CA Adjusters license
The insured carries an Equipment Breakdown policy with a limit of $300,000. A boiler has exploded and caused extensive damage to the building and its contents. As a result of the explosion a fire ensues causing $100,000 in damages. How much will the Equipment Breakdown policy pay for the fire damage? $50,000 $25,000 $100,000 $0
The correct answer is: $0. EXPLANATION: The Equipment Breakdown policy excludes fire damage. The loss would be covered under a commercial property form.
What is the loss assessment limit provided by Section II of the homeowner forms? $500 $1,500 $1,000 $2,000
The correct answer is: $1,000. EXPLANATION: The HO policy under Section II provides $1,000 for loss assessment. This usually occurs when the insured is part of a property owner's association that has suffered a liability loss and assesses the homeowners for part of the loss.
Under the "regular program" a flood insurance policy will insure a single family residence for up to: $250,000. $35,000. $100,000. $185,000.
The correct answer is: $250,000. EXPLANATION: The limit under the regular flood program is $250,000. Under the emergency flood program the dwelling is covered for only $35,000.
Supplementary payments under the liability section of a commercial auto policy include reasonable expenses incurred by the insured including loss of earnings up to ___ per day. $50 $150 $250 $500
The correct answer is: $250. EXPLANATION: Reasonable expenses including loss of earnings up to $250 per day.
Which situation could be covered by Kim's general liability insurance? Mitch slips and falls on Kim's slippery kitchen floor. Kim drives her Dodge sedan into a picket fence, and the fence is destroyed A client slips and falls in Kim's design studio. Kim is injured when she falls from a stepladder at work in her design studio.
The correct answer is: A client slips and falls in Kim's design studio. EXPLANATION: The CGL policy is designed to cover premises liability.
With inland marine insurance, each of the following would be classified as "instrumentalities of communication and transportation," EXCEPT: Cargo on long-haul trucks. Bridges and tunnels. Power transmission lines. Pipelines.
The correct answer is: Cargo on long-haul trucks. EXPLANATION: Cargo in transit would fall under a different category of the nationwide marine definition called "domestic shipments."
The California Insurance Commissioner is: Elected to a four-year term. Appointed by the governor for a two-year term. Appointed by the legislature for a four-year term. Selected by a committee.
The correct answer is: Elected to a four-year term. EXPLANATION: The state legislature has established that the Insurance Commissioner should be an elected position rather than a political appointment.
The insured owns a two-family dwelling and rents out one of the dwelling units. If a fire occurs what coverage could the insured look to for his loss of rental income under the DP-3? Consequential Loss Special Damages Fair Rental Value Additional Living Expense
The correct answer is: Fair Rental Value. EXPLANATION: The dwelling policy provides coverage for loss of rental income. The policy will pay 20% of coverage A for this coverage. (Note: In North Carolina the percentage is 10%.)
A blanket employee dishonesty bond will list the names of the employees covered? T or F True False
The correct answer is: False EXPLANATION: The blanket bond does not list the names of the employees. All employees are covered.
How do eligibility requirements of homeowner and dwelling policies differ? Homeowner policies require that the named insured reside at the described premises while dwelling policies do not. Homeowner policies are only for actual home owners while dwelling policies can be written only for tenants. Homeowner and dwelling policies have the same eligibility requirements. Dwelling policies can be written on duplexes while homeowner policies are only for single-family dwellings.
The correct answer is: Homeowner policies require that the named insured reside at the described premises while dwelling policies do not. EXPLANATION: The named insured must be a resident of the insured premises under the HO program.
A ship has negligently collided with another ship and caused severe damage. What coverage would apply to cover this claim? Hull insurance with the "running down clause". Protection and Indemnity. Inchmaree clause. Towage clause.
The correct answer is: Hull insurance with the "running down clause". EXPLANATION: Hull insurance with the "running down clause" would respond to cover this claim.
Under a Commercial Property Policy, what must the insured do to be covered for the peril of freezing? Maintain heat in the building or cut off the water and drain the lines. Install a freezing sensor. Inspect the water pipes on a regular basis. Contract with a plumbing company to maintain the system.
The correct answer is: Maintain heat in the building or cut off the water and drain the lines. EXPLANATION: The policy specifies that the insured must either maintain heat in the building or turn off the water and drain the water lines.
Which of the following would NOT be covered by a flood insurance policy? Overflow of water from a pond on the insured property Mudslides from recent heavy rain. Collapse of land along the shore of a body of water Inundation and overflow of surface waters
The correct answer is: Mudslides from recent heavy rain. EXPLANATION: Damage caused by mudflow is covered under the policy. Mudslides are not.
The commercial property Business Income Coverage Form covers all of the following, EXCEPT: Non-continuing operating expenses. Actions of a civil authority. Loss of business income. Continuing operating expenses.
The correct answer is: Non-continuing operating expenses. EXPLANATION: The business income forms would not cover those expenses that would discontinue if a loss occurred. Only those expenses that continue are covered. The insured can also elect, in some cases, to exclude ordinary payroll.
Which of the following policies would be used to cover imports and exports? Ocean marine Personal Property General Liability Businessowners policy
The correct answer is: Ocean marine EXPLANATION: Ocean marine pertains to import and export risk, including the cargo being shipped as well as the vessel transporting goods or people.
Which of the following is not an implied warranty under an ocean marine policy? Seaworthiness of the vessel Legality No deviation in the voyage Protection and indemnity
The correct answer is: Protection and indemnity. EXPLANATION: Protection and indemnity is a form of ocean marine liability coverage and is not an implied warranty.
