Casualty Actuarial Society (CAS) Practice Exam

Which of the following describes the role of legal investigations in liability claims?

1. They reduce the costs associated with claims

2. They are necessary only if the claim is serious

3. They help determine the validity of a claim

4. They are irrelevant to the overall outcome

The correct answer is: They help determine the validity of a claim

Legal investigations play a crucial role in assessing liability claims by helping to establish the validity of those claims. During a legal investigation, various pieces of evidence are collected and examined, which can include witness statements, expert opinions, incident reports, and any other relevant documentation. This process is essential for understanding the circumstances surrounding a claim and determining whether the liability rests with the involved parties based on the available facts. Additionally, legal investigations can uncover details that may not be immediately apparent. For instance, they might reveal inconsistencies in a claimant's account or provide insights about procedural compliance with regulations and standards. The findings from these investigations are instrumental in guiding decision-making for insurance companies, legal teams, and other stakeholders involved in the claims process, thus ultimately influencing the outcome of the case. In contrast, the other options do not accurately capture the significance of legal investigations. While they might have an impact on costs, they are more fundamental in establishing the legitimacy of claims rather than merely cost-reducing measures. Additionally, legal investigations are not only reserved for serious claims; even minor claims can benefit from thorough investigation to prevent fraudulent activities or erroneous payouts. Lastly, they are certainly relevant to the overall outcome, as the findings can sway the decision in a way that resolves the claims