insurance Code Sec. 4101.060 and 28 TAC 19.1004(e) allow an exemption or extension of CE deadlines for illness, medical disability, or circumstances beyond the licensee's control, supported by a written statement and evidence. The rule states that business reasons do not constitute circumstances beyond the licensee's control, so being busy with work does not qualify. TDI's website says extension requests must be made at least two weeks before the license expires.

Reference: Texas Insurance Code Sec. 4101.060; 28 TAC 19.1004(e); TDI, Adjuster: all lines, Continuing education

Correct answer: C. No, because a first cousin is not a disinterested third party

Sec. 4101.056(b) requires the course exam used for the exemption to be taken in a controlled, supervised environment proctored by a disinterested third party approved by the commissioner. Subsection (c) defines that person as someone who is not related to the applicant as a first cousin or within the third degree by consanguinity or affinity, and who is not the applicant's employee or subordinate. A first cousin is expressly excluded.

Reference: Texas Insurance Code Sec. 4101.056(b), (c)

Correct answer: A. 60 days

The standard fire policy says that, unless otherwise provided in writing, the insurer is not liable for loss occurring while a described building, whether intended for occupancy by owner or tenant, is vacant or unoccupied beyond a period of 60 consecutive days. Other standard fire policy time limits also use 60 days: proof of loss is due within 60 days after the loss, and the loss is payable 60 days after proof of loss is received and the loss is ascertained.

Reference: New York Insurance Law Sec. 3404 (165-line standard fire policy)

Correct answer: C. $40,000

The pro rata liability clause says the insurer is not liable for a greater proportion of any loss than its amount of insurance bears to the whole insurance covering the property. Company A carries $200,000 of the $300,000 total, or two-thirds: 2/3 x $60,000 = $40,000. Company B pays the other $20,000. Paying $60,000 would ignore the other insurance, and $30,000 would wrongly split the loss equally.

Reference: New York Insurance Law Sec. 3404 (165-line standard fire policy), pro rata liability

Correct answer: D. None: the breach does not void the policy or bar his claim

Sec. 862.054 provides that, unless the breach contributed to cause the destruction of the property, an insured's breach of a warranty, condition, or provision of a fire policy on personal property, or of the application, does not render the policy void and is not a defense to a suit for the loss. Because the lapsed alarm contract played no part in a lightning fire, the insurer must adjust the claim on its merits.

Reference: Texas Insurance Code Sec. 862.054

Correct answer: A. She may choose her shop, and the insurer owes only like kind and quality parts

TDI's auto guide explains that an insurer may give the insured a list of preferred repair shops but cannot require the insured to use a shop on its list. The insurer is required to pay only for parts of like kind and quality to those that were damaged, not necessarily original manufacturer parts. If the damage turns out to be worse than first estimated, the insured or the repair shop can ask the adjuster to raise the estimate.

Reference: TDI, Auto insurance guide (cb020)

Correct answer: A. $10,000

TDI's guide says insurers pay physical damage up to the car's actual cash value (the cost to replace the car, minus depreciation), not the price of a new car, and that an owner who keeps a totaled car has its salvage value subtracted from the settlement. Here $12,000 - $500 deductible - $1,500 salvage = $10,000. Had Eduardo surrendered the car, the payment would be $11,500. A car issued a nonrepairable title cannot be retitled or registered.

Reference: TDI, Auto insurance guide (cb020)

Correct answer: B. $40,000

Sec. 1952.106 requires UIM coverage to pay the damages the insured is legally entitled to recover from the underinsured driver, not to exceed the UIM limit, reduced by the amount recovered or recoverable from that driver's insurer. Her $70,000 of damages minus the $30,000 paid by the liability insurer leaves $40,000, well within her $100,000 limit. Paying $70,000 would double count the liability payment.

Reference: Texas Insurance Code Sec. 1952.106

Correct answer: C. 30 days; late pay adds a 12 percent penalty, attorney's fees, and interest

Sec. 1952.156 requires PIP benefits to be paid periodically as claims arise, but not later than the 30th day after the insurer receives satisfactory proof of the claim. If the insurer fails to pay when due, Sec. 1952.157 lets the person sue in contract and recover reasonable attorney's fees, a 12 percent penalty, and interest at the legal rate from the date the amounts became overdue. The 18 percent rate belongs to Chapter 542.

Reference: Texas Insurance Code Secs. 1952.156 and 1952.157