Which of the following should be insured by an HO-6? The owners of condominiums and townhouses A tenant who rents an apartment in a high-rise building The owner of a ranch-style house A person who wishes to schedule their valuable jewelry separately on a policy
The correct answer is: The owners of condominiums and townhouses. EXPLANATION: The HO-6 is for owners of condominiums and townhouses.
What is the coverage limit offered by the California Earthquake Authority for condominiums? There is no set coverage limit Fair market value $500,000 $50,000 for units valued over $135,000 and $25,000 for units valued at $135,000 or less
The correct answer is: $50,000 for units valued over $135,000 and $25,000 for units valued at $135,000 or less EXPLANATION: According to the California Insurance Code (CIC 10089.26(a)(1)), earthquake loss assessment coverage will be issued in a minimum amount of $50,000 for individual condominium units valued at more than $135,000. Earthquake loss assessment coverage will be issued in a minimum amount of $25,000 for individual condominium units valued at $135,000 or less. The value of the land will be excluded when determining the value of the condominium, as it relates to the earthquake loss assessment coverage offered by the Authority.
Horace Timm has a general liability policy with the Marvel Insurance Company. The policy's limit of liability is $25,000 per occurrence. In the course of one policy year, Mr. Timm becomes liable for the following amounts as a result of three separate occurrences: Occurrence #1 $35,000 Occurrence #2 $10,000 Occurrence #3 $25,000 The total amount Marvel will pay as result of these three occurrences is: $25,000 $60,000 $70,000 $75,000
The correct answer is: $60,000. EXPLANATION: The CGL policy has two limits. The first is the aggregate limit and the second is a per occurrence limit. The per occurrence limit is the most that can be paid on any one single claim. Therefore the policy can only pay $25,000 on occurrence 1 and pay the total claimed on the others.
For an injured employee to receive temporary disability compensation for the first three days of disability, the disability period must extend beyond how long? 14 days 21 days One month 60 days
The correct answer is: 14 days. EXPLANATION: Total disability compensation for the first three days of disability is not payable unless the disability continues for more than 14 days.
What workers comp benefits are an employee under age 16 eligible for, if he or she is injured at work? The same benefits as other employees 150% of normal disability benefits 50% of normal benefits None
The correct answer is: 150% of normal disability benefits. EXPLANATION: If an employee is under 16 years of age at the time of injury, disability benefits that the employee becomes eligible for are to be paid at a rate that is 50% higher than normal benefits.
Under Equipment Breakdown coverage, the full replacement cost will be provided if the equipment is repaired within what time period following the loss? 6 months 12 months 18 months 24 months
The correct answer is: 24 months. EXPLANATION: The insured must repair or replace the damaged property within 24 months after the date of the breakdown (unless the time period is extended by the insurer in writing), or recovery of the loss is limited to the lesser of the cost it would have taken to repair the damaged property or the actual cash value of the property at the time of the breakdown.
Under the dwelling insurance program an endorsement that may be attached to the policy to cover dwellings in the course of construction. The insurance company must be advised when construction is completed and within ____ after the insured takes occupancy of the dwelling. 30 days 45 days 60 days 90 days
The correct answer is: 30 days. EXPLANATION: When the intended occupant of a dwelling under construction is the named insured, the dwelling under construction endorsement is attached to the dwelling policy to provide coverage. The insurance company must be advised when construction is completed and within 30 days after the insured takes occupancy of the dwelling.
No insurer may increase the premium of a homeowner's insurance policy which has been in effect more than _____ solely because the insured filed a first claim against the policy. 45 days 60 days 90 days 180 days
The correct answer is: 45 days. EXPLANATION: No insurer may cancel, refuse to renew or increase the premium of a homeowner's insurance policy or any other personal residential insurance coverage, which has been in effect more than 45 days, solely because the insured filed a first claim against the policy.
How many days does the liberalization clause provide for under the BOP prior to or during the policy? 55 days 30 days 45 days 35 days
The correct answer is: 45 days. EXPLANATION: The policy reads, "If we adopt any revision that would broaden the coverage under this policy without additional premium within forty-five days prior to or during the policy period, the broadened coverage will immediately apply to this policy."
If the Commissioner determines that any broker-agent has failed to keep or maintain complete and accurate records, the Commissioner may order the licensee to establish those records within: 10 days. 6 months. 60 days. 30 days.
The correct answer is: 60 days. EXPLANATION: According to the California Insurance Code (CIC 1747), when the Commissioner determines that any broker-agent has failed to keep or maintain complete and accurate records as required by law, in connection with or in lieu of any other disciplinary action against the licensee, the Commissioner may issue an order requiring the licensee to establish and currently complete those records within 60 days from the date of the order. Any licensee failing to comply will be subject to disciplinary action.
The insured has sustained a loss of income loss from a covered peril under his Businessowners Policy. What deductible applies to loss of income coverage? A 72 hour waiting period before the policy pays The same deductible that applies to the building or contents coverage A $500 deductible No deductible
The correct answer is: A 72 hour waiting period before the policy pays. EXPLANATION: Business income coverage is triggered by physical loss or damage, from a covered cause of loss, to property at the described premises. This loss must result in a suspension (now defined within the coverage) of the business's operations—that is, the business activities—during the period of restoration. The period of restoration begins seventy-two hours after the time of the direct physical loss or damage. Thus, there is a time deductible.
A settlement in which the claimant receives payment in installments over a period of time instead of a lump sum is: A Structured Settlement. Scheduled Payment Release. Full Release Settlement. Open-Ended Release.
