If the decision on a claim settlement is negative, good-faith claims handling requires the claims rep to

• A. Explain the rationale behind the decision to the claimant.
• B. Deliver the decision to the claimant in writing.
• C. Deliver a hard copy of the decision to the claimant by mail.
• D. Have a supervisor sign off on the communication to the claimant.

Answer: (A)

When a claim settlement is denied or not fully paid, the claims representative must communicate the reasons for that decision to the claimant. This communicates the specific policy provisions or endorsements at issue, the facts found, and the evidence reviewed that led to the denial. Providing a clear, reasoned basis helps the claimant understand why coverage was not afforded and what options exist to pursue reconsideration, appeal, or further inquiry. In practice, this rationale is often shared in writing to create a record, but the essential point is to convey the underlying reasons. Merely delivering the decision without the rationale or requiring a supervisor’s sign-off does not meet the essential standard of good-faith handling. This transparency helps prevent misunderstandings, supports fair treatment, and reduces the potential for bad-faith concerns.