The correct answer is: A Structured Settlement. EXPLANATION: A structured settlement is usually reserved for large settlements. Structured settlements may call for part of the full amount to be paid as a lump sum.
What type of employee dishonesty bond should a company purchase when they have a large turnover of employees in various positions? An individual position bond A blanket employee bond A named schedule bond A fiduciary bond
The correct answer is: A blanket employee bond EXPLANATION: A blanket employee bond does not list the names or positions of employees. All employees are covered. It is the best type of employee dishonesty bond to use for large employers. This solves the problem of having to list the names of employees when a large turnover of employees is standard.
You own an independent adjusting company. In order to open a second office in a different location you must obtain: Written permission from the Department of Insurance A branch manager's license A fidelity bond A branch office certificate
The correct answer is: A branch office certificate EXPLANATION: "If the licensee intends to conduct business from any location in California other than the principal place of business, a Branch Office Certificate must be obtained by submitting an Application for Branch Office Certificate along with the appropriate fee."
Who of the following people would be considered as "family members" under a personal umbrella liability policy? A parent of the insured who resides in another state The divorced wife of the insured who no longer resides with the insured The insured's father-in-law who lives next door A foster child who lives with the insured
The correct answer is: A foster child who lives with the insured. EXPLANATION: Only the foster child would be considered a family member since the child resides with the insured.
Which of the following would be eligible for the Businessowners Policy? A family pub A funeral home An auto repair service station A credit union
The correct answer is: A funeral home . EXPLANATION: There are many classes that are not eligible for the businessowners program. Businesses connected with the auto business, such as repair or service stations, dealerships, or parking lots or garages are not eligible unless one of these is incidental to an eligible business. Bars and pubs are ineligible for coverage as well. A funeral home would be eligible. A credit union would not be eligible.
Which of the following could be considered a "covered auto" on the PAP? A newly acquired car reported to the insurer A owned vehicle not listed on the declarations page A non-owned vehicle available for regular use A vehicle used in speed contests
The correct answer is: A newly acquired car reported to the insurer. EXPLANATION: The insured has 14 days to report a newly acquired auto which has been done in this case. The other three answers would all be excluded.
An attorney will provide notice of deposition to an individual when the attorney wishes to secure from that individual: A recorded statement under oath. Any form of statement. A written statement. A feeling for how he or she will appear as a witness.
The correct answer is: A recorded statement under oath. EXPLANATION: A notice of deposition is essentially a subpoena which directs an individual to appear and provide testimony under oath and on record at a location named (generally not in a court room).
If symbol 23 is used in the declarations to identify covered autos under a garage policy, which of the following would be a covered auto? A sedan owned by the named insured. A van owned by the named insured and used in the business. A tow truck owned by the named insured. A pickup purchased by the named insured 30 days after the policy begins.
The correct answer is: A sedan owned by the named insured. EXPLANATION: Symbol 23 is used to cover "private passenger" type vehicles only.
Which of the following is not "mobile equipment" under the BAP? A self-propelled vehicle with permanently attached street-cleaning equipment. A Caterpillar tractor. A forklift. An electric-powered cart used solely for transportation within a large warehouse.
The correct answer is: A self-propelled vehicle with permanently attached street-cleaning equipment. EXPLANATION: In the definitions of "mobile equipment" which is usually covered by the CGL policy, a self-propelled vehicle with permanently attached street-cleaning equipment is considered to be an auto and not "mobile equipment".
In the CGL, which of the following would be included under the definition of a personal injury? A tenant evicted by his landlord sues the landlord for invasion of privacy and wrongful eviction A customer injured in a department store when a sign falls on her and sues the store for medical costs and pain and suffering An employee injured lifting a heavy carton sues his employer for costs An individual fired from her job sues her employer for unemployment benefits
The correct answer is: A tenant evicted by his landlord sues the landlord for invasion of privacy and wrongful eviction. EXPLANATION: Invasion of privacy and wrongful evictions are part of the personal injury coverage.
In commercial auto liability, which of the following would not be covered? A third party claim occurred a week after products were finally delivered to a customer. A third party claim that occurred in a warehouse as an employee was using a hand truck to load a delivery truck. A third party claim that occurred while the truck was being loaded by the use of a mechanical device attached to the truck. A third party claim as a result of a truck being unloaded by hand.
The correct answer is: A third party claim occurred a week after products were finally delivered to a customer. EXPLANATION: Commercial auto liability extends to "loading and unloading" of covered autos but coverage ends after goods are "finally delivered" from a covered auto.
Under the HO Policy, loss of use would cover which of the following? Additional Living Expense and Fair Rental Value Personal Property The Insured's Liability Other Structures
The correct answer is: Additional Living Expense and Fair Rental Value. EXPLANATION: Coverage D, covers the loss of use of a dwelling. Additional living expense is included in this coverage as well as the fair rental value coverage.
An insured is covered under a Businessowners Policy. A fire has occurred to a business a block away and the civil authorities have blocked off the street. The insured's customers cannot gain entrance to his business location. What coverages would apply to the insured's loss of income? After a waiting period of 72 hours the policy would pay for loss of income of up to three weeks. No waiting period would apply and the policy would pay on an actual loss sustained basis. A maximum of $20,000 Nothing
The correct answer is: After a waiting period of 72 hours the policy would pay for loss of income of up to three weeks. EXPLANATION: After a 72 hour waiting period the policy would pay for loss of income for a period of three weeks.
If a contractor does not properly protect a job site, another person could be injured. This is an example of: Negligence A tort A civil wrong All of the responses are correct
The correct answer is: All of the responses are correct EXPLANATION: All of the responses are correct and is the purpose of the coverage provided by the CGL policy.
Which of the following are true when an insurer denies or rejects a first party claim, in whole or in part? Provide a statement listing all bases for such rejection or denial. Reference a state specific statute if applicable. Communication must be in writing All of the responses are correct
The correct answer is: All of the responses are correct EXPLANATION: All of the responses are correct.
Garage operations" covered by a garage policy include: The sale of products and performance of work in connection with the garage business. The ownership, maintenance, or use of covered autos. The ownership, maintenance, or use of garage premises. All of the responses are correct
The correct answer is: All of the responses are correct. EXPLANATION: The garage policy is a combination of CGL type coverages and commercial auto coverage.
Which of the following coverages can be included under a Commercial Package Policy? All of the responses listed are correct Farm Coverage Commercial Crime Coverage Commercial General Liability Coverage
The correct answer is: All of the responses listed are correct. EXPLANATION: All of these coverages can be included in a Commercial Package Policy in addition to Commercial Property Coverage, Commercial Auto Coverage, Commercial Inland Marine Coverage, Boiler and Machinery Coverage, Professional Liability Coverage, and Employment Practices Liability Coverage.
Risk is best defined as: An uncertainty of loss. An undesirable insured. A hazardous exposure. A cause of loss.
The correct answer is: An uncertainty of loss. EXPLANATION: Insurance companies insure against the uncertainty of loss. Risk is the uncertainty that a loss might occur and is the reason why people buy insurance.
When can an insured cancel a homeowners policy? At any time Upon written permission from the insurer Upon receiving permission from the mortgagee When the property is sold
The correct answer is: At any time EXPLANATION: An insured can cancel a policy at any time for any reason.
Uninsured Motorist coverage includes the named insured's: I. Medical bills and pain and suffering. II. Lost wages. Both I and II Neither I nor II I only II only
The correct answer is: Both I and II EXPLANATION: Coverage C (Uninsured Motorists) provides for payments to or on behalf of the named insured for injuries sustained through the negligence of an uninsured driver.
The endorsement for water that backs up through a sewer or drain including mechanical breakdown of a sump pump contains which of the following? A separate stated limit of coverage A separate stated deductible for covered losses Both answers are correct Neither answer is correct
The correct answer is: Both answers are correct. EXPLANATION: The endorsement will set a limit of coverage per occurrence for these losses and also impose a stated deductible, which could be less than or greater than the standard deductible for property losses stated on the declarations page. Both the coverage limit and the deductible vary based on each insurer's underwriting guidelines.
None of the following can be covered by the Federal Terrorism Act insurance program, EXCEPT: Commercial Property and Casualty Risks (except auto). Federal Crop Insurance policies. Personal Insurance policies. Health and Life Insurance policies.
The correct answer is: Commercial Property and Casualty Risks (except auto). EXPLANATION: Commercial property and casualty risks (except commercial auto, burglary and theft) are eligible. Personal insurance, crop insurance and life and health insurance are not eligible for the program. The Federal Terrorism Act was revised and extended in 2015 and a few more lines of insurance have been added to the list of excluded lines. Commercial auto, surety and burglary and theft were excluded in the 2015 amendment. Please check the testing outline for the vendor in your state to determine the version of the Act on which it is testing.
In liability insurance the term "occurrence" means: Continuous or repeated exposure to the same conditions. An accident. Non intentional. A non fortuitous accident.
The correct answer is: Continuous or repeated exposure to the same conditions. EXPLANATION: Sometimes it takes time for damage or an injury to become evident. Previously, all liability policies were based on the concept of "accident" in which all damage is immediately evident. The courts ruled this concept too restrictive and for that reason, liability policies cover claims on an "occurrence" basis.
The doctrine of reasonable expectations is based primarily on: Canon Law Contract Law Negligence Law Criminal Law
The correct answer is: Contract Law. EXPLANATION: The doctrine of reasonable expectations is a part of contract law where the insured can reasonably expect coverage to apply without having to read the contract.
Mr. Smith's bicycle shop enters into many written and oral agreements with customers. Mr. Smith's agent informs him that the liability on his BOP contains: Products and Completed Operations Liability Contractual Liability Fidelity Bond Premises and Operations Liability
The correct answer is: Contractual Liability. EXPLANATION: Like the CGL policy, the liability section of the BOP contains coverage for the written and oral agreements the insured enters into known as Contractual Liability.
Which of the following would cover a farmer for income protection for his farm crops? Multi-peril Crop Insurance Crop Revenue Insurance Crop-hail Coverage Farmowners Policy
The correct answer is: Crop Revenue Insurance . EXPLANATION: Crop revenue insurance guarantees a farmer a certain income for his crops.
Which of the following is a not a common exclusion in inland marine insurance? Earth movement Loss of use Unauthorized instructions Dishonest acts by the insured
The correct answer is: Earth movement EXPLANATION: Common exclusions in commercial inland marine include government action, nuclear hazard, war, loss of use and loss of market, dishonest acts by an insured or its employees, voluntary parting of property by false pretense, and unauthorized instructions to transfer property.
Under the insuring agreements relevant to Equipment Breakdown coverage, which of the following applies? Boiler machinery only First party property damage only First party coverages, property damage and bodily injury Damages caused solely by explosion
The correct answer is: First party coverages, property damage and bodily injury. EXPLANATION: The policy provides first party coverage, property damage to property of others as well as bodily injury.
An adjuster's report that contains all the facts, evidence and disposition of the claim and is considered to be the final report is known as the: Full Report. Field Report. Interim Report. Settlement Report.
The correct answer is: Full Report. EXPLANATION: The "full report" is the third and final report containing all the information gathered.
The BOP is designed to cover all of the following, EXCEPT: An office complex with 7,500 square feet in total floor area. Small apartment houses. Medium size clothing stores. Gas stations.
The correct answer is: Gas stations. EXPLANATION: The list of eligible risks for the BOP is rather narrow. Gas stations, garages and repair shops would not qualify.
Which of the following is NOT a duty or responsibility of the California Insurance Commissioner? He or she may establish a law restricting the eligibility requirements for future applicants. He or she may investigate those applying for an agent/producer license. He or she may deny a license to an applicant who is lacking in integrity. He or she may suspend or revoke the license of someone who commits an insurance-related misdemeanor.
The correct answer is: He or she may establish a law restricting the eligibility requirements for future applicants. EXPLANATION: The Commissioner does not have the power to establish laws; that is the function of the legislative branch of state government. California law specifically gives the Commissioner the power to take the actions described in the other choices.
Which of the following is considered an uninsured motorist: I. A hit and run in which the driver cannot be identified. II. The insured's neighbor who backs out of his driveway into the fender of the insured's car. I Only II Only Neither I nor II Both I and II
The correct answer is: I Only EXPLANATION: This is one of the items that defines coverage under Uninsured Motorist coverage. Note that it includes "hit" meaning physical contact. In a few states no physical contact is needed to collect from the insurer.
The definition of bodily injury includes: I. Death. II. Sickness. III. Perils of the sea. IV. Slander. I and II only I, II, and III only II, III, and IV only I, II, III, and IV
The correct answer is: I and II only. EXPLANATION: Bodily injury does not occur as a result of slander, which is a personal injury coverage. Perils of the sea are damages that can occur to property when it is transported across water.
The common definition of theft in commercial crime forms: I. Excludes mysterious disappearance II. Includes employee dishonesty. I only II only Both I and II Neither I nor II
The correct answer is: I only EXPLANATION: "Theft" is any act of stealing and includes burglary and robbery. It also includes the taking of property by stealth (action designed to escape notice), which is a form of mysterious disappearance. The presumption of theft must be evident; merely losing money is not covered. This becomes evident as we remember for a risk to be insurable the loss must be definite and definable. This means date of loss must be evident as well as method and value.
The circumstances under which a consumer reporting agency may furnish a consumer report include: I. A credit transaction involving the consumer. II. For employment purposes. III. With the underwriting of insurance. I, II and III I only I and II only I and III only
The correct answer is: I, II and III EXPLANATION: All of these are circumstances under which an investigative consumer report may be ordered. However, a person may not procure or cause to be prepared an investigative consumer report on any consumer unless it is clearly and accurately disclosed to the consumer that an investigative consumer report may be made. This disclosure must be made in writing and mailed, or otherwise delivered to the consumer, no later than three days after the date on which the report was first requested.
Which of the following are are essential if a salvage award is to be made? I. The property involved must be in peril from some hazard. II. The salvage service must be voluntary. III. The effort must be successful. I and III only I and II only I, II and III II and III only
The correct answer is: I, II and III EXPLANATION: All of these are essential if a salvage award is to be made.
Which of the following losses would be paid under a garage policy with garage keeper's legal liability coverage, but without dealers physical damage coverage? I. Hail damage to a 4-door van held for sale. II. Damage when paint is accidentally spilled on a customer's truck by the dealer's body shop. III. Fender damage when a mechanic drives the customer's sports car into a steel post. IV. Damage to a third party's vehicle caused by a customer's vehicle driven by the mechanic test-driving the car. II and III and IV only I and II only III and IV only I, II, and III only
The correct answer is: II and III and IV only. EXPLANATION: This question covers the many aspects of coverage for an auto dealer's exposures and the necessary coverages needed to protect the dealer. The first is garage liability that covers premises liability, products liability and completed operations coverage. It also covers the operation (driving) of owned vehicles for sale and customers' vehicles. Garage keeper's liability is designed strictly for damage to customers' vehicles for which the insured can be held legally liable for the damages. A broader form of this coverage provides for damage to a customer's vehicle regardless of legal liability on the part of the garage. Lastly, dealers physical damage coverage applies to the damage to the vehicles held for sale by the dealer for, as in this question, hail damage. However, it is stated that the dealers physical damage coverage is not included. Therefore, II, III and IV is the correct answer.
Which of the following regarding free insurance offered as an incentive to purchase or rent property is true? It is permitted without limitation. It requires a separate charge. If it is offered as a guarantee of the performance of goods, it is prohibited. It may be arranged for by a broker but not an agent.
The correct answer is: If it is offered as a guarantee of the performance of goods, it is prohibited. EXPLANATION: According to the California Insurance Code (CIC 777.1), if it is offered as a guarantee of the performance of goods, it is prohibited.
What is not considered case law? Law based on new trials yet to be decided Law based on trials that have been decided Law based on higher court rulings Law laid down in the decisions of courts
The correct answer is: Law based on new trials yet to be decided. EXPLANATION: Case law is law based on prior cases that have been previously decided. It would not apply to new trials yet to be decided.
What is not covered by "extra expense" coverage in commercial property insurance? Rent Payments at a Temporary Location Moving Expenses Overtime Pay Required to Make Repairs Loss of Income
The correct answer is: Loss of Income. EXPLANATION: Extra Expense Coverage is a form of Business Interruption Coverage. It covers all reasonable extra expenses incurred by the insured in order to continue as nearly as practical the normal operation of a business that has been damaged by an insured peril. It does not cover the loss of income a business may suffer. Other forms like the "loss of income" forms would cover the loss of income.
An earthquake and landslide has occurred and soon after a house insured on an unendorsed HO-3 is damaged by fire and then an explosion. What would be covered in this scenario? The claim would be excluded due to concurrent causation. The insured would need the earthquake endorsement to be covered for any of this damage. Only the explosion damage would be covered. Only the resulting fire and explosion damage would be covered.
The correct answer is: Only the resulting fire and explosion damage would be covered. EXPLANATION: The proximate cause of loss is apparently earth movement, but the insured does NOT need the earthquake endorsement to cover the fire and explosion. In the HO forms, the earth movement exclusion states that there IS coverage. If fire or explosion ensues the insurer will pay only for the ensuing loss. (Similarly, the water damage exclusion states that direct loss by fire, explosion, and theft resulting from water damage is covered.)
An agent has altered an auto application for a customer. He struck through the higher limits of auto coverage for underinsured motorist coverage and inserted a lower limit. Neither the insured nor the agent initialed the change. The insured signed the application. The policy was renewed for three years with the lower limit. The insured was involved in a hit and run accident and was killed. What should the insurer do? Pay the lower limit of coverage Deny the claim because of the vagueness of intent Pay the higher limit Refuse to adjust the claim on the basis of an altered application
The correct answer is: Pay the higher limit. EXPLANATION: This is an actual case and the insurer paid the higher limit that had been struck through on the application without any acknowledgment on the part of the applicant. Unfair claims practice laws forbid the adjuster to adjust claims on the basis of an altered application. It was determined by the insurer's legal counsel that the higher limit should be paid.
A surety which provides a bid bond to a contractor might also provide another bond if the contractor is awarded the contract. This bond is a: Performance bond. Completion bond Financial Guarantee bond. Labor and Material bond.
The correct answer is: Performance bond. EXPLANATION: The purpose of the bid bond is to guaranty to the obligee that the contractor will enter into a contract for the bid price and provide a performance bond. The performance bond, issued by the surety, guarantees the obligee that the work will be completed per the terms of the contract with the contractor.
Which of the following most accurately describes the continuing education requirements for a person holding a personal lines license in California? Person lines agents are required to complete 10-hours of continuing education each year. Those licensed prior to January 1, 1992 are exempt from continuing education requirements. Those licensed after January 1, 1992 must, after their first four years of licensure, complete 20 hours of continuing education each year thereafter. Anyone licensed after January 1, 1992 must complete 24 hours of continuing education per year for the first three years of licensure.
The correct answer is: Person lines agents are required to complete 10-hours of continuing education each year. EXPLANATION: Personal lines agents are required to complete 10-hours of continuing education each year.
Which of the following is the term used to describe the determination by a health benefit plan, based on the information presented at the time by the health care provider, that health care services proposed by the health care provider are medically necessary. Notification of claim Claim investigation Verification of eligibilty Preauthorization/precertification
The correct answer is: Preauthorization/precertification EXPLANATION: The question provides you with the definition of preauthorization/precertification.
All of the following are duties of an insured when filing a claim, EXCEPT: Providing an adjuster to investigate the claim. Providing a proof of loss statement. Preserving the undamaged property to the best of his/her ability to avoid additional loss. Full cooperation in providing the insurance company with all relevant books and records.
The correct answer is: Providing an adjuster to investigate the claim. EXPLANATION: It is the duty of the insurer to investigate the claim. The insured is not obligated to obtain an adjuster. If there is a dispute, the insured has the option of retaining an attorney or hiring a public adjuster.
A monetary award to a plaintiff in a tort action in excess of the cash value of the economic loss as a punishment to the wrongdoer and as a deterrent to similar conduct by others is called: A Fine A Penalty Punitive Damages Excess Over Judgment Award
The correct answer is: Punitive Damages EXPLANATION: The question is providing the definition of "punitive" damages.
Mr. Smith's insurance license has expired. Which statement is correct regarding the renewal of his insurance license without re-examination? Re-apply for his insurance license within one year of his license expiration date. He cannot renew his insurance license until he files an application and pays his licensing fees. Re-apply for his insurance license within two years of his license expiration date. Have his licensing application submitted to the insurance department within one year whether complete or incomplete.
The correct answer is: Re-apply for his insurance license within one year of his license expiration date. EXPLANATION: A licensee has one year to renew his/her insurance license after the expiration date with or without reexamination.
Which of the following is not considered to be a consequential loss coverage? Replacement Cost Coverage Business Income Coverage Leasehold Interest Coverage Extra Expense Coverage
The correct answer is: Replacement Cost Coverage. EXPLANATION: A consequential loss occurs as the result of a direct loss to the insured property. Replacement cost coverage is used to determine the amount of the loss. If replacement cost coverage is not selected then actual cash value applies.
Which of the following is not a duty of an insurer in case of a loss? Conduct a thorough investigation Establish claim procedures and methods of documentation Acknowledge receipt of a claim in a timely fashion Separate the damaged property from the undamaged property and protect the property from further loss
The correct answer is: Separate the damaged property from the undamaged property and protect the property from further loss. EXPLANATION: The insurance company is not required to separate the damaged property from the undamaged property nor to protect the property from further loss. This is the responsibility of the insured.
Your insurance company pays for the damages to your auto and for your bodily injury after your car is struck by a hit and run driver. The accident is witnessed by several individuals who can describe the car and its driver but who failed to get a license number. A year after the accident, the owner of the hit and run vehicle turns himself in. It is determined that he was fully insured at the time of the accident but fled because he had been drinking. Pursuant to the California Insurance Regulations, your insurance company can: Do nothing as a full year has passed since the accident occurred Subrogate against the other insurance company to recover only for the damages to your vehicle Subrogate against the other driver to recover all sums paid for your vehicle repair and your bodily injury File a lawsuit to waive the statute of limitations then proceed with subrogation
The correct answer is: Subrogate against the other driver to recover all sums paid for your vehicle repair and your bodily injury. EXPLANATION: Payments made under both your Uninsured Motorist Bodily Injury and Uninsured Motorist Property Damage coverages can be recovered from the responsible party by subrogation if his/her identity is later confirmed.
All of the following are examples of government insurers, EXCEPT: The state run FAIR plan The National Flood Insurance Program The Excess & Surplus Lines Market Medicare/Medicaid
The correct answer is: The Excess & Surplus Lines Market. EXPLANATION: The excess and surplus lines markets are privately run insurers that usually writes risks that the standard market does not want to write.
Under the Federal Terrorism Risk Insurance Act, who determines that an act of terrorism has occurred that would be covered under the Act? The Secretary of the Treasury The President The Vice President The Majority Leader of the Senate
The correct answer is: The Secretary of the Treasury. EXPLANATION: The Secretary of the Treasury in concurrence with the Secretary of State and the Attorney General must certify an act as an act of terrorism. However please note, the Act was amended and extended in 2015. Please refer to the testing vendor outline to determine which version of the Act it will test on in your state. Under the 2015 amendment, known as the Terrorism Risk Insurance Extension Act of 2015 (TRIEA), an act of terrorism must still be certified by the Secretary of Treasury. However, it must now be certified in concurrence with the Secretary of Homeland Security instead of the Secretary of State.
In case of a Workers Compensation injury, generally the _______ is responsible for arranging medical treatment for the first 30 days from the date of the injury or illness is reported. The employer The employee The HMO The worker's compensation commission
The correct answer is: The employer. EXPLANATION: This is generally the employer's responsibility. After 30 days the employee is then free to select any treating physician or facility.
Which of the following is true regarding the amount of subrogation by an insurance company? The insurance company can subrogate only for the actual amount paid. The insurance company can subrogate for the actual amount paid, plus the insured's deductible. The company can subrogate for any amount authorized by the insured. None of the responses listed are correct.
The correct answer is: The insurance company can subrogate for the actual amount paid, plus the insured's deductible. EXPLANATION: The insurer is permitted to subrogate only for the actual amount paid in a loss plus the insured's deductible if any.
How would an insured's PAP coverage apply when renting a private passenger auto while on vacation when they have purchased insurance coverage from the rental company? The insured's PAP provides excess liability coverage when the insured drives non-owned autos. The insured's PAP is always primary coverage when the insured drives non-owned autos. The insured's PAP does not apply when renting private passenger autos. The insured's PAP would share any claim with the rental car's coverage.
The correct answer is: The insured's PAP provides excess liability coverage when the insured drives non-owned autos. EXPLANATION: PAP liability coverage is excess for an insured when operating a non-owned auto when other primary coverage may apply.
Under a Commercial Package Policy, how many days does one have to notify the insurance company of a claim? The insurer must be notified promptly. The number of days is not specified 30 days 60 days 10 days
The correct answer is: The insurer must be notified promptly. The number of days is not specified EXPLANATION: The policy language states that all claims will be promptly reported to the insurer.
What commercial auto policy form would be used to cover a company who transports their own property and property of others? The motor carrier form The business auto form The truckers form The garage liability form
The correct answer is: The motor carrier form. EXPLANATION: A motor carrier is anyone who transports property by auto in a commercial enterprise, regardless of whether he or she was hired for that purpose. The BAP can be used to cover the insured for transporting their own property. However, if they are transporting property of others and their own property, the Motor Carrier form should be used. The Truckers Form was withdrawn by ISO in 2005 and it has been replaced by the Motor Carrier form.
Underinsured Motorists Coverage provides protection to an insured after an accident in which of the following situations? The other driver has insufficient insurance and is negligent. The other driver has no insurance and is negligent. The other driver has no insurance but is not negligent. The insured driver has insufficient limits and is negligent.
The correct answer is: The other driver has insufficient insurance and is negligent. EXPLANATION: The purpose of Underinsured Motorist Coverage is to provide protection for the insured when the negligent driver has insurance but it is insufficient to cover the injuries to the insured. The insured may collect the excess from their insurer.
All of the following are elements of insurability, EXCEPT: The risk must be unpredictable. The loss must be calculable. The risk must be unexpected. The loss must create a financial hardship.
The correct answer is: The risk must be unpredictable. EXPLANATION: Remember, because this is an "except" question you are looking for the answer that is NOT an element of insurability. In order to provide insurance, the risk has to be somewhat predictable, meaning it must be of such a nature that its frequency and average severity can be readily determined to establish the required premium. It must also create a financial hardship for the insured, and must be calculable so that premium rates can be set. The only answer selection that is NOT an element of insurability is that the risk must be unpredictable. In the law of large numbers, a risk must be predictable in terms of the law of large numbers used to calculate rates.
The manager of a grocery store has checked out the cash register and places the checks and money in a night depository bank bag. He places the bag on the desk and goes to the rear of the store to check the back door. When he returns the money bag is missing. This is an example of: Forcible entry Burglary. Robbery. Theft.
The correct answer is: Theft. EXPLANATION: This is an example of the presumption of theft. Property is missing from a known place where the property should be. This would be the case because theft has the broadest definition of criminal activity.
Which of the following statements is true regarding controlled forms? These forms are very flexible and can be manuscripted to meet the needs of individual insured's. These forms are always issued by state insurance departments. Conditions and rates for these forms are determined solely on the basis of underwriting judgment. These forms are usually issued according to published rules and rates.
The correct answer is: These forms are usually issued according to published rules and rates. EXPLANATION: Controlled forms and their rates are filed for approval with the state insurance departments. They are usually issued according to published rules and rates. A jewelers block policy is an example.
Which of the following statements is true about "additional coverages" in most insurance policies? They are included at no extra cost. They are automatically included only when the loss is less than a deductible. They are included for a minimum premium. They are optional on the part of the insured.
The correct answer is: They are included at no extra cost. EXPLANATION: Examples of "additional coverages" would be debris removal and reasonable repairs which are automatically included in most property forms.
Which is not true regarding the regulation of surplus lines insurers in California? They cannot transact insurance in California without a proper Certificate of Authority issued by the Insurance Commissioner. They write coverage which cannot be obtained through admitted insurers. Only a surplus lines broker may place business with these insurers. Surplus lines brokers do not have binding authority.
The correct answer is: They cannot transact insurance in California without a proper Certificate of Authority issued by the Insurance Commissioner. EXPLANATION: Surplus insurers operate, when made eligible by the Insurance Department, without a Certificate of Authority, and write policies that cannot be obtained through admitted insurers.
An accident reconstructionist is an expert used by insurance companies and plaintiff lawyers to: Determine what type of mechanical defect caused an accident. Determine how much the at-fault driver had been drinking. Determine which way the vehicles were traveling prior to impact. Thoroughly examine the accident scene and conduct the appropriate tests to reach a reasonable conclusion as to causative factors.
The correct answer is: Thoroughly examine the accident scene and conduct the appropriate tests to reach a reasonable conclusion as to causative factors. EXPLANATION: Reconstructionists thoroughly examine the accident scene and conduct the appropriate tests to reach a reasonable conclusion as to the cause of an accident.
What does the term "bailment" mean? Transfer of possession Transfer of possession and temporary title Transfer of title Temporary release from jail
The correct answer is: Transfer of possession EXPLANATION: A bailment occurs when property is voluntarily delivered by the owner to another party, to be held by the other party (to repair, store, clean, etc.) and returned to the owner in the same or better condition. Bailment is the act of placing property in the care, custody and control of another, usually by agreement in which the holder (bailee) is responsible for the safekeeping of the property. Possession changes temporarily from the owner to the bailee, but ownership does not change.
What is the appropriate manner in which to sign a release in all claims? A business may use it's "doing business as". An individual may use an a.k.a. Use of full legal name. All of the responses are correct.
The correct answer is: Use of full legal name. EXPLANATION: A signature is not deemed valid unless it is the individual's or business entity's full legal name.
If a seaman is negligent in a claim against the employer, which of the following is correct? The claim is paid in full. Violation of posted safety standards can affect the outcome of the claim. The amount of the claim cannot be reduced because of the seaman's negligence. The claim is denied.
The correct answer is: Violation of posted safety standards can affect the outcome of the claim. EXPLANATION: Under the Jones Act, violation of posted safety regulations could point to negligence by the seaman and affect the outcome of the claim against the employer.
A statement of fact given by an applicant at the inception of a policy is a: Guarantee Stipulation Warranty Resolution
The correct answer is: Warranty. EXPLANATION: A statement of fact is usually considered to be a warranty. In some types of insurance, coverage is voided if the statement of fact is not true. Ocean marine insurance is an example.
When is a self-insured retention applied in an umbrella policy? When the umbrella policy covers a liability claim excluded by primary policies When the umbrella responds to a claim When the umbrella provides property coverage excluded by primary policies There are no self-insured retentions in umbrella policies
The correct answer is: When the umbrella policy covers a liability claim excluded by primary policies. EXPLANATION: Umbrella policies may cover a liability claim which is excluded by primary liability policies; in those cases, the umbrella imposes a self-insured retention.
All the following are permissible reasons for a consumer reporting agency to furnish motor vehicle, claims history, or credit reports, EXCEPT: a request from an underwriter in connection with an application for insurance. a request from a local television news reporter for an investigative story. a request from a prospective employer. in response to a court order issued by a federal grand jury.
The correct answer is: a request from a local television news reporter for an investigative story EXPLANATION: A request from a local television news reporter for an investigative story is not a permissible reason for a consumer reporting agency to furnish information about a consumer.
If fiduciary funds are received by any licensee in this state, the funds must be maintained in any of the following, EXCEPT: bonds issued in all 50 states of the United States. United States government bonds and treasury certificates. certificates of deposit of banks or savings and loan associations licensed by any state. bonds issued in the state of California.
The correct answer is: bonds issued in all 50 states of the United States. EXPLANATION: According to the California Insurance Code (CIC 1734.5(b)), fiduciary funds received by any licensee may not be maintained in bonds issued in any state of the United States other than California.
Which company would be called the "third party" in XYZ Corporation's general liability policy? XYZ Corporation, the insured Trustworthy Insurance, the insurer Jones Flooring Specialist, a claimant Any one of the responses is correct.
The correct answer is: ones Flooring Specialist, a claimant EXPLANATION: Claimants under a CGL policy are called the "third party".
